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 $ -
=========== ===========