The weighted-average amortization periods remaining by intangible asset category were
as follows (in years):
The following is a reconciliation of the numerators and denominators of the basic and diluted net income (loss) per share computations
for the periods presented (in millions, except per share data):
Diluted shares outstanding include Broadcom ordinary shares issuable upon exchange of the
Partnership REUs for fiscal year 2016, and ordinary shares issuable upon conversion of the Convertible Notes for fiscal years 2015.
During fiscal year 2015, the Convertible Notes were converted in full and settled with a combination of cash and the issuance of
13.8 million Avago ordinary shares. The incremental Avago ordinary shares attributable to the conversion were a component of diluted shares for the period prior to settlement and a component of basic weighted-average shares outstanding
subsequent to the conversion.
Diluted net income (loss) per share for fiscal years 2016 and 2014 excluded the potentially dilutive
effect of weighted-average outstanding equity awards to acquire 12 million and 1 million ordinary shares, respectively. There were no material antidilutive equity awards for fiscal year 2015.
The
U.S. defined benefit pension plans include a management plan and a represented plan. Benefits under the management plan are provided under either an adjusted
career-average-pay
program or a cash-balance
program. Benefits under the represented plan are based on a
dollar-per-month
formula. Benefit accruals under the management plan were frozen in 2009. Participants in the
adjusted
career-average-pay
program no longer earn service accruals. Participants in the cash-balance program no longer earn service accruals, but continue to earn 4% interest per year on their cash-balance
accounts. There are no active participants under the represented plan. We also have a
non-qualified
supplemental pension plan in the United States that principally provides benefits based on compensation in
excess of amounts that can be considered under the management plan. We also have pension plans covering certain
non-U.S.
employees.
Certain of our U.S. employees who were age 49 or younger on January 1, 2005 and who meet the retirement eligibility
requirements as of their termination dates, may receive post-retirement medical benefits under our retiree medical account program.
Effective January 1, 2014, we amended our U.S. post-retirement medical benefit plan. The amendment affected active, eligible
employees and had no impact on existing retirees. As a result of the amendment, employees who were previously eligible for a medical benefit spending account of $40,000 upon retirement received a cash settlement and have ceased to be eligible for
post-retirement medical benefits under the program. For employees who were previously eligible for a medical benefit spending account of $55,000 upon retirement, we extended the maximum age to use, as retirees, the spending account to pay premiums
for medical coverage from 65 to 75. Employees who were previously eligible for the traditional retiree medical plan upon retirement are no longer eligible to participate in such a plan and will, instead, only be eligible for an extended $55,000
retiree medical account program.
Our group life insurance plan offers post-retirement life insurance coverage for certain U.S.
employees.
In addition to the defined benefit plans for certain employees in Taiwan, Thailand, India, Japan, Korea, Israel, United Kingdom, France,
Italy and Germany, other eligible employees outside of the United States receive retirement benefits under various defined contribution retirement plans. Eligibility is generally determined based on the terms of our plans and local statutory
requirements.
We expect to recognize $2 million of net actuarial losses in net periodic benefit income in
fiscal year 2017 related to our defined benefit pension plans.
The obligations for our defined benefit pension plans were as follows (in millions):
The fair value of pension plan assets at October 30, 2016 and November 1, 2015 included
$21 million and $27 million, respectively, of assets for our
non-U.S.
pension plans. Contributions to our
non-U.S.
plans were $1 million for each of
fiscal years 2016 and 2015.
The projected benefit obligations as of October 30, 2016 and November 1, 2015 included
$118 million and $97 million, respectively, of obligations related to our
non-U.S.
plans. The accumulated benefit obligations as of October 30, 2016 and November 1, 2015 included
$110 million and $91 million, respectively, related to our
non-U.S.
plans.
Amounts recognised in the consolidated balance sheets were as follows (in millions):
We currently expect to make contributions of $37 million to our defined benefit
pension plans in fiscal year 2017. We do not expect to make any contributions to our post-retirement medical benefit plans in fiscal year 2017. As of October 30, 2016, expected payments from our benefit plans over the next 10 fiscal years are
as follows (in millions):
Plan assets of the funded defined benefit pension plans are invested in funds held by third-party fund managers or are deposited into
government-managed accounts in which we have no active involvement in and no control over investment strategy, other than establishing broad investment guidelines and parameters. The plan assets held by third-parties consist primarily of equities,
fixed income funds and commingled funds. The fund managers monitor the funds asset allocation within the guidelines established by our plans investment committee. In line with plan investment objectives and consultation with our
management, our investment committee set an allocation benchmark among equity, bond and other assets based on the relative weighting of overall
non-U.S.
market indices. The overall investment objectives of the
plan are 1) the acquisition of suitable assets of appropriate liquidity which will generate income and capital growth to meet current and future plan benefits, 2) to limit the risk of the assets failing to meet the long-term liabilities of
the plan, and 3) to minimize the long-term costs of the plan by maximizing the return on the assets. Performance is regularly evaluated by the investment committee and is based on actual returns achieved by the fund manager relative to its
benchmark.
For the defined benefit pension plans, the investment strategy for the U.S. plans is to allocate assets in a manner that
seeks both to maximize the safety of promised benefits and to minimize the cost of funding those benefits. We direct the overall portfolio allocation and use a third-party investment consultant that has discretion to structure portfolios and select
the investment managers within those
allocation parameters. Multiple investment managers are utilized, including both active and passive management approaches. The plan assets are diversified across different asset classes and
investment styles, and those assets are periodically rebalanced toward asset allocation targets.
The target asset allocation for
U.S. plans reflects a risk/return profile that we believe is appropriate relative to the liability structure and return goals for the plans. We periodically review the allocation of plan assets relative to alternative allocation models to evaluate
the need for adjustments based on forecasted liabilities and plan liquidity needs. The equity investment target allocation is equally divided between U.S. and
non-U.S.
securities. The fixed-income allocation
is primarily directed toward long-term core bond investments, with smaller allocations to Treasury Inflation-Protected Securities and high-yield bonds.
Our defined benefit pension plans weighted-average asset allocations by category were as follows:
Our overall investment strategy for the group life insurance plan is to allocate assets in a manner that seeks to both maximize the
safety of promised benefits and minimize the cost of funding those benefits. The target asset allocation for plan assets reflects a risk/return profile that we believe is appropriate relative to the liability structure and return goals for the plan.
We periodically review the allocation of plan assets relative to alternative allocation models to evaluate the need for adjustments based on forecasted liabilities and plan liquidity needs. We set the overall portfolio allocation and use an
investment manager that directs the investment of funds consistent with that allocation. The investment manager invests the plan assets in index funds that it manages.
The assumptions used to determine the benefit obligations and expense for our defined benefit and post-retirement benefit plans are
presented in the table below. The expected long-term return on assets shown in the table below represents an estimate of long-term returns on investment portfolios primarily consisting of combinations of debt, equity and other investments, depending
on the plan. We consider long-term rates of return, which are weighted based on the asset classes (both historical and forecasted) in which we expect the pension and post-retirement funds to be invested. Discount rates reflect the current rate at
which defined benefit and post-retirement benefit obligations could be settled based on the measurement dates of the plans, which in each case is our fiscal year end. The range of assumptions that are used for defined benefit pension plans reflects
the different economic environments within various countries.
Changes in the assumed health care cost trend rates could have a significant effect on
the amounts reported for the U.S. post-retirement medical benefit plans. A one percentage point change in the assumed healthcare cost trend rates for fiscal year 2016 would have the following effects:
The effect of a one percentage point increase or decrease in our healthcare cost trend rates on
the service and interest cost components of the net periodic benefit cost would have been immaterial.
Our eligible U.S. employees participate in company-sponsored 401(k) plans. Under these plans, we provide matching
contributions to employees up to 6% of their eligible earnings. All matching contributions vest immediately. During fiscal years 2016 and 2015, we made contributions of $43 million and $26 million, respectively, to the 401(k) plans.
In connection with the completion of the Broadcom Merger, on February 1, 2016, three Broadcom subsidiaries, together with a group
of lenders, including Bank of America, N.A., as the administrative agent and collateral agent, entered into a collateralized credit agreement, or the 2016 Credit Agreement, which originally provided for a Term A loan facility in the aggregate
principal amount of $4,400 million, or the Term A Loan, a Term
B-1
dollar loan facility in the aggregate principal amount of $9,750 million, or the Term
B-1
Loan, a Term
B-1
euro loan facility in the aggregate principal amount of
900 million, equivalent to $978 million as of February 1, 2016, or
the Term
B-1
Euro Loan, a Term
B-2
loan facility in the aggregate principal amount of $500 million, or the Term
B-2
Loan,
and together with the Term A Loan, Term
B-1
Loan, and Term
B-1
Euro Loan, referred to as the 2016 Term Loans. The 2016 Credit Agreement also provides for a revolving
credit facility, or the 2016 Revolving Credit Facility, that permits us to borrow from time to time in an aggregate principal amount of up to $500 million for working capital and other corporate purposes, including swingline loans of up to
$150 million in the aggregate and for the issuance of letters of credit of up to $100 million in the aggregate, which, in the case of swingline loans and letters of credit, reduce the available borrowing capacity under the 2016 Revolving
Credit Facility on a dollar for dollar basis. Our obligations under the 2016 Credit Agreement are guaranteed by certain of our subsidiaries, or the Guarantors, and are collateralized, subject to
certain exceptions, by substantially all of the assets of each Guarantor. The 2016 Term Loans were fully drawn at the time of, and the proceeds used to fund, in part, the completion of the
Broadcom Merger.
The 2016 Term Loan borrowings under the 2016 Credit Agreement on February 1, 2016 principally represented a
modification of debt and a partial extinguishment of debt outstanding under the 2014 Credit Agreement as defined below. Unamortized debt issuance costs and debt discount from the 2014 Credit Agreement related to the modification will be amortized
over the term of the 2016 Credit Agreement. We recognized $106 million of third-party financing costs related to the 2016 Credit Agreement immediately in interest expense in connection with the modification of debt. We also
recognized a $34 million loss on extinguishment of debt.
During fiscal year 2016, we made a principal prepayment totaling
$610 million on the Term
B-1
Loan and fully repaid the
900 million Term
B-1
Euro Loan. We also fully
repaid the $500 million Term
B-2
Loan, which was partially funded with $325 million of additional Term A Loan borrowings incurred pursuant to an incremental amendment to the 2016 Credit Agreement. As
a result, during fiscal year 2016 we
wrote-off
$40 million of debt issuance costs, which were included in loss on extinguishment of debt in the consolidated statements of operations.
