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BRCM > SEC Filings for BRCM > Form 8-K on 30-Jan-2014All Recent SEC Filings

Show all filings for BROADCOM CORP

Form 8-K for BROADCOM CORP


30-Jan-2014

Results of Operations and Financial Condition, Financial Statements and Exhibits


Item 2.02. Results of Operations and Financial Condition.
The information in Item 2.02 of this Current Report, including Exhibit 99.1, is being furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report shall not be incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, regardless of any general incorporation language contained in such filing.
On January 30, 2014 Broadcom Corporation (the "Company" or "Broadcom") issued a press release announcing unaudited financial results for the three and twelve months months ended December 31, 2013. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated by reference herein. Discussion of Non-GAAP Financial Measures Broadcom reports the following measures in accordance with U.S. Generally Accepted Accounting Principles, or GAAP and on a non-GAAP basis: (i) cost of product revenue, (ii) product gross profit, (iii) product gross margin
(iv) research and development and selling, general and administrative expense,
(v) net income, (vi) weighted average shares outstanding (diluted) and
(vii) diluted net income per share, referred to collectively as "non-GAAP financial measures." These non-GAAP financial measures exclude certain charges related to acquisitions, as well as stock-based compensation expense, employer payroll taxes on certain equity awards and non-recurring, infrequent or unusual 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 non-GAAP weighted average shares outstanding (diluted). For this purpose, 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 these non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to the Company's financial condition and results of operations. Broadcom's management believes that the use of these non-GAAP financial measures provides consistency and comparability among and between results from prior periods or forecasts and future prospects, and also facilitates comparisons with other companies in the Company's industry, many of which use similar non-GAAP financial measures to supplement their GAAP results. Broadcom's management has historically used these non-GAAP financial measures when evaluating operating performance, because Broadcom believes that the inclusion or exclusion of the items described below provides insight into its core operating results, its ability to generate cash and underlying business trends affecting performance. Broadcom has chosen to provide this information to investors to enable them to perform additional analysis of past, present and future operating performance and as a supplemental means to evaluate the Company's ongoing core operations. Externally, Broadcom believes that these non-GAAP financial measures, when used in conjunction with the Company's GAAP financial information, is useful to investors in their assessment of Broadcom's operating performance and the valuation of the Company. Internally, these non-GAAP financial measures are significant measures used by management for purposes of:
supplementing the financial results and forecasts reported to the Company's board of directors;

evaluating Broadcom's operating performance;

        managing and benchmarking performance internally across Broadcom's
         businesses and externally against peers;


        determining a portion of bonus compensation for executive officers and
         certain other key employees;

establishing internal operating budgets;

        calculating return on investment for development programs and growth
         initiatives;


        comparing performance with internal forecasts and targeted business
         models; and

evaluating and valuing potential acquisition candidates.


These Non-GAAP financial measures are adjusted for one or more of the following items:

        Acquisition-related charges. Acquisition-related charges include the
         amortization of purchased intangible assets and the amortization of
         acquired inventory valuation step-up (as well as the impairment of
         goodwill and purchased intangible assets primarily consisting of
         developed technology and in-process research and development assets).
         These charges are not factored into management's evaluation of potential
         acquisitions, or of the Company's performance after completion of
         acquisitions, because they do not affect the Company's current cash
         position, are not related to core operating performance and had Broadcom
         internally developed the technology acquired, the amortization of
         intangible assets would have been expensed in prior periods. In
         addition, the frequency and amount of such charges vary significantly
         based on the timing and magnitude of the Company's acquisition
         transactions, the maturities of the businesses being acquired, and
         depending on the nature of the consideration paid in connection with
         acquisitions, the then fair market value of Broadcom's Class A common
         stock.


