10-Q 1 avgo-07302017x10q.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 30, 2017
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 for 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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 ¨
Emerging growth company ¨
Broadcom Cayman L.P.:
Large accelerated filer ¨
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨
Emerging growth company ¨
 
 
 
(Do not check if a smaller reporting company)
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 25, 2017, Broadcom Limited had 407,979,354 of its ordinary shares, no par value per share, outstanding.
As of August 25, 2017, Broadcom Cayman L.P. had 390,851,713 common partnership units outstanding (all of which are owned by Broadcom Limited) and 22,190,733 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 30, 2017 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 for periods prior to February 1, 2016 relate only to Avago Technologies Limited, our predecessor, and relate to Broadcom and the Partnership for the periods after February 1, 2016. Broadcom Corporation was indirectly acquired by Broadcom on February 1, 2016.
As of July 30, 2017, Broadcom Limited 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 represents restricted exchangeable limited partnership units, or Partnership REUs, the holders of which are referred to as the Limited Partners. 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 and the Limited Partners’ 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.
The material differences between Broadcom and the Partnership are discussed in various sections in this report, including separate financial statements (but combined footnotes), separate disclosure controls and procedures sections, separate certifications of periodic report under Section 302 of the Sarbanes-Oxley Act of 2002 and separate certifications 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 30, 2017

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

4


BROADCOM LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(in millions, except share amounts)
 
 
July 30,
2017
 
October 30,
2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
5,249

 
$
3,097

Short-term investments
 
200

 

Trade accounts receivable, net
 
2,417

 
2,181

Inventory
 
1,431


1,400

Other current assets
 
646


447

Total current assets
 
9,943

 
7,125

Long-term assets:
 
 
 
 
Property, plant and equipment, net
 
2,909

 
2,509

Goodwill
 
24,706

 
24,732

Intangible assets, net
 
11,927

 
15,068

Other long-term assets
 
457


532

Total assets
 
$
49,942

 
$
49,966

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,158

 
$
1,261

Employee compensation and benefits
 
546

 
517

Current portion of long-term debt
 

 
454

Other current liabilities
 
514


846

Total current liabilities
 
2,218

 
3,078

Long-term liabilities:
 
 
 
 
Long-term debt
 
13,572

 
13,188

Pension and post-retirement benefit obligations
 
503

 
531

Other long-term liabilities
 
10,945


11,293

Total liabilities
 
27,238

 
28,090

Commitments and contingencies (Note 12)
 


 


Shareholders’ equity:
 
 
 
 
Ordinary shares, no par value; 407,553,164 shares and 398,281,461 shares issued and outstanding on July 30, 2017 and October 30, 2016, respectively
 
20,180

 
19,241

Non-economic voting preference shares, no par value; 22,199,810 shares and 22,804,591 shares issued and outstanding on July 30, 2017 and October 30, 2016, respectively
 

 

Accumulated deficit
 
(245
)
 
(215
)
Accumulated other comprehensive loss
 
(133
)
 
(134
)
Total Broadcom Limited shareholders’ equity
 
19,802

 
18,892

Noncontrolling interest
 
2,902

 
2,984

Total shareholders’ equity
 
22,704

 
21,876

Total liabilities and shareholders’ equity
 
$
49,942

 
$
49,966


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 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Net revenue
 
$
4,463

 
$
3,792

 
$
12,792


$
9,104

Cost of products sold:
 
 
 
 
 
 
 
 
Cost of products sold
 
1,658

 
1,520

 
4,795

 
3,656

Purchase accounting effect on inventory
 
1

 
271

 
2

 
1,099

Amortization of acquisition-related intangible assets
 
655

 
211

 
1,853

 
539

Restructuring charges
 

 
8

 
16

 
41

Total cost of products sold
 
2,314

 
2,010

 
6,666

 
5,335

Gross margin
 
2,149

 
1,782

 
6,126

 
3,769

Research and development
 
827

 
814

 
2,464

 
1,868

Selling, general and administrative
 
200

 
230

 
605

 
582

Amortization of acquisition-related intangible assets
 
441

 
728

 
1,323

 
1,517

Restructuring, impairment and disposal charges
 
33

 
274

 
106

 
592

Total operating expenses
 
1,501

 
2,046

 
4,498

 
4,559

Operating income (loss)
 
648

 
(264
)
 
1,628

 
(790
)
Interest expense
 
(112
)
 
(139
)
 
(335
)
 
(479
)
Loss on extinguishment of debt
 

 
(21
)
 
(159
)
 
(74
)
Other income, net
 
12

 
4

 
46

 
1

Income (loss) from continuing operations before income taxes
 
548

 
(420
)
 
1,180

 
(1,342
)
Provision for (benefit from) income taxes
 
39

 
(117
)
 
(54
)
 
(199
)
Income (loss) from continuing operations
 
509

 
(303
)
 
1,234

 
(1,143
)
Loss from discontinued operations, net of income taxes
 
(2
)
 
(12
)
 
(11
)
 
(50
)
Net income (loss)
 
507

 
(315
)
 
1,223

 
(1,193
)
Net income (loss) attributable to noncontrolling interest
 
26

 
(17
)
 
63

 
(86
)
Net income (loss) attributable to ordinary shares
 
$
481

 
$
(298
)
 
$
1,160

 
$
(1,107
)
 
 
 
 
 
 
 
 
 
Basic income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
1.19

 
$
(0.72
)
 
$
2.91

 
$
(2.99
)
Loss per share from discontinued operations
 
(0.01
)
 
(0.03
)
 
(0.03
)
 
(0.13
)
Net income (loss) per share
 
$
1.18

 
$
(0.75
)
 
$
2.88

 
$
(3.12
)
 
 
 
 
 
 
 
 
 
Diluted income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
1.14

 
$
(0.72
)
 
