EXHIBIT 99.1 QUALCOMM ANNOUNCES FIRST QUARTER FISCAL 2004 RESULTS REVENUES $1.2 BILLION, EPS $0.43 REVENUES $1.2 BILLION, EPS $0.51 EXCLUDING QSI SEGMENT SAN DIEGO - January 21, 2004 - QUALCOMM Incorporated (NASDAQ: QCOM) today announced its first quarter fiscal 2004 results ended December 28, 2003. Revenues were $1.2 billion in the first fiscal quarter, up 37 percent sequentially and 13 percent year-over-year. First fiscal quarter net income was $352 million and earnings per share were $0.43, up 21 percent and 23 percent sequentially and up 46 percent and 43 percent year-over-year, respectively. Revenues excluding the QUALCOMM Strategic Initiatives (QSI) segment were $1.2 billion in the first fiscal quarter, up 39 percent sequentially and 13 percent year-over-year. First fiscal quarter net income excluding the QSI segment was $419 million and earnings per share were $0.51, up 77 percent and 76 percent, respectively, compared to the prior quarter, and both up 21 percent year-over-year. Detailed reconciliations between total QUALCOMM results and results excluding QSI are included at the end of this news release. Prior period reconciliations are presented on our Investor Relations web page at www.qualcomm.com. "Our results for the first quarter of fiscal 2004 have exceeded our expectations by every measure," said Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM. "We now anticipate the full 2004 fiscal year to be stronger than we had earlier anticipated due to increased worldwide demand for CDMA phones and devices with increased functionality such as color screens, cameras and multimedia capabilities. We also believe that CDMA channel inventories approached near record low levels in the fourth fiscal quarter, fueling increased demand for our MSMs." "Verizon's recent announcement of their intent to proceed with a nationwide deployment of CDMA2000 1xEV-DO will have a positive effect on broadband wireless data use not only in the United States but around the world. Clearly, demand for wireless data is no longer a phenomenon associated with any single geography. Now with high speed, low latency CDMA-based networks and competitive pricing, data capabilities are fueling the next wave of innovation of value to enterprises as well as individuals. Verizon will soon offer, throughout most of the United States, a wireless broadband - -more- QUALCOMM Announces First Quarter Fiscal 2004 Results Page 2 of 16 experience with rich content and multimedia capabilities that consumers have been experiencing in South Korea, Brazil and more recently in Japan. BREW will play an ever more important role in exciting consumers with a broad range of attractive applications, supporting enterprises in readily developing vertical applications and enabling developers and carriers to realize new revenue streams. Indeed, combined with 1xEV-DO, the power of BREW for supporting new applications will quickly impact many aspects of our lives and commerce." "In this period of rapid change, QUALCOMM's close integration of technology and system software development, chipset design, application software support, and customer interaction and service provides a unique strategic advantage. QUALCOMM's technology leadership in multiband and multimode devices for worldwide roaming in combination with our history of on-time delivery positions us well for continued success in the 3G CDMA markets." Research and development (R&D) expenses were $150 million in the first fiscal quarter, up 33 percent year-over-year, largely attributable to increased R&D investment in QUALCOMM CDMA Technologies (QCT) to continue to drive broadly segmented chipset platforms in response to market demand including WCDMA (UMTS), CDMA2000 1X and 1xEV-DO. Selling, general and administrative (SG&A) expenses were $137 million in the first fiscal quarter, down 8 percent year-over-year, largely attributable to a decrease in SG&A expenses of the Vesper Operating Companies in Brazil, which we sold during the first fiscal quarter. First fiscal quarter revenues grew $333 million sequentially, including a $111 million increase in QUALCOMM Technology Licensing (QTL) segment revenues and a $247 million increase in QCT segment revenues. QTL revenues were greater than anticipated due primarily to greater CDMA phone shipments by our licensees, at higher than expected average selling prices. In the first quarter fiscal 2004 our licensees reported CDMA phone sales for the fourth quarter fiscal 2003 of approximately 31 million units as compared to the Company's initial expectation of approximately 26 million units. QCT sold approximately 32 million MSM phone chips in the first quarter fiscal 2004, which was greater than our initial expectation of 27-28 million MSM phone chips. The increase in QCT R&D expenses compared to the year ago quarter and the effects of reductions in QUALCOMM Announces First Quarter Fiscal 2004 Results Page 3 of 16 average sales prices and changes in product mix were the primary reasons that