Avago Technologies Limited Announces Second Quarter Fiscal Year 2013 Financial Results

Avago Technologies Limited Announces Second Quarter Fiscal Year 2013 Financial
Results

  *Net revenue of $562 million; down 2 percent sequentially and down 3
    percent from Q2 last year
  *GAAP gross margin of 48.4 percent; Non-GAAP gross margin of 51.2 percent
  *GAAP diluted EPS of $0.45; Non-GAAP diluted EPS of $0.61

SAN JOSE, Calif., and SINGAPORE, May 29, 2013 (GLOBE NEWSWIRE) -- Avago
Technologies Limited (Nasdaq:AVGO), a leading supplier of analog interface
components for communications, industrial, and consumer applications, today
reported financial results for the second quarter of its fiscal year 2013,
ended May 5, 2013, and provided guidance for the third quarter of its fiscal
year 2013.

Second Quarter Fiscal Year 2013 GAAP Results

Net revenue was $562 million, a decrease of 2 percent compared with the
previous quarter and a decrease of 3 percent from the same quarter last year.

Gross margin was $272 million, or 48.4 percent of net revenue. This compares
with gross margin of $276 million, or 47.9 percent of net revenue last
quarter, and gross margin of $278 million, or 48.2 percent of net revenue in
the same quarter last year.

Operating expenses were $154 million. This compares with $152 million in the
prior quarter and $141 million for the same quarter the previous year.

Income from operations was $118 million. This compares with $124 million in
the prior quarter and with $137 million in the same quarter last year.

Second quarter net income was $113 million, or $0.45 per diluted share. This
compares with net income of $125 million, or $0.50 per diluted share for the
prior quarter, and net income of $134 million, or $0.54 per diluted share in
the same quarter last year.

The Company's cash balance at the end of the second quarter was $1,219
million, compared to $1,151 million at the end of the prior quarter.

The Company generated $191 million in cash from operations in the second
quarter and spent $47 million on capital expenditures. On April 4, 2013 the
Company paid a quarterly cash dividend of 19 cents ($0.19) per ordinary share,
totaling approximately $47 million. The company also closed an acquisition
during the second fiscal quarter for an aggregate acquisition cost of
approximately $37 million in cash.

In April 2013, Avago announced the acquisition of CyOptics, Inc. for total
consideration of approximately $400 million. The Company expects to close this
transaction in its third fiscal quarter of 2013, subject to the satisfaction
of customary closing conditions, including the receipt of regulatory approvals
in the United States.

Second Quarter Fiscal Year 2013 Non-GAAP Results

Gross margin was $288 million, or 51.2 percent of net revenue. This compares
with gross margin of $292 million, or 50.7 percent of net revenue last
quarter, and gross margin of $295 million, or 51.1 percent of net revenue in
the same quarter last year.

Income from operations was $158 million. This compares with $162 million in
the prior quarter and $171 million in the same quarter the previous year.

Net income was $153 million, or $0.61 per diluted share. This compares with
net income of $163 million, or $0.65 per diluted share last quarter, and net
income of $168 million, or $0.66 per diluted share in the same quarter last
year.

Second Quarter Fiscal Year 2013 Non-GAAP Results      Change
(Dollars in millions, except EPS)  Q2 13  Q1 13 Q2 12 Q/Q    Y/Y
Net Revenue                         $562   $576  $577  -2.4%  -2.6%
Gross Margin                        51.2%  50.7% 51.1% +50bps +10bps
Operating Expenses                  $130   $130  $124  --     +$6
Net Income                          $153   $163  $168  -$10   -$15
Earnings Per Share - Diluted        $0.61  $0.65 $0.66 -$0.04 -$0.05

"During the second fiscal quarter, revenues came in at the upper end of our
guidance helped by improved resales at our distributors in our industrial
business," said Hock Tan, President and CEO of Avago Technologies Limited.
"Looking to the third quarter, we see broad-based improvement across all three
of our end markets. We believe that the initial ramp of a product transition
at a large smartphone OEM, a recovery in enterprise networking spending, as
well as a continued, gradual uptick in industrial end market demand, could
drive a sequential growth up to high single digits on a percentage basis."