$
2.79

 
$
(3.09
)
Loss per share from discontinued operations
 

 
(0.03
)
 
(0.02
)
 
(0.13
)
Net income (loss) per share
 
$
1.14

 
$
(0.75
)
 
$
2.77

 
$
(3.22
)
 
 
 
 
 
 
 
 
 
Weighted-average shares:
 
 
 
 
 
 
 
 
Basic
 
407

 
396

 
403

 
355

Diluted
 
445

 
419

 
442

 
370

 
 
 
 
 
 
 
 
 
Cash dividends declared and paid per share
 
$
1.02

 
$
0.50

 
$
3.06

 
$
1.43

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 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Net income (loss)
 
$
507

 
$
(315
)
 
$
1,223

 
$
(1,193
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Change in unrealized loss and prior service costs associated with defined benefit pension plans and post-retirement benefit plans
 

 
1

 
1

 
1

Other comprehensive income
 

 
1

 
1

 
1

Comprehensive income (loss)
 
507

 
(314
)
 
1,224

 
(1,192
)
Comprehensive income (loss) attributable to noncontrolling interest
 
26

 
(17
)
 
63

 
(86
)
Comprehensive income (loss) attributable to ordinary shares
 
$
481

 
$
(297
)
 
$
1,161

 
$
(1,106
)
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 30,
2017
 
July 31,
2016
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
1,223

 
$
(1,193
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
3,518

 
2,342

Share-based compensation
 
669

 
474

Excess tax benefits from share-based compensation
 

 
(68
)
Deferred taxes and other non-cash tax expense
 
(99
)
 
(353
)
Non-cash portion of debt extinguishment loss
 
159

 
51

Non-cash restructuring, impairment and disposal charges
 
54

 
268

Gain on disposition of assets
 
(23
)
 

Amortization of debt issuance costs and accretion of debt discount
 
19

 
27

Other
 
21

 
(10
)
Changes in assets and liabilities, net of acquisitions and disposals:
 
 
 
 
Trade accounts receivable, net
 
(236
)
 
(491
)
Inventory
 
(23
)
 
1,088

Accounts payable
 
(34
)
 
(61
)
Employee compensation and benefits
 
29

 
70

Other current assets and current liabilities
 
(570
)
 
(38
)
Other long-term assets and long-term liabilities
 
(115
)
 
(47
)
Net cash provided by operating activities
 
4,592

 
2,059

Cash flows from investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
(836
)
 
(530
)
Proceeds from disposals of properly, plant and equipment
 
1

 
5

Purchases of investments
 
(200
)
 
(58
)
Acquisitions of businesses, net of cash acquired
 
(40
)
 
(10,055
)
Proceeds from sales of businesses
 
10

 
698

Proceeds from sales and maturities of investments
 

 
89

Other
 
(5
)
 
(15
)
Net cash used in investing activities
 
(1,070
)
 
(9,866
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
13,550

 
15,926

Debt repayments
 
(13,668
)
 
(6,145
)
Payment of assumed debt
 

 
(1,475
)
Payment of debt issuance costs
 
(127
)
 
(108
)
Dividend and distribution payments
 
(1,306
)
 
(537
)
Issuance of ordinary shares
 
191

 
217

Excess tax benefits from share-based compensation
 

 
68

Payment of capital lease obligations
 
(10
)
 

Net cash provided by (used in) financing activities
 
(1,370
)
 
7,946

Net change in cash and cash equivalents
 
2,152

 
139

Cash and cash equivalents at the beginning of period
 
3,097

 
1,822

Cash and cash equivalents at end of period
 
$
5,249

 
$
1,961

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

8


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED
(in millions, except unit data)
 
 
July 30,
2017
 
October 30,
2016
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
4,929

 
$
3,044

Short-term investments
 
200

 

Trade accounts receivable, net
 
2,417

 
2,181

Inventory
 
1,431

 
1,400

Other current assets
 
966

 
500

Total current assets
 
9,943

 
7,125

Long-term assets:
 
 
 
 
Property, plant and equipment, net
 
2,909

 
2,509

Goodwill
 
24,706

 
24,732

Intangible assets, net
 
11,927

 
15,068

Other long-term assets
 
457

 
532

Total assets
 
$
49,942

 
$
49,966

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
1,158

 
$
1,261

Employee compensation and benefits
 
546

 
517

Current portion of long-term debt
 

 
454

Other current liabilities
 
514

 
846

Total current liabilities
 
2,218

 
3,078

Long-term liabilities:
 
 
 
 
Long-term debt
 
13,572

 
13,188

Pension and post-retirement benefit obligations
 
503

 
531

Other long-term liabilities
 
10,945

 
11,293

Total liabilities
 
27,238

 
28,090

Commitments and contingencies (Note 12)
 

 

Partners’ capital:
 
 
 
 

Common partnership units; 390,842,636 units and 390,237,855 units issued and outstanding on July 30, 2017 and October 30, 2016, respectively
 
19,935

 
19,026

Restricted exchangeable units; 22,199,810 units and 22,804,591 units issued and outstanding on July 30, 2017 and October 30, 2016, respectively
 
2,902

 
2,984

Accumulated other comprehensive loss
 
(133
)
 
(134
)
Total partners’ capital
 
22,704

 
21,876

Total liabilities and partners’ capital
 
$
49,942

 
$
49,966


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


9


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 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Net revenue
 
$
4,463

 
$
3,792

 
$
12,792

 
$
9,104

Cost of products sold:
 
 
 
 
 
 
 
