California | 000-23993 | 33-0480482 |
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
x | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
• | supplementing the financial results and forecasts reported to the Company’s board of directors; |
• | evaluating Broadcom’s operating performance; |
• | managing and benchmarking performance internally across Broadcom’s businesses and externally against peers; |
• | determining a portion of bonus compensation for executive officers and certain other key employees; |
• | establishing internal operating budgets; |
• | calculating return on investment for development programs and growth initiatives; |
• | comparing performance with internal forecasts and targeted business models; and |
• | evaluating and valuing potential acquisition candidates. |
• | Acquisition-related charges. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up (as well as the impairment of goodwill and purchased intangible assets primarily consisting of developed technology and in-process research and development assets). These charges are not factored into management’s evaluation of potential acquisitions, or of the Company’s performance after completion of acquisitions, because they do not affect the Company’s current cash position, are not related to core operating performance and had Broadcom internally developed the technology acquired, the amortization of intangible assets would have been expensed in prior periods. In addition, the frequency and amount of such charges vary significantly based on the timing and magnitude of the |
• | Other charges and gains. Other charges and gains consist of impairment of other long-lived assets, settlement costs (gains), restructuring costs (reversals), costs associated with the proposed acquisition by Avago Technologies Limited, charitable contributions, gains on sale of assets and gains (losses) on strategic investments and certain inventory charges relating to Broadcom's decision to exit from its cellular baseband business, all of which occur on a sporadic basis and vary greatly in amount. Management excludes these items when evaluating the Company’s operating performance because these amounts do not affect core operations and because the frequency and variability in the nature of the charges can vary significantly from period to period. Excluding this data provides investors with a basis to compare the Company’s performance against the performance of other companies without this variability. |
• | Income tax expense (benefit). Represents the reversal of a portion of the Company's valuation allowance that was directly related to the establishment of a deferred tax liability associated with the step-up of acquired identifiable intangible assets allocated to jurisdictions in which the statutory tax rate is above zero, as well as tax benefits resulting from the reduction of certain foreign deferred tax liabilities due to the impairment of long-lived assets. |
• | Although amortization and impairment of purchased intangible assets do not directly affect the Company’s current cash position, such expense represents the declining value of the technology and other intangible assets that were acquired. These assets are amortized over their respective expected economic lives or impaired, when appropriate. The expense associated with this decline in value is excluded from these non-GAAP financial measures, and therefore these non-GAAP financial measures do not reflect the costs of acquired intangible assets that supplement the Company’s research and development efforts. |
• | Broadcom periodically acquires and assimilates other companies or businesses, and expects to continue to experience acquisition-related charges in the future. Broadcom also periodically enters into settlement agreements in connection with various litigation matters. These costs can directly impact the amount of available funds or could be dilutive to shareholders in the future. |
(d) | Exhibits. |
BROADCOM CORPORATION, | ||
a California corporation | ||
July 30, 2015 | By: | /s/ Eric K. Brandt |
Eric K. Brandt | ||
Executive Vice President and | ||
