Conference Call to be Webcast Today at 1:45 p.m. Pacific Time
Net revenue for the fourth quarter of 2006 was $923.5 million, an increase of 2.3% from the $902.6 million reported for the third quarter of 2006 and an increase of 12.5% from the $820.6 million reported for the fourth quarter of 2005. Net income computed in accordance with U.S. generally accepted accounting principles (GAAP) for the fourth quarter of 2006 was $45.1 million, or $.08 per share (diluted), compared with GAAP net income of $110.2 million, or $.19 per share (diluted), for the third quarter of 2006, and GAAP net income of $186.7 million, or $.32 per share (diluted), for the fourth quarter of 2005. The 2006 results also reflect the company's adoption of Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), Share-Based Payment ("SFAS 123R"), effective January 1, 2006. Had the company applied the provisions of SFAS 123R in 2005, it would have recorded an additional $90.1 million in stock-based compensation expense and reported GAAP net income of $96.6 million, or $.17 per share (diluted), for the fourth quarter of 2005.
GAAP net income for the fourth quarter of 2006 is after $50.6 million of charges for payments Broadcom is making to or on behalf of certain current and former employees related to consequences of the company's recent equity award review, as well as non-cash stock-based compensation expense incurred related to the extension of the post-service stock option exercise period for certain former employees.
Net revenue for the year ended December 31, 2006 was $3.67 billion, an increase of 37.3% from the $2.67 billion reported for the year ended December 31, 2005. GAAP net income for the year ended December 31, 2006 was $379.0 million, or $.64 per share (diluted), compared with GAAP net income of $367.1 million, or $.66 per share (diluted), for the year ended December 31, 2005. Had the company applied the provisions of SFAS 123R in 2005, it would have recorded an additional $461.9 million in stock-based compensation expense and reported a GAAP net loss of $94.8 million, or ($.19) per share (basic and diluted), for the year ended December 31, 2005.
In addition to GAAP results, Broadcom reports adjusted net income and net income per share, referred to respectively as "non-GAAP net income" and "non-GAAP net income per share." A discussion of Broadcom's use of these non-GAAP financial measures is set forth below, and reconciliations of GAAP net income to non-GAAP net income for the three months and years ended December 31, 2006 and 2005, respectively, appear in the financial statements portion of this release.
Non-GAAP net income for the fourth quarter of 2006, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $184.9 million, or $.31 per share (diluted), compared with non-GAAP net income of $191.4 million, or $.32 per share (diluted), for the third quarter of 2006, and $196.8 million, or $.34 per share (diluted), for the fourth quarter of 2005.
Non-GAAP net income for the year ended December 31, 2006, computed with the adjustments to GAAP reporting set forth in the attached reconciliation, was $822.5 million, or $1.35 per share (diluted), compared with non-GAAP net income of $548.6 million, or $.98 per share (diluted), for the year ended December 31, 2005.
The company's cash, cash equivalents and marketable securities at December 31, 2006 totaled a record $2.8 billion, an increase of $247.2 million over the comparable balance at September 30, 2006, and an increase of $926.1 million over the comparable balance at December 31, 2005.
"The year 2006 exemplified the ever-changing nature of the semiconductor industry, as strength in the first half of the year was followed by a slowdown in the second. However, on the whole, 2006 turned out to be a very good year for Broadcom as we increased our revenue by 37% and increased our cash and marketable securities by more than $900 million," said Scott A. McGregor, Broadcom's President and Chief Executive Officer. "Our continued focus on hiring the world's best talent, combined with our execution in bringing new products to market and expanding into new end markets, enabled Broadcom's revenue growth to outpace the overall semiconductor industry four fold in 2006."
Conference Call Information
As previously announced, Broadcom will conduct a conference call with analysts and investors to discuss its fourth quarter and 2006 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, Thursday, February 22, 2007.
The financial results included in this release are unaudited. The complete, audited financial statements of the company for the year ended December 31, 2006 will be included in Broadcom's Annual Report on Form 10-K to be filed with the SEC later this month.
Discussion of Non-GAAP Financial Measures
Non-GAAP net income consists of net income excluding stock-based compensation expense as well as charges related to acquisitions and other charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the company's core operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by adjusted GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the calculation of GAAP weighted average shares outstanding (diluted) is adjusted to exclude the benefits of compensation costs attributable to future services and not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.
Broadcom believes that the presentation of non-GAAP net income and non- GAAP net income per share provides important supplemental information to management and investors regarding financial and business trends relating to the company's financial condition and results of operations. For further information regarding why Broadcom believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to the company's Current Report on Form 8-K regarding this earnings press release filed today with the SEC. The Form 8-K is available on the SEC's website at www.sec.gov or under the "Financial Information" tab of the Investors section of the Broadcom website described above.
Effects of 2006 Stock Dividend
All share numbers and per share amounts set forth in this release and the accompanying unaudited financial statements have been adjusted to reflect the company's three-for-two stock split effected February 21, 2006 through the payment of respective stock dividends to the holders of record of Class A and Class B common stock on February 6, 2006.
Broadcom Corporation is a global leader in semiconductors for wired and wireless communications. Our products enable the delivery of voice, video, data and multimedia to and throughout the home, the office and the mobile environment. Broadcom provides 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(R).
Broadcom, one of the world's largest fabless semiconductor companies with unaudited annual 2006 revenue of $3.67 billion, is headquartered in Irvine, Calif., and has offices and research facilities in North America, Asia and Europe. Broadcom may be contacted at +1.949.926.5900 or at www.broadcom.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:
All statements included or incorporated by reference in this release and 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. 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.