 
Cost of products sold
 
1,658

 
1,520

 
4,795

 
3,656

Purchase accounting effect on inventory
 
1

 
271

 
2

 
1,099

Amortization of acquisition-related intangible assets
 
655

 
211

 
1,853

 
539

Restructuring charges
 

 
8

 
16

 
41

Total cost of products sold
 
2,314

 
2,010

 
6,666

 
5,335

Gross margin
 
2,149

 
1,782

 
6,126

 
3,769

Research and development
 
827

 
814

 
2,464

 
1,868

Selling, general and administrative
 
200

 
230

 
605

 
582

Amortization of acquisition-related intangible assets
 
441

 
728

 
1,323

 
1,517

Restructuring, impairment and disposal charges
 
33

 
274

 
106

 
592

Total operating expenses
 
1,501

 
2,046

 
4,498

 
4,559

Operating income (loss)
 
648

 
(264
)
 
1,628

 
(790
)
Interest expense
 
(112
)
 
(139
)
 
(335
)
 
(479
)
Loss on extinguishment of debt
 

 
(21
)
 
(159
)
 
(74
)
Other income, net
 
12

 
4

 
46

 
1

Income (loss) from continuing operations before income taxes
 
548

 
(420
)
 
1,180

 
(1,342
)
Provision for (benefit from) income taxes
 
39

 
(117
)
 
(54
)
 
(199
)
Income (loss) from continuing operations
 
509

 
(303
)
 
1,234

 
(1,143
)
Loss from discontinued operations, net of income taxes
 
(2
)
 
(12
)
 
(11
)
 
(50
)
Net income (loss)
 
$
507

 
$
(315
)
 
$
1,223

 
$
(1,193
)
 
 
 
 
 
 
 
 
 
General Partner's interest in net income (loss)
 
$
481

 
$
(298
)
 
$
1,160

 
$
(1,484
)
Limited Partners' interest in net income (loss)
 
$
26

 
$
(17
)
 
$
63

 
$
(86
)
Net income attributable to ordinary shareholders
 
$

 
$

 
$

 
$
377

 
 
 
 
 
 
 
 
 
Cash distributions paid per restricted exchangeable partnership unit
 
$
1.02

 
$
0.50

 
$
3.06

 
$
0.99

Cash distributions paid to General Partner
 
$
415

 
$
199

 
$
1,237

 
$
392

Cash dividends paid per ordinary share
 
$

 
$

 
$

 
$
0.44

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


10


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) — UNAUDITED
(in millions)
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Net income (loss)
 
$
507

 
$
(315
)
 
$
1,223

 
$
(1,193
)
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Change in unrealized loss and prior service costs associated with defined benefit pension plans and post-retirement benefit plans
 

 
1

 
1

 
1

Other comprehensive income
 

 
1

 
1

 
1

Comprehensive income (loss)
 
$
507

 
$
(314
)
 
$
1,224

 
$
(1,192
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


11


BROADCOM CAYMAN L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
(in millions)
 
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
Cash flows from operating activities:
 
 
 
 
Net income (loss)
 
$
1,223

 
$
(1,193
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
3,518

 
2,342

Share-based compensation
 
669

 
474

Excess tax benefits from share-based compensation
 

 
(68
)
Deferred taxes and other non-cash tax expense
 
(99
)
 
(353
)
Non-cash portion of debt extinguishment loss
 
159

 
51

Non-cash restructuring, impairment and disposal charges
 
54

 
268

Gain on disposition of assets
 
(23
)
 

Amortization of debt discount issuance costs and accretion of debt discount
 
19

 
27

Other
 
21

 
(10
)
Changes in assets and liabilities, net of acquisitions and disposals:
 
 
 
 
Trade accounts receivable, net
 
(236
)
 
(491
)
Inventory
 
(23
)
 
1,088

Accounts payable
 
(34
)
 
(61
)
Employee compensation and benefits
 
29

 
70

Other current assets and current liabilities
 
(570
)
 
(38
)
Other long-term assets and long-term liabilities
 
(115
)
 
(47
)
Net cash provided by operating activities
 
4,592

 
2,059

Cash flows from investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
(836
)
 
(530
)
Proceeds from disposals of property, plant and equipment
 
1

 
5

Purchases of investments
 
(200
)
 
(58
)
Acquisitions of businesses, net of cash acquired
 
(40
)
 
(10,055
)
Proceeds from sales of businesses
 
10

 
698

Proceeds from sales and maturities of investments
 

 
89

Other
 
(5
)
 
(15
)
Net cash used in investing activities
 
(1,070
)
 
(9,866
)
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of long-term debt
 
13,550

 
15,926

Debt repayments
 
(13,668
)
 
(6,145
)
Payment of assumed debt
 

 
(1,475
)
Payment of debt issuance costs
 
(127
)
 
(108
)
Dividend payments to ordinary shareholders
 

 
(122
)
Distributions paid to unit holders
 
(1,306
)
 
(415
)
Issuance of ordinary shares by General Partner
 

 
72

Capital transactions with General Partner
 
(76
)
 
99

Excess tax benefits from share-based compensation
 

 
68

Payment of capital lease obligations
 
(10
)
 

Net cash provided by (used in) financing activities
 
(1,637
)
 
7,900

Net change in cash and cash equivalents
 
1,885

 
93

Cash and cash equivalents at the beginning of period
 
3,044

 
1,822

Cash and cash equivalents at end of period
 
$
4,929

 
$
1,915

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

12


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, is a leading designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. We have a history of innovation and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, 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.
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. Broadcom is the Partnership’s sole General Partner and 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 represents restricted exchangeable limited partnership units, or Partnership REUs, the holders of which are referred to as the Limited Partners. 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.
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 which represents the outstanding Partnership REUs and transactions between Broadcom and the Partnership, which we account for as capital transactions. Refer to Note 7. “Shareholders’ Equity” and Note 8. “Partners’ Capital” for additional information.
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 for periods prior to February 1, 2016 relate to Avago, our predecessor, and relate to Broadcom and the Partnership for the periods after February 1, 2016.
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 29, 2017, or fiscal year 2017, is a 52-week fiscal year. The first quarter of our fiscal year 2017 ended on January 29, 2017, the second quarter ended on April 30, 2017 and the third quarter ended on July 30, 2017. Our fiscal year ended October 30, 2016, or fiscal year 2016, 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 October 30, 2016 condensed consolidated balance sheet data were derived from Broadcom’s audited consolidated financial statements included in Broadcom’s Annual Report on Form 10-K for fiscal year 2016, or 2016 Annual Report on Form 10-K, 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 we do not own in our condensed consolidated financial statements. Net income (loss) attributable to noncontrolling interest in the condensed consolidated statements of operations represents the portion of income (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 Broadcom Corporation, or BRCM, and other acquisitions commencing as of their respective acquisition dates.

