10-Q 1 avgo-07312016x10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2016
OR
¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     

State or Other Jurisdiction of Incorporation or Organization
 
Exact Name of Registrant as Specified in Its Charter Address of Principal Executive Offices Registrant’s telephone number, including area code
 
Commission File Number
 
IRS Employer Identification No.
Singapore
 
Broadcom Limited
 
001-37690
 
98-1254807
 
 
1 Yishun Avenue 7
Singapore 768923
 
 
 
 
 
 
(65) 6755-7888
 
 
 
 
Cayman Islands
 
Broadcom Cayman L.P.
 
333-2025938
 
98-1254815
 
 
c/o Broadcom Limited 1 Yishun Avenue 7
Singapore 768923
 
 
 
 
 
 
(65) 6755-7888
 
 
 
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Broadcom Limited: YES þ NO ¨ Broadcom Cayman L.P. : YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Broadcom Limited: YES þ NO ¨ Broadcom Cayman L.P. : YES þ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Broadcom Limited:
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company ¨
Broadcom Cayman L.P.:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
 
 
 
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Broadcom Limited: YES ¨ NO þ Broadcom Cayman L.P. : YES ¨ NO þ
As of August 26, 2016 Broadcom Limited had 397,329,506 of its ordinary shares, no par value per share, outstanding.
As of August 26, 2016 Broadcom Cayman L.P. had 390,237,855 common partnership units outstanding (all of which are owned by Broadcom Limited) and 22,804,591 restricted exchangeable partnership units outstanding.




EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the fiscal quarter and three fiscal quarters ended July 31, 2016 of Broadcom Limited and Broadcom Cayman L.P. Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our” and “us” mean Broadcom Limited and its consolidated subsidiaries, including Broadcom Cayman L.P. References to the “Partnership” mean Broadcom Cayman L.P. and its consolidated subsidiaries. Financial information and results of operations presented in the Form 10-Q for the period prior to February 1, 2016 relate to Avago Technologies Limited, our predecessor, and relate to Broadcom and the Partnership for the period after February 1, 2016.
As of July 31, 2016, Broadcom owned approximately 95% of the Partnership, represented by common partnership units, or Common Units, and is the sole general partner of the Partnership, or the General Partner. The balance of the partnership units are held by certain former Broadcom Corporation shareholders of common stock, or the Limited Partners, in the form of restricted exchangeable limited partnership units, or Partnership REUs. Broadcom Corporation was indirectly acquired by Broadcom on February 1, 2016 (refer to Note 1. “Overview, Basis of Presentation and Significant Accounting Policies” for additional information). As the General Partner, Broadcom has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of the Partnership, in accordance with the amended and restated exempted limited partnership agreement, as amended from time to time, and applicable laws. There is no board of directors of the Partnership.
Shareholders’ equity, partners’ capital, the Limited Partner’s noncontrolling interest in Broadcom are the primary areas of difference between the unaudited condensed consolidated financial statements of Broadcom and those of the Partnership. The Partnership’s capital consists of Common Units owned by Broadcom and Partnership REUs owned by the Limited Partners. The Partnership REUs are accounted for in partners’ capital in the Partnership’s financial statements and as noncontrolling interest in shareholders’ equity in Broadcom’s financial statements.
In order to highlight the differences between Broadcom and the Partnership, there are sections in this report that separately discuss Broadcom and the Partnership, including separate financial statements (but combined footnotes), separate disclosure controls and procedures sections, separate certification of periodic report under Section 302 of the Sarbanes-Oxley Act of 2002 and separate certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In the sections that combine disclosure for Broadcom and the Partnership, this report refers to actions or holdings as being actions or holdings of Broadcom.
Broadcom consolidates the Partnership for financial reporting purposes, and neither Broadcom nor the Partnership has material assets other than its interests in their subsidiaries. Therefore, while shareholders’ equity and partners’ capital differ as discussed above, the assets of Broadcom and the Partnership are materially the same on their respective financial statements.

2


BROADCOM LIMITED AND BROADCOM CAYMAN L.P.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended July 31, 2016

TABLE OF CONTENTS

3


PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements — Unaudited
BROADCOM LIMITED AND BROADCOM CAYMAN L.P.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
 
Page
Financial Statements of Broadcom Limited:
 
Financial Statements of Broadcom Cayman L.P.:
 

4


BROADCOM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(in millions, except share amounts)
 
July 31,
2016
 
November 1,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,961

 
$
1,822

Trade accounts receivable, net
2,181

 
1,019

Inventory
1,306


524

Assets held-for-sale
246

 
22

Other current assets
354


372

Total current assets
6,048

 
3,759

Property, plant and equipment, net
2,573

 
1,460

Goodwill
24,784

 
1,674

Intangible assets, net
15,819

 
3,277

Other long-term assets
528


345

Total assets
$
49,752

 
$
10,515

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,127

 
$
617

Employee compensation and benefits
424

 
250

Current portion of long-term debt
334

 
46

Other current liabilities
843


206

Total current liabilities
2,728

 
1,119

Long-term liabilities:
 
 
 
Long-term debt
13,381

 
3,826

Pension and post-retirement benefit obligations
468

 
475

Other long-term liabilities
10,671


381

Total liabilities
27,248

 
5,801

Commitments and contingencies (Note 12)

 

Shareholders’ equity:
 
 
 
Ordinary shares, no par value; 396,440,929 shares and 276,259,120 shares issued and outstanding on July 31, 2016 and November 1, 2015, respectively
18,926

 
2,547

Non-economic voting preference shares, no par value; 22,804,591 shares and no shares issued and outstanding on July 31, 2016 and November 1, 2015, respectively

 

Retained earnings
619

 
2,240

Accumulated other comprehensive loss
(72
)
 
(73
)
Total Broadcom Limited shareholders’ equity
19,473

 
4,714

Noncontrolling interest
3,031

 

Total shareholders’ equity
22,504

 
4,714

Total liabilities and shareholders’ equity
$
49,752

 
$
10,515


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


5


BROADCOM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
(in millions, except per share amounts)
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Net revenue
 
