-- Net revenue up 5.0 percent sequentially to $606 million, up 0.5 percent
from Q3 last year
-- GAAP gross margin of 48.7 percent; Non-GAAP gross margin of 51.2 percent
-- GAAP earnings per diluted share of $0.58; Non-GAAP earnings per diluted
share of $0.72
SAN JOSE, Calif. and SINGAPORE , Aug. 16, 2012 (GLOBE NEWSWIRE) -- Avago Technologies Limited (AVGO), a leading supplier of analog interface components for communications, industrial and consumer applications, today reported financial results for the third quarter of its fiscal year 2012, ended July 29, 2012, and provided guidance for the fourth quarter of its fiscal year 2012.
Third Quarter Fiscal Year 2012 GAAP Results
Net revenue was $606 million, an increase of 5.0 percent compared with the previous quarter and 0.5 percent from the same quarter last year.
Gross margin was $295 million, or 48.7 percent of net revenue. This compares with gross margin of $278 million, or 48.2 percent of net revenue last quarter, and gross margin of $297 million, or 49.3 percent of net revenue in the same quarter last year.
Operating expenses were $146 million. This compares with $141 million in the prior quarter and $152 million for the same quarter the previous year.
Income from operations was $149 million. This compares with $137 million in the prior quarter and with $145 million in the same quarter last year.
Third quarter net income was $145 million, or $0.58 per diluted share. This compares with net income of $134 million, or $0.54 per diluted share for the prior quarter, and net income of $144 million, or $0.57 per diluted share in the same quarter last year.
The Company’s cash balance at the end of the third quarter was $973 million, compared to $954 million at the end of the prior quarter.
The Company generated $128 million in cash from operations in the third quarter and spent $65 million on capital expenditures.
On June 29, 2012 the Company paid a quarterly cash dividend of 15 cents ($0.15) per ordinary share, totaling approximately $37 million.
Third Quarter Fiscal Year 2012 Non-GAAP Results
Gross margin was $310 million, or 51.2 percent of net revenue. This compares with gross margin of $295 million, or 51.1 percent of net revenue last quarter, and gross margin of $312 million, or 51.7 percent of net revenue in the same quarter last year.
Income from operations was $186 million. This compares with $171 million in the prior quarter and $177 million in the same quarter the previous year.
Net income was $182 million, or $0.72 per diluted share. This compares with net income of $168 million, or $0.66 per diluted share last quarter, and net income of $176 million, or $0.68 per diluted share in the same quarter last year.
Third Quarter Fiscal Year 2012 Non-GAAP Results Change
-----------------------
(Dollars in millions, except EPS) Q3 12 Q2 12 Q3 11 Q/Q Y/Y
--------------------------------- ---------- ---------- ---------- ----------- ----------
Net Revenue $606 $577 $603 +5.0% +0.5%
Gross Margin 51.2% 51.1% 51.7% +10bps -50bps
Operating Expenses $124 $124 $135 $0 -$11
Net Income $182 $168 $176 +$14 +$6
Earnings Per Share - Diluted $0.72 $0.66 $0.68 +$0.06 +$0.04
"During the third fiscal quarter, we achieved healthy sales growth helped by a continued recovery in Asia industrial, modest strength in wired infrastructure, and the last-time buys in consumer navigation." said Hock Tan, President and CEO of Avago Technologies Limited. "For the fourth quarter, however, without meaningful revenue contribution from consumer navigation products and with uncertain demand in carrier routing, we expect to show only low single-digit growth despite a very strong ramp in wireless."
Other Quarterly Data
Percentage of Net Revenue Growth Rates
---------------------------- ------------------
Net Revenues by Target
Market Q3 12 Q2 12 Q3 11 Q/Q Y/Y
--------------------------- -------- -------- -------- -------- --------
Wireless Communications 40 44 37 -5% 8%
Wired Infrastructure 29 29 28 3% 2%
Industrial & Automotive 24 22 30 19% -17%
Consumer & Computing
Peripherals 7 5 5 47% 33%
Key Statistics Q3 12 Q2 12 Q3 11
--------------------------- -------- -------- --------
(Dollars in millions)
Cash From Operations $128 $211 $211
Depreciation $20 $19 $20
Amortization $20 $19 $19
Capital Expenditures $65 $56 $24
Days Sales Outstanding 50 43 43
Inventory Days On Hand 66 70 63
Fourth Quarter Fiscal Year 2012 Business Outlook
Based on current business trends and conditions, the outlook for the fourth quarter of fiscal year 2012, ending October 28, 2012, is expected to be as follows:
Reconcili
GAAP ng Items Non-GAAP
---------- --------- -------------
Sequential Change in Up 0% to
Net Revenue 3% Up 0% to 3%
48.50% 51.25%
plus/minu plus/minus
Gross Margin s 75bps $17M 75bps
Operating Expenses $143M $19M $124M
Interest and Other $1M $1M
Taxes $8M $8M
Diluted Share Count 251M 2M 253M
Revenue growth guidance includes the effect of completing of our transition to a licensing and royalty model in our consumer and computing peripheral target market, which is expected to result in a decrease of approximately $30 million revenue from this target market in the fourth quarter of 2012. Combined revenue growth from our three primary target markets is projected to be 5% to 8% for the fourth quarter, compared to revenues from these three target markets in the third quarter of 2012.
