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Broadcom Reports Third Quarter 2013 Results

Record Revenue

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IRVINE, Calif., Oct. 22, 2013 /PRNewswire/ -- 







Third Quarter 2013 Results


GAAP


Non-GAAP

Total net revenue


$2.15 billion



Net income per share


$0.55


$0.76



($0.15 better than First Call consensus)


($0.07 better than First Call consensus)

Broadcom Corporation (NASDAQ: BRCM), a global innovation leader in semiconductor solutions for wired and wireless communications, today reported unaudited financial results for its third quarter ended September 30, 2013.

"Broadcom delivered better-than-expected results across the board in the September quarter," said Scott McGregor, Broadcom's President and Chief Executive Officer. "With the Renesas transaction closed, the combined team is working diligently to deliver LTE revenue in early 2014. Looking forward, we are taking the necessary steps to tightly manage the business while focusing on strategic initiatives, including LTE, data center innovation and driving the next generation of home video with HEVC."

Net revenue for the third quarter of 2013 was $2.15 billion. This represents an increase of 2.7% compared with the $2.09 billion reported for the second quarter of 2013 and an increase of 0.8% compared with the $2.13 billion reported for the third quarter of 2012. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2013 was $316 million, or $0.55 per share (diluted), compared with a GAAP net loss of $251 million, or $0.43 per share (basic and diluted), for the second quarter of 2013 and GAAP net income of $220 million, or $0.38 per share (diluted), for the third quarter of 2012.

During the quarter Broadcom initiated a global restructuring plan to reduce expenses and better align its resources to areas of strategic focus. The plan includes a workforce reduction of up to 1,150 employees (some of whom originated from the Renesas acquisition). In connection with the plan, Broadcom recorded restructuring costs of $12 million in the third quarter of 2013 and anticipates that it will record approximately $20 million in restructuring costs in the fourth quarter of 2013.

GAAP net income for the third quarter of 2013 included a one-time, non-recurring settlement gain of $75 million, a charitable contribution to the Broadcom Foundation of $25 million and restructuring costs of $12 million as discussed above, for a total positive impact to GAAP net income per share of $0.07. GAAP net income for the second quarter of 2013 included a purchased intangible impairment charge of $501 million, or $.87 per share, which was primarily related to Broadcom's acquisition of NetLogic Microsystems, Inc.

In addition to GAAP results, Broadcom reports adjusted net income and adjusted net income per share, referred to respectively as "non-GAAP net income" and "non-GAAP diluted net income per share." A discussion of Broadcom's use of these and other non-GAAP financial measures is set forth below. Reconciliations of GAAP to non-GAAP financial measures for the three months ended September 30, 2013, June 30, 2013 and September 30, 2012, respectively, and the nine months ended September 30, 2013 and 2012 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments."

Non-GAAP net income for the third quarter of 2013 was $460 million, or $0.76 per share (diluted), compared with non-GAAP net income of $436 million, or $0.70 per share (diluted), for the second quarter of 2013 and non-GAAP net income of $476 million, or $0.79 per share (diluted), for the third quarter of 2012.

Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 2013 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial and other statistical information required by Securities and Exchange Commission (SEC) Regulation G, please visit the Investors section of the Broadcom website at www.broadcom.com/investors. The webcast will be recorded and available for replay until 11:59 p.m. Pacific Time on Saturday, November 23, 2013.

The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2012 are included in Broadcom's Annual Report on Form 10-K, filed with the SEC on January 30, 2013.

About Broadcom
Broadcom Corporation (NASDAQ: BRCM), a FORTUNE 500® company, is a global leader and innovator in semiconductor solutions for wired and wireless communications. Broadcom® products seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments. With the industry's broadest portfolio of state-of-the-art system-on-a-chip and embedded software solutions, Broadcom is changing the world by Connecting everything®. For more information, go to www.broadcom.com.  