$
3,792

 
$
1,735

 
$
9,104


$
4,984

Cost of products sold:
 
 
 
 
 
 
 
 
Cost of products sold
 
1,520

 
694

 
3,656

 
2,038

Purchase accounting effect on inventory
 
271

 
26

 
1,099

 
30

Amortization of intangible assets
 
211

 
129

 
539

 
355

Restructuring charges
 
8

 
2

 
41

 
5

Total cost of products sold
 
2,010

 
851

 
5,335

 
2,428

Gross margin
 
1,782

 
884

 
3,769

 
2,556

Research and development
 
814

 
276

 
1,868

 
762

Selling, general and administrative
 
230

 
143

 
582

 
368

Amortization of intangible assets
 
728

 
68

 
1,517

 
186

Restructuring, impairment and disposal charges
 
274

 
98

 
592

 
122

Total operating expenses
 
2,046

 
585

 
4,559

 
1,438

Operating income (loss)
 
(264
)
 
299

 
(790
)
 
1,118

Interest expense
 
(139
)
 
(43
)
 
(479
)
 
(150
)
Gain (loss) on extinguishment of debt
 
(21
)
 
3

 
(74
)
 
(10
)
Other income, net
 
4

 
8

 
1

 
24

Income (loss) from continuing operations before income taxes
 
(420
)
 
267

 
(1,342
)
 
982

Provision for (benefit from) income taxes
 
(117
)
 
23

 
(199
)
 
61

Income (loss) from continuing operations
 
(303
)
 
244

 
(1,143
)
 
921

Income (loss) from discontinued operations, net of income taxes
 
(12
)
 
(4
)
 
(50
)
 
14

Net income (loss)
 
(315
)
 
240

 
(1,193
)
 
935

Net loss attributable to noncontrolling interest
 
(17
)
 

 
(86
)
 

Net income (loss) attributable to ordinary shares
 
$
(298
)
 
$
240

 
$
(1,107
)
 
$
935

 
 
 
 
 
 
 
 
 
Basic income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
(0.72
)
 
$
0.92

 
$
(2.99
)
 
$
3.54

Income (loss) per share from discontinued operations
 
(0.03
)
 
(0.01
)
 
(0.13
)
 
0.06

Net income (loss) per share
 
$
(0.75
)
 
$
0.91

 
$
(3.12
)
 
$
3.60

 
 
 
 
 
 
 
 
 
Diluted income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
(0.72
)
 
$
0.85

 
$
(3.09
)
 
$
3.25

Income (loss) per share from discontinued operations
 
(0.03
)
 
(0.01
)
 
(0.13
)
 
0.05

Net income (loss) per share
 
$
(0.75
)
 
$
0.84

 
$
(3.22
)
 
$
3.30

 
 
 
 
 
 
 
 
 
Weighted-average shares:
 
 
 
 
 
 
 
 
Basic
 
396

 
265

 
355

 
260

Diluted
 
419

 
287

 
370

 
283

 
 
 
 
 
 
 
 
 
Cash dividends declared and paid per share
 
$
0.50

 
$
0.40

 
$
1.43

 
$
1.13

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


6


BROADCOM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED
(in millions)
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Net income (loss)
$
(315
)
 
$
240

 
$
(1,193
)
 
$
935

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Gains on defined benefit pension plans and post-retirement plans
1

 

 
1

 

Reclassification to net income (loss)

 

 

 
1

Other comprehensive income
1

 

 
1

 
1

Comprehensive income (loss)
(314
)
 
240

 
(1,192
)
 
936

Comprehensive loss attributable to noncontrolling interest
(17
)
 

 
(86
)
 

Comprehensive income (loss) attributable to ordinary shares
$
(297
)
 
$
240

 
$
(1,106
)
 
$
936

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


7


BROADCOM LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(in millions)
 
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
(1,193
)
 
$
935

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
2,342

 
712

Share-based compensation
 
474

 
169

Excess tax benefits from share-based compensation
 
(68
)
 
(102
)
Non-cash portion of debt extinguishment loss, net
 
51

 
10

Non-cash restructuring, impairment and disposal charges
 
268

 
75

Gain on sales of businesses
 
(27
)
 
(14
)
Deferred taxes
 
(353
)
 
(35
)
Amortization of debt issuance costs and accretion of debt discount
 
27

 
18

Other
 
17

 
10

Changes in assets and liabilities, net of acquisitions and disposals:
 
 
 
 
Trade accounts receivable, net
 
(491
)
 
22

Inventory
 
1,088

 
63

Accounts payable
 
(61
)
 
(52
)
Employee compensation and benefits
 
70

 
(12
)
Other current assets and current liabilities
 
(38
)
 
(25
)
Other long-term assets and long-term liabilities
 
(47
)
 
(38
)
Net cash provided by operating activities
 
2,059

 
1,736

Cash flows from investing activities:
 
 
 
 
Acquisitions of businesses, net of cash acquired
 
(10,055
)
 
(394
)
Proceeds from sales of businesses
 
698

 
650

Purchases of property, plant and equipment
 
(530
)
 
(487
)
Proceeds from disposals of property, plant and equipment
 
5

 
63

Purchases of investments
 
(58
)
 
(9
)
Proceeds from sales and maturities of investments
 
89

 

Other
 
(15
)
 

Net cash used in investing activities
 
(9,866
)
 
(177
)
Cash flows from financing activities:
 
 
 
 
Proceeds from term loan borrowings
 
15,926

 

Debt repayments
 
(6,145
)
 
(1,627
)
Payments of assumed debt
 
(1,475
)
 
(178
)
Debt issuance costs
 
(108
)
 

Dividend payments
 
(537
)
 
(292
)
Issuance of ordinary shares
 
217

 
186

Excess tax benefits from share-based compensation
 
68

 
102

Net cash provided by (used in) financing activities
 
7,946

 
(1,809
)
Net change in cash and cash equivalents
 
139

 
(250
)
Cash and cash equivalents at the beginning of period
 
1,822

 
1,604

Cash and cash equivalents at end of period
 
$
1,961

 
$
1,354

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


BROADCOM LIMITED
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY— UNAUDITED
(in millions)
 
