Published: October 25, 2011
Broadcom Reports Third Quarter 2011 Results
IRVINE, Calif., Oct. 25, 2011 /PRNewswire/ --
Q3 GAAP Results
-- Total Revenue: $1.96 billion (up 8.4% year over year)
-- Product Gross Margin: 49.5%
-- Diluted EPS: $0.48 (includes $0.10 of net non-recurring charges)
-- Cash Flow from Operations: $534 million
Q3 Non-GAAP Results
-- Product Gross Margin: 50.9%
-- Diluted EPS: $0.82
Broadcom Corporation (NASDAQ: BRCM) today reported unaudited financial results for its third quarter ended September 30, 2011.
"Broadcom delivered record revenue and cash flow in Q3 with strength across all of our end markets - Home, Hand and Infrastructure," said Scott McGregor, Broadcom's President and CEO. "While our outlook reflects potential industry softness, our long-term strategy is to continue to outgrow the overall semiconductor market with product innovations that drive new market growth and value."
Net revenue for the third quarter of 2011 was $1.96 billion. This represents an increase of 8.4% compared with the $1.81 billion reported for the third quarter of 2010. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the third quarter of 2011 was $270 million, or $.48 per share (diluted), compared with GAAP net income of $328 million, or $.60 per share (diluted), for the third quarter of 2010.
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 and nine months ended September 30, 2011 and 2010, respectively, 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 2011 was $476 million, or $.82 per share (diluted), compared with non-GAAP net income of $456 million, or $.80 per share (diluted), for the third quarter of 2010.
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its third quarter 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 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 Thursday, November 24, 2011.
The financial results included in this release are unaudited.
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, (vi) weighted average shares outstanding (diluted) and (vii) diluted net income per share. 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 stock option exercises. In addition to the exclusions noted above, our non-GAAP net income and diluted net income per share (EPS) also exclude settlement costs, charitable contributions, non-recurring legal fees, restructuring costs (reversals) and 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 and nine months ended September 30, 2011 and 2010 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments."
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 analyses 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 Securities and Exchange Commission.
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, gross product margin and operating expense targets for the fourth quarter of 2011 (on both a GAAP and non-GAAP basis), and references to our anticipated growth compared to the overall semiconductor industry. 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 face risks associated with our acquisition strategy.
-- Our operating results may be adversely impacted by worldwide economic
uncertainties and specific conditions in the markets we address.
-- We may fail to adjust our operations in response to changes in demand.
-- 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 are subject to order and shipment uncertainties.
-- We manufacture and sell complex products and may be unable to
successfully develop and introduce new products.
-- We are exposed to risks associated with our international operations.
-- We depend on third parties to fabricate, assemble and test our products.
-- There can be no assurance that we will continue to declare cash
dividends.
-- We may be unable to attract, retain or motivate key personnel.
-- Government regulation may adversely affect our business.
-- Our business is subject to potential tax liabilities.
-- Our articles of incorporation and bylaws contain anti-takeover
provisions.
-- Our co-founders and their affiliates may control the outcome of matters
that require the approval of our shareholders.
