Broadcom Reports Fourth Quarter and Year 2009 Results
Record Quarterly Net Revenue and Cash Flow from Operations
Conference Call to be Webcast Today at 1:45 p.m. Pacific Time
IRVINE, Calif., Feb. 3 /PRNewswire-FirstCall/ -- Broadcom Corporation (Nasdaq: BRCM) today reported unaudited financial results for its fourth quarter and year ended December 31, 2009.
Net revenue for the fourth quarter of 2009 was a record $1.343 billion. This represents an increase in net revenue of 7.1% compared with the $1.254 billion for the third quarter of 2009 and an increase of 19.2% compared with the $1.127 billion for the fourth quarter of 2008. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2009 was $59.2 million, or $.11 per share (diluted), compared with GAAP net income of $84.6 million, or $.16 per share (diluted), for the third quarter of 2009, and GAAP net loss of $159.2 million, or $.32 net loss per share (basic and diluted), for the fourth quarter of 2008.
Net revenue for the year ended December 31, 2009 was $4.490 billion. This represents a decrease in net revenue of 3.6% from the $4.658 billion reported for the year ended December 31, 2008. GAAP net income for the year ended December 31, 2009 was $65.3 million, or $.13 per share (diluted), compared with $214.8 million, or $.41 per share (diluted), for the year ended December 31, 2008.
As previously disclosed, in the fourth quarter of 2009, Broadcom announced that it had agreed in principle to settle the securities class action litigation pending against the company and certain of its current and former officers and directors relating to the company's historical stock option accounting practices. Under the proposed settlement, the claims against Broadcom and its officers and directors will be dismissed with prejudice and released in exchange for a $160.5 million cash payment by Broadcom. The company recorded the settlement amount as a one-time charge. The proposed settlement remains subject to the satisfaction of various conditions, including negotiation and execution of a final stipulation of settlement and approval by the U.S. District Court for the Central District of California following notice to members of the class. This charge reduced net income by $0.31 per share (diluted) in the fourth quarter and year ended 2009. In addition, we received $63.2 million from our directors' and officers' insurance carriers, which the company recorded as a reduction of selling, general and administrative expense. This increased net income by $0.12 per share (diluted) in the fourth quarter and year ended December 31, 2009.
For a discussion of non-recurring transactions and their related accounting impact for all periods presented, see the "Unaudited Supplementary Financial Data" schedule below.
"Broadcom's performance in 2009 highlights the incredible opportunities within the wired and wireless communications markets and the excellent work of our employees in creating compelling products," said Scott A. McGregor, Broadcom's President and Chief Executive Officer. "In the midst of one of the worst economic downturns, Broadcom gained market share, achieved record quarterly revenue and delivered the strongest cash flow from operations in our history."
"Given the strength of our balance sheet and our proven ability to generate strong cash flow, Broadcom's Board of Directors today announced it has adopted a quarterly dividend policy (please see separate press release). Broadcom has both the financial strength and flexibility to fund our research and development activities to grow our business in the future and return cash to shareholders in the form of share repurchases and a quarterly dividend."
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and year 2009 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 or other statistical information required by Securities and Exchange Commission (SEC) 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 5:00 p.m. Pacific Time, March 17, 2010.
The financial results included in this release are unaudited. The audited financial statements of the company for the year ended December 31, 2009 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 is a major technology innovator and global leader in semiconductors for wired and wireless communications. Broadcom® products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. We provide the industry's broadest portfolio of state-of-the-art system-on-a-chip and software solutions to manufacturers of computing and networking equipment, digital entertainment and broadband access products, and mobile devices. These solutions support our core mission: Connecting everything®.
Broadcom, one of the world's largest fabless semiconductor companies, with 2009 revenue of $4.49 billion, holds more than 3,800 U.S. and 1,550 foreign patents, and has more than 7,800 additional pending patent applications, and one of the broadest intellectual property portfolios addressing both wired and wireless transmission of voice, video, data and multimedia.
A FORTUNE 500® company, Broadcom is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5000 or at www.broadcom.com.