 
Ordinary Shares
 
Non-Economic Voting Preference Shares
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Non-controlling Interest
 
Total
Shareholders’
Equity
 
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance as of November 1, 2015
 
276

 
$
2,547

 

 
$

 
$
2,240

 
$
(73
)
 
$

 
$
4,714

Issuance of ordinary shares upon the acquisition of Broadcom Corporation
 
112

 
15,438

 

 

 

 

 

 
15,438

Issuance by the Partnership of restricted exchangeable partnership units upon the acquisition of Broadcom Corporation
 

 

 

 

 

 

 
3,140

 
3,140

Issuance of non-economic voting preference shares
 

 

 
23

 

 

 

 

 

Issuance of ordinary shares in connection with equity incentive plans
 
8

 
217

 

 

 

 

 

 
217

Share-based compensation
 

 
474

 

 

 

 

 

 
474

Excess tax benefits from share-based compensation
 

 
68

 

 

 

 

 

 
68

Cash dividends paid to ordinary shareholders
 

 

 

 

 
(514
)
 

 

 
(514
)
Cash distribution paid by the Partnership on restricted exchangeable partnership units
 

 

 

 

 

 

 
(23
)
 
(23
)
Fair value of partially vested equity awards assumed in connection with the acquisition of Broadcom Corporation
 

 
182

 

 

 

 

 

 
182

Changes in accumulated other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Gains on defined benefit pension plans and post-retirement plans
 

 

 

 

 

 
1

 

 
1

Net loss
 

 

 

 

 
(1,107
)
 

 
(86
)
 
(1,193
)
Balance as of July 31, 2016
 
396

 
$
18,926

 
23

 
$

 
$
619

 
$
(72
)
 
$
3,031

 
$
22,504

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(in millions, except unit/share data)
 
July 31,
2016
 
November 1,
2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,915

 
$
1,822

Trade accounts receivable, net
2,181

 
1,019

Inventory
1,306

 
524

Assets held-for-sale
246

 
22

Other current assets
400

 
372

Total current assets
6,048

 
3,759

Property, plant and equipment, net
2,573

 
1,460

Goodwill
24,784

 
1,674

Intangible assets, net
15,819

 
3,277

Other long-term assets
528

 
345

Total assets
$
49,752

 
$
10,515

LIABILITIES AND PARTNERS’ CAPITAL/SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,127

 
$
617

Employee compensation and benefits
424

 
250

Current portion of long-term debt
334

 
46

Other current liabilities
843

 
206

Total current liabilities
2,728

 
1,119

Long-term liabilities:
 
 
 
Long-term debt
13,381

 
3,826

Pension and post-retirement benefit obligations
468

 
475

Other long-term liabilities
10,671

 
381

Total liabilities
27,248

 
5,801

Commitments and contingencies (Note 12)

 

Partners’ capital/shareholders’ equity:
 
 
 

Common partnership units; 390,237,855 units issued and outstanding on July 31, 2016
19,545

 

Restricted exchangeable units; 22,804,591 units issued and outstanding on July 31, 2016
3,031

 

Ordinary shares, no par value; 276,259,120 shares issued and outstanding on November 1, 2015

 
2,547

Retained earnings

 
2,240

Accumulated other comprehensive loss
(72
)
 
(73
)
Total partners’ capital/shareholders’ equity
22,504

 
4,714

Total liabilities and partners’ capital/shareholders’ equity
$
49,752

 
$
10,515


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


10


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
(in millions, except per unit/share amounts)
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Net revenue
 
$
3,792

 
$
1,735

 
$
9,104

 
$
4,984

Cost of products sold:
 
 
 
 
 
 
 
 
Cost of products sold
 
1,520

 
694

 
3,656

 
2,038

Purchase accounting effect on inventory
 
271

 
26

 
1,099

 
30

Amortization of intangible assets
 
211

 
129

 
539

 
355

Restructuring charges
 
8

 
2

 
41

 
5

Total cost of products sold
 
2,010

 
851

 
5,335

 
2,428

Gross margin
 
1,782

 
884

 
3,769

 
2,556

Research and development
 
814

 
276

 
1,868

 
762

Selling, general and administrative
 
230

 
143

 
582

 
368

Amortization of intangible assets
 
728

 
68

 
1,517

 
186

Restructuring, impairment and disposal charges
 
274

 
98

 
592

 
122

Total operating expenses
 
2,046

 
585

 
4,559

 
1,438

Operating income (loss)
 
(264
)
 
299

 
(790
)
 
1,118

Interest expense
 
(139
)
 
(43
)
 
(479
)
 
(150
)
Gain (loss) on extinguishment of debt
 
(21
)
 
3

 
(74
)
 
(10
)
Other income, net
 
4

 
8

 
1

 
24

Income (loss) from continuing operations before income taxes
 
(420
)
 
267

 
(1,342
)
 
982

Provision for (benefit from) income taxes
 
(117
)
 
23

 
(199
)
 
61

Income (loss) from continuing operations
 
(303
)
 
244

 
(1,143
)
 
921

Income (loss) from discontinued operations, net of income taxes
 
(12
)
 
(4
)
 
(50
)
 
14

Net income (loss)
 
$
(315
)
 
$
240

 
$
(1,193
)
 
$
935

 
 
 
 
 
 
 
 
 
General Partner's interest in net loss
 
$
(298
)
 
$

 
$
(1,484
)
 
$

Limited Partners' interest in net loss
 
$
(17
)
 
$

 
$
(86
)
 
$

Net income attributable to ordinary shareholders
 
$

 
$
240

 
$
377

 
$
935

 
 
 
 
 
 
 
 
 
Cash distribution paid per restricted exchangeable partnership unit
 
$
0.50

 
$

 
$
0.99

 
$

Cash distribution paid to General Partner
 
$
199

 
$

 
$
392

 
$

Cash dividends paid per ordinary share
 
$

 
$
0.40

 
$
0.44

 
$
1.13

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


11


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED
(in millions)
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Net income (loss)
$
(315
)
 
$
240

 
$
(1,193
)
 