QCT earnings decreased year-over-year. Our fiscal 2004 effective income tax rate is estimated to be approximately 33 percent, including an effective income tax rate for QSI of 3 percent. In fiscal 2003 our effective income tax rate was approximately 36 percent. The effective tax rate in the first quarter fiscal 2004 was approximately 35 percent. The reported and QSI effective tax rates for the first quarter of fiscal 2004 differ from the expected annual effective tax rates due to the tax impact of the sale of the Vesper Operating Companies. Excluding the QSI segment, our fiscal 2004 effective tax rate is estimated to be approximately 31 percent, compared to 33 percent in fiscal 2003. The lower estimated annual effective tax rates as compared to the prior fiscal year are largely due to higher foreign earnings which are subject to a lower rate. QUALCOMM STRATEGIC INITIATIVES The QUALCOMM Strategic Initiatives (QSI) segment includes our strategic investments and related income and expenses. Operating losses of the Vesper Operating Companies were $7 million in the first fiscal quarter compared to $30 million in the year ago quarter. In addition, we recorded a net realized loss of $52 million on the sale of the Vesper Operating Companies to Embratel in December 2003. The remainder of the net loss before taxes in QSI was $9 million for the first fiscal quarter compared to $103 million in the year ago quarter. In addition to Vesper, the net loss in the first quarter fiscal 2004 included $16 million in equity losses, partially offset by $14 million in interest income, including $10 million in deferred interest income related to Pegaso's prepayment in full of the principal amount of all outstanding loans owed under an equipment loan facility. BUSINESS OUTLOOK The following statements are forward-looking and actual results may differ materially. Please see Note Regarding Forward-Looking Statements at the end of this news release for a description of certain risk factors and QUALCOMM's annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks. SECOND QUARTER FISCAL 2004 Based on the current business outlook, we anticipate that revenues excluding the QSI segment in the second fiscal quarter will decrease approximately 6-13 percent sequentially and increase 3-11 percent year-over-year. We anticipate that earnings per share excluding the QSI segment will be QUALCOMM Announces First Quarter Fiscal 2004 Results Page 4 of 16 approximately $0.38-$0.41 in the second fiscal quarter, compared to $0.38 in the year ago quarter. This estimate assumes shipments of approximately 29-31 million MSM phone chips during the quarter. We anticipate that operating expenses will increase in the second fiscal quarter compared to the first fiscal quarter due to seasonal factors such as higher employee payroll taxes and public company expenses, as well as continued increases in our R&D workforce. Based on the current business outlook, we anticipate that total QUALCOMM revenues in the second quarter will decrease approximately 9-15 percent sequentially and increase 1-8 percent year-over-year. We anticipate that total QUALCOMM earnings per share will be approximately $0.34-$0.37 in the second fiscal quarter, including an estimated $0.04 loss per share attributed to the QSI segment, compared to $0.13 per share in the year ago quarter. Due to their nature, certain income and expense items such as realized investment gains or losses, income related to the use of our FCC Auction Discount Voucher and asset impairments cannot be accurately forecast. Accordingly, the Company excludes such items from its business outlook, and actual results may vary materially from the business outlook if the Company incurs any such income or expense items. FISCAL 2004 Based on the current business outlook, we are increasing our guidance for fiscal 2004. We now anticipate that revenues excluding the QSI segment will grow by approximately 8-12 percent year-over-year and earnings per share excluding the QSI segment to be in the range of $1.56-$1.61 for fiscal 2004, compared to $1.42 last fiscal year. We estimate the CDMA phone market to be 138-146 million units in calendar 2004, and we estimate a decrease of approximately 7 percent in average selling prices of CDMA phones for fiscal 2004, upon which royalties are calculated, compared to an average selling price that held constant in fiscal 2003. Based on the current business outlook, we anticipate that total QUALCOMM revenues will grow by approximately 6-10 percent year-over-year and total QUALCOMM earnings per share to be in the range of $1.41-$1.46 for fiscal 2004, compared to $1.01 last fiscal year, including an estimated $0.15 loss per share attributed to the QSI segment. Due to their nature, certain income and expense items such as realized investment gains or losses, income related to the use of our FCC Auction Discount Voucher and asset impairments cannot be accurately forecast. Accordingly, the Company QUALCOMM Announces First Quarter