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. 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, gross product margin and operating expense targets for the first quarter of 2010, references to and statements about opportunities within the wired and wireless communication markets and the preliminary settlement of securities litigation pending against us. 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:
- general economic and political conditions and specific conditions in the markets we address, including the continuing volatility in the technology sector and semiconductor industry, the recent global economic recession, trends in the broadband communications markets in various geographic regions, including seasonality in sales of consumer electronic products into which our products are incorporated;
- the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory;
- our ability to adjust our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers;
- the effectiveness of our expense and product cost control and reduction efforts;
- our ability to specify, develop or acquire, complete, introduce, market and transition to volume production new products and technologies in a cost-effective and timely manner;
- our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets;
- the rate at which our present and future customers and end-users adopt Broadcom's technologies and products in our target markets;
- the risks inherent in acquisitions of technologies and businesses, including the timing and successful completion of technology and product development through volume production, integration issues, potential contractual, intellectual property or employment issues, the risk that anticipated benefits of an acquisition may not be realized, and prescribed changes in accounting treatment and charges;
- changes in current or future laws or the imposition of new laws or regulations, including new or changed tax regulations, or changes in the interpretation or enforcement of those laws or regulations;
- our dependence on a few significant customers for a substantial portion of our revenue;
- competitive pressures and other factors such as the qualification, availability and pricing of competing products and technologies and the resulting effects on sales and pricing of our products;
- intellectual property disputes and customer and directors' and officers' indemnification claims and other types of litigation risk;
- the quality of our products and any potential remediation costs;
- our ability to retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement our business and product plans;
- the risks and uncertainties associated with our international operations;
- the risks and uncertainties resulting from Broadcom's equity award review, including pending and potential new claims and proceedings related to such matters, such as shareholder litigation and any action by the SEC, U.S. Attorney's Office or other governmental agency that has resulted in, and could result in further, civil or criminal sanctions against the company and/or certain of our current or former officers, directors or employees, or other actions taken or required as a result of the review, the risk that we are unable to finalize the preliminary settlement of the securities class action litigation pending against us, and financial exposure to the extent our expenses related to such matters exceed the amounts recovered from our directors' and officers' liability insurance carriers under the partial derivative settlement and insurance agreement with those carriers;
- the volume of our product sales and pricing concessions on volume sales;
- the availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials;
- fluctuations in the manufacturing yields of our third party semiconductor foundries and other problems or delays in the fabrication, assembly, testing or delivery of our products;
- the risks of producing products with new suppliers and at new fabrication and assembly and test facilities;
- changes in our product or customer mix;
- problems, costs or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration;
- delays in the adoption and acceptance of industry standards in our target markets;
- the timing of customer-industry qualification and certification of our products and the risks of non-qualification or non-certification; and
- the level of orders received that can be shipped in a fiscal quarter.
Our Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other Securities and Exchange Commission filings 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 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, except as required by law.
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.
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Broadcom Investor Relations Contact |
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BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Product revenue $1,283,434 $1,076,188 $4,272,726 $4,485,239
Income from Qualcomm
Agreement 51,674 - 170,611 -
Licensing revenue 7,638 50,321 46,986 172,886
---------- ---------- ---------- ----------
Total net revenue 1,342,746 1,126,509 4,490,323 4,658,125
Operating costs
and expenses:
Cost of product
revenue 630,259 557,797 2,210,559 2,213,015
Research and
development 396,254 382,666 1,534,918 1,497,668
Selling, general
and administrative 84,424 147,213 479,362 543,117
Amortization of
purchased intangible
assets 2,091 2,842 14,548 3,392
In-process research
and development - 31,500 - 42,400
Impairment of goodwill
and long-lived assets - 169,443 18,895 171,593
Restructuring costs
(reversals) (4,829) - 7,501 (1,000)
Settlement costs, net 175,724 - 118,468 15,810
Charitable
contribution - - 50,000 -
---------- ---------- ---------- ----------
Total operating
costs and
expenses 1,283,923 1,291,461 4,434,251 4,485,995
---------- ---------- ---------- ----------
Income (loss) from
operations 58,823 (164,952) 56,072 172,130
Interest income, net 2,539 7,218 13,901 52,201
Other income
(expense), net (269) 971 2,218 (2,016)
---------- ---------- ---------- ----------
Income (loss) before
income taxes 61,093 (156,763) 72,191 222,315
Provision for
income taxes 1,889 2,452 6,930 7,521
---------- ---------- ---------- ----------
Net income (loss) $59,204 $(159,215) $65,261 $214,794
========== ========== ========== ==========
Net income (loss) per
share (basic) $.12 $(.32) $.13 $.42
========== ========== ========== ==========
Net income (loss) per
share (diluted) $.11 $(.32) $.13 $.41
========== ========== ========== ==========
Weighted average
shares (basic) 495,356 498,338 494,038 512,648
========== ========== ========== ==========
Weighted average
shares (diluted) 524,903 498,338 512,645 524,208
========== ========== ========== ==========
Certain prior period amounts in the unaudited condensed consolidated
statements of operations have been reclassified to conform with the
current period presentation of product revenue, income from Qualcomm
Agreement and licensing revenue.
