| AVAGO TECHNOLOGIES FINANCE PTE. LTD. | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED | ||||||||||||||||||||
| (IN MILLIONS) | ||||||||||||||||||||
| Quarter ended | Two quarters ended | |||||||||||||||||||
| May 4, | February 3, | April 30, | May 4, | April 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Net revenue | $ | 411 | $ | 402 | $ | 380 | $ | 813 | $ | 755 | ||||||||||
| Costs and expenses: | ||||||||||||||||||||
| Cost of products sold: | ||||||||||||||||||||
| Cost of products sold | 237 | 230 | 229 | 467 | 464 | |||||||||||||||
| Amortization of intangible assets | 14 | 14 | 15 | 28 | 30 | |||||||||||||||
| Restructuring charges | 1 | 1 | 1 | 2 | 15 | |||||||||||||||
| Total cost of products sold | 252 | 245 | 245 | 497 | 509 | |||||||||||||||
| Research and development | 62 | 66 | 51 | 128 | 101 | |||||||||||||||
| Selling, general and administrative | 48 | 50 | 47 | 98 | 104 | |||||||||||||||
| Amortization of intangible assets | 7 | 7 | 7 | 14 | 14 | |||||||||||||||
| Restructuring charges | 1 | 2 | 3 | 3 | 11 | |||||||||||||||
| Total costs and expenses | 370 | 370 | 353 | 740 | 739 | |||||||||||||||
| Income from operations | 41 | 32 | 27 | 73 | 16 | |||||||||||||||
| Interest expense | (20 | ) | (25 | ) | (28 | ) | (45 | ) | (57 | ) | ||||||||||
| Loss on extinguishment of debt | - | (10 | ) | (10 | ) | (10 | ) | (10 | ) | |||||||||||
| Other income, net | 1 | 1 | 5 | 2 | 6 | |||||||||||||||
| Income (loss) from continuing operations before income taxes | 22 | (2 | ) | (6 | ) | 20 | (45 | ) | ||||||||||||
| Provision for income taxes | 4 | 3 | - | 7 | 3 | |||||||||||||||
| Income (loss) from continuing operations | 18 | (5 | ) | (6 | ) | 13 | (48 | ) | ||||||||||||
| Income (loss) from and gain on discontinued operations, net of income taxes | (1 | ) | 9 | 10 | 8 | 58 | ||||||||||||||
| Net income | $ | 17 | $ | 4 | $ | 4 | $ | 21 | $ | 10 | ||||||||||
| AVAGO TECHNOLOGIES FINANCE PTE. LTD. | ||||||||||||||||||||
| FINANCIAL SUMMARY (NON-GAAP) - UNAUDITED | ||||||||||||||||||||
| (IN MILLIONS, except percentages) | ||||||||||||||||||||
| Quarter ended | Two quarters ended | |||||||||||||||||||
| May 4, | February 3, | April 30, | May 4, | April 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Net revenue | $ | 411 | $ | 402 | $ | 380 | $ | 813 | $ | 755 | ||||||||||
| Gross margin | 174 | 172 | 151 | 346 | 292 | |||||||||||||||
| % of net revenue | 42 | % | 43 | % | 40 | % | 43 | % | 39 | % | ||||||||||
| Research and development | $ | 62 | $ | 65 | $ | 51 | $ | 127 | $ | 101 | ||||||||||
| Selling, general and administrative | $ | 46 | $ | 44 | $ | 44 | $ | 90 | $ | 92 | ||||||||||
| Total operating expenses | $ | 108 | $ | 109 | $ | 95 | $ | 217 | $ | 193 | ||||||||||
| % of net revenue | 26 | % | 27 | % | 25 | % | 27 | % | 26 | % | ||||||||||
| Income from operations | $ | 66 | $ | 63 | $ | 56 | $ | 129 | $ | 99 | ||||||||||
| Interest expense | $ | (20 | ) | $ | (25 | ) | $ | (28 | ) | $ | (45 | ) | $ | (57 | ) | |||||
| Net income | $ | 43 | $ | 36 | $ | 33 | $ | 79 | $ | 45 | ||||||||||
| The financial summary excludes amortization of acquisition-related intangibles, share-based compensation, restructuring and impairment charges, acquired in-process research and development, loss on extinguishment of debt, and income (loss) from and gain on discontinued operations. | ||||||||||||||||||||
| AVAGO TECHNOLOGIES FINANCE PTE. LTD. | ||||||||||||||||||||
