8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 25, 2015

 

 

Avago Technologies Limited

(Exact name of registrant as specified in its charter)

 

 

 

Singapore   001-34428   98-0682363

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

1 Yishun Avenue 7

Singapore 768923

  N/A
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (65) 6755-7888

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On February 25, 2015, Avago Technologies Limited (“Avago” or the “Company”) issued a press release announcing its unaudited financial results for the first fiscal quarter ended February 1, 2015. The Company will host an investor conference call on February 25, 2015 at 2:00 p.m. Pacific Time to discuss these results.

The foregoing description is qualified in its entirety by reference to the press release dated February 25, 2015, a copy of which is attached hereto as Exhibit 99.1.

 

Item 7.01. Regulation FD Disclosure.

Avago will be presenting at the Goldman Sachs Sixth Annual TMT Leveraged Finance Conference in New York, New York on March 11, 2015.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit No.

  

Description

99.1    Press release, dated February 25, 2015, entitled “Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results.”

The information contained in this report, including Exhibit 99.1, shall not be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this report, including the exhibit hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements that 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. Particular uncertainties that could materially affect future results include our ability to integrate and realize the expected benefits from our acquisition of LSI Corporation, or LSI; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our ability to increase our internal manufacturing capacity to meet customer demand; our ability to accurately estimate customers’ demand and adjust supply chain and third party manufacturing capacity accordingly; our ability to improve our manufacturing efficiency and quality; cyclicality in the semiconductor industry or in our target markets; increased dependence on the volatile wireless handset market and on the enterprise storage market; delays, challenges and expenses associated with integrating acquired companies with our existing businesses and our ability to achieve the growth prospects and synergies expected from acquisitions we may make, including our recent acquisitions of LSI and PLX Technology, Inc. and our pending acquisition of Emulex Corporation; global economic conditions and concerns; quarterly and annual fluctuations in operating results; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of those design wins; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; rates of growth in our target markets; 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 or improve gross margin; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product and warranty and indemnification claims; dependence on and risks associated with distributors of our products; the significant indebtedness incurred by us in connection with the LSI acquisition, including the need to generate sufficient cashflows to service and repay such debt; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Annual Report on Form 10-K filed on December 29, 2014 and our 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.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 25, 2015

 

Avago Technologies Limited
By: /s/    Anthony E. Maslowski        
Name: Anthony E. Maslowski
Title: Chief Financial Officer


EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1    Press release, dated February 25, 2015, entitled “Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results.”
EX-99.1

Exhibit 99.1

Avago Technologies Limited Announces First Quarter

Fiscal Year 2015 Financial Results

 

    Net revenue up 3 percent sequentially

 

    Quarterly GAAP gross margin of 51 percent; Quarterly non-GAAP gross margin from continuing operations of 59 percent

 

    Quarterly GAAP diluted EPS of $1.26; Quarterly non-GAAP diluted EPS from continuing operations of $2.09

SAN JOSE, Calif., and SINGAPORE – February 25, 2015 – Avago Technologies Limited (Nasdaq: AVGO), a leading semiconductor device supplier to the wireless, enterprise storage, wired, and industrial end markets, today reported financial results for the first quarter of its fiscal year 2015, ended February 1, 2015, and provided guidance for the second quarter of its fiscal year 2015.

Basis of Presentation

Avago’s financial results include results from LSI Corporation (“LSI”) starting the third fiscal quarter of 2014, and from PLX Technology Inc. (“PLX”) starting in the fourth fiscal quarter of 2014, in each case from the date of their acquisition. The financial results from LSI’s flash and Axxia businesses, which were recently sold, have been classified as discontinued operations in the Company’s financial statements and the results of operations from these businesses are not included in the results presented below, unless otherwise stated.

First Quarter Fiscal Year 2015 GAAP Results

Net revenue was $1,635 million, an increase of 3 percent from $1,590 million in the previous quarter and an increase of 131 percent from $709 million in the same quarter last year.

Gross margin was $826 million, or 51 percent of net revenue. This compares with gross margin of $788 million, or 50 percent of net revenue last quarter, and gross margin of $339 million, or 48 percent of net revenue in the same quarter last year.

Operating expenses were $425 million. This compares with $487 million in the prior quarter and $200 million for the same quarter last year.

Operating income was $401 million, or 25 percent of net revenue. This compares with operating income of $301 million, or 19 percent of net revenue, in the prior quarter, and $139 million, or 20 percent of net revenue, in the same quarter last year.