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,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Cost of product revenue $5,961 $6,643 $24,545 $24,997
Research and development 85,186 95,975 351,884 358,018
Selling, general
and administrative 30,101 32,698 119,918 126,359
BROADCOM CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Operating activities
Net income (loss) $59,204 $(159,215) $65,261 $214,794
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 27,121 22,466 74,435 78,236
Stock-based
compensation expense:
Stock options and
other awards 33,329 55,353 159,790 224,244
Restricted stock
units 87,919 79,963 336,557 285,130
Acquisition-related
items:
Amortization of
purchased
intangible assets 6,186 6,895 30,744 19,249
In-process research
and development - 31,500 - 42,400
Impairment of
goodwill and
long-lived assets - 169,443 18,895 171,593
Loss on strategic
investment, net - - - 4,266
Non-cash restructuring
costs (reversals) (4,665) - (1,944) (1,000)
Loss (gain) on sale
of marketable
securities - - (1,046) 1,781
Changes in operating
assets and
liabilities:
Accounts
receivable 37,620 128,704 (131,656) (3,294)
Inventory (46,877) (20,881) 12,013 (112,173)
Prepaid expenses
and other assets (11,258) (9,644) 8,714 (11,273)
Accounts payable 10,460 (146,716) 122,985 616
Deferred revenue
and income (9,062) 1,226 71,760 (7,736)
Accrued settlement
costs 163,600 - 170,500 (2,000)
Other accrued and
long-term
liabilities (21,649) (12,937) 49,885 14,782
---------- ---------- ---------- ----------
Net cash
provided by
operating
activities 331,928 146,157 986,893 919,615
---------- ---------- ---------- ----------
Investing activities
Net purchases of
property and equipment (17,796) (17,657) (66,570) (82,808)
Net cash paid for
acquired companies (166,100) (140,746) (165,258) (170,541)
Purchases of
strategic investments - - (2,000) (355)
Purchases of
marketable securities (80,709) (5,190) (1,138,681) (1,115,704)
Proceeds from sales
and maturities of
marketable securities 133,775 112,004 871,152 624,026
---------- ---------- ---------- ----------
Net cash used
in investing
activities (130,830) (51,589) (501,357) (745,382)
---------- ---------- ---------- ----------
Financing activities
Repurchases of Class A
common stock (215,352) (424,177) (421,869) (1,283,952)
Proceeds from issuance
of common stock 89,980 57,271 227,209 171,853
Minimum tax withholding
paid on behalf of
employees for
restricted stock units (23,854) (12,875) (84,428) (58,061)
---------- ---------- ---------- ----------
Net cash used
in financing
activities (149,226) (379,781) (279,088) (1,170,160)
---------- ---------- ---------- ----------
Increase (decrease)
in cash and cash
equivalents 51,872 (285,213) 206,448 (995,927)
Cash and cash
equivalents at
beginning of period 1,345,221 1,475,858 1,190,645 2,186,572
---------- ---------- ---------- ----------
Cash and cash
equivalents at
end of period $1,397,093 $1,190,645 $1,397,093 $1,190,645
========== ========== ========== ==========
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
December 31, September 30, December 31,
2009 2009 2008
----------- ------------ -----------
(In thousands)
Cash and cash equivalents $1,397,093 $1,345,221 $1,190,645
Short-term marketable
securities 532,281 561,287 707,477
Long-term marketable
securities 438,616 470,643 -
----------- ------------ -----------
Total cash, cash
equivalents and
marketable securities $2,367,990 $2,377,151 $1,898,122
=========== ============ ===========
Decrease from prior
period end $(9,161)
===========
Increase from prior year end $469,868
===========
BROADCOM CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In thousands)
December 31,
----------------------------
2009 2008
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $1,397,093 $1,190,645
Short-term marketable securities 532,281 707,477
Accounts receivable, net 508,627 372,311
Inventory 362,428 366,106
Prepaid expenses and other
current assets 113,903 114,674
---------- ----------
Total current assets 2,914,332 2,751,213
Property and equipment, net 229,317 234,691
Long-term marketable securities 438,616 -
Goodwill 1,329,614 1,279,243
Purchased intangible assets, net 150,927 61,958
Other assets 64,436 66,160
---------- ----------
Total assets $5,127,242 $4,393,265
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $437,353 $310,487
Wages and related benefits 190,315 151,551
Deferred revenue and income 87,388 12,338
Accrued liabilities 433,294 242,727
---------- ----------
Total current liabilities 1,148,350 717,103
Long-term deferred revenue 608 3,898
Other long-term liabilities 86,438 65,197
Commitments and contingencies
Shareholders' equity 3,891,846 3,607,067
---------- ----------
Total liabilities
and shareholders' equity $5,127,242 $4,393,265
========== ==========
BROADCOM CORPORATION
Unaudited Supplementary Financial Data
(In thousands)
The following table presents details of supplementary financial data
included in each functional line item in the unaudited condensed
consolidated statements of operations:
Three Months Ended Year Ended