Chief Financial Officer |
Second Quarter 2015 Results | GAAP | Non-GAAP | ||
Net revenue | $2.10 billion | |||
Net income per share | $.63 | $.72 |
• | Broadcom's quarterly operating results may fluctuate significantly. |
• | The announcement and pendency of Broadcom's agreement to be acquired by Avago may have an adverse effect on Broadcom's business and share price. |
• | Litigation challenging the Avago Agreement may prevent the Transaction from being consummated at all or within the expected timeframe. |
• | The failure of Broadcom's pending acquisition by Avago to be completed may adversely affect Broadcom's business and share price. |
• | Broadcom depends on a few significant customers for a substantial portion of its revenue. |
• | Broadcom may fail to appropriately adjust its operations in response to changes in its strategy or market demand. |
• | Broadcom faces intense competition. |
• | Broadcom's operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets it addresses. |
• | Broadcom may be unable to attract, retain or motivate key personnel. |
• | Broadcom manufactures and sells complex products and may be unable to successfully develop and introduce new products. |
• | Broadcom is exposed to risks associated with its international operations. |
• | Broadcom's stock price is highly volatile. |
• | Broadcom's business is subject to potential tax liabilities. |
• | Broadcom may be required to defend against alleged infringement of intellectual property rights of others and/or may be unable to adequately protect or enforce its own intellectual property rights. |
• | Broadcom is subject to order and shipment uncertainties. |
• | Broadcom depends on third parties to fabricate, assemble and test its products. |
• | Broadcom's systems are subject to security breaches and other cybersecurity incidents. |
• | Broadcom faces risks associated with its acquisitions. |
• | Government regulation may adversely affect Broadcom's business. |
• | Broadcom's future ability to return capital to shareholders in the form of dividends may be impacted by the availability of U.S. cash. |
• | Broadcom's articles of incorporation and bylaws contain anti-takeover provisions. |
• | Broadcom's co-founders and their affiliates may strongly influence the outcome of matters that require the approval of Broadcom's shareholders, such as the approval of the Avago Agreement and the Transaction. |
BROADCOM CORPORATION | |||||||||||||||||||
Unaudited GAAP Condensed Consolidated Statements of Operations | |||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net revenue | $ | 2,096 | $ | 2,058 | $ | 2,041 | $ | 4,154 | $ | 4,025 | |||||||||
Cost of revenue | 939 | 972 | 1,005 | 1,911 | 2,009 | ||||||||||||||
Gross profit | 1,157 | 1,086 | 1,036 | 2,243 | 2,016 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research and development | 538 | 539 | 634 | 1,077 | 1,270 | ||||||||||||||
Selling, general and administrative | 188 | 177 | 182 | 365 | 367 | ||||||||||||||
Amortization of purchased intangible assets | 2 | 1 | 9 | 3 | 18 | ||||||||||||||
Impairments of long-lived assets | — | 143 | 165 | 143 | 190 | ||||||||||||||
Restructuring costs, net | 4 | 7 | 23 | 11 | 28 | ||||||||||||||
Settlement costs | 1 | — | 16 | 1 | 18 | ||||||||||||||
Other charges (gains), net | 22 | (4 | ) | (7 | ) | 18 | (59 | ) | |||||||||||
Total operating expenses | 755 | 863 | 1,022 | 1,618 | 1,832 | ||||||||||||||
Income from operations | 402 | 223 | 14 | 625 | 184 | ||||||||||||||
Interest expense, net | (3 | ) | (5 | ) | (5 | ) | (8 | ) | (10 | ) | |||||||||
Other expense, net | (5 | ) | — | (8 | ) | (5 | ) | (5 | ) | ||||||||||
Income before income taxes | 394 | 218 | 1 | 612 | 169 | ||||||||||||||
Provision for income taxes | 8 | 9 | 2 | 17 | 5 | ||||||||||||||
Net income (loss) | $ | 386 | $ | 209 | $ | (1 | ) | $ | 595 | $ | 164 | ||||||||
Net income (loss) per share (basic) | $ | 0.64 | $ | 0.35 | $ | — | $ | 0.99 | $ | 0.28 | |||||||||
Net income (loss) per share (diluted) | $ | 0.63 | $ | 0.34 | $ | — | $ | 0.97 | $ | 0.28 | |||||||||
Weighted average shares (basic) | 602 | 600 | 587 | 601 | 585 | ||||||||||||||