On August 2, 2016, three Broadcom subsidiaries, together with a group of lenders, including Bank of America, N.A., as the
administrative agent and collateral agent, entered into three amendments to the 2016 Credit Agreement, referred to as the August 2016 Amendments. These amendments were: (i) the Second Incremental Term A Facility Amendment, pursuant to which we
incurred an additional $2,994 million of Term A Loans, which were used to repay (x) $2,521 million of outstanding Term
B-1
Loans and (y) $473 million of outstanding Term A Loan by certain
non-continuing
lenders; (ii) the First Amendment pursuant to which we (x) incurred $6,595 million of new Term
B-3
loans, which were used to repay all of the
then outstanding Term
B-1
Loan, and (y) reduced the applicable margins on the Term
B-3
Loans; and (iii) the Second Amendment pursuant to which the Term A Loan
and 2016 Revolving Credit Facility lenders agreed to certain changes to the 2016 Credit Agreement to increase our operating flexibility, including the automatic release of all collateral securing the 2016 Term Loans upon (x) repayment of
all outstanding Term
B-3
Loans and (y) our achievement of the specified investment grade ratings. The Term A Loans incurred in August 2016 have the same terms as the existing Term A Loans. The Term
B-3
Loan matures on February 1, 2023 (the same date as the prior Term
B-1
Loan). As a result of the August 2016 Amendments, we
wrote-off
$49 million of debt issuance costs, which were included in loss on extinguishment of debt in the consolidated statements of operations.
The 2016 Credit Agreement includes (i) a financial covenant that requires a first
lien leverage ratio of less than 3.9:1; (ii) customary restrictive covenants (subject, in each case, to certain exceptions and amounts) that limit our ability to, among other things, incur indebtedness, create liens, merge or consolidate with
and into other persons, pay dividends or make other distributions on, redeem or repurchase shares or make other restricted payments, make acquisitions and investments and sell assets; (iii) customary events of default, upon the occurrence of
which, after any applicable grace period, the lenders will have the ability to accelerate all outstanding loans thereunder and terminate the commitments; and (iv) customary representations and warranties. We were in compliance with all of the
covenants described in the 2016 Credit Agreement as of October 30, 2016. In addition, subject to certain conditions and availability of commitments, we have the ability to increase the aggregate 2016 Term Loans and/or 2016 Revolving Credit
Facility. The 2016 Term Loans under the 2016 Credit Agreement bear interest at floating rates.
As of October 30, 2016, there
were no borrowings outstanding under the 2016 Revolving Credit Facility or any material outstanding letters of credit. As of October 30, 2016, the unamortized debt issuance costs related to the 2016 Revolving Credit Facility were
$9 million and were included in other long-term assets on the consolidated balance sheet.
During fiscal year 2016, the
accretion of discount and amortization of debt issuance costs related to the 2016 Term Loans and 2016 Revolving Credit Facility was $32 million and was included in interest expense in the consolidated statements of operations.
Senior Notes
As a result of the Broadcom Merger, we assumed $1,614 million of BRCMs outstanding senior unsecured notes, or the Senior
Notes, at fair value on the Acquisition Date. During fiscal year 2016, we tendered for and repaid $1,475 million of the Senior Notes. The following table presents the details of the Senior Notes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate
|
|
|
Effective
Interest rate
|
|
|
Amount
(In millions)
|
|
Fixed rate notes due November 2018
|
|
|
2.70%
|
|
|
|
2.70%
|
|
|
|
117
|
|
Fixed rate notes due August 2022 - August 2034
|
|
|
2.50% - 4.50%
|
|
|
|
2.50% - 4.50%
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of Senior Notes
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
2014 Term Loans and Revolving Credit Facility
During fiscal year ended November 2, 2014, certain of Avagos subsidiaries entered into a collateralized credit agreement with
the lenders named therein, or the 2014 Credit Agreement. The 2014 Credit Agreement provided for a term loan facility of $4,600 million, or the 2014 Term Loans, and a revolving credit facility, or the 2014 Revolving Credit Facility, which
permitted certain of Avagos subsidiaries to borrow up to $500 million.
Simultaneously with entering into the 2016 Credit
Agreement, we repaid in full the amounts outstanding under the 2014 Credit Agreement and terminated the 2014 Credit Agreement.
Amortization of debt issuance costs related to the 2014 Term Loans and 2014 Revolving Credit Facility was $4 million and
$16 million for fiscal years 2016 and 2015, respectively, and was included in interest expense in the consolidated statements of operations.
Convertible Senior Notes
In connection with the LSI acquisition on May 6, 2014, Avago completed a private placement of $1 billion in aggregate
principal amount of the Convertible Notes to two entities affiliated with Silver Lake Partners, or the Purchasers. The Convertible Notes were unsecured senior obligations. Interest was payable on the Convertible Notes, semi-annually in arrears, at a
rate of 2.0% per year and the Convertible Notes were scheduled to mature on August 15, 2021. Upon conversion, the Convertible Notes could be settled in Avago ordinary shares, cash or a combination of cash and ordinary shares, at
Avagos option.
During fiscal year 2015, the Purchasers converted all of the Convertible Notes that they held in exchange for
cash and Avago ordinary shares. During fiscal years 2015 and 2014, we recognized interest expense of $18 million and $15 million, respectively, related to the coupon interest and accretion of debt discount for the Convertible Notes.
A-64
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
8.
|
Borrowings
(continued)
|
Fair Value of Debt
As of October 30, 2016, the estimated fair values of the 2016 Term Loans and the Senior Notes approximate their carrying values.
The fair value of our 2016 Term Loans is determined using inputs based on discounted cash flow models with observable market inputs and takes into consideration variables such as interest rate changes, comparable instruments, and credit-rating
changes and, therefore, is classified as Level 2. The fair value of the Senior Notes is classified as Level 2 as we use quoted prices from less active markets.
Future Principal Payments of Debt
The future scheduled principal payments for the outstanding 2016 Term Loans and Senior Notes as of October 30, 2016 were as follows
(in millions):
|
|
|
|
|
|
|
Group
|
|
Financial year
|
|
|
|
2017
|
|
|
454
|
|
2018
|
|
|
570
|
|
2019
|
|
|
646
|
|
2020
|
|
|
3,347
|
|
2021
|
|
|
2,520
|
|
Thereafter
|
|
|
6,270
|
|
|
|
|
|
|
|
|
|
13,807
|
|
|
|
|
|
|
For the period from November 2, 2015 to January 31, 2016, our shareholders equity reflected Avagos outstanding
ordinary shares, all of which were publicly traded on the NASDAQ stock market. As a result of the Broadcom Transaction, our ownership interest changed. Pursuant to the Avago Scheme, Broadcom issued 278 million ordinary shares to holders of
Avago ordinary shares and issued 112 million ordinary shares to former BRCM shareholders pursuant to the Broadcom Merger. Consequently, the number of Broadcom ordinary shares outstanding increased from 278 million Avago ordinary shares on
January 31, 2016 to 390 million Broadcom ordinary shares on February 1, 2016. Both Avago and BRCM became indirect subsidiaries of Broadcom and the Partnership, and Broadcom is the sole General Partner of the Partnership. As a result,
the carrying amount of equity attributable to Broadcom was adjusted to reflect the change in our ownership interest of our subsidiaries. Additionally, Broadcom reflects a noncontrolling interest in its shareholders equity, which represents the
interest of the holders of the Limited Partners in Partnership, as further discussed below.
In connection with the Broadcom Merger,
Broadcom also issued 23 million
non-economic
voting preference shares, or the Special Voting Shares, which is equal to the number of issued Partnership
A-65
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
REUs. The Special Voting Shares were issued to a voting trustee pursuant to a voting trust agreement dated February 1, 2016, among Broadcom, the Partnership and the voting trustee, or the
Voting Trust Agreement.
Group and Company
All issued ordinary shares are fully paid. There is no par value for these ordinary shares.
Noncontrolling Interest
Noncontrolling interest represents equity interests in consolidated subsidiaries that are not attributable to Broadcom. As of
October 30, 2016, the Limited Partners held a noncontrolling interest of approximately 5% in the Partnership through their ownership of 23 million Partnership REUs, issued to former BRCM shareholders pursuant to the Broadcom Merger.
Pursuant to the terms of the Partnership Agreement, each Partnership REU is entitled to distributions from the Partnership in an amount
equal to any dividends or distributions that Broadcom declares and pays with respect to Broadcom ordinary shares. In addition, each holder of a Partnership REU is entitled to vote with respect to matters on which holders of Broadcom ordinary shares
are entitled to vote by directing the voting trustee to vote one Special Voting Share for each Partnership REU they hold, pursuant to the Voting Trust Agreement. After the first anniversary of the Acquisition Date, subject to certain additional
requirements and potential deferrals as set forth in the Partnership Agreement, a Limited Partner will have the right to require the Partnership to repurchase some or all of the Limited Partners Partnership REUs in consideration for, as
determined by Broadcom in its sole discretion, either one Broadcom ordinary share or a cash amount as determined under the Partnership Agreement for each Partnership REU submitted for repurchase.
Broadcom adjusts the net income (loss) in our consolidated statements of operations to exclude the noncontrolling interests
proportionate share of the results. In addition, Broadcom presents the proportionate share of equity attributable to the noncontrolling interest as a separate component of shareholders equity within our consolidated balance sheet and statement
of shareholders equity.
Conversion of Convertible Notes
During fiscal year 2015, the Convertible Notes were converted in full and the resulting conversion obligation was settled by a
combination of $1 billion in cash and the issuance of 13.8 million of Avago ordinary shares.
Share Repurchase Program
At our 2014 annual general meeting of shareholders, or AGM, on April 9, 2014, shareholders approved our 2014 share purchase
mandate, pursuant to which we were authorized, upon the approval of the Board, to repurchase up to approximately 25 million of our ordinary shares in open market
A-66
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Share Repurchase Program
(continued)
transactions or pursuant to equal access schemes. The 2014 share purchase mandate expired on April 8, 2015. The Board did not approve any repurchases of our ordinary shares pursuant to the
2014 share purchase mandate.
At our 2015 AGM on April 8, 2015, shareholders approved our 2015 share purchase mandate, pursuant
to which we were authorized, upon the approval of the Board, to repurchase up to approximately 26 million of our ordinary shares in open market transactions or pursuant to equal access schemes. The 2015 share purchase mandate expired on
April 6, 2016. The Board did not approve any repurchases of our ordinary shares pursuant to the 2015 share purchase mandate.
Dividends
Broadcom paid aggregate cash dividends of $1.94 and $1.55 per ordinary share, or $716 million and $408 million,
during fiscal years 2016 and 2015 respectively.
Equity Incentive Award Plans
Share-based incentive awards are provided to employees, directors and other persons who provide services to the Partnership or our
subsidiaries under the terms of various Broadcom equity incentive plans.
Effective December 1, 2005, Broadcom adopted two
equity-based compensation plans, the Equity Incentive Plan for Executive Employees of Avago Technologies Limited and Subsidiaries, or the Executive Plan, and the Equity Incentive Plan for Senior Management Employees of Avago Technologies Limited and
Subsidiaries, or the Senior Management Plan, together with the Executive Plan, referred to as the
Pre-IPO
Equity Incentive Plans, which authorized the grant of options and share purchase rights covering up to
30 million ordinary shares. Since our IPO in August 2009, we are no longer permitted to make any further grants under the
Pre-IPO
Equity Incentive Plans.
