Back to GetFilings.com



Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

     
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended September 30, 2004
 
or
 
o
   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

Broadcom Corporation

(Exact name of registrant as specified in its charter)
     
California
   33-0480482
(State or other jurisdiction of
incorporation or organization)		   (I.R.S. Employer
Identification No.)

16215 Alton Parkway

Irvine, California 92618-3616
(Address of principal executive offices and zip code)

(949) 450-8700

(Registrant’s telephone number, including area code)

     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 October 31, 2004 the registrant had 270,216,281 shares of Class A common stock, $0.0001 par value, and 58,863,848 shares of Class B common stock, $0.0001 par value, outstanding.

BROADCOM CORPORATION

QUARTERLY REPORT ON FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004

TABLE OF CONTENTS

             
Page
 PART I. FINANCIAL INFORMATION
      2  
        2  
        3  
        4  
        5  
      22  
        44  
      61  
      62  
 
 PART II. OTHER INFORMATION
      63  
      63  
      64  
      64  
      64  
      64  
 Signatures     66  
 EXHIBIT 10.1
 EXHIBIT 10.2
 EXHIBIT 10.3
 EXHIBIT 10.4
 EXHIBIT 10.5
 EXHIBIT 10.6
 EXHIBIT 10.7
 EXHIBIT 10.8
 EXHIBIT 10.9
 EXHIBIT 10.10
 EXHIBIT 10.11
 EXHIBIT 10.12
 EXHIBIT 31
 EXHIBIT 32

Broadcom®, the pulse logo, ServerWorks® and SystemI/OTM are trademarks of Broadcom Corporation and/or its affiliates in the United States and certain other counties. Bluetooth® is a trademark of the Bluetooth SIG. AMD OpteronTM is a trademark of Advanced Micro Devices, Inc. Intel® is a trademark of Intel Corporation. Any other trademarks or trade names mentioned are the property of their respective owners.

©2004 Broadcom Corporation. All rights reserved.

1

Table of Contents

PART I. FINANCIAL INFORMATION

 
Item 1. Financial Statements

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                     
September 30, December 31,
2004(1) 2003
(In thousands)
ASSETS
Current assets:
               
 
Cash and cash equivalents
  $ 779,513     $ 558,669  
 
Short-term marketable securities
    233,195       47,296  
 
Accounts receivable, net
    278,800       220,124  
 
Inventory
    177,532       104,047  
 
Prepaid expenses and other current assets
    55,130       65,667  
     
     
 
   
Total current assets
    1,524,170       995,803  
Property and equipment, net
    113,353       142,113  
Long-term marketable securities
    92,264       36,405  
Goodwill
    1,062,288       827,652  
Purchased intangible assets, net
    22,243       6,667  
Other assets
    8,350       8,982  
     
     
 
   
Total assets
  $ 2,822,668     $ 2,017,622  
     
     
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
               
 
Accounts payable
  $ 216,099     $ 219,064  
 
Wages and related benefits
    53,979       33,965  
 
Deferred revenue
    2,898       963  
 
Accrued liabilities
    304,509       249,584  
     
     
 
   
Total current liabilities
    577,485       503,576  
Commitments and contingencies
               
Long-term liabilities
    25,015       24,241  
Shareholders’ equity:
               
 
Common stock
    33       31  
 
Additional paid-in capital
    8,676,503       8,123,941  
 
Notes receivable from employees
    (8,056 )     (10,906 )
 
Deferred compensation
    (50,314 )     (77,616 )
 
Accumulated deficit
    (6,398,676 )     (6,546,280 )
 
Accumulated other comprehensive income
    678       635  
     
     
 
   
Total shareholders’ equity
    2,220,168       1,489,805  
     
     
 
   
Total liabilities and shareholders’ equity
  $ 2,822,668     $ 2,017,622  
     
     
 

(1)  Reflects November 2004 adjustment of $8.2 million in settlement costs at September 30, 2004. See Note 8.

See accompanying notes.

2

Table of Contents

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                       
Three Months Ended Nine Months Ended
September 30, September 30,
2004(1) 2003 2004(1) 2003
(In thousands, except per share data)
Net revenue
  $ 646,515     $ 425,633     $ 1,861,220     $ 1,130,976  
Cost of revenue(2)
    322,039       217,708       922,999       596,581  
     
     
     
     
 
Gross profit
    324,476       207,925       938,221       534,395  
Operating expense:
                               
 
Research and development(3)
    123,935       110,282       367,666       319,783  
 
Selling, general and administrative(3)
    53,743       50,076       161,290       138,808  
 
Stock-based compensation
    12,494       73,191       62,144       216,725  
 
Amortization of purchased intangible assets
    1,296       492       2,127       3,192  
 
