BROADCOM INC.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the unaudited condensed
consolidated financial statements and the related notes thereto included
elsewhere in this Quarterly Report on Form 10-Q ("Form 10-Q") and the audited
consolidated financial statements and notes thereto and management's discussion
and analysis of financial condition and results of operations for the fiscal
year ended November 1, 2020 ("fiscal year 2020") included in our Annual Report
on Form 10-K for fiscal year 2020 ("2020 Annual Report on Form 10-K").
References to "Broadcom," "we," "our" and "us" are to Broadcom Inc. and its
consolidated subsidiaries, unless otherwise specified or the context otherwise
requires. This Form 10-Q may contain predictions, estimates and other
forward-looking statements that involve a number of risks and uncertainties,
which are made under the safe harbor provisions of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking
statements may include the potential impact of the COVID-19 pandemic;
projections of financial information; statements about historical results that
may suggest trends for our business; statements of the plans, strategies and
objectives of management for future operations; and statements of expectation or
belief regarding future events (including any acquisitions we may make),
technology developments, our products, product sales, expenses, liquidity, cash
flow and growth rates, customer concentration and relationships, or
enforceability of our intellectual property ("IP") rights. Such statements are
based on current expectations, estimates, forecasts and projections of our
industry performance and macroeconomic conditions, based on management's
judgment, beliefs, current trends and market conditions, and involve risks and
uncertainties that may cause actual results to differ materially from those
contained in the forward-looking statements. We derive most of our
forward-looking statements from our operating budgets and forecasts, which are
based upon many detailed assumptions. While we believe that our assumptions are
reasonable, we caution that it is very difficult to predict the impact of known
factors, and it is impossible for us to anticipate all factors that could affect
our actual results. Accordingly, we caution you not to place undue reliance on
these statements. Important factors that could cause actual results to differ
materially from our expectations are disclosed under "Risk Factors" in Part II,
Item 1A of this Form 10-Q, and in other documents we file from time to time with
the Securities and Exchange Commission (the "SEC"). All of the forward-looking
statements in this Form 10-Q are qualified in their entirety by reference to the
factors listed above and those discussed under the heading "Risk Factors" below.
We undertake no intent or obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise, except as otherwise required by law.
Overview
We are a global technology leader that designs, develops and supplies a broad
range of semiconductor and infrastructure software solutions. We develop
semiconductor devices with a focus on complex digital and mixed signal
complementary metal oxide semiconductor based devices and analog III-V based
products. We have a history of innovation in the semiconductor industry and
offer thousands of products that are used in end products such as enterprise and
data center networking, home connectivity, set-top boxes, broadband access,
telecommunication equipment, smartphones and base stations, data center servers
and storage systems, factory automation, power generation and alternative energy
systems, and electronic displays. Our infrastructure software solutions enable
customers to plan, develop, automate, manage and secure applications across
mainframe, distributed, mobile and cloud platforms. Our portfolio of mainframe
and BizOps software solutions enables customers to leverage the benefits of
agility, automation, insights, resiliency and security in managing business
processes and technology investments. We offer a cyber security solutions
portfolio, including endpoint, network, information and identity security
solutions. We also offer mission critical fibre channel storage area networking
("FC SAN") products and related software in the form of modules, switches and
subsystems incorporating multiple semiconductor products.
We have two reportable segments: semiconductor solutions and infrastructure
software. Our semiconductor solutions segment includes all of our product lines
and IP licensing. Our infrastructure software segment includes our mainframe,
BizOps and cyber security solutions, and our FC SAN business.
During the fourth quarter of our fiscal year 2020, we refined our allocation
methodology for certain selling, general and administrative expenses to more
closely align these costs with the segment benefiting from the shared expenses.
Prior period segment results have been recast to conform to the current
presentation.
Quarterly Highlights
Highlights during the fiscal quarter ended August 1, 2021 include the following:
•We generated $3,541 million of cash from operations.