Options issued under the Executive Plan generally vest at a rate of 20% per year based on the passage of time, and the passage of time
and attaining certain performance criteria, in each case subject to continued employment. Those options subject to vesting based on the passage of time may accelerate by one year upon certain terminations of employment. Options issued under the
Senior Management Plan, generally vested at a rate of 20% per year based on the passage of time and continued employment.
Options
issued under the
Pre-IPO
Equity Incentive Plans generally expire ten years following the date of grant unless granted to a
non-employee,
in which case the awards
generally expire five years following the date of grant. All options awarded under these plans were granted with an exercise price equal to the fair market value on the date of grant.
A-67
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Equity Incentive Award Plans
(continued)
In July 2009, our Board adopted, and our shareholders approved, the Avago Technologies
Limited 2009 Equity Incentive Award Plan, or the 2009 Plan, to authorize the grant of options, share appreciation rights, RSUs, dividend equivalents, performance awards, and other share-based awards. A total of 20 million ordinary shares were
initially reserved for issuance under the 2009 Plan, subject to annual increases starting in fiscal year 2012. The amount of the annual increase is equal to the least of (a) 6 million shares, (b) 3% of the ordinary shares outstanding on the
last day of the immediately preceding fiscal year and (c) such smaller number of ordinary shares as determined by our Board. However, no more than 90 million ordinary shares may be issued upon the exercise of equity awards issued under the
2009 Plan. The 2009 Plan became effective on July 27, 2009. Options issued to employees under the 2009 Plan prior to March 2011 generally expire ten years following the date of grant. Since March 2011, options issued to employees under the 2009
Plan generally expire seven years after the date of grant. Options awarded to
non-employees
under this plan generally expire after five years. Options issued to employees under the 2009 Plan generally vest
over a four-year period from the date of grant and are granted with an exercise price equal to the fair market value on the date of grant. Any share options cancelled or forfeited under the
Pre-IPO
Equity
Incentive Plans after July 27, 2009 become available for issuance under the 2009 Plan. We also grant RSUs as part of our equity compensation programs under the 2009 Plan. An RSU is an equity award that is granted with an exercise price equal to
zero and which represents the right to receive one of our ordinary shares immediately upon vesting. RSU awards granted to employees are generally time-based and vest over four years.
In connection with the LSI acquisition, we assumed the LSI 2003 Equity Incentive Plan, or the 2003 Plan, and outstanding unvested stock
options and RSUs originally granted by LSI under the 2003 Plan that were held by continuing employees. At the time of the acquisition, these awards were converted to Avago share options and RSUs, with adjustments made to the exercise price of stock
options and the number of shares subject to stock options and RSU awards so that the intrinsic value of each award was approximately the same immediately before and immediately after the adjustment. These unvested options and RSUs will vest in
accordance with their original terms, generally vesting in equal annual installments over a four-year period from the original grant date and expire seven years after the grant date. Under the 2003 Plan, we may grant to former employees of LSI
and other employees who were not employees of Avago at the time of the acquisition restricted stock awards, RSUs, share options and share appreciation rights with an exercise price that is no less than the fair market value on the date of
grant. No participant may be granted share options covering more than four million shares or more than an aggregate of one million shares of restricted stock and RSUs in any fiscal year. Equity awards granted under the 2003 Plan following the
LSI acquisition are expected to be on similar terms and consistent with similar grants made pursuant to the 2009 Plan.
In
connection with the Broadcom Merger, we assumed the BRCM 2012 Stock Incentive Plan, or the 2012 Plan, and outstanding unvested RSUs originally granted by BRCM under the 2012 Plan that were held by continuing employees. At the time of the
acquisition, these awards were converted to
A-68
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Equity Incentive Award Plans
(continued)
Broadcom RSUs, with adjustments made to the number of shares subject to RSU awards so that the intrinsic value of each award was approximately the same immediately before and immediately after
the adjustment. These unvested RSUs will vest in accordance with their original terms, generally vesting in equal quarterly installments over a four-year period from the original grant date. Under the 2012 Plan, we may grant to former
employees of BRCM and other employees who were not employees of Avago at the time of the acquisition restricted stock awards, RSUs, share options and share appreciation rights with an exercise price that is no less than the fair market value on the
date of grant. No participant may be granted share options, restricted stock or RSUs, covering more than an aggregate of nine million shares in any fiscal year. Equity awards granted under the 2012 Plan following the Broadcom Merger are
expected to be on similar terms and consistent with similar grants made pursuant to the 2009 Plan.
The ESPP provides eligible
employees with the opportunity to acquire an ownership interest in us through periodic payroll deductions, based on a
6-month
look-back period, at a price equal to the lesser of 85% of the fair market value of
the ordinary shares at either the beginning or ending of the relevant offering period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. However, the ESPP is not intended
to be a qualified pension, profit sharing or stock bonus plan under Section 401(a) of the Internal Revenue Code of 1986 and is not subject to the provisions of Employee Retirement Income Security Act of 1974. The ESPP will terminate on July 27,
2019 unless sooner terminated.
Share-Based Compensation Expense
The following table summarizes share-based compensation expense reported in continuing operations related to share-based awards granted
to employees and directors for the periods presented (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
|
|
|
Cost of products sold
|
|
|
|
48
|
|
|
|
|
26
|
|
Research and development
|
|
|
|
430
|
|
|
|
|
107
|
|
Selling, general and administrative
|
|
|
|
186
|
|
|
|
|
99
|
|
|
|
|
|
|
|
Total share-based compensation expense
(a)
|
|
|
|
664
|
|
|
|
|
232
|
|
|
|
|
|
|
|
|
(a)
|
Does not include $15 million of share-based compensation
related to discontinued operations recognized during fiscal year 2016, which was included in loss from discontinued operations in our consolidated statements of operations.
|
A-69
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Share-Based Compensation Expense
(continued)
In connection with the Broadcom Merger, we assumed RSUs originally granted by BRCM.
Share-based compensation expense reported in continuing operations in fiscal year 2016 included $222 million related to the assumed BRCM RSUs.
Based on our historical experience of
pre-vesting
option cancellations, we assumed an annualized
forfeiture rate for our options of 5% in each of fiscal years 2015 and 2014. We no longer assume forfeiture for options as all options are vesting on a monthly basis from fiscal year 2016. We have assumed an annualized forfeiture rate for RSUs of
5%, 3% and 2% for fiscal years 2016, 2015 and 2014, respectively. We will recognize additional expense if actual forfeitures are lower than we estimated, and will recognize a benefit if actual forfeitures are higher than we estimated.
The income tax benefits for share-based compensation expense were $89 million and $130 million for fiscal years 2016 and 2015,
respectively.
We estimate the fair value of time-based RSUs using the closing market price of our ordinary shares on the date of
grant, reduced by the present value of dividends expected to be paid on our ordinary shares prior to vesting. We estimate the fair value of market-based awards on the date of grant using the Monte Carlo simulation technique. We estimate the
grant-date fair value of time-based options and employee share purchase plan rights using the Black-Scholes valuation model.
The
following tables summarize the weighted-average assumptions utilized to calculate the fair value of market-based awards and time-based options granted in the periods presented:
|
|
|
|
|
|
|
Group
|
|
|
|
|
Market-Based Awards
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
|
|
|
Risk-free interest rate
|
|
1.2%
|
|
1.4%
|
Dividend yield
|
|
1.3%
|
|
1.2%
|
Volatility
|
|
35.0%
|
|
36.3%
|
Expected term (in years)
|
|
3.8
|
|
4.4
|
|
|
|
A-70
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Share-Based Compensation Expense
(continued)
|
|
|
|
|
|
|
Group
|
|
|
|
|
Time-Based Options
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
|
|
|
Risk-free interest rate
|
|
n/a
|
|
1.3%
|
Dividend yield
|
|
n/a
|
|
1.4%
|
Volatility
|
|
n/a
|
|
35.0%
|
Expected term (in years)
|
|
n/a
|
|
4.0
|
|
|
|
The risk-free interest rate was derived from the average U.S. Treasury Strips rate during the
period, which approximated the rate in effect at the time of grant.
The dividend yield was based on the historical and expected
dividend payouts as of the respective award grant dates.
The expected volatility was based on Broadcoms own historical share
price volatility over the period commensurate with the expected life of the awards and the implied volatility from its own traded ordinary shares with a term of 180 days measured at a specific date.
The expected term of market-based share options valued using Monte Carlo simulation techniques was based upon the vesting dates
forecasted by the simulation and then assuming that share options which vest, and for which the market condition has been satisfied, are exercised at the midpoint between the forecasted vesting date and their expiration. The expected term of
market-based RSUs valued using Monte Carlo simulation techniques was commensurate with the awards contractual terms.
The
expected term for time-based options was based on a weighted-average combining the average life of options that have already been exercised or cancelled with the expected life of all unexercised options. The expected life for unexercised options was
calculated assuming that the options will be exercised at the midpoint of the vesting date (if unvested) or the valuation date (if vested) and the full contractual term.
Based on the above assumptions, the weighted-average fair value of time and market-based options granted under our equity incentive
award plans for fiscal year 2015 was $25.30 per share.
A-71
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Restricted Stock Unit Awards
A summary of RSU activity related to Broadcoms equity incentive award plans is as follows (in millions, except years and per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
Awards Outstanding
|
|
|
|
|
|
|
|
|
Number of
Shares
Outstanding
|
|
Weighted-
Average
Grant Date
Fair Value Per
Share
|
|
Weighted-
Average
Remaining
Contractual
Life
(in years)
|
|
|
Aggregate
Grant Date
Fair
Value
|
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
5
|
|
95.17
|
|
|
|
|
|
|
|
|
Assumed in Broadcom Merger
|
|
6
|
|
135.58
|
|
|
|
|
|
|
|
|
Granted
|
|
12
|
|
138.45
|
|
|
|
|
|
|
|
|
Vested
|
|
(4)
|
|
114.49
|
|
|
|
|
|
|
457
|
|
Forfeited
|
|
(2)
|
|
130.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 30, 2016
|
|
17
|
|
130.71
|
|
|
1.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 2, 2014
|
|
4
|
|
48.82
|
|
|
|
|
|
|
|
|
Granted
|
|
3
|
|
119.30
|
|
|
|
|
|
|
|
|
Vested
|
|
(1)
|
|
57.29
|
|
|
|
|
|
|
82
|
|
Forfeited
|
|
(1)
|
|
79.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
5
|
|
95.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The total unrecognized compensation cost related to unvested time and market-based RSUs as of
October 30, 2016 was $1,592 million, which is expected to be recognized over the remaining weighted-average service period of 3.0 years.