Net income, which includes the impact of discontinued operations, was $351 million, or $1.26 per diluted share. This compares with net income of $135 million, or $0.50 per diluted share, for the prior quarter, and net income of $134 million, or $0.53 per diluted share in the same quarter last year.

The Company’s cash balance at the end of the first fiscal quarter was $2.6 billion, compared to $1.6 billion at the end of the prior quarter.


Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results

 

The Company generated $481 million in cash from operations and spent $162 million on capital expenditures in the first fiscal quarter of 2015.

On December 31, 2014, the Company paid a quarterly cash dividend of $0.35 per ordinary share, totaling approximately $89 million.

First Quarter Fiscal Year 2015 Non-GAAP Results From Continuing Operations

The differences between our GAAP and non-GAAP results are described generally under “Non-GAAP Financial Measures” below, and presented in detail in the financial reconciliation tables attached to this release.

Net revenue from continuing operations was $1,657 million, an increase of 3 percent from $1,610 million in the previous quarter, and an increase of 134 percent from $709 million in the same quarter last year.

Gross margin from continuing operations was $974 million, or 59 percent of net revenue. This compares with gross margin of $939 million, or 58 percent of net revenue last quarter, and gross margin of $366 million, or 52 percent of net revenue in the same quarter last year.

Operating income from continuing operations was $681 million, or 41 percent of net revenue. This compares with operating income from continuing operations of $636 million, or 40 percent of net revenue, in the prior quarter, and $224 million, or 32 percent of net revenue in the same quarter last year.

Net income from continuing operations was $596 million, or $2.09 per diluted share. This compares with net income of $556 million, or $1.99 per diluted share last quarter, and net income of $217 million, or $0.84 per diluted share in the same quarter last year.

 

First Quarter Fiscal Year 2015 Non-GAAP Results

   Q1 15    Q4 14    Q1 14    Change

(Dollars in millions, except EPS)

            Q/Q    Y/Y

Net Revenue

   $1,657    $1,610    $709    +3%    +134%

Gross Margin

   59%    58%    52%    +1ppt    +7ppt

Operating Expenses

   $293    $303    $142    -$10    +$151

Net Income

   $596    $556    $217    +$40    +$379

Earnings Per Share—Diluted

   $2.09    $1.99    $0.84    +$0.10    +$1.25

“We had a strong start to our fiscal year with better than expected 3 percent sequential revenue growth in the first quarter, driven by our wireless revenues, which grew by 90 percent from the same quarter last year.” said Hock Tan, President and CEO of Avago Technologies Limited. “And we continued to deliver very strong financial results with greater than 40 percent operating margins and $2.09 in EPS.”

 

2


Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results

 

Other Quarterly Data

 

     Percentage of Net Revenue    Growth Rates

Net Revenue by Segment

   Q1 15*    Q4 14*    Q1 14    Q/Q    Y/Y

Wireless Communications

   40    39    49    6%    90%

Enterprise Storage

   29    29       5%   

Wired Infrastructure

   21    22    32    -1%    52%

Industrial & Other

   10    10    19    -4%    21%

 

  * Represent percentages of non-GAAP net revenue

 

Key Statistics (Dollars in millions)

   Q1 15    Q4 14    Q1 14

Cash From Operations

   $481    $381    $229

Depreciation

   $54    $51    $32

Amortization

   $172    $199    $25

Capital Expenditures

   $162    $189    $52

Non-GAAP Days Sales Outstanding

   39    42    42

Non-GAAP Inventory Days On Hand

   67    70    76

Second Quarter Fiscal Year 2015 Business Outlook

Based on current business trends and conditions, the outlook for continuing operations for the second quarter of fiscal year 2015, ending May 3, 2015, is expected to be as follows:

 

     GAAP    Reconciling Items    Non-GAAP

Sequential Change in Net Revenue

   down 4% to flat    $33M    down 3% to up 1%

Gross Margin

   50.0% plus/minus 1%    $152M    58.5% plus/minus 1%

Operating Expenses

   $422M    $128M    $294M

Interest and Other

   $49M       $49M

Taxes

   $30M    $7M    $37M

Diluted Share Count

   282M    7M    289M

Reconciling items include:

 

    Non-GAAP Revenue includes $33 million of LSI intellectual property licensing revenue not included in GAAP revenue as a result of the effects of purchase accounting for the LSI acquisition;

 

    Non-GAAP Gross Margin includes the effects of $33 million of LSI intellectual property licensing revenue and excludes the effects of $113 million of amortization of intangible assets, $5 million of share-based compensation expense, and $1 million of restructuring charges.