Note Regarding Use of Non-GAAP Financial Measures
Broadcom reports the following measures in accordance with GAAP and on a non-GAAP basis: (i) cost of product revenue, (ii) product gross profit, (iii) product gross margin, (iv) research and development and selling, general and administrative expense, (v) net income (loss), (vi) weighted average shares outstanding (diluted) and (vii) diluted net income (loss) per share (EPS). Broadcom's presentation of non-GAAP cost of product revenue, non-GAAP product gross profit, and non-GAAP product gross margin excludes certain charges related to acquisitions, stock-based compensation expense and employer payroll tax expense on certain equity awards. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up. Our non-GAAP research and development and selling, general and administrative expense excludes stock-based compensation expense and employer payroll tax expense on certain equity awards. In addition to the exclusions noted above, our non-GAAP net income and diluted net income per share also exclude impairment of long-lived assets, settlement costs (gains), restructuring costs (reversals), charitable contributions, gains on strategic investments, tax benefits resulting from reductions in our U.S. valuation allowance on certain deferred tax assets due to the recording of net deferred tax liabilities for identifiable intangible assets under purchase accounting, and tax benefits resulting from the reduction of certain foreign deferred tax liabilities due to the impairment of long-lived assets. Stock-based compensation expense primarily includes the impact of stock options and restricted stock units issued by Broadcom. Reconciliations of our GAAP to non-GAAP financial measures for the three months ended September 30, 2013, June 30, 2013 and September 30, 2012, respectively, and nine months ended September 30, 2013 and 2012 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments." Certain amounts previously reported as licensing revenue have been reclassified to product revenue to conform to the current period presentation. Some totals or amounts may not add or conform to prior period presentations due to rounding.

Broadcom believes that the presentation of these non-GAAP measures provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. Broadcom's management believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Broadcom's management has historically used these non-GAAP financial measures when evaluating operating performance, because we believe that the inclusion or exclusion of the items described above provides insight into our core operating results, our ability to generate cash and underlying business trends affecting our performance. Broadcom has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

For additional information on the items excluded by Broadcom from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the SEC.

Cautions Regarding Forward-Looking Statements:
All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, product gross margin and operating expenses for the fourth quarter of 2013 (on both a GAAP and non-GAAP basis), references to LTE revenue in early 2014, and the success of our strategic initiatives. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement.

These risks and uncertainties include, but are not limited to the following:

  • Our quarterly operating results may fluctuate significantly.
  • We depend on a few significant customers for a substantial portion of our revenue.
  • We face intense competition.
  • We manufacture and sell complex products and may be unable to successfully develop and introduce new products.
  • We face risks associated with our acquisition strategy.
  • We may fail to appropriately adjust our operations in response to changes in our strategy or market demand.
  • We are exposed to risks associated with our international operations.
  • Our operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets we address.
  • Our business is subject to potential tax liabilities.
  • Our stock price is highly volatile.
  • We may be required to defend against alleged infringement of intellectual property rights of others and/or may be unable to adequately protect or enforce our own intellectual property rights.
  • We may be unable to attract, retain or motivate key personnel.
  • We are subject to order and shipment uncertainties.
  • We depend on third parties to fabricate, assemble and test our products.
  • Our systems are subject to security breaches and other cybersecurity incidents.
  • Government regulation may adversely affect our business.
  • Our articles of incorporation and bylaws contain anti-takeover provisions.
  • There can be no assurance that we will continue to declare cash dividends.
  • Our co-founders and their affiliates may strongly influence the outcome of matters that require the approval of our shareholders.

Our Annual Report on Form 10-K for the year ended December 31, 2012, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings, discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements used in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

Broadcom®, the pulse logo, Connecting everything®, and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners.






















BROADCOM CORPORATION

Unaudited GAAP Condensed Consolidated Statements of Operations

(In millions, except per share amounts)












Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012

Net revenue:










Product revenue

$

2,146



$

2,047



$

2,085



$

6,155



$

5,783


Income from Qualcomm Agreement



43



43



86



143


  Total net revenue

2,146



2,090



2,128



6,241



5,926


Costs and expenses:










Cost of product revenue

1,044



1,030



1,063



3,062



3,002


Research and development

609



619



600



1,843



1,728


Selling, general and administrative

181



174



174



534



524


Amortization of purchased intangible assets

14



14



32



43



82


Impairments of long-lived assets



501



48



511



85


Restructuring costs

12





2



12



6


Settlement costs (gains)

(75)





(2)



(75)



86


Charitable contribution

25







25




  Total operating costs and expenses

1,810



2,338



1,917



5,955



5,513


Income (loss) from operations

336



(248)



211



286



413


Interest expense, net

(7)



(9)



(8)



(24)



(21)


Other income (expense), net

(4)



3



8



2



14


Income (loss) before income taxes

325



(254)



211



264



406


Provision for (benefit of) income taxes

9



(3)



(9)



8



(62)


Net income (loss)

$

316



$

(251)



$

220



$

256



$

468


Net income (loss) per share (basic)

$

0.55



$

(0.43)