Fiscal 2004 Results Page 5 of 16 excludes such items from its business outlook, and actual results may vary materially from the business outlook if the Company incurs any such income or expense items. CASH AND MARKETABLE SECURITIES QUALCOMM's cash, cash equivalents and marketable securities totaled approximately $5.9 billion at the end of the first quarter fiscal 2004, compared to $5.4 billion on September 28, 2003 and $3.9 billion on December 29, 2002. We paid $56 million in cash dividends in the first quarter fiscal 2004. In the first quarter fiscal 2004, net cash transfers from QSI were $113 million. Detailed reconciliations between total QUALCOMM cash flow and cash, cash equivalents and marketable securities excluding the QSI segment are included at the end of this news release. RESULTS OF BUSINESS SEGMENTS The following tables present segment information (in thousands): FIRST QUARTER - FISCAL YEAR 2004
RECONCILING ITEMS SEGMENTS QCT QTL QWI (1) - ----------------------------------------------------------------------------------------------------- REVENUES 751,818 353,421 132,611 (31,335) - ----------------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 49% 46% (7%) N/M - ----------------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR 6% 38% 22% N/M - ----------------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 260,661 324,673 5,480 16,041 - ----------------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 114% 53% (49%) N/M - ----------------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR (10%) 42% 98% N/M - ----------------------------------------------------------------------------------------------------- TAX RATES - --------------------------------------- NET INCOME (LOSS) - --------------------------------------- CHANGE FROM PRIOR QUARTER - --------------------------------------- CHANGE FROM PRIOR YEAR - --------------------------------------- DILUTED NET EARNINGS (LOSS) PER COMMON SHARE (2) - --------------------------------------- CHANGE FROM PRIOR QUARTER - --------------------------------------- CHANGE FROM PRIOR YEAR - ----------------------------------------------------------------------------------------------------- QUALCOMM TOTAL SEGMENTS EXCLUDING QSI QSI QUALCOMM - --------------------------------------------------------------------------------------------- REVENUES 1,206,515 35,582 1,242,097 - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 39% (7%) 37% - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR 13% 22% 13% - --------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 606,855 (67,274) 539,581 - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 72% (61%) 74% - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR 16% 49% 39% - --------------------------------------------------------------------------------------------- TAX RATES 31% 1% 35% - --------------------------------------------------------------------------------------------- NET INCOME (LOSS) 418,729 (66,436) 352,293 - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 77% N/M 21% - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR 21% 36% 46% - --------------------------------------------------------------------------------------------- DILUTED NET EARNINGS (LOSS) PER COMMON SHARE (2) 0.51 (0.08) 0.43 - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR QUARTER 76% N/M 23% - --------------------------------------------------------------------------------------------- CHANGE FROM PRIOR YEAR 21% 38% 43% - ---------------------------------------------------------------------------------------------
FOURTH QUARTER - FISCAL YEAR 2003
RECONCILING ITEMS SEGMENTS QCT QTL QWI (1) - ----------------------------------------------------------------------------------------------------- REVENUES 504,400 242,184 143,284 (19,501) - ----------------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 121,808 212,657 10,649 7,262 - ----------------------------------------------------------------------------------------------------- TAX RATES - ----------------------------------------- NET INCOME - ----------------------------------------- DILUTED NET EARNINGS PER COMMON SHARE (2) - ----------------------------------------------------------------------------------------------------- QUALCOMM TOTAL SEGMENTS EXCLUDING QSI QSI QUALCOMM - -------------------------------------------------------------------------------------- REVENUES 870,367 38,449 908,816 - -------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 352,376 (41,845) 310,531 - -------------------------------------------------------------------------------------- TAX RATES 33% 232% 6% - -------------------------------------------------------------------------------------- NET INCOME 236,092 55,310 291,402 - -------------------------------------------------------------------------------------- DILUTED NET EARNINGS PER COMMON SHARE (2) 0.29 0.07 0.35 - --------------------------------------------------------------------------------------