•We paid $1,556 million in cash dividends.
25
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Table of Contents
COVID-19 Update
In response to the ongoing COVID-19 pandemic and the various resulting
government directives, we have taken extensive measures to protect the health
and safety of our employees and contractors at our facilities. We modified our
workplace practices globally, which resulted in some of our employees working
remotely for an extended period of time. While we have implemented a phased-in
return of employees to many of our facilities, we may need to modify our
business practices and policies. We continue to monitor the implications of the
COVID-19 pandemic on our business, as well as our customers' and suppliers'
businesses.
The demand environment for our semiconductor products was consistent with our
expectations for the third quarter of our fiscal year ending October 31, 2021
("fiscal year 2021"), with continued demand for products and infrastructure to
support a dramatic increase around the world in remote or tele-work and learning
due to COVID-19. While we continue to see robust demand in this area, the
macroeconomic environment remains uncertain and it may not be sustainable over
the longer term. To date, the impact of COVID-19 on the demand environment for
our software products has been limited. On the product supply side, we continue
to experience various constraints in our supply chain due to the pandemic,
including with respect to wafers and substrates. While supply lead times have
stabilized, we continue to have difficulties in obtaining some necessary
components and inputs in a timely manner to meet increased demand.
We have also taken various actions to de-risk our business in light of the
ongoing uncertainty. In addition, we have continued to strengthen our balance
sheet, including closely managing working capital and our debt instruments.
Overall, in light of the changing nature and continuing uncertainty around the
COVID-19 pandemic, our ability to predict the impact of COVID-19 on our business
in future periods remains limited. The effects of the pandemic on our business
are unlikely to be fully realized, or reflected in our financial results, until
future periods.
Critical Accounting Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles in the United States requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. We base our estimates and assumptions on current facts, historical
experience and various other factors that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities and the accrual of costs and
expenses that are not readily apparent from other sources. Our actual financial
results may differ materially and adversely from our estimates. Our critical
accounting policies are those that affect our historical financial statements
materially and involve difficult, subjective or complex judgments by management.
Those policies include revenue recognition, business combinations, valuation of
long-lived assets, intangible assets and goodwill, inventory valuation, income
taxes, retirement and post-retirement benefit plan assumptions, stock-based
compensation expense, and employee bonus programs.
There were no significant changes in our critical accounting policies during the
three fiscal quarters ended August 1, 2021 compared to those previously
disclosed in "Critical Accounting Estimates" in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in the 2020
Annual Report on Form 10-K.
Results of Operations
Fiscal Quarter and Three Fiscal Quarters Ended August 1, 2021 Compared to Fiscal
Quarter and Three Fiscal Quarters Ended August 2, 2020
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Table of Contents The following tables set forth our results of operations for the periods presented:
Fiscal Quarter Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
(In millions) (As a percentage of net revenue)
Statements of Operations Data:
Net revenue:
Products $ 5,064 $ 4,125 75 % 71 %
Subscriptions and services 1,714 1,696 25 29
Total net revenue 6,778 5,821 100 100
Cost of revenue:
Cost of products sold 1,572 1,383 23 24
Cost of subscriptions and services 157 154 2 3
Amortization of acquisition-related intangible
assets 851 953 13 16
Restructuring charges 1 15 - -
Total cost of revenue 2,581 2,505 38 43
Gross margin 4,197 3,316 62 57
Research and development 1,205 1,228 18 21
Selling, general and administrative 346 428 5 8
Amortization of acquisition-related intangible
assets 494 600 8 10
Restructuring, impairment and disposal charges 26 52 - 1
Total operating expenses 2,071 2,308 31 40
Operating income $ 2,126 $ 1,008 31 % 17 %
Three Fiscal Quarters Ended
August 1, August 2, August 1, August 2,