| FINANCIAL BRIDGE: GAAP TO NON-GAAP - UNAUDITED | ||||||||||||||||||||
| (IN MILLIONS) | ||||||||||||||||||||
| Quarter ended | Two quarters ended | |||||||||||||||||||
| May 4, | February 3, | April 30, | May 4, | April 30, | ||||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
| Net income on GAAP basis | $ | 17 | $ | 4 | $ | 4 | $ | 21 | $ | 10 | ||||||||||
| Amortization of acquisition-related intangibles | ||||||||||||||||||||
| Cost of products sold | 14 | 14 | 15 | 28 | 30 | |||||||||||||||
| Operating Expenses | 7 | 7 | 7 | 14 | 14 | |||||||||||||||
| 21 | 21 | 22 | 42 | 44 | ||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||
| Cost of products sold | - | - | - | - | 1 | |||||||||||||||
| Operating Expenses | 2 | 7 | 3 | 9 | 12 | |||||||||||||||
| 2 | 7 | 3 | 9 | 13 | ||||||||||||||||
| Restructuring charges | ||||||||||||||||||||
| Cost of products sold | 1 | 1 | 1 | 2 | 15 | |||||||||||||||
| Operating Expenses | 1 | 2 | 3 | 3 | 11 | |||||||||||||||
| 2 | 3 | 4 | 5 | 26 | ||||||||||||||||
| Loss on extinguishment of debt | - | 10 | 10 | 10 | 10 | |||||||||||||||
| (Income) loss from and (gain) on discontinued operations | 1 | (9 | ) | (10 | ) | (8 | ) | (58 | ) | |||||||||||
| Net income on Non-GAAP basis | $ | 43 | $ | 36 | $ | 33 | $ | 79 | $ | 45 | ||||||||||
|
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 charges, loss on extinguishment of debt, and (income) loss from and (gain) 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. |
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| AVAGO TECHNOLOGIES FINANCE PTE. LTD. | |||||||||||||||||||
| RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA - UNAUDITED | |||||||||||||||||||
| (IN MILLIONS) | |||||||||||||||||||
| Quarter ended | Two quarters ended | ||||||||||||||||||
| May 4, | February 3, | April 30, | May 4, | April 30, | |||||||||||||||
| 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||
| Net income | $ | 17 | $ | 4 | $ | 4 | $ | 21 | $ | 10 | |||||||||
| Interest expense | 20 | 25 | 28 | 45 | 57 | ||||||||||||||
| Provision for income taxes | 4 | 3 | - | 7 | 3 | ||||||||||||||
| Depreciation and amortization expense | 38 | 39 | 44 | 77 | 89 | ||||||||||||||
| EBITDA | 79 | 71 | 76 | 150 | 159 | ||||||||||||||
| Restructuring and other unusual charges | 3 | 4 | 5 | 7 | 30 | ||||||||||||||
| Purchase accounting adjustments | - | 1 | 4 | 1 | 9 | ||||||||||||||
| Share-based compensation | 2 | 7 | 3 | 9 | 13 | ||||||||||||||
| Loss on extinguishment of debt | - | 10 | 10 | 10 | 10 | ||||||||||||||
| (Income) loss from and (gain) on discontinued operations | 1 | (9 | ) | (10 | ) | (8 | ) | (58 | ) | ||||||||||
| Adjusted EBITDA | $ | 85 | $ | 84 | $ | 88 | $ | 169 | $ | 163 | |||||||||
| EBITDA represents net income 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 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) | ||||||||||||
| May 4, | October 31, | April 30, | ||||||||||
| 2008 | 2007 (1) | 2007 | ||||||||||
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 83 | $ | 309 | $ | 200 | ||||||
| Trade accounts receivable, net | 213 | 218 | 206 | |||||||||
| Inventory | 166 | 140 | 143 | |||||||||
| Assets of discontinued operations | - | 25 | - | |||||||||
| Other current assets | 32 | 25 | 40 | |||||||||
| Total current assets | 494 | 717 | 589 | |||||||||
| Property, plant and equipment, net | 289 | 292 | 388 | |||||||||
| Goodwill | 156 | 122 | 116 | |||||||||