FIRST QUARTER - FISCAL YEAR 2003
RECONCILING ITEMS SEGMENTS QCT QTL QWI (1) - ----------------------------------------------------------------------------------------------------- REVENUES 709,681 255,423 108,981 (6,121) - ----------------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 288,282 229,409 2,761 1,848 - ----------------------------------------------------------------------------------------------------- TAX RATES - ------------------------------------------------ NET INCOME (LOSS) - ------------------------------------------------ DILUTED NET EARNINGS (LOSS) PER COMMON SHARE (2) - ----------------------------------------------------------------------------------------------------- QUALCOMM TOTAL SEGMENTS EXCLUDING QSI QSI QUALCOMM - --------------------------------------------------------------------------------------------- REVENUES 1,067,964 29,205 1,097,169 - --------------------------------------------------------------------------------------------- EARNINGS (LOSS) BEFORE TAXES 522,300 (133,051) 389,249 - --------------------------------------------------------------------------------------------- TAX RATES 34% 22% 38% - --------------------------------------------------------------------------------------------- NET INCOME (LOSS) 344,718 (103,384) 241,334 - --------------------------------------------------------------------------------------------- DILUTED NET EARNINGS (LOSS) PER COMMON SHARE (2) 0.42 (0.13) 0.30 - ---------------------------------------------------------------------------------------------
QUALCOMM Announces First Quarter Fiscal 2004 Results Page 6 of 16 (1) Reconciling items related to revenues consist primarily of other non-reportable segment revenues less intersegment eliminations. Reconciling items related to earnings before taxes consist primarily of corporate expenses, charges that are not allocated to the segments for management reporting purposes, unallocated net investment income, non-reportable segment results, interest expense and the elimination of intercompany profit. (2) The sum of the earnings per share amounts may not equal total earnings per share due to rounding. N/M - Not Meaningful BUSINESS SEGMENT HIGHLIGHTS QUALCOMM CDMA TECHNOLOGIES (QCT) - Shipped a record of approximately 32 million MSM(TM) phone chips, 99 percent of which were 3G CDMA2000(R) 1X and 1xEV-DO, to customers worldwide during the first fiscal quarter, compared to approximately 20 million units in the fourth quarter of fiscal 2003 and approximately 29 million units in the year ago quarter. - Shipped CSM infrastructure chips for 3G CDMA2000 1X and 1xEV-DO to support a record of nearly 4.6 million equivalent voice channels, compared to approximately 2.5 million in the prior quarter and approximately 2.2 million in the year ago quarter. Equivalent voice channels are provided rather than actual chip shipments because our CSM infrastructure chips currently support from eight to 32 voice channels per chip. - Named "Best Financially Managed Company" by the Fabless Semiconductor Association for outstanding financial performance for the second consecutive year. - Announced several new products, including: - RFR6122(TM) and RFT6122(TM) radioOne(TM) chips, the first CDMA2000 1X chipsets to use cost-competitive RF CMOS (Complementary Metal Oxide Semiconductor) process technology, marking QUALCOMM's second-generation of radioOne Zero Intermediate Frequency (ZIF) architecture products. Samples of the chipsets are expected to ship in the second quarter of 2004. - RFR6175(TM) receive and RFT6170(TM) transmit radio frequency (RF) IC chips, which are targeted to serve emerging markets supporting Band Class 5, the 450 MHz frequency band. - The highly integrated radioOne ZIF RFR6250(TM) device, a complete dual-band WCDMA (UMTS) and Global Positioning System (GPS) receive chip. Supporting WCDMA (UMTS) at 1900 MHz and 2100 MHz, as well as simultaneous assisted GPS capabilities, the RFR6250 combines three RF chips into one, delivering one of the industry's most integrated and cost-effective RF solutions to support global QUALCOMM Announces First Quarter Fiscal 2004 Results Page 7 of 16 roaming and location-based services for WCDMA (UMTS) networks. Samples of the RFR6250 chipset are expected to ship to customers in the second quarter of 2004. - Receive diversity radioOne ZIF RFR6500(TM) device, which uses additional antennas and associated receive chains to enable improved signal reception, enabling higher data throughput and significant increases in network capacity for CDMA2000 1X and 1xEV-DO networks, especially in dense urban environments. - Announced that the MSM6200(TM) WCDMA (UMTS) chipset solution has been tested and was successfully validated by all 13 worldwide WCDMA (UMTS) infrastructure vendors. QUALCOMM's chipset solution is the first to achieve voice, circuit and packet data interoperability with all WCDMA (UMTS) infrastructure vendors, enabling a wide range of handset manufacturers to offer wireless devices that