2021 2020 2021 2020
(In millions) (As a percentage of net revenue)
Statements of Operations Data:
Net revenue:
Products $ 15,128 $ 12,582 75 % 72 %
Subscriptions and services 4,915 4,839 25 28
Total net revenue 20,043 17,421 100 100
Cost of revenue:
Cost of products sold 4,792 4,290 24 25
Cost of subscriptions and services 450 475 2 3
Amortization of acquisition-related intangible
assets 2,578 2,857 13 16
Restructuring charges 17 30 - -
Total cost of revenue 7,837 7,652 39 44
Gross margin 12,206 9,769 61 56
Research and development 3,654 3,786 18 22
Selling, general and administrative 1,010 1,530 5 9
Amortization of acquisition-related intangible
assets 1,482 1,802 7 10
Restructuring, impairment and disposal charges 122 163 1 1
Total operating expenses 6,268 7,281 31 42
Operating income $ 5,938 $ 2,488 30 % 14 %
27-------------------------------------------------------------------------------- Table of Contents Net Revenue Historically, a relatively small number of customers have accounted for a significant portion of our net revenue. Direct sales to WT Microelectronics, a distributor, accounted for 16% and 17% of our net revenue for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, and 12% of our net revenue for the three fiscal quarters endedAugust 2, 2020 . No customer accounted for more than 10% of our net revenue for the fiscal quarter endedAugust 2, 2020 . We believe aggregate sales to our top five end customers, through all channels, accounted for approximately 35% of our net revenue for each of the fiscal quarter and three fiscal quarters endedAugust 1, 2021 and approximately 25% and 30% of our net revenue for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. We believe aggregate sales to Apple Inc., through all channels, accounted for approximately 20% of our net revenue for each of the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , and approximately 10% and 15% of our net revenue for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. We expect to continue to experience significant customer concentration in future periods. The loss of, or significant decrease in demand from, any of our top five end customers could have a material adverse effect on our business, results of operations and financial condition. From time to time, some of our key semiconductor customers place large orders or delay orders, causing our quarterly net revenue to fluctuate significantly. This is particularly true of our wireless products as fluctuations may be magnified by the timing of launches, and seasonal variations in sales, of mobile handsets. The ongoing COVID-19 pandemic and related challenges and uncertainties may also cause our net revenue to fluctuate significantly and adversely affect our results of operations, as discussed above. Additionally, export restrictions on one of our larger customers have had, and may continue to have, an adverse impact on our revenue. The following tables set forth net revenue by segment for the periods presented: Fiscal Quarter Ended Three Fiscal Quarters Ended August 1, August 2, August 2, Net Revenue by Segment 2021 2020 $ Change % Change August 1, 2021 2020 $ Change % Change (In millions, except for percentages) Semiconductor solutions$ 5,021 $ 4,219 $ 802 19 %$ 14,749 $ 12,437 $ 2,312 19 % Infrastructure software 1,757 1,602 155 10 % 5,294 4,984 310 6 % Total net revenue$ 6,778 $ 5,821 $ 957 16 %$ 20,043 $ 17,421 $ 2,622 15 % Fiscal Quarter Ended Three Fiscal Quarters Ended August 1, August 2, August 1, August 2, Net Revenue by Segment 2021 2020 2021 2020 (As a percentage of net revenue) Semiconductor solutions 74 % 72 % 74 % 71 % Infrastructure software 26 28 26 29 Total net revenue 100 % 100 % 100 % 100 % Fiscal quarter endedAugust 1, 2021 compared to corresponding prior year period. Net revenue from our semiconductor solutions segment increased primarily due to higher demand for our wireless content in mobile handsets, as well as the delayed production ramp of a new mobile handset by a major customer, which resulted in lower shipments in the prior year fiscal period. Net revenue from our semiconductor solutions segment also increased due to higher demand for our networking products driven by service providers' continued investments, as well as higher demand for our wireless connectivity products. Net revenue from our infrastructure software segment increased primarily due to higher demand for our FC SAN products and mainframe solutions. Three fiscal quarters endedAugust 1, 2021 compared to corresponding prior year period. Net revenue from our semiconductor solutions segment increased primarily due to higher demand for our wireless content in mobile handsets, as well as the delayed production ramp of a new mobile handset by a major customer, which resulted in lower shipments in the prior year fiscal period. Net revenue from our semiconductor solutions segment also increased due to higher demand for our networking products driven by service providers' continued investments, as well as higher demand for our wireless connectivity products, partially offset by lower demand for our server storage products. Net revenue from our infrastructure software segment increased primarily due to higher demand for our FC SAN products, mainframe and cyber security solutions. 