Other Quarterly Data

                              Percentage of Net Revenue Growth Rates
Net Revenues by Target Market Q2 13    Q1 13    Q2 12   Q/Q   Y/Y
Wireless Communications        50       53       44      -9%   9%
Wired Infrastructure           27       25       29      7%    -9%
Industrial & Other             23       22       27      4%    -16%
                                                          
Key Statistics                Q2 13    Q1 13    Q2 12        
(Dollars in millions)                                      
Cash From Operations           $191     $185     $211         
Depreciation                   $22      $22      $19          
Amortization                   $20      $19      $19          
Capital Expenditures           $47      $67      $56          
Days Sales Outstanding         44       46       43           
Inventory Days On Hand         76       72       70           

Third Quarter Fiscal Year 2013 Business Outlook

Based on current business trends and conditions, the outlook for the third
quarter of fiscal year 2013, ending August 4, 2013, is expected to be as
follows:

                          GAAP             Reconciling Items Non-GAAP
Sequential Change in Net   Up 6% to 9%                       Up 6% to 9%
Revenue
Gross Margin               48.0% plus/minus $18M              51.0% plus/minus
                           1%                                 1%
Operating Expenses         $156M            $23M              $133M
Interest and Other         $1M                               $1M
Taxes                      $6M                               $6M
Diluted Share Count        251M             2M                253M

Reconciling items include $14 million of amortization of intangible assets, $3
million of share-based compensation expense, and $1 million of restructuring
charges at the Gross Margin line, and $5 million of amortization of intangible
assets, $17 million of share-based compensation and $1 million of
restructuring charges at the Operating Expenses line.

Capital expenditures for the third quarter are expected to be approximately
$67 million. For the third quarter depreciation is expected to be $24 million
and amortization is expected to be $19 million.

The guidance provided above is only an estimate of what the Company believes
is realizable as of the date of this release. The guidance excludes any impact
from share repurchases or mergers and acquisitions activity that may occur
during the quarter, including the acquisition of CyOptics, Inc. Actual results
will vary from the guidance and the variations may be material. The Company
undertakes no intent or obligation to publicly update or revise any of these
projections, whether as a result of new information, future events or
otherwise, except as required by law.

Financial Results Conference Call

Avago Technologies Limited will host a conference call to review its financial
results for the second quarter fiscal year 2013, and to provide guidance for
the third quarter of fiscal year 2013, today at 2:00 p.m. Pacific Time. Those
wishing to access the call should dial (866) 515-2914; International +1 (617)
399-5128. The passcode is 71944742. A replay of the call will be available
through May 30, 2013. To access the replay dial (888) 286-8010; International
+1 (617) 801-6888 and reference the passcode: 78819462. A webcast of the
conference call will also be available in the "Investors" section of Avago's
website at www.avagotech.com.

Non-GAAP Financial Measures

In addition to GAAP reporting, Avago provides investors with net income,
income from operations, gross margin, operating expenses and other data, on a
non-GAAP basis. This non-GAAP information excludes amortization of intangible
assets, share-based compensation expense restructuring charges and
acquisition-related costs. Management does not believe that the excluded items
are reflective of the Company's underlying performance. The exclusion of these
and other similar items from Avago's non-GAAP presentation should not be
interpreted as implying that these items are non-recurring, infrequent or
unusual. Avago believes this non-GAAP financial information provides
additional insight into the Company's on-going performance and has therefore
chosen to provide this information to investors for a more consistent basis of
comparison and to help them evaluate the results of the Company's on-going
operations and enable more meaningful period to period comparisons. These
non-GAAP measures are provided in addition to, and not as a substitute for, or
superior to, measures of financial performance prepared in accordance with
GAAP. A reconciliation between GAAP and non-GAAP financial data is included in
the supplemental financial data attached to this press release.