Weighted average shares (diluted) | 616 | 613 | 587 | 614 | 593 | ||||||||||||||
Dividends per share | $ | 0.14 | $ | 0.14 | $ | 0.12 | $ | 0.28 | $ | 0.24 |
BROADCOM CORPORATION | |||||||||||||||||||
Unaudited Condensed Consolidated Statements of Cash Flows | |||||||||||||||||||
(In millions) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Operating activities | |||||||||||||||||||
Net income (loss) | $ | 386 | $ | 209 | $ | (1 | ) | $ | 595 | $ | 164 | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||||||||||
Depreciation and amortization | 43 | 39 | 47 | 82 | 99 | ||||||||||||||
Stock-based compensation expense | 86 | 90 | 113 | 176 | 233 | ||||||||||||||
Acquisition-related items: | |||||||||||||||||||
Amortization of purchased intangible assets | 33 | 37 | 56 | 70 | 115 | ||||||||||||||
Impairments of long-lived assets | — | 143 | 165 | 143 | 190 | ||||||||||||||
Loss (gain) on sale of assets and other | — | 3 | 2 | 3 | (47 | ) | |||||||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||||||||||
Accounts receivable, net | (105 | ) | (12 | ) | (62 | ) | (117 | ) | (1 | ) | |||||||||
Inventory | 18 | (99 | ) | (85 | ) | (81 | ) | (90 | ) | ||||||||||
Prepaid expenses and other assets | 9 | (65 | ) | (8 | ) | (56 | ) | (4 | ) | ||||||||||
Accounts payable | 146 | (58 | ) | 105 | 88 | 97 | |||||||||||||
Deferred revenue | (8 | ) | (6 | ) | (10 | ) | (14 | ) | 105 | ||||||||||
Other accrued and long-term liabilities | 194 | (306 | ) | (97 | ) | (112 | ) | (30 | ) | ||||||||||
Net cash provided by (used in) operating activities * | 802 | (25 | ) | 225 | 777 | 831 | |||||||||||||
Investing activities | |||||||||||||||||||
Net purchases of property and equipment | (17 | ) | (156 | ) | (80 | ) | (173 | ) | (158 | ) | |||||||||
Net cash paid for acquired companies | — | — | (6 | ) | — | (6 | ) | ||||||||||||
Proceeds from sale (purchases) of certain assets and other | — | (15 | ) | — | (15 | ) | 90 | ||||||||||||
Purchases of marketable securities | (1,745 | ) | (937 | ) | (436 | ) | (2,682 | ) | (913 | ) | |||||||||
Proceeds from sales and maturities of marketable securities | 1,179 | 579 | 467 | 1,758 | 970 | ||||||||||||||
Net cash used in investing activities | (583 | ) | (529 | ) | (55 | ) | (1,112 | ) | (17 | ) | |||||||||
Financing activities | |||||||||||||||||||
Repurchases of Class A common stock | (128 | ) | (335 | ) | (191 | ) | (463 | ) | (191 | ) | |||||||||
Dividends paid | (84 | ) | (84 | ) | (70 | ) | (168 | ) | (140 | ) | |||||||||
Proceeds from issuance of common stock | 327 | 148 | 229 | 475 | 283 | ||||||||||||||
Minimum tax withholding paid on behalf of employees for restricted stock units | (35 | ) | (43 | ) | (28 | ) | (78 | ) | (59 | ) | |||||||||
Net cash provided by (used in) financing activities | 80 | (314 | ) | (60 | ) | (234 | ) | (107 | ) | ||||||||||
Increase (decrease) in cash and cash equivalents | 299 | (868 | ) | 110 | (569 | ) | 707 | ||||||||||||
Cash and cash equivalents at beginning of period | 1,677 | 2,545 | 2,254 | 2,545 | 1,657 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,976 | $ | 1,677 | $ | 2,364 | $ | 1,976 | $ | 2,364 |
BROADCOM CORPORATION | |||||||
Unaudited Condensed Consolidated Balance Sheets | |||||||
(In millions) | |||||||
June 30, 2015 | December 31, 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,976 | $ | 2,545 | |||
Short-term marketable securities | 1,208 | 1,061 | |||||
Accounts receivable, net | 922 | 804 | |||||
Inventory | 612 | 531 | |||||
Prepaid expenses and other current assets | 145 | 131 | |||||
Total current assets | 4,863 | 5,072 | |||||
Property and equipment, net | 626 | 516 | |||||
Long-term marketable securities | 3,161 | 2,383 | |||||
Goodwill | 3,717 | 3,710 | |||||
Purchased intangible assets, net | 462 | 664 | |||||
Other assets | 161 | 126 | |||||
Total assets | $ | 12,990 | $ | 12,471 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 594 | $ | 503 | |||
Wages and related benefits | 220 | 220 | |||||
Deferred revenue and income | 36 | 36 | |||||
Accrued liabilities | 696 | 791 | |||||
Total current liabilities | 1,546 | 1,550 | |||||
