Supplemental Financial Information

Net Revenue

The following table presents details of our net revenue:



	Year Ended December 31,
	2014		2013		2012
Sales through direct sales force	71.0	%	76.3	%	77.8	%
Sales under fulfillment distributor arrangements	8.5		6.5		6.1
Sales through distributors	20.5		17.2		16.1
	100.0	%	100.0	%	100.0	%

Inventory

The following table presents details of our inventory:



	December 31,
	2014		2013
	(In millions)
Work in process	$	180	$	202
Finished goods	351		323
	$	531	$	525

Property and Equipment

The following table presents details of our property and equipment:



		December 31,
	Useful Life	2014			2013
	(In years)	(In millions)
Leasehold improvements	1 to 10	$	237		$	248
Office furniture and equipment	3 to 7	43			45
Machinery and equipment	5	553			725
Computer software and equipment	2 to 10	234			232
Construction in progress	N/A	147			54
		1,214			1,304
Less accumulated depreciation and amortization		(698		)	(711		)
		$	516		$	593

Accrued Liabilities

The following table presents details of our accrued liabilities included in current liabilities:



	December 31,
	2014		2013
	(In millions)
Accrued rebates	$	574	$	409
Accrued royalties	19		15
Accrued settlement charges	17		66
Accrued legal costs	10		15
Accrued taxes	28		20
Warranty reserve	6		19
Restructuring liabilities	28		17
Other	109		86
	$	791	$	647

Other Long-Term Liabilities

The following table presents details of our other long-term liabilities:



	December 31,
	2014		2013
	(In millions)
Deferred revenue	$	105	$	33
Accrued taxes	77		72
Deferred rent	38		46
Deferred tax liabilities	17		35
Accrued settlement charges	17		25
Other long-term liabilities	23		23
	$	277	$	234

Accrued Rebate Activity

The following table summarizes the activity related to accrued rebates:



	Year Ended December 31,
	2014			2013
	(In millions)
Beginning balance	$	409		$	383
Charged as a reduction of revenue	881			888
Reversal of unclaimed rebates	(33		)	(21		)
Payments	(683		)	(841		)
Ending balance	$	574		$	409

Warranty Reserve Activity

The following table summarizes activity related to the warranty reserve:



	Year Ended December 31,
	2014			2013
	(In millions)
Beginning balance	$	19		$	13
Charged to costs and expenses	4			12
Payments	(17		)	(6		)
Ending balance	$	6		$	19

Other Charges (Gains), Net

In March 2014 we sold certain Ethernet controller-related assets and provided non-exclusive licenses to intellectual property, including a non-exclusive patent license, to QLogic Corporation for a total of $209 million, referred to as the QLogic Transaction. The transaction was accounted for as a multiple element arrangement, which primarily included (i) the sale of certain assets (constituting a business for accounting purposes), (ii) the licensing of certain intellectual property, and (iii) a long-term supply agreement. In connection with the transaction, we recorded a gain on the sale of assets of $48 million (net of a goodwill adjustment of $37 million) and deferred revenue of $120 million. The revenue related to the license agreement ($76 million) and the supply agreement ($44 million) will be amortized over approximately seven years. The operating gain was recorded in “Other charges (gains), net” included in our consolidated statements of income in 2014.

In determining the fair value of the license agreement, we used the relief from royalty income approach, as well as a market approach utilizing another transaction that we had previously entered into for the same intellectual property, adjusted for changes in the market and other assumptions since that transaction. The supply agreement was valued utilizing the cost savings income approach. The relief from royalty income and cost saving income approaches employ significant unobservable inputs categorized as Level 3 inputs. The key unobservable inputs utilized include discount rates of approximately 13% to 15%, a market participant tax rate of 17%, and estimated level of future volumes and pricing based on current product and market data.

The adjustment to goodwill due to the QLogic Transaction was calculated by determining the value of the business sold in relation to the value of the Infrastructure and Networking reportable segment. The value of the business sold was determined utilizing the residual method.

In April 2009 we established the Broadcom Foundation to support science, technology, engineering and mathematics programs, as well as a broad range of community services. In September 2013 we contributed an additional $25 million to the Broadcom Foundation. This payment was recorded in “Other charges (gains), net” in our statement of income in 2013.

Computation of Net Income Per Share

The following table presents the computation of net income per share:



	Year Ended December 31,
	2014		2013		2012
	(In millions, except per share data)
Numerator: Net income	$	652	$	424	$	719
Denominator for net income per share (basic)	590		574		558
Effect of dilutive securities:
Stock awards	11		10		18
Denominator for net income per share (diluted)	601		584		576
Net income per share (basic)	$	1.11	$	0.74	$	1.29
Net income per share (diluted)	$	1.08	$	0.73	$	1.25

Net income per share (diluted) does not include the effect of anti-dilutive common share equivalents resulting from outstanding equity awards. There were 9 million, 39 million and 23 million anti-dilutive common share equivalents in 2014, 2013 and 2012, respectively.

Supplemental Cash Flow Information

In 2014 and 2013, we received $1 million in both years, related to stock option exercises that had not settled by December 31, 2013 and 2012, respectively. We had $1 million related to stock options exercises that had not settled by December 31, 2014.

At December 31, 2014, 2013 and 2012 we had billings of $22 million, $29 million and $29 million, respectively, for capital equipment that were accrued. The amounts accrued for capital equipment purchases have been excluded from the consolidated statements of cash flows and were paid in the subsequent period. In both 2014 and 2013 we also capitalized $3 million of stock-based compensation expense and $2 million in interest expense in 2014, for construction in process related to computer software and equipment.

In connection with the cash paid for acquisitions, we acquired assets (net of cash) with a fair value of $14 million, $178 million and $3.97 billion in 2014, 2013 and 2012, respectively, and assumed liabilities with a fair value of $36 million and $253 million in 2013 and 2012, respectively. In addition to the above, as part of the acquisition of NetLogic Microsystems, Inc., or NetLogic, in 2012, we assumed equity awards with a fair value of $349 million, of which $137 million was recorded as goodwill.