$
935

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Gains on defined benefit pension plans and post-retirement plans
1

 

 
1

 

Reclassification to net income (loss)

 

 

 
1

Other comprehensive income
1

 

 
1

 
1

Comprehensive income (loss)
$
(314
)
 
$
240

 
$
(1,192
)
 
$
936

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


12


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(in millions)
 
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
(1,193
)
 
$
935

Adjustments to reconcile income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
2,342

 
712

Share-based compensation
 
474

 
169

Excess tax benefits from share-based compensation
 
(68
)
 
(102
)
Non-cash portion of debt extinguishment loss, net
 
51

 
10

Non-cash restructuring, impairment and disposal charges
 
268

 
75

Gain on sales of businesses
 
(27
)
 
(14
)
Deferred taxes
 
(353
)
 
(35
)
Amortization of debt discount issuance costs and accretion of debt discount
 
27

 
18

Other
 
17

 
10

Changes in assets and liabilities, net of acquisitions and disposals:
 
 
 
 
Trade accounts receivable, net
 
(491
)
 
22

Inventory
 
1,088

 
63

Accounts payable
 
(61
)
 
(52
)
Employee compensation and benefits
 
70

 
(12
)
Other current assets and current liabilities
 
(38
)
 
(25
)
Other long-term assets and long-term liabilities
 
(47
)
 
(38
)
Net cash provided by operating activities
 
2,059

 
1,736

Cash flows from investing activities:
 
 
 
 
Acquisitions of businesses, net of cash acquired
 
(10,055
)
 
(394
)
Proceeds from sales of businesses
 
698

 
650

Purchases of property, plant and equipment
 
(530
)
 
(487
)
Proceeds from disposals of property, plant and equipment
 
5

 
63

Purchases of investments
 
(58
)
 
(9
)
Proceeds from sales and maturities of investments
 
89

 

Other
 
(15
)
 

Net cash used in investing activities
 
(9,866
)
 
(177
)
Cash flows from financing activities:
 
 
 
 
Proceeds from term loan borrowings
 
15,926

 

Debt repayments
 
(6,145
)
 
(1,627
)
Payments of assumed debt
 
(1,475
)
 
(178
)
Debt issuance costs
 
(108
)
 

Dividend payments to ordinary shareholders
 
(122
)
 
(292
)
Distributions paid to unit holders
 
(415
)
 

Issuance of ordinary shares by General Partner
 
72

 
186

Capital transactions with General Partner
 
99

 

Excess tax benefits from share-based compensation
 
68

 
102

Net cash provided by (used in) financing activities
 
7,900

 
(1,809
)
Net change in cash and cash equivalents
 
93

 
(250
)
Cash and cash equivalents at the beginning of period
 
1,822

 
1,604

Cash and cash equivalents at end of period
 
$
1,915

 
$
1,354

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

13


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL— UNAUDITED
(in millions)
 
 
Partnership REUs
 
Partnership
Common Units
 
Ordinary Shares
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
 
Units
 
Amount
 
Units
 
Amount
 
Shares
 
Amount
 
 
 
Balance as of November 1, 2015
 

 
$

 

 
$

 
276

 
$
2,547

 
$
2,240

 
$
(73
)
 
$
4,714

Issuance of ordinary shares in connection with equity incentive plans
 

 

 

 

 
2

 
72

 

 

 
72

Share-based compensation
 

 

 

 
417

 

 
57

 

 

 
474

Excess tax benefits from share-based compensation
 

 

 

 
45

 

 
23

 

 

 
68

Cash dividends paid to ordinary shareholders
 

 

 

 

 

 

 
(122
)
 

 
(122
)
Transfer to General Partner
 

 

 
278

 
5,194

 
(278
)
 
(2,699
)
 
(2,495
)
 

 

Issuance of common partnership units upon the acquisition of Broadcom Corporation
 

 

 
112

 
15,438

 

 

 

 

 
15,438

Issuance of restricted exchangeable partnership units upon the acquisition of Broadcom Corporation
 
23

 
3,140

 

 

 

 

 

 

 
3,140

Cash distribution paid to unit holders
 

 
(23
)
 

 
(392
)
 

 

 

 

 
(415
)
Capital transactions with General Partner
 

 

 

 
327

 

 

 

 

 
327

Changes in accumulated other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gains on defined benefit pension plans and post-retirement plans
 

 

 

 

 

 

 

 
1

 
1

Net income (loss)
 

 
(86
)
 

 
(1,484
)
 

 

 
377

 

 
(1,193
)
Balance as of July 31, 2016
 
23

 
$
3,031

 
390

 
$
19,545

 

 
$

 
$

 
$
(72
)
 