28 -------------------------------------------------------------------------------- Table of Contents Gross Margin Gross margin was$4,197 million for the fiscal quarter endedAugust 1, 2021 compared to$3,316 million for the fiscal quarter endedAugust 2, 2020 and$12,206 million for the three fiscal quarters endedAugust 1, 2021 compared to$9,769 million for the three fiscal quarters endedAugust 2, 2020 . As a percentage of net revenue, gross margin was 62% and 61% of net revenue for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, and 57% and 56% of net revenue for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. The increases in gross margin were primarily due to lower amortization of acquisition-related intangible assets and favorable margin within our semiconductor solutions segment due to increased demand compared to the prior year fiscal periods. Research and Development Expense Research and development expense decreased$23 million , or 2%, and$132 million , or 3%, for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to the prior year fiscal periods. The decreases were primarily due to lower stock-based compensation expense reflecting the full vesting of certain equity awards and the effects of forfeitures, partially offset by higher variable employee compensation expense. Selling, General and Administrative Expense Selling, general and administrative expense decreased$82 million , or 19%, and$520 million , or 34%, for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to the prior year fiscal periods. The decreases were primarily due to higher acquisition-related costs incurred in the prior year fiscal periods as a result of our acquisition of the Symantec Corporation Enterprise Security business (the "Symantec Business"). The decreases were also due to lower compensation expense reflecting the full benefit of the completed Symantec Business integration. In addition, fiscal year 2020 included non-recurring litigation settlements. Amortization of Acquisition-Related Intangible Assets Amortization of acquisition-related intangible assets recognized in operating expenses decreased$106 million and$320 million for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to the prior year fiscal periods. The decreases were primarily due to lower amortization of certain intangible assets from our acquisition of CA, Inc. Restructuring, Impairment and Disposal Charges Restructuring, impairment and disposal charges recognized in operating expenses decreased$26 million and$41 million for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to the prior year fiscal periods. The decreases were primarily due to higher employee termination costs in the prior year fiscal periods from cost reduction activities related to our acquisition of the Symantec Business. Stock-Based Compensation Expense Total stock-based compensation expense was$421 million and$1,290 million for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to$465 million and$1,527 million for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. The decreases primarily reflect the full vesting of certain equity awards and the effect of forfeitures. The following table sets forth the total unrecognized compensation cost related to unvested stock-based awards outstanding and expected to vest as ofAugust 1, 2021 . Fiscal Year: Unrecognized Compensation Cost, Net of Expected Forfeitures (In millions) 2021 (remainder) $ 413 2022 1,279 2023 896 2024 522 2025 199 Thereafter 25 Total $ 3,334 29
