Broadcom Reports Fourth Quarter and Full Year 2012 Results PR Newswire IRVINE, Calif., Jan. 29, 2013 IRVINE, Calif., Jan. 29, 2013 /PRNewswire/ -- — Record 2012 Net Revenue: $8.01 billion — — Record 2012 Cash Flow from Operations: $1.93 billion — — Raises Quarterly Cash Dividend by 10 Percent to $.11 Per Share — Fourth Quarter 2012 GAAP Non-GAAP Results Total net revenue $2.08 billion Diluted EPS $.43 $.76 ($.04 better than First Call ($.03 better than First consensus) Call consensus) Broadcom Corporation (NASDAQ: BRCM), a global innovation leader in semiconductor solutions for wired and wireless communications, today reported unaudited financial results for its fourth quarter and year ended December 31, 2012. "Broadcom delivered record revenue in each of our three business groups and record cash flow from operations in 2012, reflecting our continued market share growth and strong economics." said Scott McGregor, Broadcom's President and Chief Executive Officer. "Based upon these results, Broadcom's Board of Directors today announced a ten percent increase in our dividend, consistent with our commitment to enhancing shareholder value." Net revenue for the fourth quarter of 2012 was $2.08 billion. This represents a decrease of 2.3% compared with the $2.13 billion reported for the third quarter of 2012 and an increase of 14.3% compared with the $1.82 billion reported for the fourth quarter of 2011. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2012 was $251 million, or $.43 per share (diluted), compared with GAAP net income of $220 million, or $.38 per share (diluted), for the third quarter of 2012 and GAAP net income of $254 million, or $.45 per share (diluted), for the fourth quarter of 2011. Net revenue for the year ended December 31, 2012 was $8.01 billion. This represents an increase in net revenue of 8.4% from the $7.39 billion reported for the year ended December 31, 2011. Net income computed in accordance with GAAP for the year ended December 31, 2012 was $719 million, or $1.25 per share (diluted), compared with GAAP net income of $927 million, or $1.65 per share (diluted), for the year ended December 31, 2011. In addition to GAAP results, Broadcom reports adjusted net income and adjusted net income per share, referred to respectively as "non-GAAP net income" and "non-GAAP diluted net income per share." A discussion of Broadcom's use of these and other non-GAAP financial measures is set forth below. Reconciliations of GAAP to non-GAAP financial measures for the three months ended December 31, 2012 and 2011, three months ended September 30, 2012, and years ended December 31, 2012 and 2011, respectively, appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments." Non-GAAP net income for the fourth quarter of 2012 was $462 million, or $.76 per share (diluted), compared with non-GAAP net income of $476 million, or $.79 per share (diluted), for the third quarter of 2012 and non-GAAP net income of $394 million, or $.68 per share diluted, for the fourth quarter of 2011. Non-GAAP net income for the year ended December 31, 2012 was $1.76 billion, or $2.92 per share (diluted), compared with non-GAAP net income of $1.69 billion, or $2.89 per share (diluted), for the year ended December 31, 2011. Conference Call Information As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and 2012 financial results and current financial prospects today at 1:45 p.m. Pacific Time (4:45 p.m. Eastern Time). The company will broadcast the conference call via webcast over the Internet. To listen to the webcast, or to view the financial and other statistical information required by Securities and Exchange Commission Regulation G, please visit the Investors section of the Broadcom website at www.broadcom.com/investors. The webcast will be recorded and available for replay until 11:59 p.m. Pacific Time on Thursday, February 28, 2013. The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2012 will be included in Broadcom's Annual Report on Form 10-K, to be filed with the SEC as soon as practicable. About Broadcom Broadcom Corporation (NASDAQ: BRCM), a FORTUNE 500^® company, is a global leader and innovator in semiconductor solutions for wired and wireless communications. Broadcom^® products seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments. With the industry's broadest portfolio of state-of-the-art system-on-a-chip and embedded software solutions, Broadcom is changing the world by Connecting everything^®. For more information, go to www.broadcom.com. Note Regarding Use of Non-GAAP Financial Measures Broadcom reports the following measures in accordance with GAAP and on a non-GAAP basis: (i) cost of product revenue, (ii) product gross profit, (iii) product gross margin, (iv) research and development and selling, general and administrative expense, (v) net income, (vi) weighted average shares outstanding (diluted) and (vii) diluted net income per share (EPS). Broadcom's presentation of non-GAAP cost of product revenue, non-GAAP product gross profit, and non-GAAP product gross margin excludes certain charges related to acquisitions, stock-based compensation expense and employer payroll tax expense on certain stock option exercises. Acquisition-related