 

3


Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results

 

    Non-GAAP Operating Expenses exclude $59 million of amortization of intangible assets, $47 million of share-based compensation, $15 million of acquisition-related costs and $7 million of restructuring charges; and

 

    $7 million provision at the Taxes line represents the tax effects of the reconciling items noted above.

Capital expenditures for the second fiscal quarter are expected to be approximately $180 million. For the second fiscal quarter depreciation is expected to be $51 million and amortization is expected to be $172 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 also excludes any impact from any mergers, acquisitions and divestiture activity that may occur during the quarter. 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.

Avago will be presenting at the Goldman Sachs Sixth Annual TMT Leveraged Finance Conference on March 11, 2015 in New York City.

Financial Results Conference Call

Avago Technologies Limited will host a conference call to review its financial results for the first quarter of fiscal year 2015, and to provide guidance for the second quarter of fiscal year 2015, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial (877) 299-4454; International +1 (617) 597-5447. The passcode is 31794336. A replay of the call will be accessible for one week after the call. To access the replay dial (888) 286-8010; International +1 (617) 801-6888; and reference the passcode: 60779094. 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 revenue, net income, operating income, gross margin, operating expenses and other data, on a non-GAAP basis. This non-GAAP information includes the effect of purchase accounting on revenues, and excludes amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, including integration costs, purchase accounting effect on inventory, income (loss) from and gain or loss on discontinued operations and income tax effects of non-GAAP reconciling adjustments. Management does not believe that these items are reflective of the Company’s underlying performance. The presentation of these and other similar items in Avago’s non-GAAP financial results 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.

 

4


Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results

 

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 and complex digital and mixed signal CMOS based devices. Our product portfolio is extensive and includes thousands of products in four primary target markets: wireless communications, enterprise storage, wired infrastructure, and industrial & other.

Cautionary Note Regarding Forward-Looking Statements

This announcement contains forward-looking statements that 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. Particular uncertainties that could materially affect future results include our ability to integrate and realize the expected benefits from our acquisition of LSI; any loss of our significant customers and fluctuations in the timing and volume of significant customer demand; our ability to increase our internal manufacturing capacity to meet customer demand; our ability to accurately estimate customers’ demand and adjust supply chain and third party manufacturing capacity accordingly; our ability to improve our manufacturing efficiency and quality; cyclicality in the semiconductor industry or in our target markets; increased dependence on the volatile wireless handset market and on the enterprise storage market; delays, challenges and expenses associated with integrating acquired companies with our existing businesses and our ability to achieve the growth prospects and synergies expected from acquisitions we may make, including our recent acquisitions of LSI and PLX, and our pending acquisition of Emulex Corporation; global economic conditions and concerns; quarterly and annual fluctuations in operating results; our competitive performance and ability to continue achieving design wins with our customers, as well as the timing of those design wins; our ability to sell to new types of customers and to keep pace with technological advances; market acceptance of the end products into which our products are designed; rates of growth in our target markets; 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 or improve gross margin; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and the unpredictability of any associated litigation expenses; any expenses or reputational damage associated with resolving customer product and warranty and indemnification claims; dependence on and risks associated with distributors of our products; the significant indebtedness incurred by us in connection with the LSI acquisition, including the need to generate sufficient cashflows to service and repay such debt; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Annual Report on Form 10-K filed on December 29, 2014 and our 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

 

5


Avago Technologies Limited Announces First Quarter Fiscal Year 2015 Financial Results

 

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.

# # #

Contacts:

Avago Technologies Limited

Ashish Saran

Investor Relations

+1 408 435 7400

investor.relations@avagotech.com

 

6


AVAGO TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

(IN MILLIONS, EXCEPT PER SHARE DATA)

 

     Fiscal Quarter Ended  
     February 1,
2015
    November 2,
2014
    February 2,
2014
 

Net revenue

   $ 1,635      $ 1,590      $ 709   

Cost of products sold:

      

Cost of products sold

     690        678        347   

Purchase accounting effect on inventory

     4        10        —     

Amortization of intangible assets

     113        108        18   

Restructuring charges

     2        6        5   
  

 

 

   

 

 

   

 

 

 

Total cost of products sold

  809      802      370   
  

 

 

   

 

 

   

 

 

 

Gross margin

  826      788      339   

Research and development

  235      234      107   

Selling, general and administrative

  117      129      74   

Amortization of intangible assets

  59      91      7   

Restructuring charges

  14      33      12   
  

 