Our Annual Report on Form 10-K for the year ended December 31, 2010, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission 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 Income
(In millions, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2011 2010 2011 2010
---- ---- --- ---
Net revenue:
Product revenue $1,902 $1,749 $5,396 $4,700
Income from
Qualcomm
Agreement 52 52 155 155
Licensing
revenue 3 5 18 18
--- --- --- ---
Total net
revenue 1,957 1,806 5,569 4,873
Costs and
expenses:
Cost of product
revenue 960 872 2,732 2,329
Research and
development 502 448 1,504 1,290
Selling, general
and
administrative 164 144 525 421
Amortization of
purchased
intangible
assets 8 5 23 13
Impairments of
long-lived
assets 9 2 92 2
Restructuring
costs 17 - 17 -
Settlement costs
(gains), net 27 - (23) 4
Charitable
contribution - - 25 -
--- --- --- ---
Total operating
costs and
expenses 1,687 1,471 4,895 4,059
----- ----- ----- -----
Income from
operations 270 335 674 814
Interest income
(expense), net (1) 2 (1) 7
Other income
(expense), net 7 (1) 7 4
--- --- --- ---
Income before
income taxes 276 336 680 825
Provision for
income taxes 6 8 7 9
--- --- --- ---
Net income $270 $328 $673 $816
==== ==== ==== ====
Net income per
share (basic) $0.50 $0.64 $1.25 $1.63
===== ===== ===== =====
Net income per
share (diluted) $0.48 $0.60 $1.19 $1.52
===== ===== ===== =====
Weighted average
shares (basic) 537 509 537 502
=== === === ===
Weighted average
shares
(diluted) 558 544 564 537
=== === === ===
Dividends per
share $0.09 $0.08 $0.27 $0.24
===== ===== ===== =====
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, September 30,
------------- -------------
2011 2010 2011 2010
---- ---- ---- ----
Cost of product
revenue $6 $5 $19 $17
Research and
development 85 80 284 253
Selling, general and
administrative 30 28 99 89
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash
Flows
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2011 2010 2011 2010
---- ---- ---- ----
Operating
activities
Net income $270 $328 $673 $816
Adjustments
to reconcile
net income
to net cash
provided by
operating
activities:
Depreciation
and
amortization 28 20 79 58
Stock-based
compensation
expense:
Stock options
and other
awards 25 23 99 87
Restricted
stock units 96 90 303 272
Acquisition-
related
items:
Amortization
of purchased
intangible
assets 21 12 65 36
Impairment of
long-lived
assets 9 2 92 2
Non-cash
settlement
gain - - (14) -
Changes in
operating
assets and
liabilities:
Accounts
receivable (137) (109) 15 (284)
Inventory 55 (45) 137 (165)
Prepaid
expenses and
other assets (1) 12 (33) 35
Accounts
payable 42 27 (99) 129
Deferred
revenue and
income (9) (9) (28) (28)
Accrued
settlement
costs 28 (3) 31 (166)
Other accrued
and long-
term
liabilities 107 107 36 127
--- --- --- ---
Net cash
provided by
operating
activities 534 455 1,356 919
--- --- ----- ---
Investing
activities
Net purchases
of property
and
equipment (44) (35) (141) (82)
Net cash paid
for acquired
companies (3) (48) (347) (150)
Purchases of
strategic
investments - - - (8)
Purchases of
marketable
securities (1,109) (934) (2,533) (1,417)
Proceeds from
sales and
maturities
of
marketable
securities 1,196 353 3,056 723
----- --- ----- ---
Net cash
provided by
(used in)
investing
activities 40 (664) 35 (934)
--- ---- --- ----
Financing
activities
Repurchases
of Class A
common stock - - (670) (275)
Dividends
paid (48) (41) (145) (121)
Payment of
assumed debt - - - (15)
Proceeds from
issuance of
common stock 42 126 258 372
Minimum tax
withholding
paid on
behalf of
employees
for
restricted
stock units (32) (34) (123) (97)
--- --- ---- ---
Net cash
provided by
(used in)
financing
activities (38) 51 (680) (136)
--- --- ---- ----
Increase
(decrease)
in cash and
cash
equivalents 536 (158) 711 (151)
Cash and cash
equivalents
at beginning
of period 1,797 1,404 1,622 1,397
----- ----- ----- -----
Cash and cash
equivalents
at end of
period $2,333 $1,246 $2,333 $1,246
====== ====== ====== ======
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
September
30, December 31,
2011 2010
---- ----
(In millions)
Cash and cash equivalents $2,333 $1,622
Short-term marketable securities 726 1,035
Long-term marketable securities 1,184 1,401
----- -----
Total cash, cash equivalents and marketable
securities $4,243 $4,058
====== ======
Increase from prior year end $185
====
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In millions)