In-process research and development
    37,262       —       63,766       —  
 
Settlement costs
    35,700       —       68,200       178,302  
 
Impairment of goodwill and intangible assets
    —       —       18,000       438,611  
 
Stock option exchange
    —       —       —       209,266  
 
Restructuring costs
    —       —       —       2,932  
     
     
     
     
 
Income (loss) from operations
    60,046       (26,116 )     195,028       (973,224 )
Interest income, net
    4,365       1,481       8,982       4,981  
Other income, net
    6,952       25,000       6,552       24,953  
     
     
     
     
 
Income (loss) before income taxes
    71,363       365       210,562       (943,290 )
Provision for income taxes
    27,462       6,663       62,958       22,656  
     
     
     
     
 
Net income (loss)
  $ 43,901     $ (6,298 )   $ 147,604     $ (965,946 )
     
     
     
     
 
Net income (loss) per share (basic)
  $ .14     $ (.02 )   $ .47     $ (3.36 )
     
     
     
     
 
Net income (loss) per share (diluted)
  $ .13     $ (.02 )   $ .42     $ (3.36 )
     
     
     
     
 
Weighted average shares (basic)
    322,541       297,312       316,084       287,791  
     
     
     
     
 
Weighted average shares (diluted)
    347,389       297,312       347,449       287,791  
     
     
     
     
 
                               
(1) Reflects November 2004 adjustment of $8.2 million in settlement costs for the periods ended September 30, 2004. See Note 8.
 
(2) Cost of revenue includes the following:
                               
     
Stock-based compensation expense
  $ 1     $ 1,103     $ 1,272     $ 5,475  
     
Amortization of purchased intangible assets
    3,782       4,058       9,228       14,584  
     
Stock option exchange expense
    —       —       —       11,454  
     
     
     
     
 
    $ 3,783     $ 5,161     $ 10,500     $ 31,513  
     
     
     
     
 
(3) Stock-based compensation expense is excluded from the following:
                               
     
Research and development expense
  $ 9,860     $ 66,363     $ 53,020     $ 180,623  
     
Selling, general and administrative expense
    2,634       6,828       9,124       36,102  
     
     
     
     
 
    $ 12,494     $ 73,191     $ 62,144     $ 216,725  
     
     
     
     
 
   
Amortization of purchased intangible assets is excluded from the following:
                               
     
Research and development expense
  $ —     $  —     $ —     $ 815  
     
Selling, general and administrative expense
    1,296       492       2,127       2,377  
     
     
     
     
 
    $ 1,296     $ 492     $ 2,127     $ 3,192  
     
     
     
     
 
   
Stock option exchange expense is excluded from the following:
                               
     
Research and development expense
  $ —     $  —     $ —     $ 164,798  
     
Selling, general and administrative expense
    —       —       —       44,468  
     
     
     
     
 
    $ —     $  —     $ —     $ 209,266  
     
     
     
     
 

See accompanying notes.

3

Table of Contents

BROADCOM CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                       
Nine Months Ended
September 30,
2004 2003
(In thousands)
Operating activities
                
Net income (loss)
  $ 147,604     $ (965,946 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
               
 
Depreciation and amortization
    60,625       52,129  
 
Stock-based compensation expense
    63,416       222,200  
 
Amortization of purchased intangible assets
    11,355       17,776  
 
In-process research and development
    63,766       —  
 
Impairment of goodwill and intangible assets
    18,000       438,611  
 
Tax benefit from stock plans
    57,100       —  
 
Non-cash stock option exchange expense
    —       217,940  
 
Non-cash settlement costs
    —       88,087  
 
Non-cash restructuring charges
    —       972  
 
Gain on strategic investments, net
    (5,231 )     (22,041 )
 
Non-cash development revenue
    —       (508 )
 
Change in operating assets and liabilities:
               
   
Accounts receivable
    (50,034 )     (63,956 )
   
Inventory
    (71,548 )     (30,763 )
   
Prepaid expenses and other assets
    (6,934 )     (24,611 )
   
Accounts payable
    (12,336 )     19,199  
   
Other accrued liabilities
    73,703       54,275  
     
     
 
     
Net cash provided by operating activities
    349,486       3,364  
Investing activities
                
Purchases of property and equipment
    (30,871 )     (36,014 )
Purchases of strategic investments
    (2,216 )     (1,000 )
Proceeds from sales of strategic investments
    5,231       29,152  
Net cash paid in purchase transactions
    (74,846 )     (5,862 )
Purchases of marketable securities
    (375,972 )     (45,605 )
Proceeds from sale of available for sale marketable securities
    48,145       —