Avago Technologies Limited Announces Fourth Quarter and Fiscal

Avago Technologies Limited Announces Fourth Quarter and Fiscal Year 2009 Financial Results


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


	Quarter ended									Year ended
	November 1,			August 2,			November 2,			November 1,			November 2,
	2009			2009			2008			2009			2008 (1)

Net revenue	$	428		$	363		$	447		$	1,484		$	1,699
Costs and expenses:
Cost of products sold:
Cost of products sold		236			205			263			855			981
Amortization of intangible assets		14			15			15			58			57
Restructuring charges		-			2			1			11			6
Total cost of products sold		250			222			279			924			1,044
Research and development		65			59			69			245			265
Selling, general and administrative		43			40			48			165			196
Amortization of intangible assets		5			5			7			21			28
Restructuring charges		2			13			1			23			6
Advisory agreement termination fee		54			-			-			54			-
Selling shareholder expenses		4			-			-			4			-
Total costs and expenses		423			339			404			1,436			1,539

Income from operations		5			24			43			48			160
Interest expense		(19	)		(20	)		(21	)		(77	)		(86	)
Loss on extinguishment of debt		(9	)		-			-			(8	)		(10	)
Other income (expense), net		1			4			(6	)		1			(4	)
Income (loss) from continuing operations before income taxes		(22	)		8			16			(36	)		60
Provision for (benefit from) income taxes		(1	)		6			(9	)		8			3
Income (loss) from continuing operations		(21	)		2			25			(44	)		57
Income (loss) from and gain (loss) on discontinued operations, net of income taxes		-			-			(7	)		-			26
Net income (loss)	$	(21	)	$	2		$	18		$	(44	)	$	83

Net income (loss) per share:
Basic	$	(0.09	)	$	0.01		$	0.08		$	(0.20	)	$	0.39
Diluted	$	(0.09	)	$	0.01		$	0.08		$	(0.20	)	$	0.38

Shares used in per share calculations:
Basic		235			213			214			219			214
Diluted		235			218			220			219			219

Share-based compensation included in:
Research and development	$	1		$	1		$	1		$	4		$	3
Selling, general and administrative		4			2			2			8			12
Operating expenses	$	5		$	3		$	3		$	12		$	15

(1) Amounts for the year ended November 2, 2008 have been derived from audited financial statements as of that date.


AVAGO TECHNOLOGIES LIMITED
FINANCIAL SUMMARY (NON-GAAP) - UNAUDITED
(IN MILLIONS, EXCEPT PERCENTAGES AND PER SHARE DATA)


	Quarter ended									Year ended
	November 1,			August 2,			November 2,			November 1,			November 2,
	2009			2009			2008			2009			2008

Net revenue	$	428		$	363		$	447		$	1,484		$	1,699
Gross margin		192			158			184			629			718
% of net revenue		45	%		44	%		41	%		42	%		42	%
Research and development	$	64		$	58		$	68		$	241		$	262
Selling, general and administrative	$	39		$	38		$	46		$	157		$	184

Total operating expenses	$	103		$	96		$	114		$	398		$	446
% of net revenue		24	%		26	%		26	%		27	%		26	%
Income from operations	$	89		$	62		$	70		$	231		$	272
Interest expense	$	(19	)	$	(20	)	$	(21	)	$	(77	)	$	(86	)

Net income	$	72		$	40		$	52		$	147		$	179
Net income per share - diluted	$	0.29		$	0.18		$	0.24		$	0.66		$	0.81
Shares used in per share calculation - diluted		246			220			220			224			220


The financial summary excludes amortization of acquisition-related intangibles, share-based compensation, restructuring charges, advisory agreement termination fee, selling shareholder expenses, gain (loss) on extinguishment of debt, and income (loss) from and gain (loss) on discontinued operations.


AVAGO TECHNOLOGIES LIMITED
FINANCIAL RECONCILIATION: GAAP TO NON-GAAP - UNAUDITED
(IN MILLIONS)


		Quarter ended							Year ended
		November 1,			August 2,		November 2,		November 1,			November 2,
		2009			2009		2008		2009			2008

Net income (loss) on GAAP basis		$	(21	)	$	2	$	18	$	(44	)	$	83

Amortization of acquisition-related intangibles
	Cost of products sold		14			15		15		58			57
	Operating expenses		5			5		7		21			28
			19			20		22		79			85
Share-based compensation expense
	Cost of products sold		-			-		-		-			-
	Operating expenses		5			3		3		12			15
			5			3		3		12			15
Restructuring charges
	Cost of products sold		-			2		1		11			6
	Operating expenses		2			13		1		23			6
			2			15		2		34			12

Advisory agreement termination fee			54			-		-		54			-

Selling shareholder expenses			4			-		-		4			-

Loss on extinguishment of debt			9			-		-		8			10

(Income) loss from and (gain) loss on discontinued operations			-			-		7		-			(26	)

Net income on Non-GAAP basis		$	72		$	40	$	52	$	147		$	179


To supplement our unaudited condensed consolidated financial statements presented in accordance with GAAP, we have shown above a non-GAAP presentation of the Company’s net income (loss), which is adjusted to reflect the GAAP results excluding amortization of acquisition-related intangibles, share-based compensation, restructuring charges, advisory agreement termination fee, selling shareholder expenses, loss on extinguishment of debt, and (income) loss from and (gain) loss on discontinued operations. This non-GAAP presentation is provided to enhance the reader's overall understanding of the comparability of the Company's financial performance among periods.