-------------------------------------------------------------------------------- Table of Contents During the first quarter of fiscal year endedNovember 3, 2019 ("fiscal year 2019"), the Compensation Committee of our Board of Directors approved a broad-based program of multi-year equity grants of time- and market-based restricted stock units (the "Multi-Year Equity Awards") in lieu of our annual employee equity awards historically granted onMarch 15 of each year. Each Multi-Year Equity Award vests on the same basis as four annual grants madeMarch 15 of each year, beginning in fiscal year 2019, with successive four-year vesting periods. We recognize stock-based compensation expense related to the Multi-Year Equity Awards from the grant date through their respective vesting date, ranging from 4 years to 7 years. Segment Operating Results Fiscal Quarter Ended Three Fiscal Quarters Ended August 1, August 2, August 2, Operating Income by Segment 2021 2020 $ Change % Change August 1, 2021 2020 $ Change % Change (In millions, except for percentages) Semiconductor solutions$ 2,720 $ 2,112 $ 608 29 %$ 7,828 $ 6,046 $ 1,782 29 % Infrastructure software 1,226 1,069 157 15 % 3,700 3,250 450 14 % Unallocated expenses (1,820) (2,173) 353 (16) % (5,590) (6,808) 1,218 (18) % Total operating income$ 2,126 $ 1,008 $ 1,118 111 %$ 5,938 $ 2,488 $ 3,450 139 % Fiscal quarter endedAugust 1, 2021 compared to corresponding prior year period. Operating income from our semiconductor solutions segment increased primarily due to higher demand for our wireless content in mobile handsets, as well as the delayed production ramp of a new mobile handset by a major customer, which resulted in lower shipments in the prior year fiscal period. Operating income from our semiconductor solutions segment also increased due to higher demand for our networking and wireless connectivity products, as well as higher gross margin. Operating income from our infrastructure software segment increased primarily due to higher demand for our FC SAN products and mainframe solutions. Three fiscal quarters endedAugust 1, 2021 compared to corresponding prior year period. Operating income from our semiconductor solutions segment increased primarily due to higher demand for our wireless content in mobile handsets, as well as the delayed production ramp of a new mobile handset by a major customer, which resulted in lower shipments in the prior year fiscal period. Operating income from our semiconductor solutions segment also increased due to higher demand for our networking and wireless connectivity products, as well as higher gross margin, partially offset by lower demand for our server storage products. Operating income from our infrastructure software segment increased primarily due to higher demand for our FC SAN products, mainframe and cyber security solutions. Unallocated expenses include amortization of acquisition-related intangible assets; stock-based compensation expense; restructuring, impairment and disposal charges; acquisition-related costs; and other costs that are not used in evaluating the results of, or in allocating resources to, our segments. Unallocated expenses decreased 16% and 18% for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, compared to prior year fiscal periods. The decreases were primarily due to lower amortization of acquisition-related intangible assets, acquisition-related costs and stock-based compensation expense. Non-Operating Income and Expenses Interest expense. Interest expense was$415 million and$1,451 million for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, and$464 million and$1,357 million for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. The decrease for the fiscal quarter endedAugust 1, 2021 was primarily due to losses on extinguishment of debt related to refinancing activities incurred in the prior year fiscal period. The increase for the three fiscal quarters endedAugust 1, 2021 was primarily due to higher losses on extinguishment of debt related to refinancing activities and higher interest expense. Other income, net. Other income, net, includes interest income, gains or losses on investments, foreign currency remeasurement and other miscellaneous items. Other income, net, was$109 million and$175 million for the three fiscal quarters endedAugust 1, 2021 andAugust 2, 2020 , respectively. The decrease was primarily due to a$116 million non-recurring gain from the lapse of a tax indemnification arrangement included in the prior year fiscal period, offset in part by an increase in gains on investments in the current year fiscal period. Benefit from income taxes. The benefit from income taxes was$150 million and$151 million for the fiscal quarter and three fiscal quarters endedAugust 1, 2021 , respectively, and$96 million and$331 million for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 , respectively. 