A-72
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
9.
|
Shareholders Equity
(continued)
|
Share Option Awards
A summary of share option activity related to Broadcoms equity incentive award plans is as follows (in millions, except years and
per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
Awards Outstanding
|
|
|
|
|
|
|
|
Number of
Shares
Outstanding
|
|
Weighted-
Average
Exercise
Price per
Share
|
|
Weighted-
Average
Remaining
Contractual
Life
(in years)
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
21
|
|
47.92
|
|
|
|
|
Exercised
|
|
(5)
|
|
44.35
|
|
|
|
|
Cancelled
|
|
(1)
|
|
53.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 30, 2016
|
|
15
|
|
48.77
|
|
3.71
|
|
1,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 2, 2014
|
|
29
|
|
44.97
|
|
|
|
|
Granted
|
|
1
|
|
95.97
|
|
|
|
|
Exercised
|
|
(7)
|
|
34.40
|
|
|
|
|
Cancelled
|
|
(2)
|
|
65.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
21
|
|
47.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested as of October 30, 2016
|
|
10
|
|
42.53
|
|
3.40
|
|
1,218
|
Fully vested and expected to vest as of October 30, 2016
|
|
15
|
|
48.77
|
|
3.71
|
|
1,769
|
The total unrecognized compensation cost of time and market-based share options granted but not
yet vested as of October 30, 2016 was $62 million, which is expected to be recognized over the remaining weighted-average service period of 1.5 years.
Employee Share Purchase Plan
Under the ESPP, employees purchased 0.4 million in fiscal year 2016 and 0.2 million shares in fiscal years 2015 for
$51 million and $15 million, respectively. The total unrecognized compensation cost related to the ESPP purchase rights as of October 30, 2016 was $11 million, which is expected to be recognized over the remaining four months of
the current offering period under the ESPP.
A-73
BROADCOM LIMITED
NOTES TO
THE FINANCIAL STATEMENTS
For the financial year ended October 30, 2016
Components of (Loss) Income from Continuing Operations Before Income Taxes
Since we are incorporated in Singapore, domestic income reflects the results of operations based in Singapore. For financial reporting
purposes, Income (loss) from continuing operations before income taxes included the following components (in millions):
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
|
|
|
Domestic income
|
|
1,365
|
|
1,580
|
Foreign loss
|
|
(2,472)
|
|
(113)
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
|
|
(1,107)
|
|
1,467
|
|
|
|
|
|
Components of Provision for Income Taxes
We have obtained several tax incentives from the Singapore Economic Development Board, an agency of the Government of Singapore, which
provide that qualifying income we earn in Singapore are subject to tax holidays or reduced rates of Singapore income tax. Each such tax incentive is separate and distinct from the others, and may be granted, withheld, extended, modified, truncated,
complied with or terminated independently without any effect on the other incentives. In order to retain these tax benefits in Singapore, we must meet certain operating conditions specific to each incentive relating to, among other things,
maintenance of a corporate headquarters function and specified intellectual property, or IP, activities in Singapore. The Singapore tax incentives are presently scheduled to expire at various dates generally between 2020 and 2025, subject in certain
cases to potential extensions, which we may or may not be able to obtain.
We also have tax holidays on our qualifying income in
Malaysia, which are scheduled to expire between 2018 and 2028. The tax incentives that we have negotiated in Malaysia are also subject to our compliance with various operating and other conditions. If we cannot, or elect not to, comply with the
operating conditions included in any particular tax incentive, we will lose the related tax benefits and we could be required to refund previously realized material tax benefits.
The effect of all these tax incentives and tax holidays, in the aggregate, was to reduce the overall provision for income taxes by
approximately $169 million and $207 million, for fiscal years 2016 and 2015, respectively, reduce diluted net loss per share by $0.44 for fiscal year 2016 and increase diluted net income per share by $0.74 for fiscal years 2015,
respectively.
A-74
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
10.
|
Income Taxes
(continued)
|
Components of Provision for Income Taxes
(continued)
Significant components of the provision for income taxes are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
Current tax expense:
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
59
|
|
|
|
|
59
|
|
Foreign
|
|
|
|
165
|
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224
|
|
|
|
|
296
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
9
|
|
|
|
|
4
|
|
Foreign
|
|
|
|
409
|
|
|
|
|
(224)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
418
|
|
|
|
|
(220)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total provision for income taxes
|
|
|
|
642
|
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
The provision for income taxes in fiscal year 2016 increased from fiscal year 2015 primarily due
to an increase in tax associated with our undistributed earnings, partially offset by income tax benefits from losses on continuing operations and the recognition of previously unrecognized tax benefits as a result of audit settlements. The
provision for income taxes in fiscal year 2015 increased from fiscal year ended November 2, 2014 primarily due to the increase in profit before tax.
Rate Reconciliation
A reconciliation of the statutory tax rate in Singapore to the actual, effective tax rate on income before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
|
|
|
|
%
|
|
|
|
|
%
|
|
|
|
|
Statutory tax rate
|
|
|
|
17.0
|
|
|
|
|
17.0
|
|
Foreign income taxed at different rates
|
|
|
|
(89.7)
|
|
|
|
|
1.8
|
|
Tax holidays and concessions
|
|
|
|
15.3
|
|
|
|
|
(14.1)
|
|
Other, net
|
|
|
|
(0.6)
|
|
|
|
|
0.2
|
|
Valuation allowance
|
|
|
|
-
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual tax rate on (loss) income before income taxes
|
|
|
|
(58.0)
|
|
|
|
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
A-75
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
10.
|
Income Taxes
(continued)
|
Summary of Deferred Income Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their basis for income tax purposes and the tax effects of net operating losses and tax credit carryforwards.
The significant components of deferred tax assets and deferred tax liabilities included on the consolidated balance sheets were as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
October 30,
2016
|
|
November 1,
2015
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
15
|
|
|
|
|
2
|
|
Inventory
|
|
|
|
6
|
|
|
|
|
8
|
|
Trade accounts
|
|
|
|
6
|
|
|
|
|
9
|
|
Employee benefits
|
|
|
|
216
|
|
|
|
|
202
|
|
Employee share awards
|
|
|
|
90
|
|
|
|
|
58
|
|
Net operating loss carryovers and credit carryovers
|
|
|
|
1,773
|
|
|
|
|
288
|
|
Other deferred income tax assets
|
|
|
|
172
|
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross deferred income tax assets
|
|
|
|
2,278
|
|
|
|
|
616
|
|
Less: Valuation allowance
|
|
|
|
(1,003)
|
|
|
|
|
(147)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax assets
|
|
|
|
1,275
|
|
|
|
|
469
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
263
|
|
|
|
|
48
|
|
Notes receivable
|
|
|
|
-
|
|
|
|
|
100
|
|
Other deferred income tax liabilities
|
|
|
|
37
|
|
|
|
|
-
|
|
Foreign earnings not permanently reinvested
|
|
|
|
10,954
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities
|
|
|
|
11,254
|
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax (liabilities) assets
|
|
|
|
(9,979)
|
|
|
|
|
315
|
|
|
|
|
|
|
|
|
|
|
|
|
A-76
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
10.
|
Income Taxes
(continued)
|
Summary of Deferred Income Taxes
(continued)
The above net deferred income tax (liabilities) assets have been reflected on the
consolidated balance sheets as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
October 30,
2016
|
|
|
November 1,
2015
|
|
|
|
|
Other current assets
|
|
|
-
|
|
|
|
116
|
|
Other current liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net current income tax assets
|
|
|
-
|
|
|
|
116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term assets
|
|
|
308
|
|
|
|
208
|
|
Other long-term liabilities
|
|
|
(10,287
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Net long-term income tax assets (liabilities)
|
|
|
(9,979
|
)
|
|
|
199
|
|
|
|
|
|
|
|
|
|
|
The increase in the valuation allowance from $147 million in fiscal year 2015 to
$1,003 million in fiscal year 2016 is primarily related to the Broadcom Merger and an increase in state deferred tax assets not expected to be realized.
As of October 30, 2016, we had U.S. federal net operating loss carryforwards of $599 million, of which $142 million
are related to excess tax deductions related to share-based compensation, U.S. state net operating loss carryforwards of $2,650 million, of which $198 million are related to excess tax deductions related to share-based compensation, and
other foreign net operating loss carryforwards of $309 million. U.S. federal and state net operating loss carryforwards, if not utilized, will begin to expire in fiscal year 2017. The other foreign net operating losses expire in various
fiscal years beginning 2018. As of October 30, 2016, we had $1,362 million and $1,125 million of U.S. federal and state research and development tax credits, respectively, which if not utilized, will begin to expire in fiscal year
2017.
The U.S. Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in the case of an
ownership change of a corporation or separate return loss year limitations. Any ownership changes, as defined, may restrict utilization of carryforwards. As of October 30, 2016, we had approximately $457 million and
$1,214 million of federal net operating loss and tax credit carryforwards, respectively, in the U.S. subject to an annual limitation. We do not expect these limitations to result in any permanent loss of our tax benefits.
As of October 30, 2016, we had unrecognized federal and state deferred tax assets of approximately $50 million and
$12 million, respectively, attributable to excess tax deductions related to stock options, the benefit of which will be credited to equity when realized.
A-77
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
10.
|
Income Taxes
(continued)
|
Summary of Deferred Income Taxes
(continued)
In connection with the preliminary allocation of the purchase price for Broadcom
Merger, $9,921 million of net deferred tax liabilities were established on the acquired identifiable assets and on the excess of book basis over the tax basis of acquired investments in certain foreign subsidiaries that have not been
indefinitely reinvested.
During fiscal year 2016, we determined that we no longer intend to indefinitely reinvest our accumulated
and current foreign earnings in our operations outside of Singapore. As a result, we made a provision for taxes on $1,854 million of our undistributed earnings as of November 1, 2015, including projected withholding taxes that would become
payable upon the distribution of those earnings, and recognized $93 million of expense in fiscal year 2016 related to the undistributed earnings of foreign operations that were previously considered indefinitely reinvested.
Our total deferred tax liability for the excess of book basis over the tax basis increased to $10,954 million at October 30,
2016. This increase was a component of the provision for income taxes for fiscal year 2016.
Uncertain Tax Positions
Gross unrecognized tax benefits increased by $1,454 million during fiscal year 2016, resulting in gross unrecognized tax benefits
of $1,983 million as of October 30, 2016. The increase in gross unrecognized tax benefits was primarily a result of the Broadcom Merger. Uncertain tax positions assumed in connection with our acquisitions are initially estimated as of the
Acquisition Date. We continue to reevaluate these items with any adjustments to our preliminary estimates being recognized as goodwill provided that we are within the measurement period and we continue to collect information in order to determine
their estimated values. During fiscal year 2016, we recognized $49 million of previously unrecognized tax benefits as a result of the audit settlement with taxing authorities, and $8 million as a result of the expiration of the statute of
limitations for certain audit periods.
We recognize interest and penalties related to unrecognized tax benefits within provision
for income taxes in the accompanying consolidated statements of operations. We recognized approximately $26 million of expense related to interest and penalties in fiscal year 2016. Accrued interest and penalties are included within other
long-term liabilities on the consolidated balance sheets. As of October 30, 2016 and November 1, 2015, the combined amount of cumulative accrued interest and penalties was approximately $102 million and $43 million, respectively.
The increase in cumulative accrued interest and penalties was primarily a result of the Broadcom Merger.