13


The operating results for the fiscal quarter and three fiscal quarters ended July 30, 2017 are not necessarily indicative of the results that may be expected for fiscal year 2017, 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences could affect the results of operations reported in future periods.
Reclassifications. Certain reclassifications have been made to the prior period condensed consolidated statement of cash flows. These reclassifications had no impact on the previously reported net cash activities.
Recently Adopted Accounting Guidance
In the first quarter of fiscal year 2017, we early adopted an accounting standards update issued by the Financial Accounting Standards Board, or FASB, in March 2016 that simplified the accounting for certain aspects of stock-based payments to employees. The standard eliminated (i) the requirement to report excess tax benefits and certain tax deficiencies related to share-based payment transactions as additional paid-in capital and (ii) the requirement that excess tax benefits be realized before companies can recognize them. The standard required a modified-retrospective transition method by means of a cumulative-effect adjustment as of the beginning of the period in which the guidance is adopted. As a result of adoption, we recognized tax benefits of $56 million and $237 million as discrete items for the fiscal quarter and three fiscal quarters ended July 30, 2017, respectively, a $47 million cumulative-effect adjustment to reduce our accumulated deficit and a $3 million cumulative-effect adjustment to increase our noncontrolling interest for previously unrecognized excess tax benefits as of October 30, 2016. In connection with the adoption, we elected to present excess tax benefits within operating activities on the statement of cash flows prospectively and we continued our existing practice of estimating forfeitures.
Recent Accounting Guidance Not Yet Adopted
In October 2016, the FASB issued updated guidance related to the recognition of income tax consequences of an intra-entity transfer of an asset other than inventory. This guidance will be effective for the first quarter of our fiscal year 2019; however, early adoption is permitted. The adoption of this guidance will increase our income tax provision for periods in which we perform intra-entity transfers.
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 will present our statements of cash flows in accordance with this guidance for the affected transactions occurring subsequent to adoption.
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 are evaluating the impact 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 2016, the FASB issued 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 do not expect to early adopt this guidance. We have not selected a transition method and are evaluating the impact this guidance will have on our condensed consolidated financial statements.

14


2. Acquisitions
Acquisition of Broadcom Corporation
Our results of continuing operations for the fiscal quarter and three fiscal quarters ended July 31, 2016 included $2,314 million and $4,641 million of net revenue, respectively, attributable to BRCM, which we acquired on February 1, 2016, or the Acquisition Date. It is impracticable to determine the effect on net income (loss) 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 related to our acquisition of BRCM, or 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.
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 and 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 related to the acquisition and acquisition costs. The unaudited pro forma information presented below is for informational purposes only and is 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 (in millions, except for per share amounts):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 31,
2016
 
July 31,
2016
Pro forma net revenue
 
$
3,789

 
$
11,148

Pro forma net loss from continuing operations
 
$
(152
)
 
$
(611
)
Pro forma net loss
 
$
(164
)
 
$
(661
)
Pro forma net loss attributable to ordinary shares
 
$
(155
)
 
$
(625
)
Pro forma net loss per share attributable to ordinary shares - basic and diluted
 
$
(0.39
)
 
$
(1.59
)
Pending Acquisition of Brocade Communications Systems, Inc.
On November 2, 2016, we entered into an Agreement and Plan of Merger, or the Brocade Agreement, by and among Broadcom, BRCM, Brocade Communications Systems, Inc., a Delaware corporation, or Brocade, and Bobcat Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of BRCM, or Merger Sub. On December 18, 2016, BRCM assigned all of its rights and obligations under the Brocade Agreement and transferred all of the issued and outstanding capital stock of Merger Sub to LSI Corporation, or LSI. The Brocade Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into Brocade with Brocade as the surviving corporation, or the Brocade Acquisition. As a result of the Brocade Acquisition, Brocade will become an indirect subsidiary of Broadcom and the Partnership.
Under the Brocade Agreement, at the effective time of the Brocade Acquisition, each issued and outstanding share of Brocade common stock held by Brocade stockholders who do not perfect their appraisal rights with respect to the Brocade Acquisition will be converted into the right to receive $12.75 in cash, without interest. As of November 2, 2016, the Brocade Acquisition was valued at approximately $5.5 billion. We intend to finance the transaction with cash on hand from both companies and new debt financing.
We will also assume certain vested (to the extent not in-the-money) and all unvested Brocade stock options, restricted stock units, or RSUs, and performance stock units, or PSUs, held by continuing employees and service providers. All vested in-the-money Brocade stock options, after giving effect to any acceleration, and all other RSUs and PSUs will be cashed out at the effective time of the Brocade Acquisition.
Consummation of the Brocade Acquisition is subject to the satisfaction or waiver of customary closing conditions, including the receipt of clearance from The Committee on Foreign Investment in the United States, and the absence of certain pending governmental litigation with respect to the transactions contemplated by the Brocade Agreement.