$

0.39



$

0.45



$

0.84


Net income (loss) per share (diluted)

$

0.55



$

(0.43)



$

0.38



$

0.44



$

0.82


Weighted average shares (basic)

571



578



561



573



555


Weighted average shares (diluted)

578



578



579



585



574












Dividends per share

$

0.11



$

0.11



$

0.10



$

0.33



$

0.30


 

The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above:























Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012

Cost of product revenue

$

6



$

6



$

6



$

19



$

21


Research and development

86



95



89



280



278


Selling, general and administrative

33



35



33



102



116


 






















BROADCOM CORPORATION

Unaudited Condensed Consolidated Statements of Cash Flows

(In millions)












Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012

Operating activities










Net income (loss)

$

316



$

(251)



$

220



$

256



$

468


Adjustments to reconcile net income (loss) to net cash provided by operating activities:










Depreciation and amortization

44



39



38



122



95


Stock-based compensation expense

125



136



128



401



415


Acquisition-related items:










  Amortization of purchased intangible assets

56



58



87



172



230


  Impairments of long-lived assets



501



48



511



85


Gain on strategic investments and other

(1)



(1)



(9)



(2)



(12)


Changes in operating assets and liabilities, net of acquisitions:










  Accounts receivable

(91)



(10)



(42)



(112)



(140)


  Inventory

69



(87)



(28)



(14)



(35)


  Prepaid expenses and other assets

30



7



2



3



(8)


  Accounts payable

(112)



(17)



(26)



(20)



125


  Deferred revenue and income

(2)



(7)



53



(11)



39


  Accrued settlement costs

3



(38)





(38)



51


  Other accrued and long-term liabilities

235



4



150



126



25


  Net cash provided by operating activities

672



334



621



1,394



1,338


Investing activities










Net purchases of property and equipment

(64)



(67)



(65)



(172)



(189)


Net cash paid for acquired companies





(10)





(3,582)


Sales of strategic investments





10





13


Purchases of marketable securities

(678)



(917)



(1,140)



(2,214)



(1,854)


Proceeds from sales and maturities of marketable securities

391



566



187



1,496



1,192


  Net cash used in investing activities

(351)



(418)



(1,018)



(890)



(4,420)


Financing activities










Issuance of long-term debt, net





492





492


Repurchases of Class A common stock

(378)



(110)



(1)



(595)



(1)


Dividends paid

(63)



(64)



(56)



(190)



(167)


Payment of assumed contingent consideration and debt





(4)





(57)


Proceeds from issuance of common stock

25



199



53



292



209


Minimum tax withholding paid on behalf of employees for restricted stock units

(26)



(38)



(33)



(104)



(124)


  Net cash provided by (used in) financing activities

(442)



(13)



451



(597)



352


Income (decrease) in cash and cash equivalents

(121)



(97)



54



(93)



(2,730)


Cash and cash equivalents at beginning of period

1,645



1,742



1,362



1,617



4,146


Cash and cash equivalents at end of period

$

1,524



$

1,645



$

1,416



$

1,524



$

1,416


 










BROADCOM CORPORATION

Unaudited Condensed Consolidated Balance Sheets

(In millions)






September 30,
2013


December 31,
2012

ASSETS





Current assets:




Cash and cash equivalents

$

1,524



$

1,617


Short-term marketable securities

880



757


Accounts receivable, net

852



740


Inventory

541



527


Prepaid expenses and other current assets

130



140


  Total current assets

3,927



3,781


Property and equipment, net

535



485


Long-term marketable securities

1,940



1,348


Goodwill

3,743



3,726


Purchased intangible assets, net

1,112



1,786


Other assets

88



82


  Total assets

$

11,345



$

11,208






LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:




Current portion of long-term debt

$

300



$

300


Accounts payable

520



549


Wages and related benefits

219



241


Deferred revenue and income

22



22


Accrued liabilities

740



570


  Total current liabilities

1,801



1,682


Long-term debt

1,394



1,393


Other long-term liabilities

233



294


Commitments and contingencies




Shareholders' equity

7,917



7,839


  Total liabilities and shareholders' equity

$

11,345



$

11,208















UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION

(In millions)


September 30,
2013


June 30,
2013


December 31,
2012

Cash and cash equivalents

$

1,524



$

1,645



$

1,617


Short-term marketable securities

880



836



757


Long-term marketable securities

1,940



1,696



1,348


Total cash, cash equivalents and marketable securities

$

4,344



$

4,177



$

3,722


Increase from prior period end

$

167






Increase from prior year end

$

622






 






