Reconciling items include $14 million of amortization of acquisition-related intangibles, $2 million of share-based compensation expense and $1 million of restructuring charges at the Gross Margin line, and $5 million of amortization of acquisition-related intangibles, $13 million of share-based compensation and $1 million of restructuring charges at the Operating Expenses line.
Capital expenditures for the fourth quarter are expected to be in the range of $70 million to $80 million. For the fourth quarter depreciation is expected to be $21 million and amortization is expected to be $19 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 excludes any impact from share repurchases or mergers and acquisitions 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 meeting with investors at the Morgan Stanley Semi/SemiCap Corporate Access Day in Chicagoon August 22, 2012, and will be presenting at the Citi Technology Conference in New York on September 6, 2012, and the Deutsche Bank Technology Conference in Las Vegas on September 13, 2012 and meeting with investors.
Financial Results Conference Call
Avago Technologies Limited will host a conference call to review its financial results for the third quarter of fiscal year 2012, and to provide guidance for the fourth quarter of fiscal year 2012, today at 2:00 p.m. Pacific Time. Those wishing to access the call should dial 888-396-2369; International+1 -617-847-8710. The passcode is 33171564. A replay of the call will be available through August 23, 2012. To access the replay dial 888-286-8010; International +1-617-801-6888 and reference the passcode: 62006117. 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 income, income from operations, gross margin, operating expenses and other data, 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 Company’s underlying performance. The exclusion of these and other similar items from Avago’s 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 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.
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.
Cautionary Note Regarding Forward-Looking Statements
This announcement contains forward-looking statements which 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. For Avago, particular uncertainties that could materially affect future results include global economic conditions and concerns; cyclicality in the semiconductor industry or in our target markets; quarterly and annual fluctuations in operating results; our competitive performance and ability to continue achieving design wins with our customers; 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 increased dependence on outsourced service providers for certain key business services and their ability to execute to our requirements; loss of our significant customers; our ability to maintain gross margin; our ability to maintain tax concessions in certain jurisdictions; our ability to protect our intellectual property and any associated increases in litigation expenses; dependence on and risks associated with distributors of our products; any expenses associated with resolving customer product and warranty and indemnification claims; currency fluctuations; our ability to achieve the growth prospects and synergies expected from acquisitions we may make; delays, challenges and expenses associated with integrating acquired companies with our existing businesses; and other events and trends on a national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. Our Quarterly Report on Form 10-Q filed on June 8, 2012 and 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.