About Avago Technologies Limited

Avago Technologies Limited is a leading designer, developer and global
supplier of a broad range of analog semiconductor devices with a focus on
III-V based products. Our product portfolio is extensive and includes
thousands of products in three primary target markets:wireless
communications, wired infrastructure and industrial & other.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements which address our
expected future business and financial performance.These forward-looking
statements are based on current expectations, estimates, forecasts and
projections of future Company or industry performance, based on management's
judgment, beliefs, current trends and market conditions, and involve risks and
uncertainties that may cause actual results to differ materially from those
contained in the forward-looking statements.Accordingly, we caution you not
to place undue reliance on these statements.For Avago, particular
uncertainties that could materially affect future results include global
economic conditions and concerns; cyclicality in the semiconductor industry or
in our target markets; quarterly and annual fluctuations in operating results;
loss of our significant customers; increased dependence on the volatile,
wireless handset market; our competitive performance and ability to continue
achieving design wins with our customers; our ability to achieve the growth
prospects and synergies expected from acquisitions we may make, including our
planned acquisition of CyOptics, Inc.; delays, challenges and expenses
associated with integrating acquired companies with our existing businesses;
our dependence on contract manufacturing and outsourced supply chain and our
ability to improve our cost structure through our manufacturing outsourcing
program; prolonged disruptions of our or our contract manufacturers'
manufacturing facilities or other significant operations; our dependence on
outsourced service providers for certain key business services and their
ability to execute to our requirements; our ability to maintain gross margin;
our ability to maintain tax concessions in certain jurisdictions; our ability
to protect our intellectual property and any associated increases in
litigation expenses; dependence on and risks associated with distributors of
our products; any expenses associated with resolving customer product and
warranty and indemnification claims; and other events and trends on a
national, regional and global scale, including those of a political, economic,
business, competitive and regulatory nature.Our Quarterly Report on Form 10-Q
filed on March 14, 2013 and other filings with the Securities and Exchange
Commission, or "SEC" (which you may obtain for free at the SEC's website at
http://www.sec.gov) discuss some of the important risk factors that may affect
our business, results of operations and financial condition. We undertake no
intent or obligation to publicly update or revise any of these forward looking
statements, whether as a result of new information, future events or
otherwise, except as required by law.


AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
                                                             
                      Fiscal Quarter Ended        Two Fiscal Quarters Ended
                      May 5,  February 3, April 29, May 5,       April 29,
                      2013    2013        2012      2013         2012
                                                             
Net revenue            $562  $576      $577    $1,138     $1,140
Cost of products sold:                                        
Cost of products sold  276    286        284      562         563
Amortization of        14     14         14       28          28
intangible assets
Restructuring charges  --     --         1        --          1
Total cost of products 290    300        299      590         592
sold
Gross margin           272    276        278      548         548
                                                             
Research and           95     93         84       188         166
development
Selling, general and   52     53         51       105         101
administrative
Amortization of        6      5          5        11          10
intangible assets
Restructuring charges  1      1          1        2           2
Total operating        154    152        141      306         279
expenses
                                                             
Income from operations 118    124        137      242         269
Interest expense       (1)    --         --       (1)         (1)
Other income, net      1      2          3        3           2
Income before income   118    126        140      244         270
taxes
Provision for income   5      1          6        6           11
taxes
Net income             $113  $125      $134    $238       $259
                                                             
Net income per share:                                         
Basic                  $0.46 $0.51     $0.55   $0.97      $1.05
Diluted                $0.45 $0.50     $0.54   $0.95      $1.03
                                                             
Shares used in per                                            
share calculations:
Basic                  246    246        244      246         246
Diluted                251    251        250      251         251
                                                             
Share-based
compensation expense                                          
included in:
Cost of products sold  $2    $2        $2      $4         $3
Research and           7      7          5        14          9
development
Selling, general and   8      9          6        17          12
administrative
Total share-based      $17   $18       $13     $35        $24
compensation expense



AVAGO TECHNOLOGIES LIMITED
NON-GAAP FINANCIAL SUMMARY- UNAUDITED(1)
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
                                                                