| Intangible assets, net | 752 | 777 | 914 | |||||||||
| Other long-term assets | 50 | 43 | 39 | |||||||||
| Total assets | $ | 1,741 | $ | 1,951 | $ | 2,046 | ||||||
| LIABILITIES AND SHAREHOLDER'S EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 154 | $ | 194 | $ | 126 | ||||||
| Employee compensation and benefits | 54 | 56 | 46 | |||||||||
| Accrued interest | 31 | 34 | 35 | |||||||||
| Capital lease obligations - current | 2 | 2 | 2 | |||||||||
| Other current liabilities | 26 | 44 | 26 | |||||||||
| Total current liabilities | 267 | 330 | 235 | |||||||||
| Long-term liabilities: | ||||||||||||
| Long-term debt | 705 | 903 | 923 | |||||||||
| Capital lease obligations - non-current | 5 | 4 | 4 | |||||||||
| Other long-term liabilities | 60 | 30 | 30 | |||||||||
| Total liabilities | 1,037 | 1,267 | 1,192 | |||||||||
| Shareholder's equity: | ||||||||||||
| Ordinary shares, no par value | 1,074 | 1,066 | 1,071 | |||||||||
| Accumulated deficit | (374 | ) | (386 | ) | (217 | ) | ||||||
| Accumulated other comprehensive income | 4 | 4 | - | |||||||||
| Total shareholder's equity | 704 | 684 | 854 | |||||||||
| Total liabilities and shareholder's equity | $ | 1,741 | $ | 1,951 | $ | 2,046 | ||||||
| (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 | ||||||||||||
| May 4, | February 3, | April 30, | ||||||||||
| 2008 | 2008 | 2007 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 17 | $ | 4 | $ | 4 | ||||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||||||
| Depreciation and amortization | 38 | 39 | 44 | |||||||||
| Amortization of debt issuance costs | 1 | 1 | 1 | |||||||||
| Gain on sale of discontinued operations | - | (9 | ) | (10 | ) | |||||||
| Loss on extinguishment of debt | - | 5 | 10 | |||||||||
|
Loss on sale of property, plant and equipment |
- |
- |
2 |
|||||||||
| Share-based compensation | 2 | 7 | 3 | |||||||||
| Changes in assets and liabilities, net of acquisition and dispositions: | ||||||||||||
| Trade accounts receivable | 22 | (13 | ) | (30 | ) | |||||||
| Inventory | (13 | ) | (12 | ) | 23 | |||||||
| Accounts payable | (47 | ) | 6 | (10 | ) | |||||||
| Employee compensation and benefits | 14 | (16 | ) | 4 | ||||||||
| Other current assets and current liabilities | 7 | (39 | ) | - | ||||||||
| Other long-term assets and long-term liabilities | 2 | 14 | 3 | |||||||||
| Net cash (used in) provided by operating activities | 43 | (13 | ) | 44 | ||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchase of property, plant and equipment | (13 | ) | (15 | ) | (8 | ) | ||||||
| Purchase of intangible assets | - | (6 | ) | - | ||||||||
| Acquisitions and investment, net of cash acquired | (8 | ) | (38 | ) | - | |||||||
| Proceeds from sale of discontinued operations | - | 25 | 10 | |||||||||
| Net cash (used in) provided by investing activities | (21 | ) | (34 | ) | 2 | |||||||
| Cash flows from financing activities: | ||||||||||||
| Debt repayments | - | (200 | ) | (85 | ) | |||||||
| Cash settlement of equity awards | - | (1 | ) | - | ||||||||
| Payment on capital lease obligation | - | - | (1 | ) | ||||||||
| Net cash used in financing activities | - | (201 | ) | (86 | ) | |||||||
| Net (decrease) increase in cash and cash equivalents | 22 | (248 | ) | (40 | ) | |||||||
| Cash and cash equivalents at the beginning of period | 61 | 309 | 240 | |||||||||
| Cash and cash equivalents at end of period | $ | 83 | $ | 61 | $ | 200 | ||||||