A-78
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
10.
|
Income Taxes
(continued)
|
Uncertain Tax Positions
(continued)
A reconciliation of the beginning and ending balance of gross unrecognized tax benefits
is summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
October 30,
2016
|
|
|
November 1,
2015
|
|
|
|
|
Beginning of financial year
|
|
|
578
|
|
|
|
487
|
|
Lapse of statute of limitations
|
|
|
(8
|
)
|
|
|
(10
|
)
|
Increases in balances related to tax positions taken
during prior financial years (including those related
to acquisitions made during the year)
|
|
|
1,325
|
|
|
|
94
|
|
Decrease in balances related to tax positions taken
during prior financial years
|
|
|
(1
|
)
|
|
|
(40
|
)
|
Increases in balances related to tax positions taken
during current financial year
|
|
|
138
|
|
|
|
47
|
|
Decreases in balances related to settlement with taxing authorities
|
|
|
(49
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
End of financial year
|
|
|
1,983
|
|
|
|
578
|
|
|
|
|
|
|
|
|
|
|
A portion of our unrecognized tax benefits will affect our effective tax rate if they are
recognized upon favorable resolution of the uncertain tax positions. As of October 30, 2016, approximately $2,085 million of the unrecognized tax benefits including accrued interest and penalties would affect our effective tax rate. As of
November 1, 2015, approximately $615 million of the unrecognized tax benefits including accrued interest and penalties would affect our effective tax rate.
We are subject to Singapore income tax examination for fiscal years 2011 and later. Our acquired companies are subject to tax
examinations in major jurisdictions outside Singapore for fiscal years 2010 and later. We believe it is possible that we may recognize up to $8 million of our existing unrecognized tax benefits within the next 12 months as a result of lapses of
statute of limitations for certain audit periods.
Reportable Segments
We have four reportable segments: wired infrastructure, wireless communications, enterprise storage and industrial & other.
These segments align with our principal target markets. The segments represent components for which separate financial information is available that is utilized on a regular basis by the Chief Executive Officer of Broadcom, who has been identified
as the Chief Operating
A-79
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
11.
|
Segment Information
(continued)
|
Reportable Segments
(continued)
Decision Maker, or the CODM, as defined by authoritative guidance on segment reporting, in determining how to allocate resources and evaluate performance. The segments are determined based on
several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics.
Wired
Infrastructure
We provide semiconductor solutions for enabling all types of
set-top
boxes and the digital subscriber line, cable and fiber broadband access markets. We also provide a wide variety of semiconductor solutions which manage the movement of data in data center, telecom, enterprise and
Small-and-Medium
size Business/Remote-Office-Branch-Office networking applications. We offer a broad set of standard Ethernet switching technology to deliver
system-on-chip,
or SoCs, for high performance compute applications, we supply high speed Serializer/Deserializer technology integrated into application specific integrated circuits, or ASICs. In addition we
provide physical layer devices which are transceivers that enable the reception and transmission of Ethernet data packets over a physical medium such as copper wire or optical fibers. We also supply optical laser and receiver components to the
storage, Ethernet networking, access, metro and long-haul telecommunication markets.
Wireless Communications
We support the wireless communications industry with a broad variety of radio frequency, or RF, semiconductor devices that amplify, as
well as selectively filter, RF signals. In addition to RF devices, we provide a variety of optoelectronic sensors for mobile handset applications. We also provide connectivity solutions that include discrete and integrated
Wi-Fi
and Bluetooth solutions, location controllers and touch controllers.
Enterprise Storage
Our enterprise storage products enable secure movement of digital data to and from host machines such as servers, personal computers and
storage systems to the underlying storage devices such as hard disk drives, or HDDs and solid state drives, or SSDs. We provide read channel-based SoCs and preamplifiers to HDD original equipment manufacturers, or OEMs. In addition, we sell
preamplifiers, which are used to amplify the initial signal to and from the drive disk heads so the signal can be processed by the read channel.
We provide custom flash controllers to SSD OEMs, and Serial attached small computer system interface and Redundant Array of Independent
Disks controller and adapter solutions to server and storage system OEMs. We provide Fibre Channel Host Bus Adapters, which connect host computers such as servers to Fibre Channel Storage Area Networks, or FC SANs. FC SANs are networks
dedicated
A-80
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
11.
|
Segment Information
(continued)
|
Reportable Segments
(continued)
Enterprise Storage
(continued)
to storage traffic and enable simultaneous high speed and secure connections among multiple host computers and multiple storage arrays. We also provide interconnect
semiconductors that support the PCIe communication standards.
Industrial & Other
We provide a broad variety of products for the general industrial and automotive markets. We offer optical isolators, or optocouplers,
which provide electrical insulation and signal isolation. For industrial motors and robotic motion control, we supply optical encoders, as well as integrated circuits for the controller and decoder functions. For electronic signs and signals, we
supply Light Emitting Diode assemblies that offer high brightness and stable light output over thousands of hours, enabling us to support traffic signals, large commercial signs and other displays. For industrial networking, we provide faster
optical transceivers using plastic optical fiber that enable quick and interoperable networking and factory automation.
Our CODM
assesses the performance of each segment and allocates resources to those segments based on net revenue and operating income (loss) and does not evaluate operating segments using discrete asset information. Operating income (loss) by segment
includes items that are directly attributable to each segment. Operating income (loss) by segment also includes shared expenses such as global operations, including manufacturing support, logistics and quality control, which are allocated primarily
based on headcount, expenses associated with our globally integrated support organizations, such as sales and corporate marketing functions, as well as finance, information technology, human resources, legal and related corporate infrastructure
costs, along with certain benefit related expenses, which are allocated primarily based on a percentage of revenue, and facilities allocated based on square footage.
Unallocated Expenses
Unallocated expenses include amortization of acquisition-related intangible assets, share-based compensation expense, restructuring,
impairment and disposal charges, acquisition-related costs, including charges related to inventory
step-up
to fair value, and other costs, which are not used in evaluating the results of, or in allocating
resources to, our segments. Acquisition-related costs also include transaction costs and any costs directly related to the acquisition and integration of acquired businesses.
Depreciation expense directly attributable to each reportable segment is included in operating income (loss) for each segment. However,
the CODM does not evaluate depreciation expense by operating segment and, therefore, it is not separately presented. There was no inter-segment revenue. The
A-81
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
11.
|
Segment Information
(continued)
|
Unallocated Expenses
(continued)
accounting policies of the segments are the same as those described in the summary of significant accounting policies.
The following tables present our net revenue and income (loss) from operations by reportable segment (in millions):
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
October 30,
2016
|
|
|
November 1,
2015
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
Wired infrastructure
|
|
|
6,582
|
|
|
|
1,479
|
|
Wireless communications
|
|
|
3,724
|
|
|
|
2,536
|
|
Enterprise storage
|
|
|
2,291
|
|
|
|
2,180
|
|
Industrial & other
|
|
|
643
|
|
|
|
629
|
|
|
|
|
|
|
|
|
|
|
Total net revenue
|
|
|
13,240
|
|
|
|
6,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss (income):
|
|
|
|
|
|
|
|
|
Wired infrastructure
|
|
|
2,664
|
|
|
|
478
|
|
Wireless communications
|
|
|
1,282
|
|
|
|
1,202
|
|
Enterprise storage
|
|
|
995
|
|
|
|
855
|
|
Industrial & other
|
|
|
327
|
|
|
|
310
|
|
Unallocated expenses
|
|
|
(5,677
|
)
|
|
|
(1,213
|
)
|
|
|
|
|
|
|
|
|
|
Total operating loss (income)
|
|
|
(409
|
)
|
|
|
1,632
|
|
|
|
|
|
|
|
|
|
|
A-82
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
11.
|
Segment Information
(continued)
|
Unallocated Expenses
(continued)
The following tables present net revenue and long-lived asset information based on
geographic region (in millions). Net revenue is based on the geographic location of the distributors, original equipment manufacturers or contract manufacturers who purchased our products, which may differ from the geographic location of the end
customers. Long-lived assets include property, plant and equipment and are based on the physical location of the assets.
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
October 30,
2016
|
|
|
November 1,
2015
|
|
Net revenue:
|
|
|
|
|
|
|
|
|
China
|
|
|
7,184
|
|
|
|
3,675
|
|
United States
|
|
|
1,124
|
|
|
|
755
|
|
Singapore
|
|
|
250
|
|
|
|
208
|
|
Other
|
|
|
4,682
|
|
|
|
2,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,240
|
|
|
|
6,824
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
United States
|
|
|
1,917
|
|
|
|
1,116
|
|
Malaysia
|
|
|
153
|
|
|
|
123
|
|
Singapore
|
|
|
78
|
|
|
|
42
|
|
Other
|
|
|
361
|
|
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,509
|
|
|
|
1,460
|
|
|
|
|
|
|
|
|
|
|
Significant Customer Information
We sell our products primarily through our direct sales force, distributors and manufacturers representatives. One direct customer
accounted for 18% and 33% of our net accounts receivable balance at October 30, 2016 and November 1, 2015, respectively. During fiscal years 2016 and 2015, one direct customer represented 14% and 24% of our net revenue, respectively. The
majority of the revenue from this customer was included in our wired infrastructure and wireless communications segments for fiscal year 2016 and the wireless communications segment for fiscal year 2015.
12.
|
Related Party Transactions
|
2% Convertible Senior Notes
In May 2014, Avago completed a private placement of $1 billion in aggregate principal amount of the Convertible Notes to the
Purchasers. Kenneth Hao, a director of Broadcom, is a Managing Partner and Managing Director of Silver Lake Partners. In June 2015, the Purchasers submitted conversion notices
A-83
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
12.
|
Related Party Transactions
(continued)
|
2% Convertible Senior Notes
(continued)
exercising their right to convert all of the outstanding Convertible Notes in exchange for $1 billion in cash and 13.8 million Avago ordinary shares. See Note 8 Borrowings
for more information on the conversion of the Convertible Notes.
Silicon Manufacturing Partners Pte. Ltd.
As a result of the acquisition of LSI, we acquired a 51% equity interest in Silicon Manufacturing Partners Pte. Ltd., or SMP, a joint
venture with GlobalFoundries. We have a
take-or-pay
agreement with SMP under which we have agreed to purchase 51% of the managed wafer capacity from SMPs
integrated circuit manufacturing facility and GlobalFoundries has agreed to purchase the remaining managed wafer capacity. SMP determines its managed wafer capacity each year based on forecasts provided by us and GlobalFoundries. If we fail to
purchase our required commitments, we will be required to pay SMP for the fixed costs associated with the unpurchased wafers. GlobalFoundries is similarly obligated with respect to the wafers allotted to it. The agreement may be terminated by either
party upon two years written notice. The agreement may also be terminated for material breach, bankruptcy or insolvency. We purchased $41 million and $60 million of inventory from SMP for fiscal years 2016 and 2015, respectively. As of
October 30, 2016, the amount payable to SMP was $4 million.
During fiscal years 2016 or 2015, in the ordinary course of
business, we purchased from, or sold to, several entities, for which one of our directors also serves or served as a director or entities that are otherwise affiliated with one of our directors.