15


The Brocade Agreement contains certain termination rights for us and Brocade, and further provides that, upon termination of the Brocade Agreement under certain specified circumstances, Brocade will be obligated to pay us a termination fee of $195 million.
We expect the Brocade Acquisition to close during the fourth quarter of our fiscal year 2017, subject to the satisfaction of the remaining closing conditions.
Pending Divestiture of Brocade’s IP Networking Business
Under the Brocade Agreement, Brocade has agreed to cooperate with us to facilitate the sale, disposition or other transfer of its IP Networking business, including its acquired Ruckus Wireless business. The consummation of the Brocade Acquisition is not conditioned on the divestiture of Brocade’s IP Networking business.
On February 22, 2017, we announced our agreement to sell a portion of Brocade’s IP Networking business, including the Ruckus Wireless and ICX Switch businesses, to ARRIS International plc for cash consideration of $800 million, plus the additional cost of unvested assumed employee stock awards. The closing is subject to regulatory approvals in various jurisdictions and other customary closing conditions but does not require shareholder approval by either company and is not subject to any financing conditions. We have also entered into an agreement to sell the data center portion of Brocade’s IP networking business to Extreme Networks, Inc. These transactions are contingent on the closing of the Brocade Acquisition and are expected to close within one month following the closing of the Brocade Acquisition.
3. Supplemental Financial Information
Cash Equivalents and Short-Term Investments
Cash equivalents included $3,253 million and $1,022 million of time deposits as of July 30, 2017 and October 30, 2016, respectively. As of July 30, 2017, cash equivalents also included $200 million of money-market funds. As of July 30, 2017, short-term investments included $200 million of time deposits with original maturities greater than three months but less than one year. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds, which was consistent with their carrying value, was determined using unadjusted prices in active, accessible markets for identical assets, and as such they were classified as Level 1 assets in the fair value hierarchy.
Accounts Receivable Factoring
During the fiscal quarter ended July 30, 2017, we entered into a factoring agreement with a third-party financial institution to sell certain of our trade accounts receivable on a non-recourse basis. We account for these transactions as sales of receivables and record cash proceeds when received as cash provided by operating activities in the condensed consolidated statements of cash flows. Total trade accounts receivable sold under the factoring agreement were $78 million during the fiscal quarter ended July 30, 2017. Factoring fees for the sales of receivables were recorded in other income, net and were not material for the period presented.
Inventory
The following table presents details of inventory (in millions):
 
 
July 30,
2017
 
October 30,
2016
Finished goods
 
$
505

 
$
431

Work-in-process
 
689

 
596

Raw materials
 
237

 
373

Total inventory
 
$
1,431

 
$
1,400

Property, Plant and Equipment
In connection with our campus rationalization efforts, during our second fiscal quarter ended April 30, 2017, we entered into an agreement to sell our Irvine campus for $443 million. The sale was completed subsequent to our fiscal quarter ended July 30, 2017 and we leased back a portion of the campus at market rental rates. There was no significant gain or loss recognized upon completion of the sale.

16


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):
 
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
Beginning balance
 
$
317

 
$
26

Liabilities assumed in acquisitions
 

 
359

Charged as a reduction of revenue
 
194

 
388

Reversal of unclaimed rebates
 
(68
)
 
(3
)
Payments
 
(305
)
 
(360
)
Ending balance
 
$
138

 
$
410

We recorded customer rebate charges of $74 million and $165 million in the fiscal quarters ended July 30, 2017 and July 31, 2016, respectively.
Other Long-Term Liabilities
The following table presents details of other long-term liabilities (in millions):
 
 
July 30,
2017
 
October 30,
2016
Deferred tax liabilities
 
$
9,859

 
$
10,287

Unrecognized tax benefits (a)
 
1,031

 
893

Other
 
55

 
113

Total other long-term liabilities
 
$
10,945

 
$
11,293

________________________________
(a) Includes accrued interest and penalties.
Discontinued Operations
During fiscal year 2016, we sold certain BRCM businesses for aggregate cash proceeds of $830 million. In connection with these sales, we provided transitional services to the buyers as short-term assistance in assuming the operations of the purchased businesses. We do not have any material continuing involvement with these businesses and have presented their results in discontinued operations.
The following table summarizes the selected financial information of discontinued operations (in millions):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Net revenue
 
$
4

 
$
35

 
$
9

 
$
99

 
 
 
 
 
 
 
 
 
Loss from discontinued operations before gain on disposals and income taxes
 
$
(2
)
 
$
(54
)
 
$
(11
)
 
$
(115
)
Gain on disposals of discontinued operations
 

 
33

 

 
33

Benefit from income taxes
 

 
9

 

 
32

Loss from discontinued operations, net of income taxes
 
$
(2
)
 
$
(12
)
 
$
(11
)
 
$
(50
)

17


Supplemental Cash Flow Information
The following table summarizes supplemental cash flow information (in millions):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Cash paid for interest
 
$
206

 
$
198

 
$
309

 
$
343

Cash paid for income taxes
 
$
35

 
$
63

 
$
241

 
$
143

At July 30, 2017 and October 30, 2016, we had $115 million and $159 million, respectively, of unpaid purchases of property, plant and equipment included in accounts payable and other current liabilities.
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 October 30, 2016
 
$
17,641

 
$
5,952

 
$
995

 
$
144

 
$
24,732

Broadcom Merger adjustments
 
(25
)
 
(7
)
 

 

 
(32
)
Other
 
6

 

 

 

 
6

Balance as of July 30, 2017
 
$
17,622

 
$
5,945

 
$
995

 
$
144

 
$
24,706

During the first fiscal quarter ended January 29, 2017, we made adjustments to certain tax balances related to the Broadcom Merger, resulting in a $32 million decrease in goodwill.
Intangible Assets
The following table presents details of intangible assets (in millions):
 
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
As of July 30, 2017:
 
 
 
 
 
 
Purchased technology
 
$
12,773

 
$
(3,703
)
 
$
9,070

Customer contracts and related relationships
 
4,240

 
(2,669
)
 