$
22,504

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


14


BROADCOM LIMITED AND BROADCOM CAYMAN L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Overview, Basis of Presentation and Significant Accounting Policies
Overview
Broadcom Limited, or Broadcom, a company organized under the laws of the Republic of Singapore, is the successor to Avago Technologies Limited, or Avago. Broadcom Cayman L.P., or the Partnership, is an exempted limited partnership formed under the laws of the Cayman Islands in order to effect the business combination between Avago and Broadcom Corporation, a California corporation, or BRCM. On February 1, 2016, pursuant to an Agreement and Plan of Merger dated as of May 28, 2015, or the Broadcom Agreement, Broadcom, Avago, BRCM, the Partnership and various other parties completed various transactions, including a scheme of arrangement under Singapore law between Avago and Broadcom, or the Avago Scheme. Pursuant to the Avago Scheme, all issued ordinary shares of Avago were exchanged on a one-for-one basis for newly issued ordinary shares of Broadcom. Immediately following the consummation of the Avago Scheme, two subsidiaries of Broadcom merged with and into BRCM with BRCM as the surviving corporation of each such merger, or the Broadcom Merger. Following the Avago Scheme and the Broadcom Merger, or the Broadcom Transaction, each of Avago and BRCM became indirect subsidiaries of Broadcom and the Partnership.
Broadcom is the Partnership’s sole General Partner and currently owns a majority interest (by vote and value) in the Partnership represented by common partnership units, or Common Units. The balance of the partnership units are held by certain former BRCM shareholders, or the Limited Partners, in the form of restricted exchangeable limited partnership units, or Partnership REUs. As General Partner, Broadcom has the exclusive right, power and authority to manage, control, administer and operate the business and affairs and to make decisions regarding the undertaking and business of the Partnership in accordance with the Partnership’s amended and restated exempted limited partnership agreement, or Partnership Agreement, as amended from time to time, and applicable laws. There is no board of directors of the Partnership.
The Avago Scheme was accounted for in all periods presented using a carryover basis, similar to a pooling-of-interests, as the transaction was premised on a non-substantive exchange in order to facilitate the acquisition of BRCM, resulting in the retention of the historical basis of accounting. Under this method of accounting, Broadcom and Avago were treated as if they had always been combined for accounting and financial reporting purposes. The Broadcom Merger is discussed in further detail in Note 2. “Acquisitions.”
The Partnership REUs are deemed to be registered under Section 12(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Partnership is subject to the informational requirements of the Exchange Act and the rules and regulations promulgated thereunder.
The condensed consolidated financial statements and accompanying notes are being presented in a combined report being filed by two separate registrants: Broadcom and the Partnership. The differences in the condensed consolidated financial statements relate to the noncontrolling interest that represents the outstanding Partnership REUs and transactions between Broadcom and the Partnership, which are accounted for as capital transactions. Refer to Note 7. “Shareholders’ Equity” and Note 8. “Partners’ Capital” for additional information.
We are a leading designer, developer and global supplier of a broad range of analog and digital semiconductor connectivity solutions with a focus on analog III-V based products and complex digital and mixed signal complementary metal oxide semiconductor based devices. We have a history of innovation and offer thousands of products that are used in end products such as data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and electronic displays. We have four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & other, which align with our principal target markets.
Basis of Presentation
We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31. Our fiscal year ending October 30, 2016, or fiscal year 2016, is a 52-week fiscal year. The first quarter of our fiscal year 2016 ended on January 31, 2016, the second quarter ended on May 1, 2016 and the third quarter ended on July 31, 2016. Our fiscal year ended November 1, 2015, or fiscal year 2015, was also a 52-week fiscal year.
The accompanying condensed consolidated financial statements of Broadcom and the Partnership include the accounts of Broadcom and the Partnership, respectively, and their subsidiaries, and have been prepared by us in accordance with generally accepted accounting principles in the United States, or GAAP, for interim financial information. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The November 1, 2015 condensed consolidated

15


balance sheet data were derived from Avago’s audited consolidated financial statements included in Avago’s Annual Report on Form 10-K for fiscal year 2015, as filed with the Securities and Exchange Commission, or SEC, but do not include all disclosures required by GAAP. All intercompany transactions and balances have been eliminated in consolidation.
As a result of Broadcom’s controlling interest in the Partnership, we consolidate the financial results of the Partnership and present a noncontrolling interest for the portion of the Partnership it does not own in our condensed consolidated financial statements. Net loss attributable to the noncontrolling interest on the condensed consolidated statements of operations represents the portion of loss attributable to the economic interest in the Partnership owned by the Limited Partners.
The accompanying condensed consolidated financial statements include the results of operations of BRCM and other acquisitions commencing as of their respective acquisition dates.
The operating results for the fiscal quarter and three fiscal quarters ended July 31, 2016 are not necessarily indicative of the results that may be expected for fiscal year 2016, or for any other future period.
Significant Accounting Policies
Use of estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.
Reclassifications. Certain reclassifications have been made to the prior period condensed consolidated balance sheet and condensed consolidated statement of cash flows. These reclassifications have no impact on the previously reported net assets or net cash activities.
Recently Adopted Accounting Guidance
In November 2015, the Financial Accounting Standards Board, or FASB, issued guidance that simplifies the presentation of deferred tax assets and liabilities in a classified balance sheet. This guidance eliminates the current requirement to present deferred tax assets and liabilities as current and non-current in a classified balance sheet. Instead, all deferred tax assets and liabilities are classified as non-current. We adopted this guidance during the fiscal quarter ended January 31, 2016, on a prospective basis. The adoption resulted in $116 million of net current deferred tax assets being reclassified from other current assets to other long-term assets on our condensed consolidated balance sheet.
In April 2015, the FASB issued an amendment to the guidance related to the financial statement presentation of debt issuance costs. The new guidance is required to be applied retrospectively to each prior reporting period presented. The guidance requires certain debt issuance costs to be presented on the balance sheet as a direct reduction to the carrying amount of debt, consistent with debt discounts or premiums. In August 2015, the FASB further clarified that entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. We early-adopted this guidance during the fiscal quarter ended May 1, 2016, and applied its provisions retrospectively. The adoption resulted in $13 million of other current assets and $64 million of other long-term assets being reclassified to long-term debt on our condensed consolidated balance sheet as of November 1, 2015.
Recent Accounting Guidance Not Yet Adopted
In August 2016, the FASB issued guidance related to the classification of certain transactions on the statement of cash flows. This guidance will be effective for the first quarter of our fiscal year 2019, however early adoption is permitted. We are currently evaluating the impact that this guidance will have on our condensed consolidated financial statements.
In June 2016, the FASB issued new guidance requiring measurement and recognition of expected credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. This guidance will be effective for us in the first quarter of our fiscal year 2021; however early adoption is permitted. The new guidance is required to be applied using a modified retrospective approach with certain elements being adopted prospectively. We are currently evaluating the impact that this guidance will have on our condensed consolidated financial statements.
In March 2016, the FASB issued guidance that involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This guidance will be effective for the first quarter of our fiscal year 2018, however early adoption is permitted. We are currently evaluating the impact that this guidance will have on our condensed consolidated financial statements.
In February 2016, the FASB issued guidance related to the accounting for leases, which among other things, requires a lessee to recognize lease assets and lease liabilities on the balance sheet for operating leases. This guidance will be effective for the first quarter of our fiscal year 2020. The new guidance is required to be applied using a modified retrospective approach. We