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Fiscal
Fiscal Quarter Ended Quarters Ended
------------------------- ------------------
July April July July 29, July 31,
29, 29, 31,
2012 2012 2011 2012 2011
------- ------- ------- -------- --------
Net revenue $ 606 $ 577 $ 603 $ 1,746 $ 1,713
Cost of products sold:
Cost of products sold 297 284 292 860 828
Amortization of intangible
assets 14 14 14 42 42
Restructuring charges -- 1 -- 1 --
------- ------- ------- -------- --------
Total cost of products
sold 311 299 306 903 870
------- ------- ------- -------- --------
Gross margin 295 278 297 843 843
Research and development 89 84 85 255 234
Selling, general and
administrative 49 51 60 150 165
Amortization of intangible
assets 6 5 5 16 16
Restructuring charges 2 1 2 4 3
------- ------- ------- -------- --------
Total operating expenses 146 141 152 425 418
------- ------- ------- -------- --------
Income from operations 149 137 145 418 425
Interest expense -- -- -- (1) (4)
Loss on extinguishment of
debt -- -- -- -- (20)
Other income, net 1 3 -- 3 1
------- ------- ------- -------- --------
Income before income taxes 150 140 145 420 402
Provision for income taxes 5 6 1 16 4
------- ------- ------- -------- --------
Net income $ 145 $ 134 $ 144 $ 404 $ 398
======= ======= ======= ======== ========
Net income per share:
Basic $ 0.59 $ 0.55 $ 0.59 $ 1.65 $ 1.62
Diluted $ 0.58 $ 0.54 $ 0.57 $ 1.61 $ 1.57
Shares used in per share
calculations:
Basic 245 244 246 245 246
Diluted 250 250 253 251 253
Share-based compensation
included in:
Cost of products sold $ 1 $ 2 $ 1 $ 4 $ 3
Research and development 6 5 4 15 10
Selling, general and
administrative 8 6 6 20 14
------- ------- ------- -------- --------
Total share-based
compensation $ 15 $ 13 $ 11 $ 39 $ 27
======= ======= ======= ======== ========
AVAGO TECHNOLOGIES LIMITED
NON-GAAP FINANCIAL SUMMARY - UNAUDITED(1)
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)
Three Fiscal
Fiscal Quarter Ended Quarters Ended
------------------------- ------------------
July April July July 29, July 31,
29, 29, 31,
2012 2012 2011 2012 2011
------- ------- ------- -------- --------
Net revenue $ 606 $ 577 $ 603 $ 1,746 $ 1,713
Gross margin $ 310 $ 295 $ 312 $ 890 $ 888
% of net revenue 51% 51% 52% 51% 52%
Research and development $ 83 $ 79 $ 81 $ 240 $ 224
Selling, general and
administrative $ 41 $ 45 $ 54 $ 130 $ 151
Total operating expenses $ 124 $ 124 $ 135 $ 370 $ 375
% of net revenue 20% 21% 22% 21% 22%
Income from operations $ 186 $ 171 $ 177 $ 520 $ 513
Net income $ 182 $ 168 $ 176 $ 506 $ 506
Net income per share - diluted $ 0.72 $ 0.66 $ 0.68 $ 1.99 $ 1.97
Shares used in per share
calculation - diluted 252 253 257 254 257
(1) A reconciliation of the non-GAAP measures presented above to the most
directly comparable GAAP financial data appears in the next table. 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 intangible assets, share-based
compensation, restructuring charges, and loss on extinguishment of debt.
AVAGO TECHNOLOGIES LIMITED
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED
(IN MILLIONS)
Three Fiscal
Fiscal Quarter Ended Quarters Ended
----------------------- ----------------
July April July July 29, July
29, 29, 31, 31,
2012 2012 2011 2012 2011
------- ------ ------ -------- ------
Net income on GAAP basis $ 145 $ 134 $ 144 $ 404 $ 398
Amortization of intangible assets 20 19 19 58 58
Share-based compensation expense 15 13 11 39 27
Restructuring charges 2 2 2 5 3
Loss on extinguishment of debt -- -- -- -- 20
------- ------ ------ -------- ------
Net income on Non-GAAP basis $ 182 $ 168 $ 176 $ 506 $ 506
======= ====== ====== ======== ======
Gross margin on GAAP basis $ 295 $ 278 $ 297 $ 843 $ 843
Amortization of intangible assets 14 14 14 42 42
Share-based compensation expense 1 2 1 4 3
------- ------ ------ -------- ------
Gross margin on Non-GAAP basis $ 310 $ 295 $ 312 $ 890 $ 888
======= ====== ====== ======== ======
Research and development on GAAP basis $ 89 $ 84 $ 85 $ 255 $ 234
Share-based compensation expense 6 5 4 15 10
------- ------ ------ -------- ------
Research and development on Non-GAAP
basis $ 83 $ 79 $ 81 $ 240 $ 224
======= ====== ====== ======== ======
Selling, general and administrative on
GAAP basis $ 49 $ 51 $ 60 $ 150 $ 165
Share-based compensation expense 8 6 6 20 14
------- ------ ------ -------- ------
Selling, general and administrative on
Non-GAAP basis $ 41 $ 45 $ 54 $ 130 $ 151
======= ====== ====== ======== ======
Total operating expenses on GAAP basis $ 146 $ 141 $ 152 $ 425 $ 418
Amortization of intangible assets 6 5 5 16 16
Share-based compensation expense 14 11 10 35 24
Restructuring charges 2 1 2 4 3
------- ------ ------ -------- ------
Total operating expenses on Non-GAAP
basis $ 124 $ 124 $ 135 $ 370 $ 375
======= ====== ====== ======== ======
Income from operations on GAAP basis $ 149 $ 137 $ 145 $ 418 $ 425
Amortization of intangible assets 20 19 19 58 58
Share-based compensation expense 15 13 11 39 27
Restructuring charges 2 2 2 5 3
------- ------ ------ -------- ------
Income from operations on Non-GAAP
basis $ 186 $ 171 $ 177 $ 520 $ 513
======= ====== ====== ======== ======
Shares used in per share calculation -
diluted on GAAP basis 250 250 253 251 253
Non-GAAP adjustment 2 3 4 3 4
------- ------ ------ -------- ------
Shares used in per share calculation -
diluted on Non-GAAP basis(1) 252 253 257 254 257
======= ====== ====== ======== ======
(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.