September December
30, 31,
2011 2010
---- ----
ASSETS
Current assets:
Cash and cash equivalents $2,333 $1,622
Short-term marketable securities 726 1,035
Accounts receivable, net 817 820
Inventory 491 598
Prepaid expenses and other current assets 125 109
--- ---
Total current assets 4,492 4,184
Property and equipment, net 339 266
Long-term marketable securities 1,184 1,401
Goodwill 1,796 1,677
Purchased intangible assets, net 427 366
Other assets 58 50
--- ---
Total assets $8,296 $7,944
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $510 $604
Wages and related benefits 169 208
Deferred revenue and income 28 55
Accrued liabilities 524 404
--- ---
Total current liabilities 1,231 1,271
Long-term debt 698 697
Other long-term liabilities 202 150
Commitments and contingencies
Shareholders' equity 6,165 5,826
----- -----
Total liabilities and shareholders' equity $8,296 $7,944
====== ======
BROADCOM CORPORATION
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2011 2010 2011 2010
---- ---- ---- ----
Product revenue $1,902 $1,749 $5,396 $4,700
GAAP cost of product
revenue 960 872 2,732 2,329
--- --- ----- -----
GAAP product gross
profit $942 $877 $2,664 $2,371
==== ==== ====== ======
GAAP product gross
margin 49.5% 50.1% 49.4% 50.5%
GAAP cost of product
revenue $960 $872 $2,732 $2,329
Adjustments:
Stock-based
compensation and
related payroll
taxes (6) (5) (19) (17)
Amortization of
purchased
intangible assets
and step-up of
acquired inventory (22) (7) (61) (30)
--- --- --- ---
Non-GAAP cost of
product revenue $932 $860 $2,652 $2,282
==== ==== ====== ======
Product revenue $1,902 $1,749 $5,396 $4,700
Non-GAAP cost of
product revenue 932 860 2,652 2,282
--- --- ----- -----
Non-GAAP product
gross profit $970 $889 $2,744 $2,418
==== ==== ====== ======
Non-GAAP product
gross margin 50.9% 50.9% 50.8% 51.5%
GAAP research and
development and
selling, general
and administrative
expense $666 $592 $2,029 $1,711
Adjustments:
Stock-based
compensation and
related payroll
taxes (117) (109) (389) (347)
Non-recurring legal
fees - - (25) -
--- --- --- ---
Total GAAP to Non-
GAAP adjustments (117) (109) (414) (347)
---- ---- ---- ----
Non-GAAP research
and development and
selling, general
and administrative
expense $549 $483 $1,615 $1,364
==== ==== ====== ======
GAAP net income $270 $328 $673 $816
Adjustments:
Stock-based
compensation and
related payroll
taxes 123 114 408 364
Amortization of
purchased
intangible assets
and step-up of
acquired inventory 30 12 84 43
Impairment of long-
lived assets 9 2 92 2
Settlement costs
(gains), net 27 - (23) 4
Charitable
contributions - - 25 -
Restructuring costs 17 - 17 -
Non-recurring legal
fees 25
--- --- --- ---
Total GAAP to Non-
GAAP adjustments 206 128 628 413
--- --- --- ---
Non-GAAP net income $476 $456 $1,301 $1,229
==== ==== ====== ======
Shares used in
calculation -
diluted (GAAP) 558 544 564 537
Non-GAAP adjustment 23 24 24 26
--- --- --- ---
Shares used in
calculation -
diluted (Non-
GAAP)* 581 568 588 563
=== === === ===
GAAP diluted net
income per share $0.48 $0.60 $1.19 $1.52
===== ===== ===== =====
Non-GAAP diluted
net income per
share $0.82 $0.80 $2.21 $2.18
===== ===== ===== =====
*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.
BROADCOM CORPORATION
Guidance for the Three Months Ending December
31, 2011
Three Months Ending
December 31, 2011
Total Net Revenue (in
billions) $1.70 - $1.80 billion
Flat to slightly
Product Gross Margin (GAAP) down from Q3'11
Product Gross Margin (Non- Flat to slightly
GAAP) down from Q3'11
Research & development and
selling, general, and
administrative expenses Roughly flat from
(GAAP) Q3'11
Research & development and
selling, general, and
administrative expenses Flat to up $10
(Non-GAAP) million from Q3'11
Broadcom has based the preceding guidance for the three months ending December 31, 2011 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of October 25, 2011. 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, 2010, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other Securities and Exchange Commission 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
Donnelle Koselka Chris Zegarelli
Director, Corporate Communications Director, Investor Relations
949-926-3248 949-926-7567
dkoselka@broadcom.com czegarel@broadcom.com
SOURCE Broadcom Corporation; BRCM Corporate
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