16


are currently evaluating the impact that this guidance will have on our condensed consolidated financial statements.
In September 2015, the FASB issued guidance which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Acquirers must recognize measurement-period adjustments during the period of resolution, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. The guidance will be effective for the first quarter of our fiscal year 2017, however early adoption is permitted. We are currently evaluating the impact that this guidance will have on our condensed consolidated financial statements.
In August 2015, the FASB deferred the effective date of the guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. This guidance will be effective for the first quarter of our fiscal year 2019. Early adoption is permitted, but not before the first quarter of our fiscal year 2018. The new guidance is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. In addition, in May 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations, identifying performance obligations and the accounting for licenses of intellectual property, and narrow-scope improvements and practical expedients. We have not yet selected a transition method and are currently evaluating the impact of this guidance on our condensed consolidated financial statements.
2. Acquisitions
Acquisition of Broadcom Corporation
The Broadcom Merger closed on February 1, 2016, or the Acquisition Date, pursuant to the terms of the Broadcom Agreement. The aggregate consideration for the Broadcom Merger, which consisted of both cash and equity consideration, was approximately $28,758 million, net of cash acquired.
We funded the cash portion of the Broadcom Merger with the net proceeds from the issuance of the 2016 Term Loans, as defined and discussed in further detail in Note 6. “Borrowings,” as well as cash on hand of the combined companies.
BRCM was a leader in semiconductor solutions for wired and wireless communications and provided a broad portfolio of highly-integrated system-on-a-chip solutions that seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments. We acquired BRCM to position us as a global diversified leader in wired and wireless communication semiconductors and to deepen our broad portfolios, and to enable us to better address the evolving needs of customers across the wired and wireless end markets.
The aggregate consideration for the Broadcom Merger, net of cash acquired, consisted of the following (in millions):
Cash for outstanding BRCM common stock
 
$
16,798

Fair value of Broadcom ordinary shares issued for outstanding BRCM common stock
 
15,438

Fair value of Partnership REUs issued for outstanding BRCM common stock
 
3,140

Fair value of partially vested assumed restricted stock unit awards
 
182

Cash for vested BRCM equity awards
 
137

Effective settlement of pre-existing relationships
 
11

Total purchase consideration
 
35,706

Less: cash acquired
 
6,948

Total purchase consideration, net of cash acquired
 
$
28,758

Broadcom issued 112 million ordinary shares and the Partnership issued 23 million Partnership REUs, all of which are valued and presented in the above table, to former BRCM shareholders in the Broadcom Merger. Broadcom also assumed unvested restricted stock unit awards, or RSUs, originally granted by BRCM and converted them into 6 million of Broadcom RSUs. The portion of the fair value of partially vested assumed RSUs associated with prior service of BRCM employees represented a component of the total consideration, as presented above, and was valued based on Broadcom’s ordinary share price as of the Acquisition Date.
We allocated the purchase price to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The fair value of identifiable intangible assets acquired was based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, such as finalization of the estimated fair value of tax accounts, we may further revise our preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from the Acquisition Date). Any such revisions or changes may be material as we finalize the fair values of the tangible and intangible assets acquired and liabilities assumed.

17


Our preliminary allocation of the total purchase price, net of cash acquired, is as follows (in millions):
 
 
Estimated Fair Value
Trade accounts receivable
 
$
669

Inventory
 
1,853

Assets held-for-sale
 
833

Other current assets
 
194

Property, plant and equipment
 
889

Goodwill
 
23,076

Intangible assets
 
14,808

Other long-term assets
 
121

Total assets acquired
 
42,443

Accounts payable
 
(559
)
Employee compensation and benefits
 
(104
)
Current portion of long-term debt
 
(1,475
)
Other current liabilities
 
(791
)
Long-term debt
 
(139
)
Other long-term liabilities
 
(10,617
)
Total liabilities assumed
 
(13,685
)
Fair value of net assets acquired
 
$
28,758

Goodwill was primarily attributable to the assembled workforce, anticipated synergies and economies of scale expected from the operations of the combined company. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the Broadcom Merger. Goodwill is not expected to be deductible for tax purposes.
The assets held-for-sale represented BRCM’s businesses that are not aligned with our strategic objectives. Assets held-for-sale are discussed in further detail in Note 3. “Supplemental Financial Information.”
Our results of continuing operations for the fiscal quarter and three fiscal quarters ended July 31, 2016 include $2,314 million and $4,641 million of net revenue, respectively, attributable to BRCM. It is impracticable to determine the effect on net income attributable to BRCM for the periods presented as we immediately integrated BRCM into our ongoing operations. Transaction costs of $2 million and $39 million incurred in connection with the Broadcom Merger are included in selling, general and administrative expense in the condensed consolidated statements of operations for the fiscal quarter and three fiscal quarters ended July 31, 2016, respectively.
Intangible Assets
Identified intangible assets and their respective useful lives were as follows:
 
 
Approximate Fair Value
(in millions)
 
Weighted-Average Amortization Periods (in years)
Developed technology
 
$
9,010

 
6
Customer contracts and related relationships
 
2,703

 
2
Order backlog
 
750

 
< 1
Trade name
 
350

 
17
Other
 
45

 
16
Total identified finite-lived intangible assets
 
12,858

 
 
In-process research and development
 
1,950

 
N/A
Total identified intangible assets, net of assets held-for-sale
 
14,808

 
 
Intangible assets included in assets held-for-sale
 
320

 
 
Identified intangible assets
 
$
15,128

 
 

18


Developed technology relates to products for wired and wireless communication applications. We valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.
Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of BRCM. Customer contracts and related relationships were valued using the with-and-without-method under the income approach. In this method, the fair value was measured by the difference between the present values of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. The economic useful life was determined based on historical customer turnover rates.
Order backlog represents business under existing contractual obligations as of the Acquisition Date. The fair value of backlog was determined using the multi-period excess earnings method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period.
Trade name relates to the “Broadcom” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This valuation method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.
The fair value of in-process research and development, or IPR&D, was determined using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the IPR&D, less charges representing the contribution of other assets to those cash flows.
We believe the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of the Acquisition Date.
The following table summarizes the details of IPR&D by category as of the Acquisition Date (dollars in millions):
Description
 