Long-term debt | 1,594 | 1,593 | |||||
Other long-term liabilities | 247 | 277 | |||||
Commitments and contingencies | |||||||
Shareholders' equity | 9,603 | 9,051 | |||||
Total liabilities and shareholders’ equity | $ | 12,990 | $ | 12,471 |
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION | |||||||||||
(In millions) | |||||||||||
June 30, 2015 | March 31, 2015 | December 31, 2014 | |||||||||
Cash and cash equivalents | $ | 1,976 | $ | 1,677 | $ | 2,545 | |||||
Short-term marketable securities | 1,208 | 1,274 | 1,061 | ||||||||
Long-term marketable securities | 3,161 | 2,533 | 2,383 | ||||||||
Total cash, cash equivalents and marketable securities | $ | 6,345 | $ | 5,484 | $ | 5,989 | |||||
Increase from prior period end | $ | 861 | |||||||||
Increase from prior year end | $ | 356 |
BROADCOM CORPORATION | |||||||||||||||||||
Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments | |||||||||||||||||||
(In millions) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, | March 31, | June 30, | June 30, | ||||||||||||||||
2015 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||
Net revenue | $ | 2,096 | $ | 2,058 | $ | 2,041 | $ | 4,154 | $ | 4,025 | |||||||||
GAAP cost of revenue | 939 | 972 | 1,005 | 1,911 | 2,009 | ||||||||||||||
GAAP gross profit | $ | 1,157 | $ | 1,086 | $ | 1,036 | $ | 2,243 | $ | 2,016 | |||||||||
GAAP gross margin | 55.2 | % | 52.8 | % | 50.8 | % | 54.0 | % | 50.1 | % | |||||||||
GAAP cost of revenue | $ | 939 | $ | 972 | $ | 1,005 | $ | 1,911 | $ | 2,009 | |||||||||
Adjustments: | |||||||||||||||||||
Amortization of purchased intangible assets | (31 | ) | (36 | ) | (47 | ) | (67 | ) | (97 | ) | |||||||||
Inventory charges related to the exit of the cellular baseband business | 1 | 2 | (34 | ) | 3 | (34 | ) | ||||||||||||
Non-GAAP cost of revenue | $ | 909 | $ | 938 | $ | 924 | $ | 1,847 | $ | 1,878 | |||||||||
Net revenue | $ | 2,096 | $ | 2,058 | $ | 2,041 | $ | 4,154 | $ | 4,025 | |||||||||
Non-GAAP cost of revenue | 909 | 938 | 924 | 1,847 | 1,878 | ||||||||||||||
Non-GAAP gross profit | $ | 1,187 | $ | 1,120 | $ | 1,117 | $ | 2,307 | $ | 2,147 | |||||||||
Non-GAAP gross margin | 56.6 | % | 54.4 | % | 54.7 | % | 55.5 | % | 53.3 | % |
GAAP net income (loss) | $ | 386 | $ | 209 | $ | (1 | ) | $ | 595 | $ | 164 | ||||||||
Adjustments: | |||||||||||||||||||
Amortization of purchased intangible assets | 33 | 37 | 56 | 70 | 115 | ||||||||||||||
Inventory charges related to the exit of the cellular baseband business | (1 | ) | (2 | ) | 34 | (3 | ) | 34 | |||||||||||
Impairment of long-lived assets | — | 143 | 165 | 143 | 190 | ||||||||||||||
Settlement costs | 1 | — | 16 | 1 | 18 | ||||||||||||||
Other charges (gains), net | 22 | (4 | ) | (7 | ) | 18 | (59 | ) | |||||||||||
Restructuring costs, net | 4 | 7 | 23 | 11 | 28 | ||||||||||||||
Other expense, net | — | — | 5 | — | 3 | ||||||||||||||
Certain income tax benefit | — | — | (1 | ) | — | (6 | ) | ||||||||||||
Total GAAP to Non-GAAP adjustments | 59 | 181 | 291 | 240 | 323 | ||||||||||||||
Non-GAAP net income | $ | 445 | $ | 390 | $ | 290 | $ | 835 | $ | 487 | |||||||||
Shares used in calculation - diluted (GAAP and Non-GAAP) | 616 | 613 | 587 | 614 | 593 | ||||||||||||||
GAAP diluted net income (loss) per share | $ | 0.63 | $ | 0.34 | $ | — | $ | 0.97 | $ | 0.28 | |||||||||
Non-GAAP diluted net income per share | $ | 0.72 | $ | 0.64 | $ | 0.49 | $ | 1.36 | $ | 0.82 |
Three Months Ending | |
September 30, 2015 | |
Net revenue | ~$2.135 billion +/- $75 million |
Gross margin (GAAP) | 53.8% +/- 75 basis points |
Gross margin (Non-GAAP) | 55.3% +/- 75 basis points |
Research & development, and selling, general & administrative expenses | Down ~$10 million +/- $10 million from Q2'15 |
Corporate Communications | Investor Relations | |
Karen Kahn | T. Peter Andrew | Sameer Desai |
Vice President, Corporate Communications | Vice President, Treasury and Investor Relations | Director, Investor Relations |
415-297-5035 | 949-926-6932 | 949-926-4425 |
kkahn@broadcom.com | andrewtp@broadcom.com | sameerd@broadcom.com |
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