1,571

Trade names
 
528

 
(107
)
 
421

Other
 
123

 
(20
)
 
103

Intangible assets subject to amortization
 
17,664

 
(6,499
)
 
11,165

In-process research and development
 
762

 

 
762

Total
 
$
18,426

 
$
(6,499
)
 
$
11,927

 
 
 
 
 
 
 
As of October 30, 2016:
 
 
 
 
 
 
Purchased technology
 
$
12,182

 
$
(1,855
)
 
$
10,327

Customer contracts and related relationships
 
4,231

 
(1,377
)
 
2,854

Trade names
 
528

 
(77
)
 
451

Other
 
107

 
(7
)
 
100

Intangible assets subject to amortization
 
17,048

 
(3,316
)
 
13,732

In-process research and development
 
1,336

 

 
1,336

Total
 
$
18,384

 
$
(3,316
)
 
$
15,068


18


Based on the amount of intangible assets subject to amortization at July 30, 2017, the expected amortization expense for each of the next five years and thereafter was as follows (in millions):
Fiscal Year:
 
 
2017 (remainder)
 
$
1,102

2018
 
2,960

2019
 
2,192

2020
 
1,820

2021
 
1,435

Thereafter
 
1,656

Total
 
$
11,165

The weighted-average amortization periods remaining by intangible asset category as of July 30, 2017 were as follows (in years):
Purchased technology
 
5
Customer contracts and related relationships
 
3
Trade name
 
13
Other
 
11
5. Net Income (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 shares outstanding during the period. Diluted shares outstanding included 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) for the fiscal quarter and three fiscal quarters ended July 30, 2017. Diluted shares outstanding also included Broadcom ordinary shares issuable upon exchange of the Partnership REUs (refer to Note 8. “Partners’ Capital” for additional information) for all periods presented.
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 and the amount of compensation cost for future service that we have not yet recognized are collectively assumed to be used to repurchase ordinary shares. For the fiscal quarter and three fiscal quarters ended July 31, 2016, the amount of tax benefits that would be recognized when equity awards become deductible for income tax purposes was also 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.
Diluted net 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 their effect was antidilutive.

19


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 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Numerator - Basic:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
509

 
$
(303
)
 
$
1,234

 
$
(1,143
)
Less: Income (loss) from continuing operations attributable to noncontrolling interest
 
26

 
(16
)
 
63

 
(83
)
Income (loss) from continuing operations attributable to ordinary shares
 
483

 
(287
)
 
1,171

 
(1,060
)
 
 
 
 
 
 
 
 
 
Loss from discontinued operations, net of income taxes
 
(2
)
 
(12
)
 
(11
)
 
(50
)
Less: Loss from discontinued operations, net of income taxes, attributable to noncontrolling interest
 

 
(1
)
 

 
(3
)
Loss from discontinued operations, net of income taxes, attributable to ordinary shares
 
(2
)
 
(11
)
 
(11
)
 
(47
)
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to ordinary shares
 
$
481

 
$
(298
)
 
$
1,160

 
$
(1,107
)
 
 
 
 
 
 
 
 
 
Numerator - Diluted:
 
 
 
 
 
 
 
 
Income (loss) from continuing operations
 
$
509

 
$
(303
)
 
$
1,234

 
$
(1,143
)
Loss from discontinued operations, net of income taxes
 
(2
)
 
(12
)
 
(11
)
 
(50
)
Net income (loss)
 
$
507

 
$
(315
)
 
$
1,223

 
$
(1,193
)
Denominator:
 
 
 
 
 
 
 
 
Weighted-average ordinary shares outstanding - basic
 
407

 
396

 
403

 
355

Dilutive effect of equity awards
 
16

 

 
16

 

Exchange of noncontrolling interest for ordinary shares
 
22

 
23

 
23

 
15

Weighted-average ordinary shares outstanding - diluted
 
445

 
419

 
442

 
370

 
 
 
 
 
 
 
 
 
Basic income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
1.19

 
$
(0.72
)
 
$
2.91

 
$
(2.99
)
Loss per share from discontinued operations, net of income taxes
 
(0.01
)
 
(0.03
)
 
(0.03
)
 
(0.13
)
Net income (loss) per share
 
$
1.18

 
$
(0.75
)
 
$
2.88

 
$
(3.12
)
 
 
 
 
 
 
 
 
 
Diluted income (loss) per share attributable to ordinary shares:
 
 
 
 
 
 
 
 
Income (loss) per share from continuing operations
 
$
1.14

 
$
(0.72
)
 
$
2.79

 
$
(3.09
)
Loss per share from discontinued operations, net of income taxes
 

 
(0.03
)
 
(0.02
)
 
(0.13
)
Net income (loss) per share
 
$
1.14

 
$
(0.75
)
 
$
2.77

 
$
(3.22
)
The Partnership
Income (loss) per unit for the Partnership is not required to be presented as its Common Units and Partnership REUs are not publicly traded.

