Broadcom Corporation
Oct 22, 2013

Broadcom Reports Third Quarter 2013 Results

Record Revenue

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