will seamlessly operate on any WCDMA (UMTS) network in the world. QUALCOMM TECHNOLOGY LICENSING (QTL) - Reported that licensees around the world are participating in the growing 3G CDMA market: - Forty-three subscriber licensees reported sales of CDMA2000 1X products and nine subscriber licensees reported sales of WCDMA products through the first fiscal quarter. - Fifteen infrastructure licensees reported sales of CDMA2000 1X products and eight infrastructure licensees reported sales of WCDMA products through the first fiscal quarter. - WCDMA royalties contributed approximately 12 percent of total royalties reported by licensees in the December quarter for shipments in the September quarter. QUALCOMM WIRELESS & INTERNET GROUP (QWI) QUALCOMM INTERNET SERVICES (QIS) - Worldwide BREW(TM) application downloads continue to grow, reaching more than 72 million. Thirteen wireless operators launched BREW services in the first quarter of fiscal 2004, bringing the total number of carriers to 23. - Announced the third major release of our BREW client software and BREW SDK(TM) (software development kit) tool. The new BREW 3.0 client software extends a mobile handset's multimedia functionality by adding support for removable storage media and a QUALCOMM Announces First Quarter Fiscal 2004 Results Page 8 of 16 serial interface that allows users to easily connect their BREW-enabled handsets to other devices, such as keyboards or personal computers. In addition to multimedia enhancements, the BREW 3.0 client software also offers group management features, which will enable operators to segment consumers, including business users and corporations, to deliver tailored wireless applications portfolios. - Announced together with America Online, the world's leading interactive services company, an agreement for the distribution of America Online's content and applications across QUALCOMM's BREW platform. - Announced together with Kyocera Wireless, a leading global manufacturer of CDMA wireless phones and manufacturer of the world's first commercial BREW-enabled phone, plans to develop new handsets to support QUALCOMM's BREWChat(TM) push-to-chat solution. The technology enables person-to-person and person-to-group communication between subscribers at the push of a button. BREWChat is planned for commercial availability in the first quarter of calendar 2004 and was designed to seamlessly upgrade to and interoperate with QChat(R). QUALCOMM WIRELESS BUSINESS SOLUTIONS(R) (QWBS) - Shipped approximately 10,900 OmniTRACS(R) units and related products in the first quarter of fiscal 2004, compared to approximately 10,100 in the fourth quarter and 10,600 in the year ago quarter. This brings the cumulative total number of OmniTRACS and related product shipments to nearly 500,000 units shipped worldwide. - Announced that Case New Holland (CNH), one of the world's largest construction equipment manufacturers, has exclusively endorsed QUALCOMM's GlobalTRACS(R) equipment management system for use on CNH construction equipment. - Announced the latest version of the FleetAdvisor(R) system, which includes support for the new Hours of Service regulations issued by the Federal Motor Carrier Safety Administration which took effect on January 4, 2004. QUALCOMM's FleetAdvisor is a transportation management system that supports automated full-function on-board computing, vehicle tracking, highly integrated back-office software and mobile wireless communications. QUALCOMM STRATEGIC INITIATIVES (QSI) QUALCOMM Announces First Quarter Fiscal 2004 Results Page 9 of 16 - Announced the closing of the sale of the Vesper Operating Companies to Embratel. QUALCOMM realized a net loss of $52 million on the transaction. As part of this transaction, QUALCOMM retained, through a new wholly owned subsidiary (TowerCo), ownership and control of Vesper's existing 622 communication towers and related interests in tower site property leases. - Announced that Pegaso, a wireless operating company in Mexico, prepaid in full to QUALCOMM the principal amount of all outstanding loans owed under an equipment loan facility, in addition to accrued interest. The principal amount of the prepayment was $193 million, which included a 2 percent discount as part of an early prepayment agreement. Notwithstanding the discount, QUALCOMM recognized $10 million in deferred interest income as a result of the prepayment. CONFERENCE CALL QUALCOMM's first quarter fiscal 2004 earnings conference call will be broadcast live on January 21, 2004 beginning at 2:30 p.m. Pacific Standard Time on the Company's web site at: www.qualcomm.com. This conference call may contain forward-looking financial information. The conference call will include a discussion of "non-GAAP financial measures" as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as the other material financial and statistical information to be discussed in the conference call, will be posted on the Company's Investor Relations web site at www.qualcomm.com