charges include the amortization of purchased intangible assets and the amortization of acquired inventory valuation step-up. Our non-GAAP research and development and selling, general and administrative expense excludes stock-based compensation expense and employer payroll tax expense on certain stock option exercises, non-recurring legal fees, and changes in contingent earn-out liabilities. In addition to the exclusions noted above, our non-GAAP net income and diluted net income per share also exclude settlement costs (gains), charitable contributions, restructuring costs (reversals), impairment of long-lived assets, gains on strategic investments, tax benefits resulting from reductions in our U.S. valuation allowance on certain deferred tax assets due to the recording of net deferred tax liabilities for identifiable intangible assets under purchase accounting, and tax benefits resulting from the reduction of certain foreign deferred tax liabilities due to the impairment of long-lived assets. Stock-based compensation expense primarily includes the impact of stock options and restricted stock units issued by Broadcom. Reconciliations of our GAAP to non-GAAP financial measures for the three months ended December 31, 2012 and 2011, three months ended September 30, 2012, and years ended December 31, 2012 and 2011 appear in the financial statements portion of this release under the heading "Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments." Some totals or amounts may not add or conform to prior period presentations due to rounding. Broadcom believes that the presentation of these non-GAAP measures provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. Broadcom's management believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Broadcom's management has historically used these non-GAAP financial measures when evaluating operating performance, because we believe that the inclusion or exclusion of the items described above provides insight into our core operating results, our ability to generate cash and underlying business trends affecting our performance. Broadcom has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. For additional information on the items excluded by Broadcom from one or more of its non-GAAP financial measures, refer to the Form 8-K regarding this release furnished today to the Securities and Exchange Commission. Cautions Regarding Forward-Looking Statements: All statements included or incorporated by reference in this release and the related conference call for analysts and investors, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our business and industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. Examples of such forward-looking statements include, but are not limited to, guidance provided on future revenue, product gross margin and operating expenses for the first quarter of 2013 (on both a GAAP and non-GAAP basis), and references to our continued dividend program. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. These risks and uncertainties include, but are not limited to the following: oOur quarterly operating results may fluctuate significantly. oWe depend on a few significant customers for a substantial portion of our revenue. oWe face intense competition. oOur operating results may be adversely impacted by worldwide economic uncertainties and specific conditions in the markets we address. oWe may fail to adjust our operations in response to changes in demand. oOur stock price is highly volatile. oWe may be required to defend against alleged infringement of intellectual property rights of others and/or may be unable to adequately protect or enforce our own intellectual property rights. oWe are subject to order and shipment uncertainties. oWe manufacture and sell complex products and may be unable to successfully develop and introduce new products. oWe depend on third parties to fabricate, assemble and test our products. oWe face risks associated with our acquisition strategy. oWe are exposed to risks associated with our international operations. oThere can be no assurance that we will continue to declare cash dividends. oWe may be unable to attract, retain or motivate key personnel. oGovernment regulation may adversely affect our business. oOur business is subject to potential tax liabilities. oOur systems are subject to security breaches and other cybersecurity incidents. oOur articles of incorporation and bylaws contain anti-takeover provisions. oOur co-founders and their affiliates may strongly influence the outcome of matters that require the approval of our shareholders. Our Annual Report on Form 10-K for the year ended December 31, 2011, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2012 when it is filed, discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect our business, results of operations and financial condition. The forward-looking statements used in this release and the related conference call for analysts and investors speak only as of the date they are made. We undertake no obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances. Broadcom^®, the pulse logo, Connecting everything^®, and the Connecting everything logo