Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
All statements included or incorporated by reference in this release and in 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 industry and business, 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. 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.
Our future reported GAAP-based results will be negatively affected by the implementation of new accounting rules related to the expensing of stock options, commencing in 2006. Other important factors that may affect Broadcom's business, results of operations and financial condition 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, trends in the broadband communications markets in various geographic regions, including seasonality in sales of consumer products into which our products are incorporated, and possible disruption in commercial activities related to terrorist activity or armed conflict; our ability to scale our operations in response to changes in demand for our existing products and services or demand for new products requested by our customers; intellectual property disputes and customer indemnification claims and other types of litigation risk; 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; the timing, rescheduling or cancellation of significant customer orders and our ability, as well as the ability of our customers, to manage inventory; the gain or loss of a key customer, design win or order; the rate at which our present and future customers and end-users adopt Broadcom's technologies and products in our target markets; delays in the adoption and acceptance of industry standards in those markets; 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 availability and pricing of third party semiconductor foundry, assembly and test capacity and raw materials; our ability to timely and accurately predict market requirements and evolving industry standards and to identify opportunities in new markets; the quality of our products and any remediation costs; 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; problems or delays that we may face in shifting our products to smaller geometry process technologies and in achieving higher levels of design integration; the timing of customer-industry qualification and certification of our products and the risks of non-qualification or non-certification; changes in our product or customer mix; the volume of our product sales and pricing concessions on volume sales; our ability to develop new sources of revenue to replace lost revenue from our declining Intel processor-based server chipset business; 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 facilities; the effectiveness of our expense and product cost control and reduction efforts; the risks and uncertainties associated with our international operations, particularly in light of recent events; the effects of natural disasters, public health emergencies, international conflicts and other events beyond our control; the level of orders received that can be shipped in a fiscal quarter; and other factors.
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 for any reason.
Broadcom(R), the pulse logo, Connecting everything(R), the Connecting everything logo, NetXtreme(R) and BLINK(TM) are among the trademarks of Broadcom Corporation and/or its affiliates in the United States, certain other countries and/or the EU. Bluetooth(R) is a trademark of the Bluetooth SIG. Any other trademarks or trade names mentioned are the property of their respective owners.
Broadcom Financial Analyst Contact T. Peter Andrew Sr. Director, Investor Relations 949-926-5663 Email Contact BROADCOM CORPORATION Unaudited GAAP Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Net revenue $694,977 $646,515 $1,850,183 $1,861,220 Cost of revenue (1) 326,608 322,038 875,417 921,727 Cost of revenue - stock-based compensation 471 1 1,233 1,272 Gross profit 367,898 324,476 973,533 938,221 Operating expense: Research and development (1) 159,096 123,935 441,660 367,666 Research and development - stock-based compensation 11,559 9,860 28,499 53,020 Selling, general and administrative (1) 64,838 53,743 176,948 161,290 Selling, general and administrative - stock-based compensation 4,554 2,634 12,694 9,124 Amortization of purchased intangible assets 1,040 1,296 2,992 2,127 In-process research and development 35,000 37,262 41,652 63,766 Restructuring costs (reversal) (2,500) -- (2,500) -- Settlement costs -- 35,700 110,000 68,200 Impairment of intangible assets -- -- -- 18,000 Income from operations 94,311 60,046 161,588 195,028 Interest income, net 14,317 4,365 32,953 8,982 Other income, net 2,580 6,952 3,357 6,552 Income before income taxes 111,208 71,363 197,898 210,562 Provision (benefit) for income taxes (21,448) 27,462 (19,001) 62,958 Net income $132,656 $43,901 $216,899 $147,604 Net income per share (basic) $.39 $.14 $.65 $.47 Net income per share (diluted) $.35 $.13 $.59 $.42 Weighted average shares (basic) 341,849 322,541 336,074 316,084 Weighted average shares (diluted) 383,675 347,389 368,321 347,449 (1) Excludes stock-based compensation, which is presented separately by respective expense category. Stock-based compensation expense includes the impact of restricted stock units (RSUs) and certain other equity compensation instruments issued by Broadcom as well as stock options and restricted stock assumed in acquisitions. RSUs are share awards that entitle the holder to receive freely tradable shares of Broadcom's Class A Common Stock upon vesting. Generally, RSUs vest on a quarterly basis over sixteen quarters from the date of grant. BROADCOM CORPORATION Unaudited Reconciliation of Pro Forma Non-GAAP Adjustments (In thousands) The following represents a reconciliation (unaudited) of GAAP net income to pro forma non-GAAP net income. Three Months Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 GAAP net income $132,656 $43,901 $216,899 $147,604 Stock-based compensation: Restricted stock units issued by Broadcom 9,875 76 23,434 76 Stock options and restricted stock assumed in acquisitions and other equity compensation instruments issued by Broadcom 6,709 12,419 18,992 63,340 Additional acquisition-related items: Amortization of purchased intangible assets: Cost of revenue 2,774 3,782 8,308 9,228 Other operating expense 1,040 1,296 2,992 2,127 In-process research and development 35,000 37,262 41,652 63,766 Impairment of intangible assets -- -- -- 18,000 Employer payroll tax on certain stock option exercises: Cost of revenue 98 51 186 258 Research and development 1,315 283 2,102 2,130 Selling, general and administrative 586 85 938 1,069 Settlement costs -- 35,700 110,000 68,200 Restructuring costs (reversal) (2,500) -- (2,500) -- Gains on strategic investments, net (1,151) (5,231) (1,151) (5,231) Non-operating gains (471) (1,979) (646) (2,586) Income tax benefits from adjustments to tax reserves of foreign subsidiaries (25,900) -- (25,900) -- Income tax effects (11,996) (3,560) ( 43,520) (23,230) Pro forma non-GAAP net income $148,035 $124,085 $351,786 $344,751 Pro Forma Non-GAAP Adjustments