December 31, December 31,
------------------ -----------------
2009 2008 2009 2008
------- ------- ------- -------
Cost of product revenue:
Stock-based compensation $5,961 $6,643 $24,545 $24,997
Amortization of purchased
intangible assets 4,095 4,053 16,196 15,857
Research and development:
Stock-based compensation 85,186 95,975 351,884 358,018
Selling, general
and administrative:
Stock-based compensation 30,101 32,698 119,918 126,359
Other operating costs
and expenses:
Amortization of purchased
intangible assets 2,091 2,842 14,548 3,392
In-process research
and development (1) - 31,500 - 42,400
Impairment of goodwill
and long-lived assets (2) - 169,443 18,895 171,593
Restructuring costs
(reversals) (3) (4,829) - 7,501 (1,000)
Settlement costs (gains) (4) 175,724 - 118,468 15,810
Charitable contribution (5) - - 50,000 -
Other:
Employer payroll tax expense
on certain stock option
exercises 1,300 335 4,866 3,966
Loss on strategic
investments, net - - - 4,266
Non-operating gains - (10) 13 (203)
(1) Recorded in connection with the company's acquisitions of the
digital television business of Advanced Micro Devices, Inc. ("AMD")
and Sunext Design, Inc. in 2008.
(2) Goodwill and long-lived asset impairment charges of $18.9 million
and $169.4 million were made in 2009 and 2008, related to the
company's acquisition of the digital television business of AMD and
the company's mobile platforms reporting unit, respectively.
(3) Recorded in connection with the company's restructuring plans
implemented in 2009 (including a reversal of restructuring costs of
$4.2 million as part of a contractual obligation due from AMD to
reimburse us for certain restructuring actions taken during a
stipulated post acquisition period), as well as a restructuring
cost reversal of a prior restructuring plan in 2008.
(4) Recorded settlement costs of $175.7 million in the three months
ended December 31, 2009, of which $160.5 million related to the
agreement in principle to settle the securities class action
litigation pending against the company and certain of its current
and former officers and directors relating to the company's
historical stock option accounting practices and the remainder
primarily related to a $12.1 million payment to the Israeli
government associated with a post-acquisition technology transfer
fee related to our acquisition of Dune Networks. This was offset by
the $65.3 million gain on settlement in connection with the
Qualcomm litigation in 2009. We also recorded $11.2 million in
settlement costs in 2009 for estimated settlements associated with
certain employment tax items, other employment matters and a patent
infringement claim. Recorded settlement costs of $15.8 million, of
which $12.0 million related to our settlement with the Securities
and Exchange Commission and $3.8 million related to patent
infringement claims settled in 2008.
(5) Recorded in connection with an accrued $50.0 million charitable
contribution to the recently established Broadcom Foundation in the
year ended December 31, 2009.
BROADCOM CORPORATION
Unaudited Supplementary Financial Data
(In thousands)
Three Months Ended
---------------------------------------
December 31, December 31, September 30,
2009 2008 2009
----------- ----------- -----------
Product revenue $1,283,434 $1,076,188 $1,194,745
Income from Qualcomm Agreement 51,674 - 51,674
Licensing revenue 7,638 50,321 7,778
----------- ----------- -----------
Total net revenue $1,342,746 $1,126,509 $1,254,197
=========== =========== ===========
Cost of product revenue $630,259 $557,797 $615,349
=========== =========== ===========
Product gross margin 50.9% 48.2% 48.5%
=========== =========== ===========
Total gross margin 53.1% 50.5% 50.9%
=========== =========== ===========
BROADCOM CORPORATION
Guidance for the Three Months Ending March 31, 2010
Three Months
Ending March 31, 2010
--------------------------------
Total net revenue up 0% to 5% from Q4
Product gross margin down by 100 basis points from Q4
Research and development up approximately $10 million
and selling, general from Q4 (excluding the affect of
and administrative expenses the non-recurring net recovery
(including stock-based of $63 million of legal fees
compensation) received from our D&O insurance
carriers in Q4)
Broadcom has based the preceding guidance for the three months ending
March 31, 2010 on expectations, assumptions and estimates that we
believe are reasonable given our assessment of historical trends and
other information reasonably available as of February 3, 2010. 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 guidance set forth in the table above 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, 2009, subsequent Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, recent Current Reports on Form 8-K, and our other
Securities and Exchange Commission filings. We undertake no obligation
to publicly update or revise any forward-looking statements, including
the guidance set forth herein.
SOURCE Broadcom Corporation; BRCM Corporate
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