are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Any other trademarks or trade names mentioned are the property of their respective owners. BROADCOM CORPORATION Unaudited GAAP Condensed Consolidated Statements of Income (In millions, except per share amounts) Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011 Net revenue: Product revenue $ 2,028 $ 1,763 $ 7,793 $ 7,159 Income from Qualcomm Agreement 43 52 186 207 Licensing revenue 9 5 27 23 Total net revenue 2,080 1,820 8,006 7,389 Costs and expenses: Cost of product revenue 1,025 894 4,027 3,626 Research and development 590 479 2,318 1,983 Selling, general and administrative 172 157 696 682 Amortization of purchased intangible 31 7 113 30 assets Impairments of long-lived assets 5 — 90 92 Restructuring costs (reversals), net 1 (1) 7 16 Settlement costs (gains), net (7) 5 79 (18) Charitable contribution — — — 25 Total operating costs and expenses 1,817 1,541 7,330 6,436 Income from operations 263 279 676 953 Interest expense, net (9) (4) (30) (5) Other income (expense), net (4) 1 10 8 Income before income taxes 250 276 656 956 Provision for (benefit of) income taxes (1) 22 (63) 29 Net income $ 251 $ 254 $ 719 $ 927 Net income per share (basic) $ 0.44 $ 0.47 $ 1.29 $ 1.72 Net income per share (diluted) $ 0.43 $ 0.45 $ 1.25 $ 1.65 Weighted average shares (basic) 566 543 558 539 Weighted average shares (diluted) 581 561 576 563 Dividends per share $ 0.10 $ 0.09 $ 0.40 $ 0.36 The following table presents details of total stock-based compensation expense included in each functional line item in the unaudited condensed consolidated statements of income above: Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011 Cost of product revenue $ 6 $ 5 $ 27 $ 24 Research and development 90 79 368 363 Selling, general and administrative 32 27 148 126 BROADCOM CORPORATION Unaudited Condensed Consolidated Statements of Cash Flows (In millions) Three Months Ended Year Ended December 31, December 31, 2012 2011 2012 2011 Operating activities Net income $ 251 $ 254 $ 719 $ 927 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 39 29 134 108 Stock-based compensation expense: Stock options and other awards 22 19 80 119 Restricted stock units 106 92 463 394 Acquisition-related items: Amortization of purchased intangible 81 19 311 84 assets Impairments of long-lived assets 5 — 90 92 Non-cash settlement gains (7) — (8) (14) Loss (gain) on strategic investments 1 (1) (10) (1) and other Changes in operating assets and liabilities, net of acquisitions: Accounts receivable 124 139 (16) 154 Inventory 30 70 (5) 207 Prepaid expenses and other assets — 5 (8) (28) Accounts payable (53) (102) 72 (201) Deferred revenue and income 6 (5) 45 (33) Accrued settlement costs 3 (10) 54 21 Other accrued and long-term liabilities (15) (27) 10 9 Net cash provided by operating 593 482 1,931 1,838 activities Investing activities Net purchases of property and equipment (55) (22) (244) (163) Net cash paid for acquired companies — — (3,582) (347) Sales (purchases) of strategic 14 (2) 27 (2) investments Purchases of marketable securities (697) (235) (2,551) (2,768) Proceeds from sales and maturities of 362 1,087 1,554 4,143 marketable securities Net cash provided by (used in) (376) 828 (4,796) 863 investing activities Financing activities Issuance of long-term debt, net — 494 492 494 Repurchases of Class A common stock (32) — (33) (670) Dividends paid (57) (49) (224) (194) Payment of assumed contingent — — (57) — consideration and debt Proceeds from issuance of common stock 102 90 311 348 Minimum tax withholding paid on behalf (29) (32) (153) (155) of employees for restricted stock units Net cash provided by (used in) (16) 503 336 (177) financing activities Increase (decrease) in cash and cash 201 1,813 (2,529) 2,524 equivalents Cash and cash equivalents at beginning 1,416 2,333 4,146 1,622 of period Cash and cash equivalents at end of $ 1,617 $ 4,146 $ 1,617 $ 4,146 period BROADCOM CORPORATION Unaudited Condensed Consolidated Balance Sheets (In millions) December 31, December 31, 2012 2011 ASSETS Current assets: Cash and cash equivalents $ 1,617 $ 4,146 Short-term marketable securities 757 383 Accounts receivable, net 740 678 Inventory 527 421 Prepaid expenses and other current assets 140 124 Total current assets 3,781 5,752 Property and equipment, net 485 368 Long-term marketable securities 1,348 676 Goodwill 3,726 1,787 Purchased intangible assets, net 1,786 400 Other assets 82 57 Total assets $ 11,208 $ 9,040 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 300 $ — Accounts payable 549 442 Wages and related benefits 241 175 Deferred revenue and income 22 21 Accrued liabilities 570 461 Total current liabilities 1,682 1,099 Long-term debt 1,393 1,196 Other long-term liabilities 294 224 Commitments and contingencies Shareholders' equity 7,839 6,521 Total liabilities and shareholders' equity $ 11,208 $ 9,040 UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION (In millions) December 31, September 30, 2012 December 31, 2012 2011 Cash and cash equivalents $ 1,617 $ 1,416 $ 4,146 Short-term marketable 757 735 383 securities Long-term marketable securities 1,348 1,039 676 Total cash, cash equivalents $ 3,722 $ 3,190 $ 5,205 and marketable