30 -------------------------------------------------------------------------------- Table of Contents The benefit from income taxes for the fiscal quarter endedAugust 1, 2021 was primarily due to excess tax benefits from stock-based awards, the recognition of gross unrecognized tax benefits as a result of lapses of statutes of limitations and audit settlements, and the jurisdictional mix of income and expense. The benefit from income taxes for the three fiscal quarters endedAugust 1, 2021 reflected excess tax benefits from stock-based awards and the recognition of gross unrecognized tax benefits as a result of lapses of statutes of limitations and audit settlements, offset in part by higher taxes on income from continuing operations. The benefit from income taxes for the fiscal quarter and three fiscal quarters endedAugust 2, 2020 was primarily due to the jurisdictional mix of income and expense, the remeasurement of certain foreign deferred tax assets and liabilities and excess tax benefits from stock-based awards. Liquidity and Capital Resources The following section discusses our principal liquidity and capital resources as well as our principal liquidity requirements and uses of cash. Our cash and cash equivalents are maintained in highly liquid investments with remaining maturities of 90 days or less at the time of purchase. We believe our cash equivalents are liquid and accessible. Our primary sources of liquidity as ofAugust 1, 2021 consisted of: (i)$11,105 million in cash and cash equivalents, (ii) cash we expect to generate from operations and (iii) available capacity under our$7.5 billion unsecured revolving credit facility (the "Revolving Facility"). In addition, we may also generate cash from the sale of assets and debt or equity financing from time to time. Our short-term and long-term liquidity requirements primarily arise from: (i) business acquisitions and investments we may make from time to time, (ii) working capital requirements, (iii) research and development and capital expenditure needs, (iv) cash dividend payments (if and when declared by our Board of Directors), (v) interest and principal payments related to our$41,499 million of outstanding indebtedness and (vi) payment of income taxes. Our ability to fund these requirements will depend, in part, on our future cash flows, which are determined by our future operating performance and, therefore, subject to prevailing global macroeconomic conditions and financial, business and other factors, some of which are beyond our control. We expect our capital expenditures for fiscal year 2021 to be slightly higher than fiscal year 2020. We believe that our cash and cash equivalents on hand, cash flows from operations, and the Revolving Facility will provide sufficient liquidity to operate our business and fund our current and assumed obligations for at least the next 12 months. From time to time, we engage in discussions with third parties regarding potential acquisitions of, or investments in, businesses, technologies and product lines. Any such transaction, or evaluation of potential transactions, could require significant use of our cash and cash equivalents, or require us to increase our borrowings to fund such transactions. If we do not have sufficient cash to fund our operations or finance growth opportunities, including acquisitions, or unanticipated capital expenditures, our business and financial condition could suffer. In such circumstances, we may also seek to obtain new debt or equity financing. However, we cannot assure you that such additional financing will be available on terms acceptable to us or at all. Our ability to service our senior unsecured notes and any other indebtedness we may incur will depend on our ability to generate cash in the future. We may also elect to sell additional debt or equity securities for reasons other than those specified above. In addition, we may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash tenders and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such tenders, exchanges or purchases, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. Working Capital Working capital increased to$9,135 million atAugust 1, 2021 from$5,524 million atNovember 1, 2020 . The increase was primarily attributable to the following: •Cash and cash equivalents increased to$11,105 million atAugust 1, 2021 from$7,618 million atNovember 1, 2020 , primarily due to$10,223 million in net cash provided by operating activities and$9,904 million in proceeds from long-term borrowings. These increases were partially offset by$10,733 million of debt payments,$4,651 million of dividend payments, and$1,033 million of employee withholding tax payments related to net settled equity awards. •Current portion of long-term debt decreased to$279 million atAugust 1, 2021 from$827 million atNovember 1, 2020 due to repayments of certain debt instruments. •Other current assets increased to$1,137 million atAugust 1, 2021 from$977 million atNovember 1, 2020 , primarily due to increases in prepaid taxes. 