The following tables summarize the transactions with these parties, including SMP and the Purchasers, for the indicated periods (for the
portion of such period that they were considered related) (in millions):
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
October 30,
2016
|
|
|
November 1,
2015
|
|
Total net revenue
|
|
|
335
|
|
|
|
183
|
|
Total costs and expenses including inventory purchases
|
|
|
81
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total receivables
|
|
|
15
|
|
|
|
7
|
|
Total payables
|
|
|
7
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
Compensation earned by Mr. Tan and Dr. Samueli, our employee director, for the financial
year ended October 30, 2016 consisted of $3 millions of cash compensation and benefits. Compensation earned by Mr. Tan for the financial year ended November 1, 2015 consisted of $4 million of cash compensation and benefits.
A-84
BROADCOM LIMITED
NOTES TO
THE FINANCIAL STATEMENTS
For the financial year ended October 30, 2016
13.
|
Commitments and Contingencies
|
Commitments
The
following table summarizes contractual obligations and commitments as of October 30, 2016 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
Thereafter
|
|
Debt principal, interest and fees
|
|
|
15,828
|
|
|
|
850
|
|
|
|
965
|
|
|
|
1,019
|
|
|
|
3,684
|
|
|
|
2,757
|
|
|
|
6,553
|
|
Purchase commitments
|
|
|
1,508
|
|
|
|
1,455
|
|
|
|
53
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other contractual commitments
|
|
|
390
|
|
|
|
152
|
|
|
|
106
|
|
|
|
79
|
|
|
|
49
|
|
|
|
4
|
|
|
|
-
|
|
Operating lease obligations
|
|
|
446
|
|
|
|
144
|
|
|
|
116
|
|
|
|
69
|
|
|
|
43
|
|
|
|
18
|
|
|
|
56
|
|
Pension plan contributions
|
|
|
37
|
|
|
|
37
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,209
|
|
|
|
2,638
|
|
|
|
1,240
|
|
|
|
1,167
|
|
|
|
3,776
|
|
|
|
2,779
|
|
|
|
6,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Principal, Interest and Fees
Represents principal, interest and commitment fees payable on borrowings and credit facilities under the 2016 Credit Agreement and the
Senior Notes.
Purchase Commitments
Represents unconditional purchase obligations that include agreements to purchase goods or services, primarily inventory, that are
enforceable and legally binding on us and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions, and the approximate timing of the transaction. Purchase obligations
exclude agreements that are cancelable without penalty. Cancellation for outstanding purchase orders for capital expenditures in connection with internal fabrication facility expansion and construction of our new campuses is generally allowed but
requires payment of all costs incurred through the date of cancellation and, therefore, cancelable purchase orders for these capital expenditures are included in the table above.
Other Contractual Commitments
Represents amounts payable pursuant to agreements related to IT, human resources, financial infrastructure outsourcing services and
other service agreements.
Operating Lease Obligations
Represents real property and equipment leased from third parties under
non-cancelable
operating
leases. Rent expense was $229 million and $77 million for fiscal years 2016 and 2015, respectively.
A-85
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Commitments
(continued)
Pension Plan Contributions
Represents our planned minimum contributions to our pension plans. Although additional future contributions will be required, the amount
and timing of these contributions will be affected by actuarial assumptions, the actual rate of returns on plan assets, the level of market interest rates, legislative changes and the amount of voluntary contributions to the plans. The amount shown
in the table represents our planned contributions to our pension plans within a year. Because any contributions for fiscal year 2018 and later will depend on the value of the plan assets in the future and thus are uncertain, we have not included any
amounts for fiscal year 2018 and beyond in the above table.
Due to the inherent uncertainty with respect to the timing of future
cash outflows associated with our unrecognized tax benefits at October 30, 2016, we are unable to reliably estimate the timing of cash settlement with the respective taxing authority. Therefore, $893 million of unrecognized tax
benefits and accrued interest classified within other long-term liabilities on our consolidated balance sheet as of October 30, 2016 have been excluded from the contractual obligations table above.
Standby Letters of Credit
As of October 30, 2016 and November 1, 2015, we had outstanding obligations relating to standby letters of credit of
$12 million and $9 million, respectively. Standby letters of credit are financial guarantees provided by third parties for leases, customs, taxes and certain self-insured risks. If the guarantees are called, we must reimburse the provider
of the guarantees. The fair values of the letters of credit approximate the contract amounts. The standby letters of credit generally renew annually.
Contingencies
From
time to time, we are involved in litigation that we believe is of the type common to companies engaged in our line of business, including commercial disputes, employment issues and disputes involving claims by third parties that our activities
infringe their patent, copyright, trademark or other intellectual property rights. Legal proceedings are often complex, may require the expenditure of significant funds and other resources, and the outcome of litigation is inherently uncertain, with
material adverse outcomes possible. Intellectual property claims generally involve the demand by a third-party that we cease the manufacture, use or sale of the allegedly infringing products, processes or technologies and/or pay substantial damages
or royalties for past, present and future use of the allegedly infringing intellectual property. Claims that our products or processes infringe or misappropriate any third-party intellectual property rights (including claims arising through our
contractual indemnification of our customers) often involve highly complex, technical issues, the outcome of which is inherently uncertain. Moreover, from time to time we pursue litigation to assert our intellectual property rights. Regardless of
the merit or resolution of any such litigation, complex
A-86
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Contingencies
(continued)
intellectual property litigation is generally costly and diverts the efforts and attention of our management and technical personnel.
Lawsuits Relating to the Brocade Merger
On December 13, 2016, December 15, 2016, and December 21, 2016, four putative class action complaints were filed in the
United States District Court for the Northern District of California, entitled Steinberg v. Brocade Communications Systems, Inc., et al., No.
3:16-cv-7081-EMC,
Gross v. Brocade Communications Systems, Inc., et al., No.
3:16-cv-7173-EJD,
Jha v. Brocade Communications Systems, Inc., et al.,
No. 3:16-cv-7270-HRL,
and Bragan v. Brocade Communications Systems, Inc., et al.,
No. 3:16-cv-7271-JSD,
respectively. The Steinberg and Bragan complaints name as defendants Brocade, the members of Brocades board of directors, Broadcom
Limited, BRCM, and Merger Sub. The Gross and Jha complaints name as defendants Brocade and the members of Brocades board of directors. All of the complaints assert claims under Sections 14(a) and 20(a) of the Exchange Act and Rule
14a-9
promulgated thereunder. The complaints allege, among other things, that the board of directors of Brocade failed to provide material information and/or omitted material information from the Preliminary
Proxy Statement filed with the SEC on December 6, 2016 by Brocade. The complaints seek to enjoin the closing of the transaction between Brocade and Broadcom, as well as certain other equitable and declaratory relief and attorneys
fees and costs.
Lawsuits Relating to Tessera, Inc.
On May 23, 2016, Tessera Technologies, Inc., Tessera, Inc., or Tessera, and Invensas Corp., or Invensas or collectively, the
Complainants, filed a complaint to institute an investigation with the U.S. International Trade Commission, or the U.S. ITC. The Complainants allege infringement by Broadcom, BRCM, Avago and Avago Technologies U.S. Inc., or Avago U.S. or
collectively, the Respondents, of three patents relating to semiconductor packaging and semiconductor manufacturing technology. The downstream respondents, which are customers of the Respondents, are Arista Networks, Inc., ARRIS International
plc, ARRIS Group, Inc., ARRIS Technology, Inc., ARRIS Enterprises LLC, ARRIS Solutions, Inc., Pace Ltd., Pace Americas, LLC, Pace USA, LLC, ASUSteK Computer Inc., ASUS Computer International, Comcast Cable Communications, LLC, Comcast Cable
Communications Management, LLC, Comcast Business Communications, LLC, HTC Corporation, HTC America, Inc., NETGEAR, Inc., Technicolor S.A., Technicolor USA, Inc., and Technicolor Connected Home USA LLC, or collectively, the Downstream
Respondents. On July 20, 2016, the U.S. ITC instituted the investigation, or the ITC Investigation.
A-87
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Lawsuits Relating to Tessera, Inc.
(continued)
Complainants seek the following relief: (1) a permanent limited exclusion order
excluding from importation into the U.S. all of the Respondents semiconductor devices and semiconductor device packages and Downstream Respondents products containing Respondents semiconductor devices and semiconductor device
packages that infringe one or more of the three patents subject to the ITC Investigation and (2) a permanent cease and desist order prohibiting the Respondents and Downstream Respondents and related companies from importing, marketing,
advertising, demonstrating, warehousing inventory for distribution, offering for sale, selling, qualifying for use in the products of others, distributing, or using the Respondents semiconductor devices and semiconductor device packages and
Downstream Respondents products containing Respondents semiconductor devices and semiconductor device packages that infringe one or more of the three patents subject to the ITC Investigation.
On May 23, 2016, Tessera and Invensas filed a complaint against BRCM in the U.S. District Court for the District of Delaware, Case
No.
1-16-cv-00379,
alleging infringement of the three patents subject to the ITC Investigation. The complaint seeks compensatory
damages in an unspecified amount, as well as an award of reasonable attorneys fees, interest, and costs. This case is stayed pending resolutions of the ITC Investigation.
On May 23, 2016, Tessera and Tessera Advanced Technologies, Inc. filed a complaint against BRCM in the U.S. District Court for the
District of Delaware, Case No.
1-16-cv-00380,
alleging infringement of four patents relating to semiconductor packaging and
circuit technologies. On June 19, 2016, the complaint was amended to add three more patents relating to semiconductor packaging technologies for a total of seven patents in this matter. The complaint seeks compensatory damages in an
unspecified amount, as well as an award of reasonable attorneys fees, interest, and costs.
On May 23, 2016, Invensas
filed a Writ of Summons against Broadcom, BRCM, Broadcom Netherlands B.V. and Broadcom Communications Netherlands B.V. in the Hague District Court in the Netherlands, Case No. L1422381, alleging infringement of a single European patent that is a
foreign counterpart to one of the patents subject to the ITC Investigation, or the European Patent. The named defendants also include distributors EBV Elektronik GmbH, Arrow Central Europe GmbH, and Mouser Electronics Netherlands B.V. The
requested relief includes a
cease-and-desist
order and damages in an unspecified amount.
On May 23, 2016, Invensas also filed a complaint against each of (i) Broadcom Germany GmbH and its German distributors, Case
No. 7 O 97/16, and (ii) Broadcom and BRCM, Case No. 7 O 98/16, in the Mannheim District Court in Germany, alleging infringement of the European Patent. The required relief includes damages in an unspecified amount and an injunction
preventing the sale of the accused products.
A-88
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Lawsuits Relating to Tessera, Inc.
(continued)
On November 7, 2016, Invensas filed a complaint against Avago, Avago U.S., Emulex,
LSI and PLX in the U.S. District Court for the District of Delaware, Case No.
1-16-cv-01033,
alleging infringement of two of the
patents subject to the ITC Investigation. The complaint seeks compensatory damages in an unspecified amount, as well as an award of reasonable attorneys fees, interest, and costs.
