UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended June 30, 2003 | ||
| or | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from to | ||
Commission file number: 000-23993
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California
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33-0480482 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
16215 Alton Parkway
(949) 450-8700
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o
As of July 31, 2003 the registrant had 226,936,299 shares of Class A common stock, $0.0001 par value, and 69,645,544 shares of Class B common stock, $0.0001 par value, outstanding.
BROADCOM CORPORATION
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||
| PART I. FINANCIAL INFORMATION | ||||||
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Item 1.
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Financial Statements | 2 | ||||
| Unaudited Condensed Consolidated Balance Sheets at June 30, 2003 and December 31, 2002 | 2 | |||||
| Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003 and 2002 | 3 | |||||
| Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 | 4 | |||||
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |||||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20 | ||||
| Risk Factors | 35 | |||||
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk | 51 | ||||
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Item 4.
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Controls and Procedures | 52 | ||||
| PART II. OTHER INFORMATION | ||||||
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Item 1.
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Legal Proceedings | 54 | ||||
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Item 2.
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Changes in Securities and Use of Proceeds | 54 | ||||
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Item 3.
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Defaults upon Senior Securities | 54 | ||||
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Item 4.
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Submission of Matters to a Vote of Security Holders | 54 | ||||
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Item 5.
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Other Information | 55 | ||||
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Item 6.
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Exhibits and Reports on Form 8-K | 56 | ||||
| Signatures | 57 | |||||
Broadcom®, the pulse logo, ServerWorksTM and SystemI/OTM are trademarks of Broadcom Corporation and/or its affiliates in the United States and certain other countries. All other trademarks mentioned are the property of their respective owners.
©2003 Broadcom Corporation. All rights reserved.
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BROADCOM CORPORATION
| June 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (In thousands) | ||||||||||
| ASSETS | ||||||||||
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Current assets:
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||||||||||
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Cash and cash equivalents
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$ | 453,435 | $ | 389,555 | ||||||
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Short-term marketable securities
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12,566 | 56,031 | ||||||||
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Short-term restricted marketable securities
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28,777 | 57,117 | ||||||||
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Accounts receivable, net
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182,905 | 128,215 | ||||||||
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Inventory
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85,000 | 46,036 | ||||||||
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Prepaid expenses and other current assets
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49,971 | 44,830 | ||||||||
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Total current assets
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812,654 | 721,784 | ||||||||
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Property and equipment, net
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157,476 | 177,557 | ||||||||
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Long-term marketable securities
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4,220 | 5,067 | ||||||||
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Long-term restricted marketable securities
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17,458 | 35,137 | ||||||||
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Goodwill
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841,307 | 1,228,603 | ||||||||
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Purchased intangible assets, net
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14,152 | 24,036 | ||||||||
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Other assets
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12,589 | 23,969 | ||||||||
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Total assets
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$ | 1,859,856 | $ | 2,216,153 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
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Current liabilities:
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||||||||||
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Accounts payable
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$ | 210,570 | $ | 168,236 | ||||||
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Wages and related benefits
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35,983 | 34,278 | ||||||||
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Deferred revenue
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7,815 | 15,129 | ||||||||
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Accrued liabilities
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290,496 | 204,116 | ||||||||
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Short-term debt and current portion of long-term
debt
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57,626 | 112,258 | ||||||||
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Total current liabilities
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602,490 | 534,017 | ||||||||
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Commitments and contingencies
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||||||||||
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Long-term restructuring liabilities
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29,974 | 36,403 | ||||||||
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Long-term debt, less current portion
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— | 1,212 | ||||||||
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Shareholders’ equity:
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||||||||||
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Common stock
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30 | 28 | ||||||||
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Additional paid-in capital
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7,983,132 | 7,698,399 | ||||||||
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Notes receivable from employees
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(12,166 | ) | (12,847 | ) | ||||||
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Deferred compensation
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(197,951 | ) | (454,890 | ) | ||||||
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Accumulated deficit
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(6,546,063 | ) | (5,586,415 | ) | ||||||
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Accumulated other comprehensive income
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410 | 246 | ||||||||
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Total shareholders’ equity
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1,227,392 | 1,644,521 | ||||||||
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Total liabilities and shareholders’ equity
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$ | 1,859,856 | $ | 2,216,153 | ||||||
See accompanying notes.