IPR&D
 
Percentage of Completion
 
Estimated Cost to Complete
 
Expected Release Date (by fiscal year)
Set-top box solutions
 
$
90

 
56
%
 
$
90

 
2016 - 2017
Broadband carrier access solutions
 
390

 
34

 
376

 
2016 - 2018
Carrier switch solutions
 
270

 
51

 
255

 
2016 - 2019
Compute and connectivity solutions
 
170

 
61

 
136

 
2016 - 2018
Physical layer product solutions
 
190

 
51

 
71

 
2016 - 2019
Wireless connectivity combo solutions
 
770

 
57

 
364

 
2016 - 2018
Touch controllers
 
70

 
39

 
21

 
2016 - 2017
Discount rates of 14% and 16% were applied to the projected cash flows to reflect the risk related to these wired and wireless IPR&D, respectively. These discount rates represent a premium of 2% over the respective wired and wireless weighted-average cost of capital to reflect the higher risk and uncertainty of the cash flows for IPR&D relative to the overall businesses.
Subsequent to the Acquisition Date, $240 million of acquired IPR&D was written-off as we no longer intend to develop and invest in these projects. The majority of these abandoned IPR&D projects were included in the wireless connectivity combo and broadband carrier access solutions above.
Unaudited Pro Forma Information
The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if BRCM had been acquired as of the beginning of fiscal year 2015. The unaudited pro forma financial information for the three fiscal quarters ended July 31, 2016 combined the historical results of Avago for the fiscal quarter ended January 31, 2016, the historical results of BRCM for the three months ended December 31, 2015, representing BRCM’s previous reporting period prior to the Acquisition Date, and the historical results of Broadcom for the fiscal quarters ended May 1, 2016 and July 31, 2016. The pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to share-based compensation expense, the purchase accounting effect on inventory acquired, interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges in connection with the acquisition and acquisition costs. The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2015 or of the results of future operations of the combined business. Consequently,

19


actual results will differ from the unaudited pro forma information presented below (in millions, except for per share amounts):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Pro forma net revenue
 
$
3,789

 
$
3,828

 
$
11,148

 
$
11,272

Pro forma net income (loss) from continuing operations
 
(152
)
 
242

 
(611
)
 
(717
)
Pro forma net income (loss)
 
(164
)
 
238

 
(661
)
 
(703
)
Pro forma net income (loss) attributable to ordinary shares
 
(155
)
 
225

 
(624
)
 
(664
)
Pro forma income (loss) per share attributable to ordinary shares - basic
 
(0.39
)
 
0.60

 
(1.76
)
 
(1.78
)
Pro forma income (loss) per share attributable to ordinary shares - diluted
 
(0.39
)
 
0.59

 
(1.76
)
 
(1.78
)
3. Supplemental Financial Information
Cash, Cash Equivalents and Short-Term Investments
Cash equivalents included $270 million and $490 million of time deposits as of July 31, 2016 and November 1, 2015, respectively. As of July 31, 2016 and November 1, 2015, cash equivalents also included $300 million and $100 million of money-market funds, respectively. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds as of July 31, 2016 and November 1, 2015 approximates the carrying value and is determined using unadjusted prices in active, accessible markets for identical assets, as such they are classified as Level 1 assets in the fair value hierarchy.
Inventory
Inventory consists of the following (in millions):
 
 
July 31,
2016
 
November 1,
2015
Finished goods
 
$
499

 
$
177

Work-in-process
 
498

 
271

Raw materials
 
309

 
76

Total inventory
 
$
1,306

 
$
524

Assets Held-for-Sale
The following table summarizes components of assets held-for-sale (in millions):
 
 
July 31,
2016
 
November 1,
2015
Goodwill
 
$
147

 
$

Intangible assets, net
 
64

 

Other assets
 
35

 
22

Total assets held-for-sale
 
$
246

 
$
22

In connection with the Broadcom Merger, we classified certain BRCM businesses as assets held-for-sale on February 1, 2016. The carrying value of these assets as of July 31, 2016 represents the fair value determined in the preliminary purchase price allocation of the Broadcom Merger, adjusted for operating activities since the Acquisition Date. During the fiscal quarter ended July 31, 2016, we completed the sales of certain BRCM businesses for aggregate cash proceeds of $630 million. Subsequent to July 31, 2016, we completed the sale of an additional BRCM business for $200 million in cash. As part of these transactions, we are, in most cases, providing transitional services to provide short-term assistance for the buyers in assuming the operations of the purchased businesses. We do not have any material continuing involvement with these discontinued operations.

20


Discontinued Operations
We have presented the results of the BRCM businesses discussed above under “Assets Held-for-Sale,” as well as the sale of our Axxia business in fiscal year 2015, in discontinued operations. The following table summarizes the selected financial information of discontinued operations (in millions):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Net revenue
 
$
35

 
$
6

 
$
99

 
$
59

 
 
 
 
 
 
 
 
 
Income (loss) from discontinued operations before gain on disposals and income taxes
 
$
(54
)
 
$
(4
)
 
$
(115
)
 
$
13

Gain on disposals of discontinued operations
 
33

 

 
33

 
14

Benefit from (provision for) income taxes
 
9

 

 
32

 
(13
)
Income (loss) from discontinued operations, net of income taxes
 
$
(12
)
 
$
(4
)
 
$
(50
)
 
$
14

Accrued Rebate Activity
The following table summarizes activities related to accrued rebates included in other current liabilities on our condensed consolidated balance sheets (in millions):
 
 
Accrued Rebate Liabilities
Balance as of November 1, 2015
 
$
26

Liabilities assumed in acquisitions
 
359

Charged as a reduction of revenue
 
388

Reversal of unclaimed rebates
 
(3
)
Payments
 
(360
)
Balance as of July 31, 2016
 
$
410

We recorded customer rebate charges of $165 million in the fiscal quarter ended July 31, 2016.
Other Long-Term Liabilities
Other long-term liabilities consist of the following (in millions):
 
July 31,
2016
 
November 1,
2015
Deferred tax liabilities
$
9,614

 
$
9

Unrecognized tax benefits (a)
927

 
317

Other
130

 
55

Total other long-term liabilities
$
10,671

 
$
381

________________________________
(a) Includes accrued interest and penalties.
Supplemental Cash Flow Disclosures
At July 31, 2016 and November 1, 2015, we had $119 million and $78 million, respectively, of unpaid purchases of property, plant and equipment included in accounts payable. Amounts reported as unpaid purchases are presented as cash outflows from investing activities for purchases of property, plant and equipment in the condensed consolidated statements of cash flows in the period in which they are paid.