immediately prior to commencement of the call. A taped audio replay will be available via telephone on January 21, 2004 beginning at approximately 4:30 p.m. (PST) through January 26, 2004 at 4:30 p.m. (PST). To listen to the replay, U.S. callers may dial (800) 633-8284 and international callers may dial (402) 977-9140. U.S. and international callers should use reservation number 21173309. An audio replay of the conference call will be available on the Company's web site at www.qualcomm.com for two weeks following the live call. QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 QUALCOMM Announces First Quarter Fiscal 2004 Results Page 10 of 16 Index and is a 2003 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM. NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES The Company presents financial information excluding the QUALCOMM Strategic Initiatives (QSI) segment to facilitate evaluation by management, investors and analysts of its ongoing core operating businesses, including QUALCOMM CDMA Technologies (QCT), QUALCOMM Technology Licensing (QTL) and QUALCOMM Wireless & Internet (QWI). QSI results relate to strategic investments for which the Company has exit strategies of varying durations. Management believes that the information excluding QSI presents a more representative measure of the operating and liquidity performance of the Company because it excludes the effect of fluctuations in value of investments that are unrelated to the Company's operational performance. The Company presents cash flow information excluding QSI and including marketable securities. The Company's management uses this non-GAAP presentation to analyze increases and decreases in certain of its liquid assets, comprised of cash, cash equivalents and marketable securities. Management views certain marketable securities as liquid assets available to fund operations, which result from cash management strategies designed to increase yields. However, these instruments do not meet the definition of cash equivalents in accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows" and must be excluded from the GAAP statements of cash flows. Since the GAAP statements of cash flows reconcile the Company's beginning and ending cash and cash equivalents balances, the purchases and sales of marketable securities are presented as inflows and outflows. For internal analysis of the Company's cash position, management does not view these transactions as inflows and outflows from the business, but as cash management transactions. If required, such investments could be settled relatively quickly as additional cash resources are needed. The Company believes that this non-GAAP presentation is a helpful measure of the Company's liquidity. The financial information excluding QSI should be considered in addition, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Reconciliations between total QUALCOMM results and results excluding QSI and between total QUALCOMM cash flow and cash, cash equivalents and marketable securities excluding the QSI segment are presented herein. QUALCOMM Announces First Quarter Fiscal 2004 Results Page 11 of 16 NOTE REGARDING FORWARD-LOOKING STATEMENTS In addition to the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with: the rate of development, deployment and commercial acceptance of CDMA based networks and CDMA based technology, including CDMA2000 1X and WCDMA (UMTS), both domestically and internationally; our dependence on major customers and licensees, fluctuations in the demand for CDMA based products, services or applications; foreign currency fluctuations; strategic loans, investments and transactions the Company has or may pursue; dependence on third party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; developments in current and future litigation as well as other risks detailed from time-to-time in the Company's SEC reports. ### QUALCOMM(R), QCT(R), MSM(TM), MSM6200(TM), CSM(TM), Launchpad(TM), radioOne(TM), RFR6500(TM), RFR6175(TM), RFT6170(TM), RFR6122(TM), RFT6122(TM), RFR6250(TM), BREW(TM), BREWChat(TM), BREW SDK(TM), QChat(R), gpsOne(TM), QUALCOMM Wireless Business Solutions(R), OmniTRACS(R), GlobalTRACS(R) and FleetAdvisor(R) are trademarks and/or service marks of QUALCOMM Incorporated. All other trademarks are the property of their respective owners. QUALCOMM Announces First Quarter Fiscal 2004 Results Page 12 of 16 QUALCOMM INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM RESULTS EXCLUDING QSI TO TOTAL QUALCOMM RESULTS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 28, 2003 --------------------------------------------- TOTAL EXCLUDING QSI QSI QUALCOMM ------------- ----------- ----------- Revenues: Equipment and services $ 852,911 $ 35,582 $ 888,493 Licensing and royalty fees 353,604 - 353,604 ----------- ----------- ----------- 1,206,515 35,582 1,242,097 ----------- ----------- ----------- Operating expenses: Cost of equipment and services revenues 369,730 38,801 408,531 Research and development 