Avago Finance Announces Fourth Quarter and Fiscal Year 2008 Financial Results

An affiliate of Avago Finance has filed a registration statement with the SEC relating to a proposed offering which has not yet become effective. Such securities may not be sold nor may offers to buy be accepted prior to the time that the registration statement becomes effective. This press release is not an offer to sell nor a solicitation of an offer to buy any securities.

AVAGO TECHNOLOGIES FINANCE PTE. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
(IN MILLIONS)
         
 
Quarter ended Year ended
November 2, August 3, October 31, November 2, October 31,
  2008     2008     2007     2008    

2007

 
 
Net revenue $ 447 $ 439 $ 391 $ 1,699 $ 1,527
Costs and expenses:
Cost of products sold:
Cost of products sold 263 251 241 981 936
Amortization of intangible assets 15 14 15 57 60
Asset impairment charges - - - - 140
Restructuring charges   1     3     6     6     29  
 
Total cost of products sold 279 268 262 1,044 1,165
Research and development 69 68 51 265 205
Selling, general and administrative 48 50 45 196 193
Amortization of intangible assets 7 7 7 28 28
Asset impairment charges - - - - 18
Restructuring charges 1 2 8 6 22
Acquired in-process research & development   -     -     -     -     1  
 
Total costs and expenses 404 395 373 1,539 1,632
 
Income (loss) from operations 43 44 18 160 (105 )
Interest expense (21 ) (20 ) (26 ) (86 ) (109 )
Loss on extinguishment of debt - - (1 ) (10 ) (12 )
Other income (expense), net   (6 )   -     6     (4 )   14  
 
Income (loss) from continuing operations before income taxes 16 24 (3 ) 60 (212 )
Provision for (benefit from) income taxes   (9 )   5     2     3     8  
 
Income (loss) from continuing operations 25 19 (5 ) 57 (220 )
Income (loss) from and gain (loss) on discontinued operations, net of income taxes   (7 )   25     3     26     61  
 
Net income (loss) $ 18   $ 44   $ (2 ) $ 83   $ (159 )
AVAGO TECHNOLOGIES FINANCE PTE. LTD.
FINANCIAL SUMMARY (NON-GAAP) - UNAUDITED
(IN MILLIONS, except percentages)
         
 
Quarter ended Year ended
November 2, August 3, October 31, November 2, October 31,
  2008     2008     2007     2008     2007

 

 
Net revenue $ 447 $ 439 $ 391 $ 1,699 $ 1,527
Gross margin 184 188 150 718 592
% of net revenue 41 % 43 % 38 % 42 % 39 %
Research and development $ 68 $ 67 $ 51 $ 262 $ 205
Selling, general and administrative $ 46 $ 48 $ 46 $ 184 $ 182
 
Total operating expenses $ 114 $ 115 $ 97 $ 446 $ 387
% of net revenue 26 % 26 % 25 % 26 % 25 %
Income from operations $ 70 $ 73 $ 53 $ 272 $ 205
Interest expense $ (21 ) $ (20 ) $ (26 ) $ (86 ) $ (109 )
 
Net income $ 52 $ 48 $ 31 $ 179 $ 102
 
 
The financial summary excludes amortization of acquisition-related intangibles, share-based compensation, restructuring and asset impairment charges, acquired in-process research and development, loss on extinguishment of debt, and income (loss) from and gain (loss) on discontinued operations.
AVAGO TECHNOLOGIES FINANCE PTE. LTD.
FINANCIAL BRIDGE: GAAP TO NON-GAAP - UNAUDITED
(IN MILLIONS)
         
 
Quarter ended Year ended
November 2, August 3, October 31, November 2, October 31,
2008 2008 2007 2008 2007
 
Net income (loss) on GAAP basis $ 18 $ 44 $ (2 ) $ 83 $ (159 )
 

Amortization of acquisition-related intangibles

Cost of products sold 15 14 15 57 60
Operating Expenses 7 7 7 28 28
22 21 22 85 88
Share-based compensation expense
Cost of products sold - - - - 1
Operating Expenses 3 3 (1 ) 15 11
3 3 (1 ) 15 12
Asset impairment charges
Cost of products sold - - - - 140
Operating Expenses - - - - 18
- - - - 158
Restructuring charges
Cost of products sold 1 3 6 6 29
Operating Expenses 1 2 8 6 22
2 5 14 12 51
 
Acquired in-process research & development - - - - 1
 
Loss on extinguishment of debt - - 1 10 12
 
(Income) loss from and (gain) loss on discontinued operations 7 (25 ) (3 ) (26 ) (61 )
  2   2        
Net income on Non-GAAP basis $ 52 $ 48   $ 31   $ 179   $ 102  
 
 

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, which is adjusted to reflect the GAAP results excluding amortization of acquisition-related intangibles, share-based compensation, restructuring and asset impairment charges, acquired in-process research and development, 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 2,   August 3,   October 31, November 2,   October 31,
  2008     2008     2007     2008     2007  
 