20


6. Borrowings
Senior Notes
On January 19, 2017, two Broadcom subsidiaries, BRCM and Broadcom Cayman Finance Limited, or the Co-Issuers, completed the issuance and sale of senior unsecured notes, or Senior Notes, in an aggregate principal amount of $13,550 million. Each series of Senior Notes is fully and unconditionally guaranteed, jointly and severally, on an unsecured, unsubordinated basis by Broadcom, the Partnership, and BC Luxembourg S.à r.l., an indirect subsidiary of Broadcom, or collectively, the Guarantors, subject to certain release conditions described in the indenture governing the Senior Notes, or the Indenture. The Co-Issuers may redeem all or a portion of the Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the Indenture. In the event of a change of control triggering event, each holder of Senior Notes will have the right to require us to purchase for cash all or a portion of their Senior Notes at a redemption price of 101% of the aggregate principal amount of such Senior Notes plus accrued and unpaid interest. The Indenture also contains covenants that restrict, among other things, the ability of Broadcom and its subsidiaries to incur additional secured debt and consummate certain sale and leaseback transactions, and the ability of the Co-Issuers and the Guarantors to merge, consolidate or sell all or substantially all of their assets. We were in compliance with all of the covenants described in the Indenture as of July 30, 2017.
The Co-Issuers used the net proceeds, plus cash on hand, to repay all of the term loans outstanding under our guaranteed, collateralized credit agreement, or the 2016 Credit Agreement, dated February 1, 2016, in the aggregate amount of $13,555 million and to pay $127 million of related fees and expenses. Each series of Senior Notes pays interest semi-annually in cash in arrears on January 15 and July 15 of each year, which began on July 15, 2017. The Senior Notes are recorded as long-term debt, net of original issue discount and capitalized debt issuance costs. The discount and debt issuance costs associated with the issuance of the Senior Notes are amortized to interest expense over their respective terms. The effective interest rates for fixed-rate debt include the stated interest on the notes, the accretion of the original issue discount and amortization of the debt issuance costs.
As a result of the repayment of the outstanding term loans under the 2016 Credit Agreement, during the three fiscal quarters ended July 30, 2017, we wrote-off $159 million of debt issuance costs, which were included in loss on extinguishment of debt in the condensed consolidated statements of operations.
In connection with the issuance of the Senior Notes, the Co-Issuers and Guarantors entered into a registration rights agreement pursuant to which they agreed to use commercially reasonable efforts to file one or more registration statements pursuant to the Securities Act of 1933, as amended, to exchange each series of Senior Notes for new notes, with terms substantially identical in all material respects to such series of Senior Notes and to cause the registration statement to be declared effective by the SEC on or before July 13, 2018. If the Co-Issuers and Guarantors do not comply with these obligations with respect to each series of the Senior Notes, they will be subject to interest penalties.
The following table summarizes details of our Senior Notes:
 
 
July 30, 2017
 
 
Interest Rate
 
Effective Interest Rate
 
Issuance Price
 
Amount
(In millions)
Fixed rate notes due January 2020
 
2.375
%
 
2.615
%
 
99.774
%
 
$
2,750

Fixed rate notes due January 2022
 
3.000
%
 
3.214
%
 
99.592
%
 
3,500

Fixed rate notes due January 2024
 
3.625
%
 
3.744
%
 
99.896
%
 
2,500

Fixed rate notes due January 2027
 
3.875
%
 
4.018
%
 
99.558
%
 
4,800

Unaccreted discount and unamortized debt issuance costs
 
 
(117
)
Carrying value of Senior Notes
 
 
$
13,433

Revolving Credit Facility
The 2016 Credit Agreement also provides for a revolving credit facility, or the 2016 Revolving Credit Facility, that permits us to borrow from time to time in an aggregate principal amount of up to $500 million for working capital and other corporate purposes, including swingline loans of up to $150 million in the aggregate and for the issuance of letters of credit of up to $100 million in the aggregate, which, in the case of swingline loans and letters of credit, reduce the available borrowing capacity under the 2016 Revolving Credit Facility on a dollar for dollar basis.
As of July 30, 2017, there were no borrowings outstanding under the 2016 Revolving Credit Facility or any material outstanding letters of credit. Unamortized debt issuance costs related to the 2016 Revolving Credit Facility were $7 million and $9 million as of July 30, 2017 and October 30, 2016, respectively, and were included in other long-term assets on the condensed consolidated balance sheets.

21


We were in compliance with all of the covenants described in the 2016 Credit Agreement as of July 30, 2017.
Assumed Senior Notes
The following table presents the details of the outstanding long-term debt assumed in connection with the acquisition of BRCM, or the Assumed Senior Notes:
 
 
July 30, 2017
 
 
Interest Rate
 
Effective Interest Rate
 
Amount
(in millions)
Fixed rate notes due November 2018
 
2.70
%
 
2.70
%
 
$
117

Fixed rate notes due August 2022 - August 2034
 
2.50% - 4.50%

 
2.50% - 4.50%

 
22

Carrying value of Assumed Senior Notes
 
 
$
139

We were in compliance with all of the covenants described in the indentures governing the Assumed Senior Notes as of July 30, 2017.
Fair Value of Debt
As of July 30, 2017, the estimated fair value of the Senior Notes and the Assumed Senior Notes was $13,982 million. The fair value of the Senior Notes and the Assumed Senior Notes was classified as Level 2 as we used quoted prices from less active markets.
Future Principal Payments of Debt
The future scheduled principal payments for the outstanding Senior Notes and Assumed Senior Notes as of July 30, 2017 were as follows (in millions):
Fiscal Year:
 
 
2017 (remainder)
 
$

2018
 
117

2019
 

2020
 
2,750

2021
 

Thereafter
 
10,822

Total
 
$
13,689

7. Shareholders’ Equity
Noncontrolling Interest
The Limited Partners held a noncontrolling interest of approximately 5% in the Partnership through their ownership of Partnership REUs as of July 30, 2017 and October 30, 2016.
Broadcom adjusts the net income (loss) in its condensed consolidated statements of operations to exclude the noncontrolling interest’s proportionate share of the results. In addition, Broadcom presents the proportionate share of equity attributable to the noncontrolling interest as a separate component of shareholders’ equity.
On January 30, 2017, Broadcom registered 23 million ordinary shares to allow for Limited Partners to exchange their Partnership REUs pursuant to the Partnership Agreement. Effective February 1, 2017, subject to certain additional requirements and potential deferrals as set forth in the Partnership Agreement, Limited Partners have the right to require the Partnership to repurchase some or all of such Limited Partner’s Partnership REUs for consideration, as determined by Broadcom in its sole discretion, of either one Broadcom ordinary share or a cash amount as determined under the Partnership Agreement for each Partnership REU submitted for repurchase.