31 -------------------------------------------------------------------------------- Table of Contents •Inventory increased to$1,160 million atAugust 1, 2021 from$1,003 million atNovember 1, 2020 , primarily to support customer demand. These increases in working capital were offset in part by the following: •Other current liabilities increased to$4,361 million atAugust 1, 2021 from$3,831 million atNovember 1, 2020 , primarily due to increases in contract liabilities and interest payable. •Accounts payable increased to$968 million atAugust 1, 2021 from$836 million atNovember 1, 2020 , primarily due to the timing of payments. Working capital increased to$6,979 million atAugust 2, 2020 from$3,018 million atNovember 3, 2019 . The increase was attributable to the following: •Cash and cash equivalents increased to$8,857 million atAugust 2, 2020 from$5,055 million atNovember 3, 2019 , primarily due to$27,802 million in proceeds from long-term borrowings and$8,713 million in net cash provided by operating activities. These increases were partially offset by$17,099 million of debt repayments,$10.7 billion of our acquisition of the Symantec Business (the "Symantec Asset Purchase"), and$4,139 million of dividend payments. •Inventory increased to$1,081 million atAugust 2, 2020 from$874 million atNovember 3, 2019 , primarily due to the timing of customer product ramps. •Other current assets increased to$1,059 million atAugust 2, 2020 from$729 million atNovember 3, 2019 , primarily due to increases in prepaid taxes and short-term investments. •Current portion of long-term debt decreased to$822 million atAugust 2, 2020 from$2,787 million atNovember 3, 2019 , primarily due to repayment of certain debt instruments, partially offset by certain debt instruments becoming due within the next twelve months. These increases in working capital were offset in part by the following: •Accounts receivable decreased to$2,684 million atAugust 2, 2020 from$3,259 million atNovember 3, 2019 , primarily due to revenue linearity and$552 million of additional receivables sold through factoring arrangements. •Accounts payable increased to$1,092 million atAugust 2, 2020 from$855 million atNovember 3, 2019 , primarily due to the timing of vendor payments. •Other current liabilities increased to$4,056 million atAugust 2, 2020 from$2,616 million atNovember 3, 2019 , primarily due to increases in contract liabilities, interest payable, lease liabilities resulting from the adoption of the new lease standard, and higher taxes payable, partially offset by repayments of notional pooling liabilities. Capital Returns
Three Fiscal Quarters Ended
August 1, August 2,
Cash Dividends Declared and Paid 2021 2020
(In millions, except per share data)
Dividends per share to common stockholders $ 10.80 $ 9.75
Dividends to common stockholders $ 4,427 $ 3,915
Dividends per share to preferred stockholders $ 60.00 $ 60.00
Dividends to preferred stockholders $
224
During the three fiscal quarters endedAugust 1, 2021 andAugust 2, 2020 , we paid approximately$1,033 million and$580 million , respectively, in employee withholding taxes due upon the vesting of net settled equity awards. We withheld approximately 2 million shares of common stock from employees in connection with such net share settlements during each of the three fiscal quarters endedAugust 1, 2021 andAugust 2, 2020 . 32 -------------------------------------------------------------------------------- Table of Contents Cash Flows Three Fiscal Quarters Ended August 1, August 2, 2021 2020 (In millions) Net cash provided by operating activities$ 10,223 $ 8,713 Net cash used in investing activities (295) (11,009) Net cash provided by (used in) financing activities (6,441) 6,098 Net change in cash and cash equivalents $
3,487
Operating Activities Cash provided by operating activities consisted of net income adjusted for certain non-cash and other items and changes in assets and liabilities. The$1,510 million increase in cash provided by operations during the three fiscal quarters endedAugust 1, 2021 compared to the prior year fiscal period was due to$3,111 million higher net income, offset by a$976 million decrease in amortization of intangible assets and stock-based compensation and other adjustments, as well as a$625 million decrease resulting from changes in operating assets and liabilities. Investing Activities Cash flows from investing activities primarily consisted of cash used for acquisitions and capital expenditures. The$10,714 million decrease in cash used in investing activities during the three fiscal quarters endedAugust 1, 2021 compared to the prior year fiscal period was primarily related to a$10,864 million decrease in