securities Increase from prior period end 532 Decrease from prior year end $ (1,483) BROADCOM CORPORATION Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments (In millions) Three Months Ended Year Ended December 31, September December December 31, 30, 31, 2012 2012 2011 2012 2011 Product revenue $ 2,028 $ 2,078 $ 1,763 $ 7,793 $ 7,159 GAAP cost of product 1,025 1,063 894 4,027 3,626 revenue GAAP product gross $ 1,003 $ 1,015 $ 869 $ 3,766 $ 3,533 profit GAAP product gross 49.5 % 48.8 % 49.3 % 48.3 % 49.4 % margin GAAP cost of product $ 1,025 $ 1,063 $ 894 $ 4,027 $ 3,626 revenue Adjustments: Stock-based compensation and (6) (6) (5) (27) (23) related payroll taxes Amortization of purchased intangible (50) (62) (17) (270) (78) assets and step-up of acquired inventory Non-GAAP cost of $ 969 $ 995 $ 872 $ 3,730 $ 3,525 product revenue Product revenue $ 2,028 $ 2,078 $ 1,763 $ 7,793 $ 7,159 Non-GAAP cost of 969 995 872 3,730 3,525 product revenue Non-GAAP product $ 1,059 $ 1,083 $ 891 $ 4,063 $ 3,634 gross profit Non-GAAP product 52.2 % 52.1 % 50.5 % 52.1 % 50.8 % gross margin GAAP research and development and selling, general and $ 762 $ 774 $ 636 $ 3,014 $ 2,665 administrative expense Adjustments: Stock-based compensation and (124) (126) (109) (526) (498) related payroll taxes Non-recurring legal — — — — (25) fees Change in contingent — — 1 — 1 earn-out liability Total GAAP to (124) (126) (108) (526) (522) Non-GAAP adjustments Non-GAAP research and development and selling, general and $ 638 $ 648 $ 528 $ 2,488 $ 2,143 administrative expense BROADCOM CORPORATION Unaudited Schedule of Selected GAAP to Non-GAAP Adjustments (In millions) Three Months Ended Year Ended December 31, September 30, December December 31, 31, 2012 2012 2011 2012 2011 GAAP net income $ 251 $ 220 $ 254 $ 719 $ 927 Adjustments: Stock-based compensation and 130 132 114 553 521 related payroll taxes Amortization of purchased intangible assets and step-up 81 94 24 383 108 of acquired inventory Impairment of 5 48 — 90 92 long-lived assets Settlement costs (7) (2) 5 79 (18) (gains) Charitable — — — — 25 contributions Restructuring costs, 1 2 (1) 7 16 net Non-recurring legal — — — — 25 fees Change in contingent — — (1) — (1) earn-out liability Other income, net — (6) (1) (9) (1) Certain income tax 1 (12) — (62) — expense (benefit) Total GAAP to 211 256 140 1,041 767 Non-GAAP adjustments Non-GAAP net income $ 462 $ 476 $ 394 $ 1,760 $ 1,694 Shares used in calculation - 581 579 561 576 563 diluted (GAAP) Non-GAAP adjustment 24 26 20 26 23 * Shares used in calculation - 605 605 581 602 586 diluted (Non-GAAP) GAAP diluted net $ 0.43 $ 0.38 $ 0.45 $ 1.25 $ 1.65 income per share Non-GAAP diluted net $ 0.76 $ 0.79 $ 0.68 $ 2.92 $ 2.89 income per share *Represents the benefits of compensation costs attributable to future services and not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method. BROADCOM CORPORATION Guidance for the Three Months Ending March 31, 2013 Three Months Ending March 31, 2013 Total net revenue ~$1.90 billion plus or minus 4% Product gross margin (GAAP) Flat to down 50 basis points from Q4'12 Product gross margin (Non-GAAP) Flat to down 50 basis points from Q4'12 Research & development and selling, general, and Up ~$35 million to ~$50 administrative expenses (GAAP) million from Q4'12 Research & development and selling, general, and Up ~$25 million to ~$40 administrative expenses (Non-GAAP) million from Q4'12 Broadcom has based the preceding guidance for the three months ending March 31, 2013 on expectations, assumptions and estimates that we believe are reasonable given our assessment of historical trends and other information reasonably available as of January 29, 2013. Our guidance consists of predictions only, however, and is subject to a wide range of known and unknown business risks and uncertainties, many of which are beyond our control. The forecasts and projections contained in the table above should not be regarded as representations by Broadcom that the estimated results will be achieved. Projections and estimates are necessarily speculative in nature and actual results may vary materially from the guidance we provide today. The non-GAAP guidance presented above is consistent with the presentation of non-GAAP results included elsewhere herein. The guidance set forth in the above table should be read together with the information under the caption, "Cautions Regarding Forward-Looking Statements" above, our Annual Report on Form 10-K for the year ended December 31, 2011, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2012 when it is filed. We undertake no obligation to publicly update or revise any forward-looking statements, including the guidance set forth herein, to reflect future events or circumstances. Broadcom Business Press Contact Broadcom Investor Relations Contact Karen Kahn Chris Zegarelli Vice President, Corporate Communications Senior Director, Investor Relations 415-297-5035 949-926-7567 firstname.lastname@example.org email@example.com SOURCE Broadcom Corporation; BRCM Corporate Website: http://www.broadcom.com
Broadcom Reports Fourth Quarter and Full Year 2012 Results
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