149,938 - 149,938 Selling, general and administrative 116,510 20,379 136,889 Amortization of acquisition-related intangible assets 2,125 750 2,875 Other (21) 33,645 33,624 ----------- ----------- ----------- Total operating expenses 638,282 93,575 731,857 ----------- ----------- ----------- Operating income (loss) 568,233 (57,993) 510,240 Interest expense (324) (8,244) (8,568) Investment income (expense), net 38,946 (a) (1,037)(d) 37,909 ----------- ----------- ----------- Income (loss) before income taxes 606,855 (67,274)(b) 539,581 Income tax (expense) benefit (188,126)(c) 838 (187,288)(c) ----------- ----------- ----------- Net income (loss) $ 418,729 $ (66,436) $ 352,293 =========== =========== =========== Net earnings (loss) per common share: Diluted $ 0.51 (e) $ (0.08)(e) $ 0.43 (e) =========== =========== =========== Shares used in per share calculations: Diluted 827,030 827,030 827,030 =========== =========== ===========
(a) Includes $36 million in interest income related to cash, cash equivalents and marketable securities, which are not part of the Company's strategic investment portfolio. (b) Includes $52 million realized net loss on the sale of the Vesper Operating Companies and $7 million loss from operations of the Vesper Operating Companies from September 1, 2003 through December 2, 2003, due to the Company's practice of consolidating foreign subsidiaries one month in arrears and the closing of the sale of the Vesper Operating Companies. (c) The fiscal year 2004 estimated effective tax rate for operations excluding QSI and total QUALCOMM are approximately 31% and approximately 33%, respectively. The first quarter fiscal 2004 effective tax rate for total QUALCOMM was approximately 35%, due to the tax impact of the sale of the Vesper Operating Companies. (d) Includes $16 million equity in losses of investees, partially offset by $14 million in interest income. (e) The sum of the earnings per share amounts may not equal total earnings per share due to rounding. QUALCOMM Announces First Quarter Fiscal 2004 Results Page 13 of 16 QUALCOMM INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND MARKETABLE SECURITIES THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING CASH FLOWS FROM CASH CASH EQUIVALENTS AND MARKETABLE SECURITIES EXCLUDING QSI TO TOTAL QUALCOMM CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 28, 2003 ------------------------------------ EXCLUDING TOTAL QSI QSI QUALCOMM --------- ---------- ---------- Earnings (loss) before taxes, depreciation, amortization and other adjustments (1) $ 640,560 $ (5,098) $ 635,462 Working capital changes and taxes paid (2) (183,414) 8,830 (174,584) --------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 457,146 3,732 460,878 Capital expenditures (63,084) (717) (63,801) --------- ---------- ---------- FREE CASH FLOW (NET CASH PROVIDED BY OPERATING ACTIVITIES LESS CAPITAL EXPENDITURES) 394,062 3,015 397,077 Net additional share capital 31,619 - 31,619 Dividends paid (56,043) - (56,043) Net collections of finance receivables 424 193,308 193,732 Other investments (12,569) (31,026) (43,595) Other items (1,038) (63,817) (64,855) Changes in fair value and other changes to marketable securities 8,806 (1,921) 6,885 Marketable securities pending settlement payment 13,985 - 13,985 Transfer from QSI (3) 207,046 (207,046) - Transfer to QSI (4) (93,829) 93,829 - --------- ---------- ---------- NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES (5) $ 492,463 $ (13,658) $ 478,805 ========= ========== ========== (1) Reconciliation to GAAP: Net income (loss) $ 418,729 $ (66,436) $ 352,293 Non-cash adjustments (a) 213,047 62,778 275,825 Net realized gains on marketable securities and other investments (3,324) (1,440) (4,764) Plus: Taxes paid 12,108 - 12,108 --------- ---------- ---------- Earnings (loss) before taxes, depreciation, amortization and other adjustments $ 640,560 $ (5,098) $ 635,462 ========= ========== ========== (2) Reconciliation to GAAP: (Decrease) Increase in cash resulting from changes in working capital $(171,306) $ 8,830 $ (162,476) Minus: Taxes paid (12,108) - (12,108) --------- ---------- ---------- Working capital changes and taxes paid $(183,414) $ 8,830 $ (174,584) ========= ========== ========== (3) Cash from loan payments and sale of equity securities. (4) Funding for strategic debt and equity investments, operations of Vesper and other QSI operating expenses. (5) Reconciliation to GAAP cash flow statement: Net decrease in cash and cash equivalents (GAAP) $(240,914) $ (8,253) $ (249,167) Plus: Net purchase (proceeds) of marketable securities 710,586 (3,484) 707,102 Plus: Net increase (decrease) in fair value and other changes to marketable securities 8,806 (1,921) 6,885 Plus: Net increase in marketable securities pending settlement (receipt) payment 13,985 - 13,985 --------- ---------- ---------- Net increase (decrease) in cash, cash equivalents and marketable securities $ 492,463 $ (13,658) $ 478,805 ========= ========== ==========