2
BROADCOM CORPORATION
| Three Months Ended | Six Months Ended | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||
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Net revenue
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$ | 377,879 | $ | 258,203 | $ | 705,343 | $ | 497,003 | |||||||||
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Cost of revenue(a)
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206,853 | 143,577 | 378,873 | 277,699 | |||||||||||||
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Gross profit
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171,026 | 114,626 | 326,470 | 219,304 | |||||||||||||
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Operating expense:
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|||||||||||||||||
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Research and development(b)
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106,378 | 114,727 | 209,501 | 226,421 | |||||||||||||
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Selling, general and administrative(b)
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47,373 | 40,607 | 88,732 | 81,081 | |||||||||||||
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Stock-based compensation
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74,706 | 81,696 | 143,534 | 183,160 | |||||||||||||
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Amortization of purchased intangible assets
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1,168 | 5,866 | 2,700 | 11,250 | |||||||||||||
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Impairment of goodwill
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438,611 | — | 438,611 | — | |||||||||||||
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Stock option exchange
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209,266 | — | 209,266 | — | |||||||||||||
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Settlement costs
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178,302 | — | 178,302 | — | |||||||||||||
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Restructuring costs
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2,165 | — | 2,932 | 4,822 | |||||||||||||
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Loss from operations
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(886,943 | ) | (128,270 | ) | (947,108 | ) | (287,430 | ) | |||||||||
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Interest income, net
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1,310 | 3,313 | 3,500 | 6,753 | |||||||||||||
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Other income (expense), net
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569 | 428 | (47 | ) | (3,919 | ) | |||||||||||
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Loss before income taxes
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(885,064 | ) | (124,529 | ) | (943,655 | ) | (284,596 | ) | |||||||||
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Provision for income taxes
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6,678 | 4,889 | 15,993 | 10,889 | |||||||||||||
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Net loss
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$ | (891,742 | ) | $ | (129,418 | ) | $ | (959,648 | ) | $ | (295,485 | ) | |||||
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Net loss per share (basic and diluted)
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$ | (3.08 | ) | $ | (0.49 | ) | $ | (3.39 | ) | $ | (1.12 | ) | |||||
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Weighted average shares (basic and diluted)
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289,745 | 265,356 | 283,031 | 263,678 | |||||||||||||
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(a) Cost of revenue includes the
following:
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|||||||||||||||||
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Stock-based compensation expense
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$ | 1,845 | $ | 3,330 | $ | 4,372 | $ | 6,679 | |||||||||
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Amortization of purchased intangible assets
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4,473 | 13,643 | 10,526 | 26,807 | |||||||||||||
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Stock option exchange expense
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11,454 | — | 11,454 | — | |||||||||||||
| $ | 17,772 | $ | 16,973 | $ | 26,352 | $ | 33,486 | ||||||||||
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(b) Stock-based compensation expense is
excluded from the following:
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Research and development expense
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$ | 63,327 | $ | 55,007 | $ | 114,260 | $ | 124,793 | |||||||||
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Selling, general and administrative expense
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11,379 | 26,689 | 29,274 | 58,367 | |||||||||||||
| $ | 74,706 | $ | 81,696 | $ | 143,534 | $ | 183,160 | ||||||||||
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Amortization of purchased intangible assets is
excluded from the following:
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Research and development expense
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$ | — | $ | 4,903 | $ | 815 | $ | 10,064 | |||||||||
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Selling, general and administrative expense
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1,168 | 963 | 1,885 | 1,186 | |||||||||||||
| $ | 1,168 | $ | 5,866 | $ | 2,700 | $ | 11,250 | ||||||||||
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Stock option exchange expense is excluded
from the following:
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Research and development expense
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$ | 164,798 | $ | — | $ | 164,798 | $ | — | |||||||||
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Selling, general and administrative expense
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44,468 | — | 44,468 | — | |||||||||||||
| $ | 209,266 | $ | — | $ | 209,266 | $ | — | ||||||||||
See accompanying notes.
3
BROADCOM CORPORATION
| Six Months Ended June 30, | |||||||||||
| 2003 | 2002 | ||||||||||
| (In thousands) | |||||||||||
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Operating activities
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Net loss
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$ | (959,648 | ) | $ | (295,485 | ) | |||||
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Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
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Depreciation and amortization
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34,175 | 33,835 | |||||||||
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Stock-based compensation expense
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147,906 | 189,839 | |||||||||
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Amortization of purchased intangible assets
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13,226 | 38,057 | |||||||||
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Impairment of goodwill
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438,611 | — | |||||||||
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Non-cash stock option exchange expense
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217,940 | — | |||||||||
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Non-cash settlement costs
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88,087 | — | |||||||||
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Non-cash restructuring costs
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972 | 1,006 | |||||||||
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Non-cash development revenue
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(508 | ) | (4,500 | ) | |||||||
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Loss on strategic investments, net
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72 | 4,146 | |||||||||
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Changes in operating assets and liabilities:
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Accounts receivable
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(53,800 | ) | (35,573 | ) | |||||||
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Inventory
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(38,507 | ) | (5,921 | ) | |||||||
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Prepaid expenses and other assets
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(8,148 | ) | 4,517 | ||||||||
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Accounts payable
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42,334 | 48,192 | |||||||||
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Accrued liabilities
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76,407 | 37,437 | |||||||||
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Net cash provided by (used in) operating
activities
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(881 | ) | 15,550 | ||||||||
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Investing activities
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Purchases of property and equipment, net
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(17,811 | ) | (48,690 | ) | |||||||
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Purchases of strategic investments
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(500 | ) | (3,000 | ) | |||||||
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Proceeds from sales of strategic investments
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509 | — | |||||||||
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Net cash received (paid) in purchase
transactions
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(5,862 | ) | 839 | ||||||||
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Purchases of marketable securities
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(4,220 | ) | (84,300 | ) | |||||||
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Proceeds from maturities of marketable securities
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48,532 | 63,767 | |||||||||
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Proceeds from maturities of restricted marketable
securities
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46,019 | — | |||||||||
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Net cash provided by (used in) investing
activities
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66,667 | (71,384 | ) | ||||||||
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Financing activities
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Payments on debt and other obligations
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(55,844 | ) | (8,439 | ) | |||||||
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Net proceeds from issuances of common stock
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53,257 | 25,785 | |||||||||
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Proceeds from repayment of notes receivable from
employees
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681 | 636 | |||||||||
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Net cash provided by (used in) financing
activities
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(1,906 | ) | 17,982 | ||||||||
| < | |||||||||||