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN MILLIONS)
-------- --------
July 29, October
30,
2012 2011 (1)
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 973 $ 829
Trade accounts receivable,
net 330 328
Inventory 216 194
Other current assets 62 42
-------- --------
Total current assets 1,581 1,393
Property, plant and equipment,
net 453 316
Goodwill 180 177
Intangible assets, net 441 499
Other long-term assets 60 61
-------- --------
Total assets $ 2,715 $ 2,446
======== ========
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Accounts payable $ 239 $ 221
Employee compensation and
benefits 69 89
Capital lease obligations -
current 1 2
Other current liabilities 33 38
-------- --------
Total current liabilities 342 350
Long-term liabilities:
Capital lease obligations -
non-current 2 4
Other long-term liabilities 82 86
-------- --------
Total liabilities 426 440
Shareholders’ equity:
Ordinary shares, no par
value 1,456 1,479
Retained earnings 831 525
Accumulated other
comprehensive income 2 2
-------- --------
Total shareholders’
equity 2,289 2,006
-------- --------
Total liabilities and
shareholders’ equity $ 2,715 $ 2,446
======== ========
(1) Amounts for the year ended October 30, 2011
have been derived from audited financial
statements as of that date.
AVAGO TECHNOLOGIES LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN MILLIONS)
Three Fiscal
Fiscal Quarter Ended Quarters Ended
----------------------- ----------------
July April July July 29, July
29, 29, 31, 31,
2012 2012 2011 2012 2011
------- ------ ------ -------- ------
Cash flows from operating activities:
Net income $ 145 $ 134 $ 144 $ 404 $ 398
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 40 38 39 115 118
Amortization of debt issuance costs -- -- 1 -- 1
Loss on extinguishment of debt -- -- -- -- 6
Loss on disposal of property, plant and
equipment 2 1 -- 3 1
Impairment of investment and loan
receivable from investee -- -- -- 2 --
Share-based compensation 15 13 11 39 27
Tax benefits of share-based compensation 8 2 -- 10 8
Excess tax benefits from share-based
compensation (5) (1) -- (6) (2)
Changes in assets and liabilities, net
of acquisitions:
Trade accounts receivable (56) 34 4 (2) 1
Inventory 2 (25) (6) (22) (11)
Accounts payable (27) 21 (13) (14) 2
Employee compensation and benefits 12 6 26 (20) 6
Other current assets and current
liabilities (7) (8) 5 (25) (25)
Other long-term assets and long-term
liabilities (1) (4) -- (6) 1
------- ------ ------ -------- ------
Net cash provided by operating activities 128 211 211 478 531
------- ------ ------ -------- ------
Cash flows from investing activities:
Purchase of property, plant and
equipment (65) (56) (24) (168) (75)
Acquisitions and investment, net of cash
acquired (2) -- -- (2) (9)
------- ------ ------ -------- ------
Net cash used in investing activities (67) (56) (24) (170) (84)
------- ------ ------ -------- ------
Cash flows from financing activities:
Proceeds from government grants -- 1 -- 2 --
Debt repayments -- -- -- -- (230)
Debt financing costs -- -- -- -- (2)
Payments on capital lease obligations (1) (1) -- (2) (2)
Issuance of ordinary shares 6 17 11 28 55
Repurchases of ordinary shares (15) (6) (68) (100) (68)
Excess tax benefits from share-based
compensation 5 1 -- 6 2
Dividend payments to shareholders (37) (32) (22) (98) (59)
------- ------ ------ -------- ------
Net cash used in financing activities (42) (20) (79) (164) (304)
------- ------ ------ -------- ------
Net increase in cash and cash equivalents 19 135 108 144 143
Cash and cash equivalents at the beginning
of period 954 819 596 829 561
------- ------ ------ -------- ------
Cash and cash equivalents at end of period $ 973 $ 954 $ 704 $ 973 $ 704
======= ====== ====== ======== ======
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Avago Technologies
CONTACT: Avago Technologies Ltd.
Thomas Krause, 408-435-7400
VP Corporate Development
investor.relations@avagotech.com
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