(a) See detail on the following page. QUALCOMM Announces First Quarter Fiscal 2004 Results Page 14 of 16 QUALCOMM INCORPORATED SUPPLEMENTAL DETAIL TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND MARKETABLE SECURITIES (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED DECEMBER 28, 2003 ------------------------------------ EXCLUDING TOTAL QSI QSI QUALCOMM --------- --------- ---------- (a) Non-cash adjustments are comprised of: Depreciation and amortization $ 39,344 $ 9,211 $ 48,555 Change in fair values of derivative investments - 466 466 Other-than-temporary losses on marketable securities and other investments - 700 700 Loss on the sale of the Vesper Operating Companies, net of cash balance - 51,698 51,698 Equity in losses of investees 286 15,784 16,070 Non-cash income tax expense (benefit) 176,017 (837) 175,180 Other non-cash charges and credits (2,600) (14,244) (16,844) --------- --------- ---------- Total non-cash adjustments $ 213,047 $ 62,778 275,825 ========= ========= ==========
QUALCOMM Announces First Quarter Fiscal 2004 Results Page 15 of 16 QUALCOMM INCORPORATED CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) ASSETS
QUALCOMM EXCLUDING QSI QSI (a) QUALCOMM QUALCOMM DECEMBER 28, DECEMBER 28, DECEMBER 28, SEPTEMBER 28, 2003 2003 2003 2003 ------------ ------------ ------------ ------------- Current assets: Cash and cash equivalents $ 1,795,698 $ 229 $ 1,795,927 $ 2,045,094 Marketable securities 3,226,556 44,019 3,270,575 2,516,003 Accounts receivable, net 655,048 111 655,159 483,793 Inventories, net 85,943 - 85,943 110,351 Deferred tax assets (a) 480,118 - 480,118 611,536 Other current assets 158,615 190 158,805 181,987 ----------- ----------- ----------- ----------- Total current assets 6,401,978 44,549 6,446,527 5,948,764 Marketable securities 667,547 116,508 784,055 810,654 Property, plant and equipment, net 532,097 4,793 536,890 622,265 Goodwill, net 349,675 1,865 351,540 346,464 Deferred tax assets (a) 366,624 - 366,624 406,746 Other assets 192,601 355,193 547,794 687,543 ----------- ----------- ----------- ----------- Total assets $ 8,510,522 $ 522,908 $ 9,033,430 $ 8,822,436 =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 150,662 $ 4,528 $ 155,190 $ 195,065 Payroll and other benefits related liabilities 114,311 441 114,752 141,000 Unearned revenue 164,923 25 164,948 174,271 Dividends payable 56,177 - 56,177 - Current portion of long-term debt - 88 88 102,625 Other current liabilities 195,568 7,415 202,983 195,241 ----------- ----------- ----------- ----------- Total current liabilities 681,641 12,497 694,138 808,202 Unearned revenue 215,776 - 215,776 236,732 Long-term debt - 116,919 116,919 123,302 Other liabilities 77,477 - 77,477 55,628 ----------- ----------- ----------- ----------- Total liabilities 974,894 129,416 1,104,310 1,223,864 ----------- ----------- ----------- ----------- Stockholders' equity: Preferred stock, $0.0001 par value - - - - Common stock, $0.0001 par value 81 - 81 81 Paid-in capital 6,361,910 - 6,361,910 6,324,971 Retained earnings 1,537,360 - 1,537,360 1,297,289 Accumulated other comprehensive (loss) income (29,200) 58,969 29,769 (23,769) ----------- ----------- ----------- ----------- Total stockholders' equity 7,870,151 58,969 7,929,120 7,598,572 ----------- ----------- ----------- ----------- Total liabilities and stockholders' equity $ 8,845,045 $ 188,385 $ 9,033,430 $ 8,822,436 =========== =========== =========== ===========
(a) Deferred tax assets and liabilities are not allocated to the Company's segments. Net deferred tax assets and liabilities, if any, of subsidiaries that are consolidated by QSI are reflected as QSI assets and liabilities. QUALCOMM Announces First Quarter Fiscal 2004 Results Page 16 of 16 QUALCOMM INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED ----------------------------- DECEMBER 28, DECEMBER 29, 2003 2002 ------------ ------------ Revenues: Equipment and services $ 888,493 $ 857,463 Licensing and royalty fees 353,604 239,706 ----------- ----------- 1,242,097 1,097,169 ----------- ----------- Operating expenses: Cost of equipment and services revenues 408,531 388,001 Research and development 149,938 112,479 Selling, general and administrative 136,889 147,999 Amortization of acquisition-related intangible assets 2,875 1,972 Other 33,624 - ----------- ----------- Total operating expenses 731,857 650,451 ----------- ----------- Operating income 510,240 446,718 Interest expense (8,568) (6,881) Investment income (expense), net 37,909 (50,588) ----------- ----------- Income before income taxes 539,581 389,249 Income tax expense (187,288) (147,915) ----------- ----------- Net income $ 352,293 $ 241,334 =========== =========== Net earnings per common share: Basic $ 0.44 $ 0.31 =========== =========== Diluted $ 0.43 $ 0.30 =========== =========== Shares used in per share calculations: Basic 800,365 783,280 =========== =========== Diluted 827,030 815,475 =========== =========== Dividends per share $ 0.14 $ - =========== ===========