AVAGO TECHNOLOGIES FINANCE PTE. LTD
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA - UNAUDITED
(IN MILLIONS)


	Quarter ended								Year ended
	November 1,			August 2,		November 2,			November 1,			November 2,
	2009			2009		2008			2009			2008

Net income (loss)	$	(21	)	$	2	$	18		$	(44	)	$	83
Interest expense		19			20		21			77			86
Provision for (benefit from) income taxes		(1	)		6		(9	)		8			3
Depreciation and amortization expense		40			40		42			160			159
EBITDA		37			68		72			201			331

Restructuring and other unusual charges		60			16		6			98			20
Purchase accounting adjustments		-			-		-			-			1
Share-based compensation		5			3		3			12			15
Loss on extinguishment of debt		9			-		-			8			10
(Income) loss from and (gain) loss on discontinued operations		-			-		7			-			(26	)
Adjusted EBITDA	$	111		$	87	$	88		$	319		$	351

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 and senior subordinated notes 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)


	November 1,			November 2,
	2009			2008 (1)

ASSETS

Current assets:
Cash and cash equivalents	$	472		$	213
Trade accounts receivable, net		186			184
Inventory		162			188
Other current assets		44			34
Total current assets		864			619
Property, plant and equipment, net		264			299
Goodwill		171			169
Intangible assets, net		647			721
Other long-term assets		24			63
Total assets	$	1,970		$	1,871


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	154		$	174
Employee compensation and benefits		55			74
Accrued interest		25			32
Capital lease obligations - current		2			2
Other current liabilities		33			46
Current portion of long-term debt		364			-
Total current liabilities		633			328

Long-term liabilities:
Long-term debt		230			703
Capital lease obligations - non-current		3			5
Other long-term liabilities		64			55
Total liabilities		930			1,091

Shareholders' equity:
Ordinary shares, no par value		1,393			1,084
Accumulated deficit		(356	)		(312	)
Accumulated other comprehensive income		3			8
Total shareholders' equity		1,040			780
Total liabilities and shareholders' equity	$	1,970		$	1,871

(1) Amounts for the year ended November 2, 2008 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									Year ended
	November 1,			August 2,			November 2,			November 1,			November 2,
	2009			2009			2008			2009			2008 (1)
Cash flows from operating activities:
Net income (loss)	$	(21	)	$	2		$	18		$	(44	)	$	83

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization		40			40			42			160			159
Amortization of debt issuance costs		1			1			1			4			4
(Gain) loss on sale of discontinued operations		-			-			7			-			(27	)
Non-cash portion of restructuring charges		-			-			-			1			-
Impairment of investment		-			-			-			2			-
Loss on extinguishment of debt		9			-			-			8			6
Loss on disposal of property, plant and equipment		1			1			1			2			2
Share-based compensation		5			3			3			12			15
Tax benefits of share-based compensation		1			-			-			1			-
Excess tax benefits of share-based compensation		(1	)		-			-			(1	)		-
Changes in assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		(8	)		7			29			-			38
Inventory		(9	)		(2	)		7			27			(45	)
Accounts payable		9			(21	)		-			(16	)		(29	)
Employee compensation and benefits		8			7			4			(19	)		18
Other current assets and current liabilities		(13	)		(17	)		24			(39	)		(13	)
Other long-term assets and long-term liabilities		24			10			(22	)		41			(3	)
Net cash provided by operating activities		46			31			114			139			208

Cash flows from investing activities:
Purchase of property, plant and equipment		(20	)		(12	)		(18	)		(57	)		(65	)
Acquisitions and investment, net of cash acquired		-			-			(32	)		(7	)		(78	)
Purchase of intangible assets		(1	)		-			-			(1	)		(6	)
Proceeds from disposal of property, plant, and equipment		-			-			5			-			5
Proceeds from sale of discontinued operations		-			-			-			2			50
Net cash used in investing activities		(21	)		(12	)		(45	)		(63	)		(94	)

Cash flows from financing activities:
Debt repayments		(112	)		-			-			(114	)		(202	)
Issuance of ordinary shares, net of issuance costs		304			-			-			304			-
Repurchase of ordinary shares		-			(5	)		(1	)		(6	)		(5	)
Payment of equity issuance costs		-			-			(2	)		-			(2	)
Cash settlement of equity awards		-			-			(1	)		(1	)		(2	)
Payment on capital lease obligation		-			(1	)		-			(1	)		-
Excess tax benefits from share-based compensation		1			-			-			1			1
Net cash (used in) provided by financing activities		193			(6	)		(4	)		183			(210	)

Net (decrease) increase in cash and cash equivalents		218			13			65			259			(96	)
Cash and cash equivalents at the beginning of period		254			241			148			213			309
Cash and cash equivalents at end of period	$	472		$	254		$	213		$	472		$	213

(1) Amounts for the year ended November 2, 2008 have been derived from audited financial statements as of that date.

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