        Stock-based compensation. Stock-based compensation relates primarily to
         employee stock options and restricted stock units issued by Broadcom.
         Stock-based compensation expense is a non-cash expense (not reflected in
         ongoing operating results) that varies in amount from period to period
         and is affected by market forces that are difficult to predict and are
         not within the control of management, such as the price of Broadcom's
         Class A common stock. Stock-based compensation is different from cash
         compensation in that the latter has a fixed and determinable cost. For
         example, the expense associated with an equity award is most often
         unrelated to the amount of compensation ultimately received by the
         employee. Further, the cost to the Company is based on a stock-based
         compensation valuation methodology and underlying assumptions that may
         vary over time and that does not reflect any cash expenditures by the
         Company. Finally, the expense recognized by the Company may be very
         different than the expense to other companies for awarding comparable
         equity awards, which makes it difficult to assess the Company's
         operating performance relative to its competitors. Accordingly,
         management excludes this item from its internal operating forecasts and
         models. Broadcom takes into account the dilutive impact of stock options
         and shares issued pursuant to its stock-based compensation plans at the
         aggregate company level, but regularly excludes stock-based compensation
         expense when analyzing individual line items on the Company's financial
         statements or when making decisions that affect Broadcom's various
         businesses.


        Employer payroll tax expense. Employer payroll tax expense on certain
         equity awards varies greatly in amount from period-to-period and is
         significantly impacted by factors that are difficult to predict and are
         not within the control of management, such as the timing, number and
         magnitude of employee stock option exercises and the fair market value
         of Broadcom's Class A common stock at the time of exercise.


        Other charges and gains. Other charges and gains consist of impairment
         of other long-lived assets, settlement costs (gains), restructuring
         costs (reversals), charitable contributions, and gains (losses) on
         strategic investments, all of which occur on a sporadic basis and vary
         greatly in amount. Management excludes these items when evaluating the
         Company's operating performance because these amounts do not affect core
         operations and because the frequency and variability in the nature of
         the charges can vary significantly from period to period. Excluding this
         data provides investors with a basis to compare the Company's
         performance against the performance of other companies without this
         variability.


        Income tax expense (benefit). Represents the reversal of a portion of
         our valuation allowance that was directly related to the establishment
         of a deferred tax liability associated with the step-up of acquired
         identifiable intangible assets allocated to jurisdictions in which the
         statutory tax rate is above zero, as well as tax benefits resulting from
         the reduction of certain foreign deferred tax liabilities due to the
         impairment of long-lived assets.

Additionally, the calculation of non-GAAP net income per share uses non-GAAP weighted average shares outstanding (diluted). The treasury stock method used to calculate GAAP weighted average shares outstanding (diluted) requires amounts related to compensation costs attributable to future services and not yet recognized in the financial statements to be treated as proceeds that are assumed to be used to repurchase shares. As a result, this reduces the total number of weighted average shares for purposes of calculating GAAP weighted average shares outstanding (diluted). Since Broadcom does not include the effects of these compensation costs in its non-GAAP net income, management believes these amounts should not be applied to the repurchase of shares in calculating non-GAAP net income per share, and, accordingly, adds such shares back into weighted average shares outstanding for purposes of calculating non-GAAP net income per share.
Non-GAAP financial measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, these non-GAAP


measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Broadcom's business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Broadcom's results as reported under GAAP. Broadcom expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from Broadcom's non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Some of the limitations in relying on non-GAAP financial measures are:
Although amortization and impairment of purchased intangible assets do not directly affect the Company's current cash position, such expense represents the declining value of the technology and other intangible assets that were acquired. These assets are amortized over their respective expected economic lives or impaired, when appropriate. The expense associated with this decline in value is excluded from these non-GAAP financial measures, and therefore these non-GAAP financial measures do not reflect the costs of acquired intangible assets that supplement the Company's research and development efforts.

        Non-GAAP financial measures do not include stock-based compensation
         expense related to equity awards granted to the Company's workforce.
         Broadcom's stock incentive plans are important components of its
         employee incentive compensation arrangements and are reflected as
         expenses in Broadcom's GAAP results. While the Company includes the
         dilutive impact of such equity awards in weighted average shares
         outstanding, the expense associated with stock-based awards is excluded
         from these non-GAAP financial measures.


        Broadcom periodically acquires and assimilates other companies or
         businesses, and expects to continue to experience acquisition-related
         charges in the future. Broadcom also periodically enters into settlement
         agreements in connection with various litigation matters. These costs
         can directly impact the amount of available funds or could be dilutive
         to shareholders in the future.



Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.

99.1 - Press Release dated January 30, 2014 of the Registrant.


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