 

   

 

 

   

 

 

 

Total operating expenses

  425      487      200   
  

 

 

   

 

 

   

 

 

 

Operating income

  401      301      139   

Interest expense

  (54   (54   —     

Other income, net

  4      16      —     
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

  351      263      139   

Provision for income taxes

  13      126      5   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations

  338      137      134   

Income (loss) from discontinued operations (including gains on disposals of $14 million and $18 million in the fiscal quarters ended February 1, 2015 and November 2, 2014, respectively), net of income taxes

  13      (2   —     
  

 

 

   

 

 

   

 

 

 

Net income

$ 351    $ 135    $ 134   
  

 

 

   

 

 

   

 

 

 

Basic income (loss) per share:

Income per share from continuing operations

$ 1.33    $ 0.54    $ 0.54   

Income (loss) per share from discontinued operations, net of income taxes

$ 0.05    $ (0.01 $ —     

Net income per share

$ 1.38    $ 0.53    $ 0.54   

Diluted income (loss) per share:

Income per share from continuing operations

$ 1.22    $ 0.50    $ 0.53   

Income (loss) per share from discontinued operations, net of income taxes

$ 0.04    $ —      $ —     

Net income per share

$ 1.26    $ 0.50    $ 0.53   

Shares used in per share calculations:

Basic

  255      254      249   

Diluted

  278      272      255   

Share-based compensation expense included in continuing operations:

Cost of products sold

$ 6    $ 6    $ 3   

Research and development

  19      19      8   

Selling, general and administrative

  24      24      13   
  

 

 

   

 

 

   

 

 

 

Total share-based compensation expense

$ 49    $ 49    $ 24   
  

 

 

   

 

 

   

 

 

 


AVAGO TECHNOLOGIES LIMITED

NON-GAAP FINANCIAL SUMMARY - UNAUDITED (1)

(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)

 

     Fiscal Quarter Ended  
     February 1,
2015
    November 2,
2014
    February 2,
2014
 

Net revenue

   $ 1,657      $ 1,610      $ 709   

Gross margin

   $ 974      $ 939      $ 366   

% of net revenue

     59     58     52

Research and development

   $ 210      $ 214      $ 98   

Selling, general and administrative

   $ 83      $ 89      $ 44   

Total operating expenses

   $ 293      $ 303      $ 142   

% of net revenue

     18     19     20

Operating income

   $ 681      $ 636      $ 224   

Income before income taxes

   $ 631      $ 598      $ 224   

Provision for income taxes

   $ 35      $ 42      $ 7   

Net income

   $ 596      $ 556      $ 217   

Net income per share - diluted

   $ 2.09      $ 1.99      $ 0.84   

Shares used in per share calculation - diluted

     285        280        258   

 

(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 includes the effect of purchase accounting on revenues and excludes purchase accounting effect on inventory, amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, including integration costs, income (loss) from and gain or loss on discontinued operations and income tax effects of non-GAAP reconciling adjustments.


AVAGO TECHNOLOGIES LIMITED

FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED

(IN MILLIONS, EXCEPT DAYS)

 

     Fiscal Quarter Ended  
     February 1,
2015
    November 2,
2014
    February 2,
2014
 

Net revenue on GAAP basis

   $ 1,635      $ 1,590      $ 709   

Acquisition-related purchase accounting revenue adjustment

     22        20        —     
  

 

 

   

 

 

   

 

 

 

Net revenue on non-GAAP basis

$ 1,657    $ 1,610    $ 709   
  

 

 

   

 

 

   

 

 

 

Gross margin on GAAP basis

$ 826    $ 788    $ 339   

Acquisition-related purchase accounting revenue adjustment

  22      20      —     

Purchase accounting effect on inventory

  4      10      —     

Amortization of intangible assets

  113      108      18   

Share-based compensation expense

  6      6      3   

Restructuring charges

  2      6      5   

Acquisition-related costs

  1      1      1   
  

 

 

   

 

 

   

 

 

 

Gross margin on non-GAAP basis

$ 974    $ 939    $ 366   
  

 

 

   

 

 

   

 

 

 

Research and development on GAAP basis

$ 235    $ 234    $ 107   

Share-based compensation expense

  19      19      8   

Acquisition-related costs

  6      1      1   
  

 

 

   

 

 

   

 

 

 