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During the fiscal quarter and three fiscal quarters ended July 30, 2017, the Partnership exchanged 0.1 million and 0.6 million Partnership REUs, respectively, pursuant to exchange notices received. In accordance with the terms of the Partnership Agreement, the exchange notices were satisfied by exchanging these Partnership REUs for the same number of newly issued Broadcom ordinary shares valued at $19 million and $79 million, respectively, for the fiscal quarter and three fiscal quarters ended July 30, 2017. The exchanges represented increases in our ownership interest in the Partnership and were accounted for as equity transactions, with no gain or loss recorded in Broadcom’s condensed consolidated statements of operations. Pursuant to the terms of the Partnership Agreement, upon the exchange of Partnership REUs, each such Partnership REU was cancelled and the Partnership issued the same number of Common Units to the General Partner concurrently with the exchange.
Dividends
The following table summarizes dividend information for the periods presented (in millions, except per share data):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Cash dividends paid per ordinary share
 
$
1.02

 
$
0.50

 
$
3.06

 
$
1.43

Cash dividends paid to ordinary shareholders
 
$
415

 
$
199

 
$
1,237

 
$
514

Share-Based Compensation Expense
The following table summarizes share-based compensation expense reported in continuing operations related to share-based awards granted to employees and directors for the periods presented (in millions):
 
 
Fiscal Quarter Ended
 
Three Fiscal Quarters Ended
 
 
July 30,
2017
 
July 31,
2016
 
July 30,
2017
 
July 31,
2016
Cost of products sold
 
$
18

 
$
15

 
$
47

 
$
34

Research and development
 
174

 
144

 
465

 
294

Selling, general and administrative
 
59

 
54

 
156

 
128

Total share-based compensation expense
 
$
251

 
$
213

 
$
668

 
$
456

Equity Incentive Award Plans
A summary of time and market-based RSU activity is as follows (in millions, except per share data):
 
 
Number of RSUs
Outstanding
 
Weighted-
Average
Grant Date
Fair Value
Per Share
Balance as of October 30, 2016
 
17

 
$
130.71

Granted
 
8

 
$
197.55

Vested
 
(5
)
 
$
126.26

Forfeited
 
(2
)
 
$
140.00

Balance as of July 30, 2017
 
18

 
$
161.04

During the three fiscal quarters ended July 30, 2017, we granted market-based RSUs that included the usual service conditions as well as market conditions related to total shareholder return, or TSR, as compared to the TSR of an index group of companies. Under the terms of the agreement, grantees may receive from 0% to 450% of the original grant. Share-based compensation expense for these market-based RSUs was measured at the grant date and recognized, based on the number of shares ultimately expected to vest, using a graded vesting method over the service period of 4 years.
Total grant-date fair value of RSUs vested during the three fiscal quarters ended July 30, 2017 was $633 million. Total unrecognized compensation cost related to unvested RSUs as of July 30, 2017 was $2,293 million, which is expected to be recognized over the remaining weighted-average service period of 3.1 years.

23


A summary of time and market-based share option activity is as follows (in millions, except years and per share data):
 
 
Number of Options
Outstanding
 
 
Weighted-
Average
Exercise Price
Per Share
 
Weighted-
Average
Remaining
Contractual
Life (In years)
 
Aggregate
Intrinsic
Value
Balance as of October 30, 2016
 
15

 
 
$
48.77

 
 
 
 
Exercised
 
(4
)
 
 
$
45.10

 
 
 
$
562

Cancelled
 

*
 
$
65.05

 
 
 
 
Balance as of July 30, 2017
 
11

 
 
$
49.50

 
3.06
 
$
2,211

Fully vested as of July 30, 2017
 
9

 
 
$
45.94

 
2.91
 
$
1,777

Fully vested and expected to vest as of July 30, 2017
 
11

 
 
$
49.50

 
3.06
 
$
2,211

________________________________
* Represents less than 0.5 million shares.
The total unrecognized compensation cost related to unvested share options as of July 30, 2017 was $25 million, which is expected to be recognized over the remaining weighted-average service period of 0.9 years.
8. Partners’ Capital
Effective February 1, 2017, subject to certain additional requirements and potential deferrals as set forth in the Partnership Agreement, Limited Partners have the right to require the Partnership to repurchase some or all of such Limited Partner’s Partnership REUs for consideration, as determined by Broadcom in its sole discretion, of either one Broadcom ordinary share or a cash amount as determined under the Partnership Agreement for each Partnership REU submitted for repurchase.
During the fiscal quarter and three fiscal quarters ended July 30, 2017, the Partnership exchanged 0.1 million and 0.6 million Partnership REUs, respectively, pursuant to exchange notices received. In accordance with the terms of the Partnership Agreement, the exchange notices were satisfied by exchanging these Partnership REUs for the same number of newly issued Broadcom ordinary shares valued at $19 million and $79 million, respectively, for the fiscal quarter and three fiscal quarters ended July 30, 2017. The issuances of shares were accounted for as a capital contribution by Broadcom to the Partnership. The exchanges of Partnership REUs were recorded as increases to the Common Units balance and reductions to the Partnership REUs balance within partners' capital of the Partnership’s condensed consolidated balance sheet. Pursuant to the terms of the Partnership Agreement, upon the exchange of Partnership REUs, each such Partnership REU was cancelled and the Partnership issued the same number of Common Units to the General Partner concurrently with the exchange.
Share-Based Compensation Expense
Share-based incentive awards are provided to employees and Broadcom’s directors under the terms of various Broadcom equity incentive plans. Refer to Note 7. “Shareholders’ Equity” for further details.
Capital Transactions with General Partner
The following table summarizes capital transactions with the General Partner f