cash paid for acquisitions. Financing Activities Cash flows from financing activities primarily consisted of proceeds and payments related to our long-term borrowings, dividend payments and employee withholding tax payments related to net settled equity awards. The$12,539 million change in cash related to financing activities during the three fiscal quarters endedAugust 1, 2021 compared to the prior year fiscal period was primarily due to an$11,532 million change in net borrowing activities, a$512 million increase in dividend payments and a$453 million increase in employee withholding tax payments related to net settled equity awards. Indebtedness See Note 7. "Borrowings" in Part I, Item 1 of this Form 10-Q for additional information related to our indebtedness. Summarized Obligor Group Financial Information Pursuant to indentures datedJanuary 19, 2017 andOctober 17, 2017 (collectively, the "2017 Indentures"),Broadcom Cayman Finance Limited (subsequently merged intoBroadcom Technologies Inc. ("BTI") during fiscal year 2019 with BTI remaining as the surviving entity) andBroadcom Corporation ("BRCM" and with BTI, collectively, the "2017 Senior Notes Co-Issuers") issued$13,550 million and$4,000 million aggregate principal amount of notes, respectively (collectively, the "2017 Senior Notes"). Substantially all of the 2017 Senior Notes have been registered with theSEC . We may redeem all or a portion of our 2017 Senior Notes at any time prior to their maturity, subject to a specified make-whole premium as set forth in the 2017 Indentures. In the event of a change of control triggering event, holders of our 2017 Senior Notes will have the right to require us to purchase for cash, all or a portion of their 2017 Senior Notes at a redemption price of 101% of the aggregate principal amount plus accrued and unpaid interest. The 2017 Indentures also contain covenants that restrict, among other things, the ability of Broadcom and its subsidiaries to incur certain secured debt and to consummate certain sale and leaseback transactions and restrict the ability of Broadcom, BRCM and BTI (collectively, the "Obligor Group ") to merge, consolidate or sell all or substantially all of their assets. Broadcom and BTI fully and unconditionally guarantee, jointly and severally, on an unsecured, unsubordinated basis, the 2017 Senior Notes. Because the guarantees are not secured, they are effectively subordinated to any existing and future secured indebtedness of the guarantors to the extent of the value of the collateral securing that indebtedness. The guarantee by Broadcom and BTI will be automatically and unconditionally released upon the sale, exchange, disposition or other transfer of all or substantially all of the assets of such guarantor if any of these events occurs in compliance with the 2017 Indentures. The guarantee by Broadcom (1) will also be automatically and unconditionally released at such time as: (A) the 2017 Senior Notes Co-Issuers, in their sole discretion, determine that such guarantee is no longer required by Rule 3-10(a), as applicable, of Regulation S-X to except the 2017 Senior Notes Co-Issuers' financial statements from being required to be filed pursuant to Rule 3-10(a) of Regulation S-X or otherwise facilitate a reduction in its financial reporting obligations or (B) either of the 2017 Senior Notes Co-Issuers becomes subject to Section 13 or 15(d) of the Exchange Act and (2) may, at the election of the 2017 33
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Table of Contents Senior Notes Co-Issuers, be unconditionally released at such time as Broadcom is eligible to suspend its reporting obligation under the Exchange Act. InMarch 2021 , we completed the settlement of our private offers to exchange$5.5 billion of certain of our outstanding notes maturing between 2024 and 2027 (the "Exchange Offer") for$2,250 million of 3.419% new senior unsecured notes dueApril 2033 and$3,250 million of 3.469% new senior unsecured notes dueApril 2034 . In connection with the Exchange Offer, BRCM and BTI were automatically and unconditionally released from their guarantees in accordance with the respective indentures governing theJanuary 2021 Senior Notes,June 2020 Senior Notes,May 2020 Senior Notes,April 2020 Senior Notes, andApril 2019 Senior Notes. The following tables set forth the summarized financial information of theObligor Group on a combined basis. This summarized financial information excludes any subsidiaries that are not issuers or guarantors (the "Non-Obligor Group "). Intercompany balances and transactions between members of theObligor Group have been eliminated.
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