Research and development on non-GAAP basis

$ 210    $ 214    $ 98   
  

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense on GAAP basis

$ 117    $ 129    $ 74   

Share-based compensation expense

  24      24      13   

Acquisition-related costs

  10      16      17   
  

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense on non-GAAP basis

$ 83    $ 89    $ 44   
  

 

 

   

 

 

   

 

 

 

Total operating expenses on GAAP basis

$ 425    $ 487    $ 200   

Amortization of intangible assets

  59      91      7   

Share-based compensation expense

  43      43      21   

Restructuring charges

  14      33      12   

Acquisition-related costs

  16      17      18   
  

 

 

   

 

 

   

 

 

 

Total operating expenses on non-GAAP basis

$ 293    $ 303    $ 142   
  

 

 

   

 

 

   

 

 

 

Operating income on GAAP basis

$ 401    $ 301    $ 139   

Acquisition-related purchase accounting revenue adjustment

  22      20      —     

Purchase accounting effect on inventory

  4      10      —     

Amortization of intangible assets

  172      199      25   

Share-based compensation expense

  49      49      24   

Restructuring charges

  16      39      17   

Acquisition-related costs

  17      18      19   
  

 

 

   

 

 

   

 

 

 

Operating income on non-GAAP basis

$ 681    $ 636    $ 224   
  

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes on GAAP basis

$ 351    $ 263    $ 139   

Acquisition-related purchase accounting revenue adjustment

  22      20      —     

Purchase accounting effect on inventory

  4      10      —     

Amortization of intangible assets

  172      199      25   

Share-based compensation expense

  49      49      24   

Restructuring charges

  16      39      17   

Acquisition-related costs

  17      18      19   
  

 

 

   

 

 

   

 

 

 

Income before income taxes on non-GAAP basis

$ 631    $ 598    $ 224   
  

 

 

   

 

 

   

 

 

 

Provision for income taxes on GAAP basis

$ 13    $ 126    $ 5   

Income tax effects of non-GAAP reconciling adjustments

  22      (84   2   
  

 

 

   

 

 

   

 

 

 

Provision for income taxes on non-GAAP basis

$ 35    $ 42    $ 7   
  

 

 

   

 

 

   

 

 

 

Net income on GAAP basis

$ 351    $ 135    $ 134   

Acquisition-related purchase accounting revenue adjustment

  22      20      —     

Purchase accounting effect on inventory

  4      10      —     

Amortization of intangible assets

  172      199      25   

Share-based compensation expense

  49      49      24   

Restructuring charges

  16      39      17   

Acquisition-related costs

  17      18      19   

Income tax effects of non-GAAP reconciling adjustments

  (22   84      (2

Discontinued operations, net of income taxes

  (13   2      —     
  

 

 

   

 

 

   

 

 

 

Net income on non-GAAP basis

$ 596    $ 556    $ 217   
  

 

 

   

 

 

   

 

 

 


Shares used in per share calculation—diluted on GAAP basis

  278      272      255   

Non-GAAP adjustment

  7      8      3   
  

 

 

   

 

 

   

 

 

 

Shares used in per share calculation—diluted on non-GAAP basis(1)

  285      280      258   
  

 

 

   

 

 

   

 

 

 

Days sales outstanding on GAAP basis

  40      45   

Non-GAAP adjustment

  (1   (3
  

 

 

   

 

 

   

Days sales outstanding on non-GAAP basis(2)

  39      42   
  

 

 

   

 

 

   

Inventory Days on Hand on GAAP basis

  66      69      75   

Non-GAAP adjustment

  1      1      1   
  

 

 

   

 

 

   

 

 

 

Inventory Days on Hand on non-GAAP basis(3)

  67      70      76   
  

 

 

   

 

 

   

 

 

 

 

(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.
(2) Days sales outstanding on a non-GAAP basis includes the impact of the acquisition-related purchase accounting revenue adjustment and excludes the impact of accounts receivable related to discontinued operations.
(3) Inventory days on hand on a non-GAAP basis excludes the impact of purchase accounting on inventory, amortization of intangible assets, share-based compensation expense, restructuring charges, acquisition-related costs, and cost of products sold attributable to discontinued operations.