Net income (loss) $ 18 $ 44 $ (2 ) $ 83 $ (159 )
Interest expense 21 20 26 86 109
Provision for (benefit from) income taxes (9 ) 5 2 3 8
Depreciation and amortization expense   42     40     42     159     176  
EBITDA 72 109 68 331 134
 
Asset impairment charges - - - - 158
Restructuring and other unusual charges 6 7 15 20 57
Purchase accounting adjustments - - 2 1 16
Share-based compensation 3 3 (1 ) 15 12
Loss on extinguishment of debt - - 1 10 12
(Income) loss from and (gain) loss on discontinued operations   7     (25 )   (3 )   (26 )   (61 )
Adjusted EBITDA $ 88   $ 94   $ 82   $ 351   $ 328  
 
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 (loss), as that term is defined under GAAP, and should not be considered as an alternative to net income 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.
AVAGO TECHNOLOGIES FINANCE PTE. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS - UNAUDITED
(IN MILLIONS)
   
   
November 2, October 31,
2008 2007 (1)
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 213 $ 309
Trade accounts receivable, net 184 218
Inventory 188 140
Assets of discontinued operations - 25
Other current assets   34     25  
Total current assets 619 717
Property, plant and equipment, net 299 292
Goodwill 169 122
Intangible assets, net 721 777
Other long-term assets   61     43  
Total assets $ 1,869   $ 1,951  
 
 
LIABILITIES AND SHAREHOLDER'S EQUITY
 
Current liabilities:
Accounts payable $ 174 $ 194
Employee compensation and benefits 74 56
Accrued interest 32 34
Capital lease obligations - current 2 2
Other current liabilities   48     44  

Total current liabilities

330 330
 
Long-term liabilities:
Long-term debt 703 903
Capital lease obligations - non-current 5 4
Other long-term liabilities   55     30  
Total liabilities 1,093 1,267
 
Shareholder's equity:
Ordinary shares, no par value 1,080 1,066
Accumulated deficit (312 ) (386 )
Accumulated other comprehensive income   8     4  
Total shareholder's equity   776     684  
Total liabilities and shareholder's equity $ 1,869   $ 1,951  
 
 
(1) Amounts as of October 31, 2007 have been derived from audited financial statements as of that date.
AVAGO TECHNOLOGIES FINANCE PTE. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(IN MILLIONS)
         
 
Quarter ended Year ended
November 2, August 3, October 31, November 2, October 31,
  2008     2008     2007     2008     2007  
Cash flows from operating activities:
Net income (loss) $ 18 $ 44 $ (2 ) $ 83 $ (159 )
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
Depreciation and amortization 42 40 42 159 176
Amortization of debt issuance costs 1 1 1 4 4
Asset impairment charges - - - - 158
(Gain) loss on sale of discontinued operations 7 (25 ) (3 ) (27 ) (61 )
Non-cash portion of restructuring charges - - 3 - 4
Acquired in-process research & development - - - - 1
Loss on extinguishment of debt - - 1 6 12
Loss on disposal of property, plant and equipment 1 1 - 2 2
Share-based compensation 3 3 (1 ) 15 12
Changes in assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable 29 - 1 38 (31 )
Inventory 7 (27 ) (2 ) (45 ) 28
Accounts payable - 12 29 (29 ) 29
Employee compensation and benefits 4 16 6 18 (12 )
Other current assets and current liabilities 21 (8 ) 48 (20 ) (28 )
Other long-term assets and long-term liabilities   (22 )   3     (3 )   (3 )   9  
Net cash provided by operating activities   111     60     120     201     144  
 
Cash flows from investing activities:
Purchase of property, plant and equipment (18 ) (19 ) (10 ) (65 ) (37 )
Purchase of intangible assets - - - (6 ) -
Acquisitions and investment, net of cash acquired (32 ) - - (78 ) (27 )
Proceeds from disposal of property, plant, and equipment 5 - - 5 -
Proceeds from sale of discontinued operations   -     25     4     50     69  
Net cash (used in) provided by investing activities   (45 )   6     (6 )   (94 )   5  
 
Cash flows from financing activities:
Debt repayments - (2 ) (15 ) (202 ) (107 )
Cash settlement of equity awards (1 ) - (4 ) (2 ) (5 )
Payment on capital lease obligation - - - - (1 )
Excess tax benefits from share-based compensation   -     1     1     1     1  
Net cash used in financing activities   (1 )   (1 )   (18 )   (203 )   (112 )
 
Net increase (decrease) in cash and cash equivalents 65 65 96 (96 ) 37
Cash and cash equivalents at the beginning of period   148     83     213     309     272  
Cash and cash equivalents at end of period $ 213   $ 148   $ 309   $ 213   $ 309  




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