BROADCOM CORPORATION

Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments

(In millions)






Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012











Product revenue

$

2,146



$

2,047



$

2,085



$

6,155



$

5,783


GAAP cost of product revenue

1,044



1,030



1,063



3,062



3,002


GAAP product gross profit

$

1,102



$

1,017



$

1,022



$

3,093



$

2,781


GAAP product gross margin

51.4

%


49.7

%


49.0

%


50.3

%


48.1

%





















GAAP cost of product revenue

$

1,044



$

1,030



$

1,063



$

3,062



$

3,002


Adjustments:










  Stock-based compensation and related payroll taxes

(6)



(6)



(6)



(19)



(21)


  Amortization of purchased intangible assets and step-up of acquired inventory

(42)



(44)



(62)



(130)



(220)


Non-GAAP cost of product revenue

$

996



$

980



$

995



$

2,913



$

2,761
































Product revenue

$

2,146



$

2,047



$

2,085



$

6,155



$

5,783


Non-GAAP cost of product revenue

996



980



995



2,913



2,761


Non-GAAP product gross profit

$

1,150



$

1,067



$

1,090



$

3,242



$

3,022


Non-GAAP product gross margin

53.6

%


52.1

%


52.3

%


52.7

%


52.3

%





















GAAP research and development and selling, general and administrative expense

$

790



$

793



$

774



$

2,377



$

2,252


Adjustments:










  Stock-based compensation and related payroll taxes

(120)



(131)



(126)



(386)



(402)


Non-GAAP research and development and selling, general and administrative expense

$

670



$

662



$

648



$

1,991



$

1,850


 






















BROADCOM CORPORATION

Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments

(In millions)






Three Months Ended


Nine Months Ended


September 30,


June 30,


September 30,


September 30,


2013


2013


2012


2013


2012











GAAP net income (loss)

$

316



$

(251)



$

220



$

256



$

468


Adjustments:










  Stock-based compensation and related payroll taxes

126



137



132



405



423


  Amortization of purchased intangible assets and step-up of acquired inventory

56



58



94



173



302


  Impairment of long-lived assets



501



48



511



85


  Settlement costs (gains)

(75)





(2)



(75)



86


  Charitable contributions

25







25




  Restructuring costs

12





2



12



6


  Other income, net



(1)



(6)



(1)



(9)


  Certain income tax benefit



(8)



(12)



(10)



(63)


Total GAAP to Non-GAAP adjustments

144



687



256



1,040



830


Non-GAAP net income

$

460



$

436



$

476



$

1,296



$

1,298






















Shares used in calculation - diluted (GAAP)

578



578



579



585



574


  Non-GAAP adjustment *

27



44



26



29



27


Shares used in calculation - diluted (Non-GAAP)

605



622



605



614



601












GAAP diluted net income (loss) per share

$

0.55



$

(0.43)



$

0.38



$

0.44



$

0.82


Non-GAAP diluted net income per share

$

0.76



$

0.70



$

0.79



$

2.11



$

2.16


 

*Represents the benefits of compensation costs attributable to future services and not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method. In the three months ended June 30, 2013 the amount also includes dilutive securities that were excluded from GAAP diluted loss per share as they had an anti-dilutive impact as a result of the net loss position.

 

BROADCOM CORPORATION

Guidance for the Three Months Ending December 31, 2013




Three Months Ending


December 31, 2013

Total net revenue

~$1.975 billion plus or minus 3%

Product gross margin (GAAP and Non-GAAP)

Down ~50 to 100 basis points from Q3'13

Research & development and selling, general, and administrative expenses (GAAP)

Up ~$40 million to $60 million from Q3'13

Research & development and selling, general, and administrative expenses (Non-GAAP)

Up ~$40 million to $60 million from Q3'13

Broadcom has based the preceding guidance for the three months ending December 31, 2013 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 22, 2013. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today. The non-GAAP guidance presented above is consistent with the presentation of non-GAAP results included elsewhere herein.

The guidance set forth in the above table should be read together with the information under the caption, "Cautions Regarding Forward-Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2012, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances.




Broadcom Business Press Contact

Broadcom Investor Relations Contact

Karen Kahn

Chris Zegarelli

Vice President, Corporate Communications

Senior Director, Investor Relations

415-297-5035

949-926-7567

kkahn@broadcom.com

czegarel@broadcom.com

SOURCE Broadcom Corporation; BRCM Corporate



RELATED LINKS
http://www.broadcom.com

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