Avago Technologies Limited Announces Second Quarter Fiscal Year 2010 Financial Results

 
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
         
 
Quarter ended Two quarters ended

  May 2,  

January 31,

  May 3,  

  May 2,  

  May 3,  

2010 2010 2009 2010 2009
Net revenue $ 515 $ 456 $ 325 $ 971 $ 693
Costs and expenses:

 

Cost of products sold:
Cost of products sold 268 247 210 515 414
Amortization of intangible assets 14 15 14 29 29
Restructuring charges   -     -     3     -     9  
Total cost of products sold   282     262     227     544     452  
Gross margin 233 194 98 427 241
 
Research and development 70 64 59 134 121
Selling, general and administrative 48 46 42 94 82
Amortization of intangible assets 6 5 5 11 11
Restructuring charges   1     1     3     2     8  
Total operating expenses   125     116     109     241     222  
 
Income(loss) from operations 108 78 (11 ) 186 19
Interest expense (8 ) (11 ) (20 ) (19 ) (38 )
(Loss) gain on extinguishment of debt - (24 ) - (24 ) 1
Other income (expense), net   (1 )   (1 )   (2 )   (2 )   (4 )
Income (loss) before income taxes 99 42 (33 ) 141 (22 )
Provision for (benefit from) income taxes   9     4     (2 )   13     3  
Net income (loss) $ 90   $ 38   $ (31 ) $ 128   $ (25 )
 
Net income (loss) per share:
Basic $ 0.38 $ 0.16 $ (0.14 ) $ 0.54 $ (0.12 )
Diluted $ 0.37 $ 0.16 $ (0.14 ) $ 0.52 $ (0.12 )
 
Shares used in per share calculations:
Basic 238 236 214 237 214
Diluted 246 244 214 244 214
 
Share-based compensation included in:
Cost of products sold $ 1 $ - $ - $ 1 $ -
Research and development 2 1 1 3 2
Selling, general and administrative   3     4     3     7     2  
$ 6   $ 5   $ 4   $ 11   $ 4  
 
AVAGO TECHNOLOGIES LIMITED
FINANCIAL SUMMARY (NON-GAAP) - UNAUDITED
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
 
         
Quarter ended Two quarters ended
May 2, January 31, May 3, May 2, May 3,
2010 2010 2009 2010 2009
 
Net revenue $ 515 $ 456 $ 325 $ 971 $ 693
Gross margin 248 209 115 457 279
% of net revenue 48 % 46 % 35 % 47 % 40 %
Research and development $ 68 $ 63 $ 58 $ 131 $ 119
Selling, general and administrative $ 45 $ 42 $ 39 $ 87 $ 80
 
Total operating expenses $ 113 $ 105 $ 97 $ 218 $ 199
% of net revenue 22 % 23 % 30 % 22 % 29 %
Income from operations $ 135 $ 104 $ 18 $ 239 $ 80
Interest expense $ (8 ) $ (11 ) $ (20 ) $ (19 ) $ (38 )
 
Net income(loss) $ 117 $ 88 $ (2 ) $ 205 $ 35
Net income per share - diluted $ 0.47 $ 0.36 $ (0.01 ) $ 0.83 $ 0.16
Shares used in per share calculation - diluted(1) 249 247 214 247 218

 

 
The financial summary excludes amortization of acquisition-related intangibles, share-based compensation, restructuring charges, advisory agreement termination fee, selling shareholder expenses and (loss)gain on extinguishment of debt.
 
 
(1) The shares used in diluted per share calculation exclude the impact of share-based compensation.
 
AVAGO TECHNOLOGIES LIMITED
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED
(IN MILLIONS)
         
 
Quarter ended Two quarters ended

   May 2,   

January 31,

   May 3,   

   May 2,   

   May 3,   

2010 2010 2009 2010 2009
 
Net income (loss) on GAAP basis $ 90 $ 38 $ (31 ) $ 128

 

$ (25 )
 
Amortization of acquisition-related intangibles 20 20 19 40 40
Share-based compensation expense 6 5 4 11 4
Restructuring charges 1 1 6 2 17
Loss(gain) on extinguishment of debt   -   24   -     24   (1 )
Net income(loss) on Non-GAAP basis $ 117 $ 88 $ (2 ) $ 205 $ 35  
 
Gross margin on GAAP basis $ 233 $ 194 $ 98 $ 427 $ 241
Amortization of acquisition-related intangibles 14 15 14 29 29
Share-based compensation expense 1 - - 1 -
Restructuring charges   -   -   3     -   9  
Gross margin on Non-GAAP basis $ 248 $ 209 $ 115   $ 457 $ 279  
 
Research and development on GAAP basis $ 70 $ 64 $ 59 $ 134 $ 121
Share-based compensation expense   2   1   1     3   2  
Research and development on Non-GAAP basis $ 68 $ 63 $ 58   $ 131 $ 119  
 
Selling, general and administrative on GAAP basis $ 48 $ 46 $ 42 $ 94 $ 82
Share-based compensation expense   3   4   3     7   2  
Selling, general and administrative on Non-GAAP basis $ 45 $ 42 $ 39   $ 87 $ 80  
 
Total operating expenses on GAAP basis $ 125 $ 116 $ 109 $ 241 $ 222
Amortization of acquisition-related intangibles 6 5 5 11 11
Share-based compensation expense 5 5 4 10 4
Restructuring charges   1   1   3     2   8  
Total operating expenses on Non-GAAP basis $ 113 $ 105 $ 97   $ 218 $ 199  
 