On November 7, 2016, Tessera and Invensas filed a complaint against Avago, Avago U.S., and Avago Technologies Wireless (U.S.A.)
Manufacturing Inc. in the U.S. District Court for the District of Delaware, Case No.
1-16-cv-01034,
alleging infringement of two
patents relating to semiconductor packaging technology. The complaint seeks compensatory damages in an unspecified amount, as well as an award of reasonable attorneys fees, interest, and costs.
We intend to vigorously defend these actions.
Lawsuits Relating to the Acquisition of BRCM
Since the announcement of the Broadcom Transaction, 11 putative class action complaints have been filed by and purportedly on behalf of
alleged BRCM shareholders. Two putative class action complaints were filed in the United States District Court for the Central District of California, or the U.S. District Court, captioned: Wytas, et al. v. McGregor, et al., Case No.
8:15-cv-00979,
filed on June 18, 2015; and Yassian, et al. v. McGregor, et al., Case No.
8:15-cv-01303,
filed on August 15, 2015, or the Federal Actions. On September 2, 2015, plaintiffs in the Wytas, et al. v. McGregor, et al. matter filed an
amended complaint adding claims under the U.S. federal securities laws. One putative class action complaint was filed in the Superior Court of the State of California, County of Santa Clara, captioned Jew v. Broadcom Corp., et al., Case No.
1-15-CV-281353,
filed June 2, 2015. Eight putative class action complaints were filed in the Superior Court of the State of
California, County of Orange, captioned: Xu v. Broadcom Corp., et al., Case No.
30-2015-00790689-CU-SL-CXC,
filed June 1, 2015; Freed v. Broadcom Corp., et al.,
Case No.
30-2015-00790699-CU-SL-CXC,
filed June 1, 2015; N.J. Building Laborers
Statewide Pension Fund v. Samueli, et al., Case No.
30-2015-00791484-CU-SL-CXC,
filed
June 4, 2015; Yiu v. Broadcom Corp., et al., Case No.
30-2015-00791490-CU-SL-CXC,
filed June 4, 2015; Yiu, et al. v. Broadcom Corp., et al., Case No.
30-2015-00791762-CU-BT-CXC,
filed June 5, 2015; Yassian, et al. v. McGregor, et al.,
Case No.
30-2015-00793360-CU-SL-CXC,
filed June 15, 2015; Seafarers Pension
Plan v. Samueli, et al., Case No.
30-2015-00794492-CU-SL-CXC,
filed June 19, 2015;
and Engel v. Broadcom Corp., et al., Case No.
30-2015-00797343-CU-SL-CXC,
filed on
July 2, 2015 (together with Jew v. Broadcom Corp., et al., the State Actions). The Federal Actions and State Actions name as defendants, among other parties, BRCM, members of BRCMs board of directors and Avago, and allege, among other
things, breaches of fiduciary duties and aiding and abetting those alleged breaches. Additionally, the Federal Actions allege violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and
SEC Rule
14-a9.
A-89
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Lawsuits Relating to the Acquisition of BRCM
(continued)
On August 14, 2015, the Superior Court of the State of California, County of
Orange, issued an order coordinating and consolidating the State Actions, captioned Broadcom Shareholder Cases, JCCP 4834. On September 18, 2015, the U.S. District Court consolidated the Federal Actions under the caption In re Broadcom
Corporation Stockholder Litigation, Case No.
8:15-cv-00979.
On September 25, 2015, the Superior Court of the State of California, County of Orange, stayed the State
Actions pending the outcome of the Federal Actions.
On October 28, 2015, BRCM supplemented its disclosures, and filed
additional proxy materials with the SEC. On November 10, 2015, BRCM shareholders voted to approve the Broadcom Transaction.
On
November 16, 2015, the U.S. District Court appointed lead plaintiffs and lead counsel in the Federal Actions.
On
January 15, 2016, lead plaintiffs in the Federal Actions filed a Second Amended Consolidated Class Action Complaint, or the Federal Consolidated Complaint, which names as defendants, among other parties, members of BRCMs board of
directors and Avago, and alleges breaches of fiduciary duties and aiding and abetting those alleged breaches, as well as violation of Sections 14(a) and 20(a) of the Exchange Act and SEC Rule
14-a9.
On February 1, 2016, we completed the acquisition of BRCM.
On September 23, 2016, the parties entered into a Stipulation and Agreement of Compromise and Settlement, or the Stipulation, which
has been filed with the U.S. District Court. Pursuant to the Stipulation, BRCM agreed to confirm certain facts concerning the Broadcom Transaction. Additionally, defendants agreed to pay or cause to be paid attorneys fees and expenses as may
be awarded by the U.S. District Court to plaintiffs counsel for their efforts in prosecuting the litigation, as well as the costs of administering the settlement. The Stipulation provides that the settlement is subject to certain conditions,
including final approval of the settlement and final certification of a settlement class by the U.S. District Court. The Stipulation includes a release of all claims against defendants relating to or arising from the litigation. On December 2,
2016, the U.S. District Court granted preliminary approval of the settlement. A hearing for final approval is scheduled for February 27, 2017.
There can be no assurance that the conditions for the settlement will be satisfied and, therefore, that the settlement will be
consummated on the terms set forth in the Stipulation. Accordingly, the possible loss, if any, related to these matters, including any attorneys fees and expenses awarded to the plaintiffs counsel, is uncertain and cannot be reasonably
estimated at this time. We believe that the claims in the litigation, including the Federal Consolidated Complaint, are without merit and that no misconduct or damages occurred, and if the settlement does not receive final approval, the Company
intends to defend against them vigorously. Defendants are entering into the settlement to eliminate the burden, distraction, and expense of further litigation.
A-90
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Lawsuits Relating to the Acquisition of Emulex
On March 3, 2015, two putative shareholder class action complaints were filed in the Court of Chancery of the State of Delaware
against Emulex, its directors, Avago Technologies Wireless (U.S.A.) Manufacturing Inc., or AT Wireless, and Emerald Merger Sub, Inc., or Merger Sub, captioned as follows: James Tullman v. Emulex Corporation, et al., Case No.
10743-VCL
(Del. Ch.); Moshe Silver ACF/Yehudit Silver U/NY/UTMA v. Emulex Corporation, et al., Case No.
10744-VCL
(Del. Ch.). On March 11, 2015, a third complaint was
filed in the Delaware Court of Chancery, captioned Hoai Vu v. Emulex Corporation, et al., Case No.
10776-VCL
(Del. Ch.). The complaints alleged, among other things, that Emulexs directors breached their
fiduciary duties by approving the Agreement and Plan of Merger, dated February 25, 2015, by and among AT Wireless, Merger Sub and Emulex, or the Merger Agreement, and that AT Wireless and Merger Sub aided and abetted these alleged breaches of
fiduciary duty. The complaints sought, among other things, either to enjoin the transaction or to rescind it following its completion, as well as damages, including attorneys and experts fees. The Delaware Court of Chancery has entered
an order consolidating the three Delaware actions under the caption In re Emulex Corporation Stockholder Litigation, Consolidated C.A. No.
10743-VCL.
On May 5, 2015, we completed our acquisition of
Emulex. On June 5, 2015, the Court of Chancery dismissed the consolidated action without prejudice.
On April 8,
2015, a putative class action complaint was filed in the United States District Court for the Central District of California, entitled Gary Varjabedian, et al. v. Emulex Corporation, et al., No.
8:15-cv-554-CJC-JCG.
The complaint names as defendants Emulex, its directors, AT Wireless and Merger Sub, and purported to
assert claims under Sections 14(d), 14(e) and 20(a) of the Exchange Act. The complaint alleged, among other things, that the board of directors of Emulex failed to provide material information and/or omitted material information from the
Solicitation/Recommendation Statement on Schedule
14D-9
filed with the SEC on April 7, 2015 by Emulex, together with the exhibits and annexes thereto. The complaint sought to enjoin the tender offer to
purchase all of the outstanding shares of Emulex common stock, as well as certain other equitable relief and attorneys fees and costs. On July 28, 2015, the court issued an order appointing the lead plaintiff and approving lead counsel
for the putative class. On September 9, 2015, plaintiff filed a first amended complaint seeking rescission of the merger, unspecified money damages, other equitable relief and attorneys fees and costs. On October 13, 2015,
defendants moved to dismiss the first amended complaint, which the court granted with prejudice on January 13, 2016. Plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit on January 15, 2016.
The appeal is captioned Gary Varjabedian, et al. v. Emulex Corporation, et al.,
No. 16-55088.
On June 27, 2016, the Plaintiff-Appellant filed his opening brief, on August 17 and August 22,
2016, the Defendants-Appellees filed their answering briefs, and on October 5, 2016 Plaintiff-Appellant filed his reply brief.
A-91
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Lawsuits Relating to the Acquisition of PLX
In June and July 2014, four lawsuits were filed in the Superior Court for the State of California, County of Santa Clara challenging our
acquisition of PLX. On July 22, 2014, the court consolidated these California actions under the caption In re PLX Technology, Inc. Sholder Litig., Lead Case
No. 1-14-CV-267079
(Cal. Super. Ct., Santa Clara) and appointed lead counsel. That same day, the court also stayed the consolidated action, pending resolution of related actions filed in the
Delaware Court of Chancery, described below.
Also in June and July 2014, five similar lawsuits were filed in the Delaware Court of
Chancery. On July 21, 2014, the court consolidated these Delaware actions under the caption In re PLX Technology, Inc. Stockholders Litigation, Consol. C.A. No.
9880-VCL
(Del. Ch.), appointed lead
plaintiffs and lead counsel, and designated an operative complaint for the consolidated action. On July 31, 2014, counsel for lead plaintiffs in Delaware informed the court that they would not seek a preliminary injunction, but intend to seek
damages and pursue monetary remedies through post-closing litigation. Our acquisition of PLX closed on August 12, 2014.
On
October 31, 2014, lead plaintiffs filed a consolidated amended complaint. This complaint alleges, among other things, that PLXs directors breached their fiduciary duties to PLXs stockholders by seeking to sell PLX for an
inadequate price, pursuant to an unfair process, and by agreeing to preclusive deal protections in the merger agreement. Plaintiffs also allege that Potomac Capital Partners II, L.P., Deutsche Bank Securities, Avago Technologies Wireless (U.S.A.)
Manufacturing Inc., or AT Wireless, and Pluto Merger Sub, Inc., the acquisition subsidiary, aided and abetted the alleged fiduciary breaches. Plaintiffs also allege that PLXs Solicitation/Recommendation statement on Schedule
14D-9,
as filed with the SEC, contained false and misleading statements and/or omitted material information necessary to inform the shareholder vote. The plaintiffs seek, among other things, monetary damages and
attorneys fees and costs. On September 3, 2015, the court granted motions to dismiss filed by AT Wireless, the acquisition subsidiary and two PLX directors, and denied motions to dismiss filed by several other PLX directors, Potomac
Capital Partners II, L.P. and Deutsche Bank Securities.