                         Fiscal Quarter Ended           Two Fiscal Quarters
                                                           Ended
                         May 5,   February 3,  April 29,  May 5,    April 29,
                         2013     2013         2012       2013      2012
                                                                
Net revenue               $562   $576       $577     $1,138  $1,140
Gross margin              $288   $292       $295     $580    $580
% of net revenue          51%      51%          51%        51%       51%
Research and development  $88    $86        $79      $174    $157
Selling, general and      $42    $44        $45      $86     $89
administrative
Total operating expenses  $130   $130       $124     $260    $246
% of net revenue          23%      23%          21%        23%       22%
Income from operations    $158   $162       $171     $320    $334
                                                                
Net income                $153   $163       $168     $316    $324
Net income per share -    $0.61  $0.65      $0.66    $1.25   $1.28
diluted
Shares used in per share  252     252         253       252      254
calculation - diluted
                                                                
(1) A reconciliation of the non-GAAP measures presented above to the most
directly comparable GAAP financial data appears on the next page. These
non-GAAP measures are provided in addition to and not as a substitute for
measures of financial performance prepared in accordance with GAAP.The
financial summary excludes amortization of intangible assets, share-based
compensation, restructuring charges and acquisition-related costs.



AVAGO TECHNOLOGIES LIMITED
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED
(IN MILLIONS)
                                                               
                             Fiscal Quarter Ended       Two Fiscal Quarters
                                                           Ended
                             May 5, February 3, April 29, May 5,   April 29,
                             2013   2013        2012      2013     2012
                                                               
Net income on GAAP basis      $113 $125      $134    $238   $259
Amortization of intangible    20    19         19       39      38
assets
Share-based compensation      17    18         13       35      24
expense
Restructuring charges         1     1          2        2       3
Acquisition-related costs     2     --         --       2       --
Net income on Non-GAAP basis  $153 $163      $168    $316   $324
                                                               
Gross margin on GAAP basis    272   276        278      548     548
Amortization of intangible    14    14         14       28      28
assets
Share-based compensation      2     2          2        4       3
expense
Restructuring charges         --    --         1        --      1
Gross margin on Non-GAAP      $288 $292      $295    $580   $580
basis
                                                               
Research and development on   95    93         84       188     166
GAAP basis
Share-based compensation      7     7          5        14      9
expense
Research and development on   $88  $86       $79     $174   $157
Non-GAAP basis
                                                               
Selling, general and          $52  $53       $51     $105   $101
administrative on GAAP basis
Share-based compensation      8     9          6        17      12
expense
Acquisition-related costs     2     --         --       2       --
Selling, general and
administrative on Non-GAAP    $42  $44       $45     $86    $89
basis
                                                               
Total operating expenses on   $154 $152      $141    $306   $279
GAAP basis
Amortization of intangible    6     5          5        11      10
assets
Share-based compensation      15    16         11       31      21
expense
Restructuring charges         1     1          1        2       2
Acquisition-related costs     2     --         --       2       --
Total operating expenses on   $130 $130      $124    $260   $246
Non-GAAP basis
                                                               
Income from operations on     $118 $124      $137    $242   $269
GAAP basis
Amortization of intangible    20    19         19       39      38
assets
Share-based compensation      17    18         13       35      24
expense
Restructuring charges         1     1          2        2       3
Acquisition-related costs     2     --         --       2       --
Income from operations on     $158 $162      $171    $320   $334
Non-GAAP basis
                                                               
Shares used in per share
calculation - diluted on GAAP 251   251        250      251     251
basis
Non-GAAP adjustment           1     1          3        1       3
Shares used in per share
calculation - diluted on      252   252        253      252     254
Non-GAAP basis(1)
                                                               
(1) The number of shares used in the diluted per share calculations on a
non-GAAP basis excludes the impact of share-based compensation expense
expected to be incurred in future periods and not yet recognized in the
financial statements, which would otherwise be assumed to be used to
repurchase shares under the GAAP treasury stock method.



AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN MILLIONS)
                                                           
                                             May 5,         October 28,
                                             2013           2012 (1)
ASSETS                                                      
                                                           
Current assets:                                             
Cash and cash equivalents                     $1,219       $1,084
Trade accounts receivable, net                271           341
Inventory                                     229           194
Other current assets                          99            72
Total current assets                          1,818         1,691
Property, plant and equipment, net            561           503
Goodwill                                      201           180
Intangible assets, net                        393           422
Other long-term assets                        66            66
Total assets                                  $3,039       $2,862
                                                           
LIABILITIES AND SHAREHOLDERS' EQUITY                        
                                                           
Current liabilities:                                        
Accounts payable                              $240         $248
Employee compensation and benefits            59            61
Capital lease obligations - current           1             1
Other current liabilities                     30            36
Total current liabilities                     330           346
                                                           
Long-term liabilities:                                      
Capital lease obligations - non-current       2             2
Other long-term liabilities                   96            95
Total liabilities                             428           443
                                                           
Shareholders' equity:                                       
Ordinary shares, no par value                 1,518         1,479
Retained earnings                             1,100         951
Accumulated other comprehensive loss          (7)           (11)
Total shareholders' equity                    2,611         2,419
Total liabilities and shareholders'equity    $3,039       $2,862
                                                           
(1) Amounts as of October 28, 2012 have been derived from audited consolidated
financial statements as of that date.



AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN MILLIONS)
                                                                
                           Fiscal Quarter Ended         Two Fiscal Quarters
                                                           Ended
                           May 5,   February 3, April 29, May 5,    April 29,
                           2013     2013        2012      2013      2012
Cash flows from operating                                        
activities:
Net income                  $113   $125      $134    $238    $259
                                                                
Adjustments to reconcile
net income to net cash                         
provided by operating
activities:
                                                                
Depreciation and            42      41         38       83       75
amortization
Loss on disposal of
property, plant and         1       --         1        1        1
equipment
Share-based compensation    18      17         13       35       24
Tax benefits of share-based --      --         2        --       2
compensation
Excess tax benefits from    --      --         (1)      --       (1)
share-based compensation
Other                       1       (2)        --       (1)      2
Changes in assets and
liabilities, net of                                              
acquisitions:
Trade accounts receivable   (5)     75         34       70       54
Inventory                   (20)    (14)       (25)     (34)     (24)
Accounts payable            36      (34)       21       2        13
Employee compensation and   11      (13)       6        (2)      (32)
benefits
Other current assets and    (7)     (11)       (8)      (18)     (18)
current liabilities
Other long-term assets and  1       1          (4)      2        (5)
long-term liabilities
Net cash provided by        191     185        211      376      350
operating activities
                                                                
Cash flows from investing                                        
activities:
Purchases of property,      (47)    (67)       (56)     (114)    (103)
plant and equipment
Acquisitions and
investment, net of cash     (37)    (9)        --       (46)     --
acquired
Net cash used in investing  (84)    (76)       (56)     (160)    (103)
activities
                                                                
Cash flows from financing                                        
activities:
Proceeds from government    2       3          1        5        2
grants
Payments of capital lease   (1)     --         (1)      (1)      (1)
obligations
Issuance of ordinary shares 18      10         17       28       22
Repurchases of ordinary     (11)    (13)       (6)      (24)     (85)
shares
Excess tax benefits from    --      --         1        --       1
share-based compensation
Dividend payments to        (47)    (42)       (32)     (89)     (61)
shareholders
Net cash used in financing  (39)    (42)       (20)     (81)     (122)
activities
                                                                
Net increase in cash and    68      67         135      135      125
cash equivalents
Cash and cash equivalents   1,151   1,084      819      1,084    829
at the beginning of period
Cash and cash equivalents   $1,219 $1,151    $954    $1,219  $954
at end of period

CONTACT: Avago Technologies Ltd.
         Thomas Krause, 408-435-7400
         VP Corporate Development
         investor.relations@avagotech.com

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