AVAGO TECHNOLOGIES LIMITED

GAAP AND NON-GAAP NET REVENUE BY SEGMENT - UNAUDITED

(IN MILLIONS, EXCEPT PERCENTAGES)

 

     Fiscal Quarter Ended      Growth Rates
     February 1,
2015
     November 2,
2014
     February 2,
2014
    
     GAAP      Non-GAAP      GAAP      Non-GAAP      GAAP      GAAP    Non-GAAP
     $      %      $      %      $      %      $      %      $      Q/Q    Y/Y    Q/Q    Y/Y

Net revenue by segment:

                                      

Wireless Communications

   $ 664         41       $ 664         40       $ 628         40       $ 628         39       $ 349       6%    90%    6%    90%

Enterprise Storage

     486         30         486         29         463         29         463         29         —         5%    —      5%    —  

Wired Infrastructure

     347         21         347         21         352         22         352         22         228       -1%    52%    -1%    52%

Industrial & Other

     138         8         160         10         147         9         167         10         132       -6%    5%    -4%    21%
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

             

Total net revenue

$ 1,635      100    $ 1,657      100    $ 1,590      100    $ 1,610      100    $ 709   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

             


AVAGO TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED

(IN MILLIONS)

 

     February 1,
2015
    November 2,
2014(1)
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 2,569      $ 1,604   

Trade accounts receivable, net

     718        782   

Inventory

     500        519   

Assets held-for-sale

     4        628   

Other current assets

     307        302   
  

 

 

   

 

 

 

Total current assets

  4,098      3,835   

Property, plant and equipment, net

  1,269      1,158   

Goodwill

  1,596      1,596   

Intangible assets, net

  3,445      3,617   

Other long-term assets

  289      285   
  

 

 

   

 

 

 

Total assets

$ 10,697    $ 10,491   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$ 452    $ 515   

Employee compensation and benefits

  132      219   

Other current liabilities

  215      236   

Current portion of long-term debt

  46      46   
  

 

 

   

 

 

 

Total current liabilities

  845      1,016   

Long-term liabilities:

Long-term debt

  4,531      4,543   

Convertible notes payable to related party - non-current

  923      920   

Pension and post-retirement benefit obligations

  496      506   

Other long-term liabilities

  274      263   
  

 

 

   

 

 

 

Total liabilities

  7,069      7,248   
  

 

 

   

 

 

 

Shareholders’ equity:

Ordinary shares, no par value

  2,131      2,009   

Retained earnings

  1,546      1,284   

Accumulated other comprehensive loss

  (49   (50
  

 

 

   

 

 

 

Total shareholders’ equity

  3,628      3,243   
  

 

 

   

 

 

 

Total liabilities and shareholders’ equity

$ 10,697    $ 10,491   
  

 

 

   

 

 

 

 

(1) Amounts as of November 2, 2014 have been derived from audited financial statements as of that date.


AVAGO TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(IN MILLIONS)

 

     Fiscal Quarter Ended  
     February 1,
2015
    November 2,
2014
    February 2,
2014
 

Cash flows from operating activities:

      

Net income

   $ 351      $ 135      $ 134   

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation and amortization

     226        250        57   

Share-based compensation

     49        54        24   

Tax benefits of share-based compensation

     21        42        4   

Excess tax benefits from share-based compensation

     (20     (39     (3

Gains on sales of businesses

     (14     (18     —     

Amortization of debt issuance costs and accretion of debt discount

     7        7        —     

Gain from post-retirement medical plan curtailment and settlement

     —          —          (3

Deferred taxes

     (6     (72     —     

Other

     11        1        —     

Changes in assets and liabilities, net of acquisitions:

      

Trade accounts receivable, net

     64        (180     95   

Inventory

     33        (6     (1

Accounts payable

     (78     52        (24

Employee compensation and benefits

     (90     2        (39

Other current assets and current liabilities

     (66     188        (7

Other long-term assets and long-term liabilities

     (7     (35     (8
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

  481      381      229   
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

Proceeds from sales of businesses

  650      450      —     

Purchases of property, plant and equipment

  (162   (189   (52

Proceeds from disposals of property, plant and equipment

  26      —        —     

Acquisition of business, net of cash acquired

  —        (317   —     

Proceeds from sale of investments

  —        21      —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

  514      (35   (52
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

Debt repayments

  (12   (12   —     

Issuance of ordinary shares

  51      38      19   

Repurchases of ordinary shares

  —        —        (12

Dividend payments to shareholders

  (89   (81   (62

Excess tax benefits from share-based compensation

  20      39      3   

Payments for settlement of acquisition liability

  —        (4   —     

Proceeds from government grants

  —        1      2   
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

  (30   (19   (50
  

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

  965      327      127   

Cash and cash equivalents at beginning of period

  1,604      1,277      985   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

$ 2,569    $ 1,604    $ 1,112