Avago Technologies Limited Announces First Quarter Fiscal Year

Avago Technologies Limited Announces First Quarter Fiscal Year 2010 Financial Results

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


	Quarter ended
	January 31,			November 1,			February 1,
		2010			2009			2009

Net revenue	$	456		$	428		$	368
Costs and expenses:
Cost of products sold:
Cost of products sold		247			236			204
Amortization of intangible assets		15			14			15
Restructuring charges		-			-			6

Total cost of products sold		262			250			225
Research and development		64			65			62
Selling, general and administrative		46			43			40
Amortization of intangible assets		5			5			6
Restructuring charges		1			2			5
Advisory agreement termination fee		-			54			-
Selling shareholder expenses		-			4			-

Total costs and expenses		378			423			338

Income from operations		78			5			30
Interest expense		(11	)		(19	)		(18	)
(Loss) gain on extinguishment of debt		(24	)		(9	)		1
Other income (expense), net		(1	)		1			(2	)

Income (loss) before income taxes		42			(22	)		11
Provision for (benefit from) income taxes		4			(1	)		5

Net income (loss)	$	38		$	(21	)	$	6


Net income (loss) per share:
Basic	$	0.16		$	(0.09	)	$	0.03
Diluted	$	0.16		$	(0.09	)	$	0.03

Shares used in per share calculations:
Basic		236			235			214
Diluted		244			235			219

Share-based compensation included in:
Research and development	$	1		$	1		$	1
Selling, general and administrative		4			4			(1	)

Operating expenses	$	5		$	5		$	-

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


	Quarter ended
	January 31,			November 1,			February 1,
	2010			2009			2009

Net revenue	$	456		$	428		$	368
Gross margin(1)		209			192			164
% of net revenue		46	%		45	%		45	%
Research and development(2)	$	63		$	64		$	61
Selling, general and administrative(2)	$	42		$	39		$	41

Total operating expenses	$	105		$	103		$	102
% of net revenue		23	%		24	%		28	%
Income from operations	$	104		$	89		$	62
Interest expense	$	(11	)	$	(19	)	$	(18	)

Net income	$	88		$	72		$	37
Net income per share - diluted	$	0.36		$	0.29		$	0.17
Shares used in per share calculation - diluted(3)		247			246			220



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) Gross margin represents the difference between net revenue and cost of products sold.

(2) Research and development and selling, general and administrative above exclude share-based compensation as follows:

	Quarter ended
	January 31,			November 1,			February 1,
	2010			2009			2009
	(in millions)
Research and development	$	1		$	1		$	1
Selling, general and administrative		4			4			(1	)

Operating expenses	$	5		$	5		$	-


(3) 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
		January 31,		November 1,			February 1,
		2010		2009			2009

Net income (loss) on GAAP basis		$	38	$	(21	)	$	6

Amortization of acquisition-related intangibles
	Cost of products sold		15		14			15
	Operating expenses		5		5			6
			20		19			21
Share-based compensation expense
	Cost of products sold		-		-			-
	Operating expenses		5		5			-
			5		5			-
Restructuring charges
	Cost of products sold		-		-			6
	Operating expenses		1		2			5
			1		2			11

Advisory agreement termination fee			-		54			-

Selling shareholder expenses			-		4			-

Loss(gain) on extinguishment of debt			24		9			(1	)


Net income on Non-GAAP basis		$	88	$	72		$	37



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, and (gain)loss on extinguishment of debt. 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
		January 31,		November 1,			February 1,
		2010		2009			2009

	Net income (loss)	$	38	$	(21	)	$	6
	Interest expense		11		19			18
	Provision for (benefit from) income taxes		4		(1	)		5
	Depreciation and amortization expense		39		40			41
	EBITDA		92		37			70

	Restructuring and other unusual charges		1		60			12
	Share-based compensation		5		5			-
	Loss(gain) on extinguishment of debt		24		9			(1	)
	Adjusted EBITDA	$	122	$	111		$	81

	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)




	January 31,			November 1,
	2010			2009 (1)

ASSETS

Current assets:
Cash and cash equivalents	$	144		$	472
Trade accounts receivable, net		203			186
Inventory		166			162
Other current assets		44			44

Total current assets		557			864
Property, plant and equipment, net		254			264
Goodwill		171			171
Intangible assets, net		627			647
Other long-term assets		23			24

Total assets	$	1,632		$	1,970




LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	160		$	154
Employee compensation and benefits		46			55
Accrued interest		5			25
Capital lease obligations - current		3			2
Other current liabilities		34			33
Current portion of long-term debt		-			364

Total current liabilities		248			633

Long-term liabilities:
Long-term debt		230			230
Capital lease obligations - non-current		2			3
Other long-term liabilities		65			64

Total liabilities		545			930

Shareholders' equity:
Ordinary shares, no par value		1,402			1,393
Accumulated deficit		(318	)		(356	)
Accumulated other comprehensive income		3			3

Total shareholders' equity		1,087			1,040

Total liabilities and shareholders' equity	$	1,632		$	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
	January 31,	November 1,	February 1,
	2010	2009	2009
Cash flows from operating activities:
Net income (loss)	$ 38	$ (21)	$ 6

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

Depreciation and amortization	39	40	41
Amortization of debt issuance costs	1	1	1
(Gain) loss on extinguishment of debt	8	9	(1)
Loss on disposal of property, plant and equipment	1	1	-
Share-based compensation	5	5	-
Tax benefits of share-based compensation	-	1	-
Excess tax benefits of share-based compensation	-	(1)	-
Changes in assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable	(17)	(8)	-
Inventory	(4)	(9)	10
Accounts payable	5	9	(5)
Employee compensation and benefits	(9)	8	(31)
Other current assets and current liabilities	(28)	(13)	(24)
Other long-term assets and long-term liabilities	2	24	(1)

Net cash provided by (used in) operating activities	41	46	(4)


Cash flows from investing activities:
Purchase of property, plant and equipment	(9)	(20)	(12)
Purchase of intangible assets	-	(1)	-

Net cash used in investing activities	(9)	(21)	(12)


Cash flows from financing activities:
Debt repayments	(364)	(112)	(2)
Issuance of ordinary shares, net of issuance costs	4	304	-
Excess tax benefits from share-based compensation	-	1	-

Net cash (used in) provided by financing activities	(360)	193	(2)


Net (decrease) increase in cash and cash equivalents	(328)	218	(18)
Cash and cash equivalents at the beginning of period	472	254	213
			272
Cash and cash equivalents at end of period	$ 144	$ 472	$ 195

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