21


4. Goodwill and Intangible Assets
Goodwill
The following table summarizes changes in goodwill by segment (in millions):
 
Wired Infrastructure
 
Wireless Communications
 
Enterprise Storage
 
Industrial & Other
 
Total
Balance as of November 1, 2015
$
287

 
$
261

 
$
990

 
$
136

 
$
1,674

Broadcom Merger
17,395

 
5,681

 

 

 
23,076

Other acquisitions

 
21

 
11

 
8

 
40

Reclassification of goodwill related to certain assets held-for-sale

 

 
(6
)
 

 
(6
)
Balance as of July 31, 2016
$
17,682

 
$
5,963

 
$
995

 
$
144

 
$
24,784

During the three fiscal quarters ended July 31, 2016, we made three immaterial acquisitions in addition to the Broadcom Merger.
Intangible Assets
Intangible assets consist of the following (in millions):
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
As of July 31, 2016:
 
 
 
 
 
Purchased technology
$
12,179

 
$
(1,697
)
 
$
10,482

Customer and distributor relationships
4,401

 
(1,200
)
 
3,201

Backlog
848

 
(848
)
 

Trade names
528

 
(67
)
 
461

Other
99

 
(4
)
 
95

Intangible assets subject to amortization
18,055

 
(3,816
)
 
14,239

IPR&D
1,580

 

 
1,580

Total
$
19,635

 
$
(3,816
)
 
$
15,819

 
 
 
 
 
 
As of November 1, 2015:
 
 
 
 
 
Purchased technology
$
2,918

 
$
(1,165
)
 
$
1,753

Customer and distributor relationships
1,702

 
(459
)
 
1,243

Trade names
178

 
(41
)
 
137

Other
120

 
(101
)
 
19

Intangible assets subject to amortization
4,918

 
(1,766
)
 
3,152

IPR&D
125

 

 
125

Total
$
5,043

 
$
(1,766
)
 
$
3,277

During the three fiscal quarters ended July 31, 2016, $267 million of IPR&D was transferred to purchased technology upon completion of the respective project and $246 million of IPR&D was written off to restructuring, impairment and disposal charges for certain IPR&D projects that were abandoned as a result of integration efforts related to the Broadcom Merger.

22


Based on the amount of intangible assets subject to amortization at July 31, 2016, the expected amortization expense for each of the next five fiscal years and thereafter is as follows (in millions):
Fiscal Year:
 
 
2016 (remainder)
 
$
582

2017
 
4,197

2018
 
2,810

2019
 
2,046

2020
 
1,678

2021
 
1,339

Thereafter
 
1,587

Total
 
$
14,239

The weighted-average amortization periods remaining by intangible asset category as of July 31, 2016 were as follows (in years):
Amortizable intangible assets:
 
 
Purchased technology
 
6
Customer and distributor relationships
 
3
Trade name
 
14
Other
 
13
5. Earnings (Loss) Per Share
Broadcom
Basic net income (loss) per share is computed by dividing net income (loss) attributable to ordinary shares by the weighted-average number of Broadcom ordinary shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to ordinary shares and, if the Partnership REUs are dilutive, net income (loss) attributable to noncontrolling interest by the weighted-average number of Broadcom ordinary shares and potentially dilutive share equivalents outstanding during the period. Diluted shares outstanding include the dilutive effect of in-the-money share options, RSUs and employee share purchase rights under the Amended and Restated Broadcom Limited Employee Share Purchase Plan, or ESPP (together referred to as equity awards). Diluted shares outstanding also include Broadcom ordinary shares issuable upon exchange of the Partnership REUs (refer to Note 8. “Partners’ Capital” for additional information) for the fiscal quarter and three fiscal quarters ended July 31, 2016, and Broadcom ordinary shares issuable upon conversion of the 2.0% Convertible Senior Notes due 2021 issued by Avago, or the Convertible Notes, for the fiscal quarter and three fiscal quarters ended August 2, 2015.
The dilutive effect of equity awards is calculated based on the average share price for each fiscal period, using the treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising share options and to purchase shares under the ESPP, the amount of compensation cost for future service that we have not yet recognized, and the amount of tax benefits that would be recognized when equity awards become deductible for income tax purposes are collectively assumed to be used to repurchase ordinary shares.
The dilutive effect of the Partnership REUs is calculated using the if-converted method. The if-converted method assumes that the Partnership REUs were converted at the beginning of the reporting period.
The dilutive effect of the Convertible Notes was calculated using the treasury stock method based on our assumption that the Convertible Notes would be settled in cash. The treasury stock method assumed that the carrying value of the Convertible Notes represented proceeds, since settlement of the Convertible Notes tendered for conversion could be settled with cash, Avago ordinary shares or a combination of both at Avago’s option.
During the third quarter of fiscal year 2015, the Convertible Notes were converted in full and settled with a combination of cash and the issuance of 13.8 million Avago ordinary shares. The incremental Avago ordinary shares attributable to the conversion were a component of diluted shares for the period prior to settlement and a component of basic weighted-average shares outstanding subsequent to the conversion.
Diluted net income (loss) per share for the fiscal quarter and three fiscal quarters ended July 31, 2016 excluded the potentially dilutive effect of weighted-average outstanding equity awards to acquire 12 million ordinary shares in each period as

23


their effect was antidilutive. There were no material antidilutive equity awards for the fiscal quarter or three fiscal quarters ended August 2, 2015.
The following is a reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations for the periods presented (in millions, except per share data):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
August 2,
2015
 
July 31,
2016
 
August 2,
2015
Numerator - Basic: