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8-K - FORM 8-K - Avago Technologies LTD | f58450e8vk.htm |
Exhibit 99.1
Avago Technologies Limited Announces First Quarter
Fiscal Year 2011 Financial Results
Fiscal Year 2011 Financial Results
| Net revenue down 4 percent quarter-on-quarter to $550 million | ||
| GAAP gross margin increased to 49.3 percent; Non-GAAP gross margin increased to 52.0 percent |
SAN JOSE, Calif., and SINGAPORE February 23, 2011 Avago Technologies Limited (Nasdaq:
AVGO), a leading supplier of analog interface components for communications, industrial and
consumer applications, today reported financial results for its first quarter fiscal year 2011,
ended January 30, 2011, and provided guidance for the second quarter of fiscal year 2011.
First Quarter Fiscal Year 2011 GAAP Results
Net revenue was $550 million, a decrease of 4 percent compared with the previous quarter, and up 21
percent from the same quarter last year.
Gross margin was $271 million, or 49.3 percent of net revenue. This compares with gross margin of
$276 million, or 48.3 percent of net revenue last quarter, and gross margin of $194 million, or
42.5 percent of net revenue in the same quarter last year.
Operating expenses were $129 million. This compares with $131 million in the prior quarter and
$116 million in the same quarter the previous year.
Income from operations was $142 million. This compares with $145 million in the prior quarter and
$78 million in the same quarter last year.
First quarter net income was $119 million, or $0.48 per diluted share. This compares with net
income of $164 million, or $0.66 per diluted share last quarter, and a net income of $38 million,
or $0.16 per diluted share in the same quarter last year.
The Companys cash and cash equivalents balance at the end of the first quarter was $363 million,
compared to $561 million at the end of the prior quarter. The decrease over the previous quarter
is primarily due to $230 million in principal and $28 million in interest and call premium used to
redeem the Companys outstanding senior subordinated debt in December 2010.
In addition, on December 30, 2010 the Company paid an interim cash dividend of 7 cents ($0.07) per
ordinary share, totaling approximately $17 million.
First Quarter Fiscal Year 2011 Non-GAAP Results
Gross margin was $286 million, or 52.0 percent of net revenue. This compares with gross margin of
$291 million, or 50.9 percent of net revenue last quarter, and gross margin of $209 million, or
45.8 percent of net revenue in the same quarter last year.
Income from operations was $169 million. This compares with $171 million in the prior quarter and
$104 million in the same quarter the previous year.
Net income was $165 million, or $0.65 per diluted share. This compares with net income of $190
million, or $0.76 per diluted share last quarter, and net income of $88 million, or $0.36 per
diluted share in the same quarter last year.
Avago Technologies Limited Announces First Quarter Fiscal Year 2011 Financial Results
First Quarter Fiscal Year 2011 Non-GAAP Results
Change | ||||||||||||||||||||
(Dollars in millions, except EPS) | Q1 11 | Q4 10 | Q1 10 | Q/Q | Y/Y | |||||||||||||||
Net Revenue |
$ | 550 | $ | 572 | $ | 456 | -4 | % | +21 | % | ||||||||||
Gross Margin |
52.0 | % | 50.9 | % | 45.8 | % | +110bps | +620bps | ||||||||||||
Operating Expenses |
$ | 117 | $ | 120 | $ | 105 | -$3 | +$12 | ||||||||||||
Net Income |
$ | 165 | $ | 190 | $ | 88 | -$25 | +$77 | ||||||||||||
Earnings Per Share Diluted |
$ | 0.65 | $ | 0.76 | $ | 0.36 | -$0.11 | +$0.29 |
Notwithstanding inventory
adjustments in sales channels and the return of seasonality this quarter, we were able
to grow
revenue 21 percent year-on-year, said Hock Tan,
President and CEO of Avago Technologies Limited. This growth was driven by a trend of increasing
sales of proprietary products, which drove an improvement in gross margin to 52.0 percent.
Other Quarterly Data
Percentage of Net Revenue | Growth Rates | |||||||||||||||||||
Net Revenues by Target Market | Q1 11 | Q4 10 | Q1 10 | Q/Q | Y/Y | |||||||||||||||
Wireless Communications |
37 | 38 | 38 | -8 | % | 17 | % | |||||||||||||
Wired Infrastructure |
28 | 25 | 26 | 7 | % | 27 | % | |||||||||||||
Industrial & Automotive |
30 | 30 | 26 | -3 | % | 42 | % | |||||||||||||
Consumer & Computing Peripherals |
5 | 7 | 10 | -26 | % | -36 | % |
Key Statistics | Q1 11 | Q4 10 | Q1 10 | |||||||||
(Dollars in millions) | ||||||||||||
Cash From Operations |
$ | 67 | $ | 217 | $ | 41 | ||||||
Depreciation |
$ | 21 | $ | 21 | $ | 19 | ||||||
Amortization |
$ | 20 | $ | 19 | $ | 20 | ||||||
Capital Expenditures |
$ | 32 | $ | 30 | $ | 9 | ||||||
Days Sales Outstanding |
48 | 45 | 41 | |||||||||
Inventory Days On Hand |
70 | 61 | 61 |
Second Quarter Fiscal Year 2011 Business Outlook
Based on current business trends, the outlook for the second fiscal quarter of 2011, ending May 1,
2011, is expected to be as follows:
GAAP | Reconciling Items | Non-GAAP | ||||||||||
Net Revenue |
Down 1% to Up 2% | Down 1% to Up 2% | ||||||||||
Gross Margin |
49.3% plus/minus 1% | $ | 15M | 52.0% plus/minus 1% | ||||||||
Operating Expenses |
$ | 137M | $ | 13M | $ | 124M | ||||||
Interest and Other |
( $1M | ) | ($1M | ) | $ | 0M | ||||||
Taxes |
$ | 4M | $ | 4M | ||||||||
Diluted Share Count |
253M | 256M |
2
Avago Technologies Limited Announces First Quarter Fiscal Year 2011 Financial Results
Reconciling items include $14 million of amortization of acquisition-related intangibles and
$1 million of share-based compensation expense at the Gross Margin line, $5 million of amortization
of acquisition-related intangibles, $7 million of share-based compensation and $1 million of
restructuring charges at the Operating Expenses line, and the write-off of $1 million of
unamortized expense from the anticipated replacement of the
Companys outstanding revolving credit facility
at the Interest and Other line.
The guidance provided above is only an estimate of what the Company believes is realizable as of
the date of this release. 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.
Financial Results Conference Call
Avago Technologies Limited will host a conference call to review its financial results for the
first quarter of fiscal year 2011, and to provide guidance for the second quarter of fiscal year
2011, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial 800-659-1942;
International 617-614-2710. The passcode is 52483815. A replay of the call will be available
through March 2, 2011. To access the replay dial 888-286-8010; International 617-801-6888 and
reference the passcode: 16710653. A webcast of the conference call will also be available in the
Investors section of Avagos website at www.avagotech.com.
Non-GAAP Financial Measures
In addition to GAAP reporting, Avago provides investors with net income or loss, as well as gross
margin and operating expenses, on a non-GAAP basis. This non-GAAP information excludes
amortization of acquisition-related intangibles, share-based compensation expense, restructuring
charges and debt extinguishment losses. Management does not believe that the excluded items are
reflective of the Companys underlying performance. The exclusion of these and other similar items
from Avagos non-GAAP presentation 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 Companys 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 Companys on-going operations and enable more meaningful period to period
comparisons. These non-GAAP measures are in addition to, and not 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.
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. Our product portfolio is
extensive and includes over 6,500 products in four primary target markets: wireless
communications, wired infrastructure, industrial and automotive electronics and consumer and
computing peripherals.
3
Avago Technologies Limited Announces First Quarter Fiscal Year 2011 Financial Results
Cautionary Note Regarding Forward-Looking Statements
This announcement contains forward-looking statements which address our expected future business
and financial performance. All statements other than statements of historical fact could be deemed
forward-looking, including, but not limited to, any statements of the plans, strategies and
objectives of management for future operations; any statements of expectation or belief regarding
future events, our products, product sales, expenses, liquidity, cash flow and growth rates;
technology developments or enforceability of our intellectual property rights and related
litigation expenses; and any statements of assumptions underlying any of the foregoing. These
forward-looking statements are based on current expectations, estimates, forecasts and projections
of future Company or industry performance, based on managements 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. For Avago, particular uncertainties that could
materially affect future results include cyclicality in the semiconductor industry or in our target
markets and general economic conditions; quarterly and annual fluctuations in operating results;
our competitive performance and ability to continue achieving design wins with our customers; our
ability to generate cash sufficient to fund our research and development, capital expenditures and
other business needs; our increased dependence on outsourced service providers for certain key
business services and their ability to execute to our requirements; our dependence on contract
manufacturing and outsourced supply chain; loss of our significant customers; our ability to
maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property
and any associated increases in litigation expenses; any expenses associated with resolving
customer product and warranty and indemnification claims; costs associated with and our ability to
achieve the growth prospects and synergies expected from our acquisitions; delays and challenges
associated with integrating acquired companies with our existing businesses; our ability to improve
our cost structure through our manufacturing outsourcing program; and other events and trends on a
national, regional and global scale, including those of a political, economic, business,
competitive and regulatory nature. Our 2010 Annual Report on Form 10-K filed on December 15, 2010
and other filings with the Securities and Exchange Commission, or SEC (which you may obtain for
free at the SECs 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.
# # #
Contacts:
Avago Technologies Ltd.
Jacob Sayer, 408-435-7400
VP Business Development and Investor Relations
investor.relations@avagotech.com
Avago Technologies Ltd.
Jacob Sayer, 408-435-7400
VP Business Development and Investor Relations
investor.relations@avagotech.com
4
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
Quarter ended | ||||||||||||
January 30, | October 31, | January 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Net revenue |
$ | 550 | $ | 572 | $ | 456 | ||||||
Cost of products sold: |
||||||||||||
Cost of products sold |
265 | 282 | 247 | |||||||||
Amortization of intangible assets |
14 | 14 | 15 | |||||||||
Total cost of products sold |
279 | 296 | 262 | |||||||||
Gross margin |
271 | 276 | 194 | |||||||||
Research and development |
73 | 75 | 64 | |||||||||
Selling, general and administrative |
50 | 51 | 46 | |||||||||
Amortization of intangible assets |
6 | 5 | 5 | |||||||||
Restructuring charges |
| | 1 | |||||||||
Total operating expenses |
129 | 131 | 116 | |||||||||
Income from operations |
142 | 145 | 78 | |||||||||
Interest expense |
(3 | ) | (7 | ) | (11 | ) | ||||||
Loss on extinguishment of debt |
(19 | ) | | (24 | ) | |||||||
Other income (expense), net |
| | (1 | ) | ||||||||
Income before income taxes |
120 | 138 | 42 | |||||||||
Provision for (benefit from) income taxes |
1 | (26 | ) | 4 | ||||||||
Net income |
$ | 119 | $ | 164 | $ | 38 | ||||||
Net income per share: |
||||||||||||
Basic |
$ | 0.49 | $ | 0.69 | $ | 0.16 | ||||||
Diluted |
$ | 0.48 | $ | 0.66 | $ | 0.16 | ||||||
Shares used in per share calculations: |
||||||||||||
Basic |
242 | 239 | 236 | |||||||||
Diluted |
250 | 248 | 244 | |||||||||
Share-based compensation included in: |
||||||||||||
Cost of products sold |
$ | 1 | $ | 1 | $ | | ||||||
Research and development |
3 | 3 | 1 | |||||||||
Selling, general and administrative |
3 | 3 | 4 | |||||||||
$ | 7 | $ | 7 | $ | 5 | |||||||
AVAGO TECHNOLOGIES LIMITED
NON-GAAP FINANCIAL SUMMARY UNAUDITED(1)
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
NON-GAAP FINANCIAL SUMMARY UNAUDITED(1)
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
Quarter ended | ||||||||||||
January 30, | October 31, | January 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Net revenue |
$ | 550 | $ | 572 | $ | 456 | ||||||
Gross margin |
286 | 291 | 209 | |||||||||
% of net revenue |
52 | % | 51 | % | 46 | % | ||||||
Research and development |
$ | 70 | $ | 72 | $ | 63 | ||||||
Selling, general and administrative |
$ | 47 | $ | 48 | $ | 42 | ||||||
Total operating expenses |
$ | 117 | $ | 120 | $ | 105 | ||||||
% of net revenue |
21 | % | 21 | % | 23 | % | ||||||
Income from operations |
$ | 169 | $ | 171 | $ | 104 | ||||||
Interest expense |
$ | (3 | ) | $ | (7 | ) | $ | (11 | ) | |||
Net income |
$ | 165 | $ | 190 | $ | 88 | ||||||
Net income per share diluted |
$ | 0.65 | $ | 0.76 | $ | 0.36 | ||||||
Shares used in per share
calculation diluted |
254 | 251 | 247 |
(1) | A reconciliation of the non-GAAP measures presented above to 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 excludes amortization of acquisition-related intangibles, share-based compensation, restructuring charges, and loss on extinguishment of debt. |
AVAGO TECHNOLOGIES LIMITED
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP UNAUDITED
(IN MILLIONS)
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP UNAUDITED
(IN MILLIONS)
Quarter ended | ||||||||||||
January 30, | October 31, | January 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Net income on GAAP basis |
$ | 119 | $ | 164 | $ | 38 | ||||||
Amortization
of intangible assets |
20 | 19 | 20 | |||||||||
Share-based compensation expense |
7 | 7 | 5 | |||||||||
Restructuring charges |
| | 1 | |||||||||
Loss on extinguishment of debt |
19 | | 24 | |||||||||
Net income on Non-GAAP basis |
$ | 165 | $ | 190 | $ | 88 | ||||||
Gross margin on GAAP basis |
$ | 271 | $ | 276 | $ | 194 | ||||||
Amortization
of intangible assets |
14 | 14 | 15 | |||||||||
Share-based compensation expense |
1 | 1 | | |||||||||
Gross margin on Non-GAAP basis |
$ | 286 | $ | 291 | $ | 209 | ||||||
Research and development on GAAP basis |
$ | 73 | $ | 75 | $ | 64 | ||||||
Share-based compensation expense |
3 | 3 | 1 | |||||||||
Research and development on Non-GAAP basis |
$ | 70 | $ | 72 | $ | 63 | ||||||
Selling, general and administrative on GAAP basis |
$ | 50 | $ | 51 | $ | 46 | ||||||
Share-based compensation expense |
3 | 3 | 4 | |||||||||
Selling, general and administrative on Non-GAAP basis |
$ | 47 | $ | 48 | $ | 42 | ||||||
Total operating expenses on GAAP basis |
$ | 129 | $ | 131 | $ | 116 | ||||||
Amortization
of intangible assets |
6 | 5 | 5 | |||||||||
Share-based compensation expense |
6 | 6 | 5 | |||||||||
Restructuring charges |
| | 1 | |||||||||
Total operating expenses on Non-GAAP basis |
$ | 117 | $ | 120 | $ | 105 | ||||||
Income from operations on GAAP basis |
$ | 142 | $ | 145 | $ | 78 | ||||||
Amortization
of intangible assets |
20 | 19 | 20 | |||||||||
Share-based compensation expense |
7 | 7 | 5 | |||||||||
Restructuring charges |
| | 1 | |||||||||
Income from operations on Non-GAAP basis |
$ | 169 | $ | 171 | $ | 104 | ||||||
Shares used in per share calculation diluted on GAAP basis |
250 | 248 | 244 | |||||||||
Non-GAAP adjustment |
4 | 3 | 3 | |||||||||
Shares used in per share calculation diluted on Non-GAAP basis(1) |
254 | 251 | 247 | |||||||||
(1) | The shares used in the diluted per share calculations on a Non-GAAP basis exclude the impact of share-based compensation attributable to future services 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. |
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED
(IN MILLIONS)
CONDENSED CONSOLIDATED BALANCE SHEETS UNAUDITED
(IN MILLIONS)
January 30, | October 31, | |||||||
2011 | 2010 (1) | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 363 | $ | 561 | ||||
Trade accounts receivable, net |
291 | 285 | ||||||
Inventory |
203 | 189 | ||||||
Other current assets |
53 | 52 | ||||||
Total current assets |
910 | 1,087 | ||||||
Property, plant and equipment, net |
281 | 281 | ||||||
Goodwill |
175 | 172 | ||||||
Intangible assets, net |
557 | 573 | ||||||
Other long-term assets |
48 | 44 | ||||||
Total assets |
$ | 1,971 | $ | 2,157 | ||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 156 | $ | 198 | ||||
Employee compensation and benefits |
51 | 82 | ||||||
Accrued interest |
| 12 | ||||||
Capital lease obligations current |
2 | 2 | ||||||
Other current liabilities |
28 | 41 | ||||||
Current portion of long-term debt |
| 230 | ||||||
Total current liabilities |
237 | 565 | ||||||
Long-term liabilities: |
||||||||
Capital lease obligations non-current |
5 | 4 | ||||||
Other long-term liabilities |
85 | 83 | ||||||
Total liabilities |
327 | 652 | ||||||
Shareholders equity: |
||||||||
Ordinary shares, no par value |
1,487 | 1,450 | ||||||
Retained earnings |
161 | 59 | ||||||
Accumulated other comprehensive loss |
(4 | ) | (4 | ) | ||||
Total shareholders equity |
1,644 | 1,505 | ||||||
Total liabilities and shareholders equity |
$ | 1,971 | $ | 2,157 | ||||
(1) | Amounts for the year ended October 31, 2010 have been derived from audited financial statements as of that date. |
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(IN MILLIONS)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(IN MILLIONS)
Quarter ended | ||||||||||||
January 30, | October 31, | January 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 119 | $ | 164 | $ | 38 | ||||||
Adjustments to reconcile net income to net cash provided
by operating activities: |
||||||||||||
Depreciation and amortization |
41 | 40 | 39 | |||||||||
Amortization of debt issuance costs |
| 1 | 1 | |||||||||
Loss on extinguishment of debt |
5 | | 8 | |||||||||
Loss on disposal of property, plant and equipment |
| 1 | 1 | |||||||||
Share-based compensation |
7 | 7 | 5 | |||||||||
Tax benefits of share-based compensation |
8 | | | |||||||||
Excess tax benefits from share-based compensation |
(2 | ) | (1 | ) | | |||||||
Changes in assets and liabilities, net of acquisition: |
||||||||||||
Trade accounts receivable |
(5 | ) | (6 | ) | (17 | ) | ||||||
Inventory |
(14 | ) | (4 | ) | (4 | ) | ||||||
Accounts payable |
(30 | ) | 19 | 5 | ||||||||
Employee compensation and benefits |
(31 | ) | 13 | (9 | ) | |||||||
Other current assets and current liabilities |
(31 | ) | 6 | (28 | ) | |||||||
Other long-term assets and long-term liabilities |
| (23 | ) | 2 | ||||||||
Net cash provided by operating activities |
67 | 217 | 41 | |||||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property, plant and equipment |
(32 | ) | (30 | ) | (9 | ) | ||||||
Acquisition and investment, net of cash acquired |
(9 | ) | | | ||||||||
Net cash used in investing activities |
(41 | ) | (30 | ) | (9 | ) | ||||||
Cash flows from financing activities: |
||||||||||||
Debt repayments |
(230 | ) | | (364 | ) | |||||||
Issuance of ordinary shares, net of issuance costs |
22 | 6 | 4 | |||||||||
Dividend payments to shareholders |
(17 | ) | | | ||||||||
Payment on capital lease obligation |
(1 | ) | (1 | ) | | |||||||
Excess tax benefits from share-based compensation |
2 | 2 | | |||||||||
Net cash provided by (used in) financing activities |
(224 | ) | 7 | (360 | ) | |||||||
Net increase (decrease) in cash and cash equivalents |
(198 | ) | 194 | (328 | ) | |||||||
Cash and cash equivalents at the beginning of period |
561 | 367 | 472 | |||||||||
Cash and cash equivalents at end of period |
$ | 363 | $ | 561 | $ | 144 | ||||||