On August 17, 2016, the five remaining PLX director-defendants and
Deutsche Bank Securities entered into a stipulation of partial settlement to resolve claims against all of the former PLX directors and Deutsche Bank Securities asserted in the Delaware class action. The partial settlement also provides for a
release of all potential claims against AT Wireless, Pluto Merger Sub, Avago and PLX. Defendant Potomac Capital Partners II, L.P. is not a party to the settlement. This partial settlement is subject to court approval following notice to the putative
class of PLX shareholders. A hearing on the settlement was held on November 17, 2016, and the matter was taken under submission.
The Delaware class litigation is
on-going.
A-92
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Other Matters
In addition to the matters discussed above, we are currently engaged in a number of legal actions in the ordinary course of our
business.
We do not believe, based on currently available facts and circumstances, that the final outcome of any pending legal
proceedings, taken individually or as a whole, will have a material adverse effect on our financial condition, results of operations or cash flows. However, lawsuits may involve complex questions of fact and law and may require the expenditure of
significant funds and other resources to defend. The results of litigation are inherently uncertain, and material adverse outcomes are possible. From time to time, we may enter into confidential discussions regarding the potential settlement of such
lawsuits. Any settlement of pending litigation could require us to incur substantial costs and other ongoing expenses, such as future royalty payments in the case of an intellectual property dispute.
During the periods presented, no material amounts have been accrued or disclosed in the accompanying consolidated financial statements
with respect to loss contingencies associated with any legal proceedings, as potential losses for such matters are not considered probable and ranges of losses are not reasonably estimable. These matters are subject to many uncertainties and the
ultimate outcomes are not predictable. There can be no assurances that the actual amounts required to satisfy any liabilities arising from the matters described above will not have a material adverse effect on our results of operations, financial
position or cash flows.
Warranty
We accrue for the estimated costs of product warranties at the time revenue is recognized. Product warranty costs are estimated based
upon our historical experience and specific identification of the products requirements, which may fluctuate based on product mix. Additionally, we accrue for warranty costs associated with occasional or unanticipated product quality issues if a
loss is probable and can be reasonably estimated.
Other Indemnifications
As is customary in our industry and as provided for in local law in the United States and other jurisdictions, many of our standard
contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify
customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering
events related to the sale and the use of our products, the use of their goods and services, the use of facilities and state of our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts,
usually up to a specified maximum amount. In addition, from time to time we also provide protection to these parties against
A-93
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
13.
|
Commitments and Contingencies
(continued)
|
Other Indemnifications
(continued)
claims related to undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such indemnifications are rare and the associated
estimated fair value of the liability is not material.
14.
|
Restructuring, Impairment and Disposal Charges
|
Restructuring charges
During fiscal years 2016 and 2015, we initiated a series of restructuring activities intended to realign our operations to improve
overall efficiency and effectiveness. The following is a summary of significant restructuring expense recognized in continuing operations, primarily operating expenses, for the periods specified below:
|
|
|
In connection with the Broadcom Merger, we began the implementation of cost reduction activities, including the expected
elimination of a total of approximately 3,100 positions from our workforce across all business and functional areas on a global basis. During fiscal year 2016, we recognized $418 million and $29 million of employee termination costs and
lease exits costs, respectively, primarily associated with the Broadcom Merger. As of October 30, 2016 approximately 1,900 positions were eliminated. We expect to substantially complete the restructuring activities related to the Broadcom
Merger in fiscal year 2017, and expect to incur additional costs in fiscal year 2017 primarily for termination benefits for employees on long-term transition plans.
|
|
|
|
In fiscal year 2015, we recognized $34 million and $11 million of employee termination costs and lease and
other exit costs, respectively, for restructuring activities in connection with the Emulex acquisition
|
|
|
|
In fiscal year 2015, we recognized $26 million of employee termination costs and $6 million of lease and other
exit costs for restructuring activities in connection with the acquisition of LSI.
|
A-94
BROADCOM LIMITED
NOTES TO THE FINANCIAL STATEMENTS
For the financial year
ended October 30, 2016
14.
|
Restructuring, Impairment and Disposal Charges
(continued)
|
Restructuring charges
(continued)
The following table summarizes the significant activities within, and components of,
the restructuring liabilities related to continuing and discontinued operations during fiscal years 2016 and 2015 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
|
|
|
|
|
|
|
|
|
|
Employee
Termination
Costs
|
|
|
|
|
|
Leases
and
Other
Exit Costs
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
26
|
|
Liabilities assumed in Broadcom Merger
|
|
|
2
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
15
|
|
Restructuring charges
(a)
|
|
|
445
|
|
|
|
|
|
|
|
37
|
|
|
|
|
|
|
|
482
|
|
Utilization
|
|
|
(344
|
)
|
|
|
|
|
|
|
(28
|
)
|
|
|
|
|
|
|
(372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of October 30, 2016
(b)
|
|
|
116
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 2, 2014
|
|
|
34
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
40
|
|
Restructuring charges
(a)
|
|
|
65
|
|
|
|
|
|
|
|
30
|
|
|
|
|
|
|
|
95
|
|
Utilization
|
|
|
(86
|
)
|
|
|
|
|
|
|
(23
|
)
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of November 1, 2015
|
|
|
13
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes $35 million and $12 million of restructuring expense related to discontinued operations recognized
during fiscal years 2016 and 2015, respectively, which was included in income (loss) from discontinued operations in our consolidated statements of operations.
|
|
(b)
|
The majority of the employee termination costs balance is expected to be paid by the second quarter of fiscal year 2017.
The leases and other exit costs balance is expected to be paid during the remaining terms of the leases, which extend through fiscal year 2021.
|
Impairment and Disposal Charges
During fiscal year 2016, we recorded $417 million of impairment charges in our wireless communications segment and wired
infrastructure segment for IPR&D projects which were abandoned as a result of integration of BRCM. In addition, we recorded impairment charges of $173 million primarily for property, plant and equipment acquired through the Broadcom Merger.
During fiscal year 2015, we realigned certain product groups within our wired infrastructure segment and agreed to sell certain
fiber optics subsystem assets to a third party, resulting in a $61 million loss to write these assets down to fair value less costs to sell. During fiscal year 2016, we recorded a $16 million loss on disposal of these assets.
A-95
BROADCOM LIMITED
NOTES TO
THE FINANCIAL STATEMENTS
For the financial year ended October 30, 2016
Cash Dividends Declared
On December 6, 2016, Broadcoms Board of Directors declared an interim cash dividend of $1.02 per Broadcom ordinary share,
payable on December 30, 2016 to shareholders of record at the close of business (Eastern Time) on December 16, 2016, or the Broadcom Dividend.
A-96
APPENDIX B
DIRECTIONS TO BROADCOM LIMITED
2017 ANNUAL
GENERAL MEETING
Our subsidiarys offices located at
1320 Ridder Park Drive, San Jose, CA
Coming North on
US-880:
1.
|
Take
Brokaw Road
exit and turn right onto
Brokaw Road
and move into the left lane
.
|
2.
|
Turn left onto
Ridder Park Drive.
|
3.
|
Turn into the
Broadcom campus
, which is the second building on the right, at the main entrance sign.
|
Coming
South on
US-101:
1.
|
Exit onto
US-880
North
.
|
2.
|
Take
Brokaw Road
exit and turn right onto
Brokaw Road
and move into the left lane
.
|
3.
|
Turn left onto
Ridder Park Drive.
|
4.
|
Turn into the
Broadcom campus
, which is the second building on the right, at the main entrance sign.
|
Coming
South on
I-880:
1.
|
Take
Brokaw Road
exit and turn right onto
Brokaw Road
and move into the left lane
.
|
2.
|
Turn left onto
Ridder Park Drive.
|
3.
|
Turn into the
Broadcom campus
, which is the second building on the right, at the main entrance sign.
|
B-1
BROADCOM ®
Using a black ink pen, mark your votes with an X as
shown in this example. Please do not write outside the designated areas. ☒
Annual Meeting Proxy Card
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
[REVERSE SIDE]
The board of directors of Broadcom Limited unanimously recommends a vote FOR each of the director nominees (Proposal Nos. 1(a) through 1(i)), FOR
Proposals No. 2, 3 and 4, and ONE YEAR on Proposal 5.
1. Election of Directors: For Against Abstain For Against Abstain
(a) Mr. Hock E. Tan ☐ ☐ ☐
4.
NON-BINDING,
ADVISORY VOTE
To approve the compensation of Broadcoms named executive officers, as disclosed in Compensation Discussion and Analysis and in the compensation tables and
accompanying narrative disclosure under Executive Compensation in Broadcoms proxy statement relating to its 2017 Annual General Meeting. ☐ ☐ ☐
(b) Mr. James V. Diller ☐ ☐ ☐
(c) Mr. Lewis C. Eggebrecht ☐ ☐ ☐
(d) Mr. Kenneth Y. Hao ☐ ☐ ☐
(e) Mr. Eddy W. Hartenstein ☐ ☐ ☐
(f) Mr. Check Kian Low ☐ ☐ ☐
One Year Two Years Three Years Abstain
(g) Mr. Donald Macleod ☐ ☐ ☐
5.
NON-BINDING,
ADVISORY
VOTE
To recommend that a
non-binding,
advisory vote to approve the compensation of the Broadcoms named executive officers be
put to shareholders for their consideration every: one; two; or three years, as set forth in Broadcoms notice of, and proxy statement relating to, its 2017 Annual General Meeting. ☐ ☐ ☐ ☐
(h) Mr. Peter J. Marks ☐ ☐ ☐
(i) Dr. Henry Samueli ☐ ☐ ☐
For Against Abstain
2. To approve the
re-appointment
of
PricewaterhouseCoopers LLP as Broadcoms independent registered public accounting firm and independent Singapore auditor for the fiscal year ending October 29, 2017 and to authorize the Audit Committee to fix its remuneration, as set forth
in Broadcoms notice of, and proxy statement relating to, its 2017 Annual General Meeting. ☐ ☐ ☐
In their discretion, the Proxies, and each of them
acting alone, are authorized to vote on such other business as may properly come before the meeting and any adjournment or postponement of the meeting.
For Against Abstain
Meeting Attendance Yes No
3. To approve the general authorization for the directors of Broadcom
to allot and issue shares in our capital, as set forth in Broadcoms notice of, and proxy statement relating to, its 2017 Annual General Meeting. ☐ ☐ ☐
Please indicate if you plan to attend the meeting ☐ ☐
Important Notice Regarding the
Internet Availability of Proxy Materials for the 2017 Annual General Meeting of Shareholders:
The notice, proxy statement and annual report to shareholders are available at
http://investors.broadcom.com/phoenix.zhtml?c=203541&p=proxy.
If you would like to reduce the costs incurred by Broadcom in mailing proxy materials, you can consent to
receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please contact Broadcoms transfer agent, Computershare Investor Services at
1-877-373-6374
within the U.S., U.S. Territories and Canada, or at
+1-781-575-3100
outside the U.S., U.S. Territories and Canada.
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE
BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
BROADCOM LIMITED
(Incorporated in the Republic of Singapore)
(Company Registration Number 201505572G)