Income(loss) from operations on GAAP basis $ 108 $ 78 $ (11 ) $ 186 $ 19
Amortization of acquisition-related intangibles 20 20 19 40 40
Share-based compensation expense 6 5 4 11 4
Restructuring charges   1   1   6     2   17  
Income from operations on Non-GAAP basis $ 135 $ 104 $ 18   $ 239 $ 80  
 
AVAGO TECHNOLOGIES FINANCE PTE. LTD
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA - UNAUDITED
(IN MILLIONS)
         
Quarter ended Two quarters ended
May 2, January 31, May 3, May 2, May 3,
2010 2010 2009 2010 2009
 
Net income (loss) $ 90 $ 38 $ (31 ) $ 128

 

$ (25 )
Interest expense 8 11 20 19 38
Provision for (benefit from) income taxes 9 4 (2 ) 13 3
Depreciation and amortization expense   40   39   39     79   80  
EBITDA 147 92 26 239 96
 
Restructuring and other unusual charges 1

 

1

 

10

 

2

 

22
Share-based compensation 6

 

5

 

4

 

11

 

4
Loss(gain) on extinguishment of debt   -   24   -     24   (1 )
Adjusted EBITDA $ 154 $ 122 $ 40   $ 276 $ 121  
 
EBITDA represents net income (loss) before interest expense, provision for income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA further adjusted to give effect to certain items that are required in calculating covenant compliance under our senior subordinated notes indenture as well as under our senior secured credit facility. Adjusted EBITDA is calculated by subtracting from or adding to EBITDA items of income or expense described above. EBITDA and Adjusted EBITDA do not represent net income, as that term is defined under GAAP, and should not be considered as an alternative to net income (loss) as an indicator of our operating performance.
 
Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow available for management or discretionary use as such measures do not consider certain cash requirements such as capital expenditures, tax payments and debt service requirements. EBITDA and Adjusted EBITDA as presented herein are not necessarily comparable to similarly titled measures used by other companies.
 
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN MILLIONS)
   
   
May 2, November 1,
2010 2009 (1)
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 256 $ 472
Trade accounts receivable, net 249 186
Inventory 178 162
Other current assets   44     44  
Total current assets 727 864
Property, plant and equipment, net 261 264
Goodwill 171 171
Intangible assets, net 607 647
Other long-term assets   16     24  
Total assets $ 1,782   $ 1,970  
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 169 $ 154
Employee compensation and benefits 59 55
Accrued interest 12 25
Capital lease obligations - current 2 2
Other current liabilities 39 33
Current portion of long-term debt   -     364  
Total current liabilities 281 633
 
Long-term liabilities:
Long-term debt 230 230
Capital lease obligations - non-current 4 3
Other long-term liabilities   67     64  
Total liabilities 582 930
 
Shareholders' equity:
Ordinary shares, no par value 1,425 1,393
Accumulated deficit (228 ) (356 )
Accumulated other comprehensive income   3     3  
Total shareholders' equity   1,200     1,040  
Total liabilities and shareholders' equity $ 1,782   $ 1,970  
 
(1) Amounts for the year ended November 1, 2009 have been derived from audited financial statements as of that date.
 
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN MILLIONS)
         
 
Quarter ended Two quarters ended

  May 2,  

January 31,

  May 3,  

  May 2,  

  May 3,  

2010 2010 2009 2010 2009
Cash flows from operating activities:
Net income (loss) $ 90 $ 38 $ (31 ) $ 128 $ (25 )
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
Depreciation and amortization 40 39 39 79 80
Amortization of debt issuance costs - 1 1 1 2
Non-cash portion of restructuring charges - - 1 - 1
Impairment of investment - - 2 - 2
(Gain) loss on extinguishment of debt - 8 - 8 (1 )
Loss on disposal of property, plant and equipment - 1 - 1 -
Share-based compensation 6 5 4 11 4
Excess tax benefits from share-based compensation (1 ) - - (1 ) -
Changes in assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable (46 ) (17 ) 1 (63 ) 1
Inventory (12 ) (4 ) 28 (16 ) 38
Accounts payable 2 5 1 7 (4 )
Employee compensation and benefits 13 (9 ) (3 ) 4 (34 )
Other current assets and current liabilities 14 (28 ) 15 (14 ) (9 )
Other long-term assets and long-term liabilities   9     2     8     11     7  
Net cash provided by operating activities   115     41     66     156     62  
 
Cash flows from investing activities:
Purchase of property, plant and equipment (18 ) (9 ) (13 ) (27 ) (25 )
Acquisitions and investment, net of cash acquired (1 ) - (7 ) (1 ) (7 )
Proceeds from disposal of property, plant, and equipment 1 - - 1 -
Proceeds from sale of discontinued operations   -     -     2     -     2  
Net cash used in investing activities   (18 )   (9 )   (18 )   (27 )   (30 )
 
Cash flows from financing activities:
Debt repayments - (364 ) - (364 ) (2 )
Issuance of ordinary shares, net of issuance costs 15 4 - 19 -
Repurchase of ordinary shares - - (1 ) - (1 )
Cash settlement of equity awards - - (1 ) - (1 )
Payment on capital lease obligation (1 ) - - (1 )
Excess tax benefits from share-based compensation   1     -     -     1     -  
Net cash (used in) provided by financing activities   15     (360 )   (2 )   (345 )   (4 )
 
Net (decrease) increase in cash and cash equivalents 112 (328 ) 46 (216 ) 28
Cash and cash equivalents at the beginning of period   144     472     195     472     213  
Cash and cash equivalents at end of period $ 256   $ 144   $ 241   $ 256   $ 241  

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