Exhibit 99.1
FOR IMMEDIATE RELEASE
QUALCOMM Contact:
John Gilbert
Vice President of Investor and Industry Analyst Relations
1-(858) 658-4813 (ph) 1-(858) 651-9303 (fax)
e-mail: ir@qualcomm.com
QUALCOMM Announces First Quarter Fiscal 2007 Results
Revenues $2.02 Billion, Diluted EPS $0.38
Pro Forma Revenues $2.02 Billion, Diluted EPS $0.43
QUALCOMM Reaffirms Most Recent Fiscal 2007
Revenue and Pro Forma Earnings Guidance
SAN DIEGO – January 24, 2007 – QUALCOMM Incorporated (NASDAQ: QCOM) today announced results for the first quarter of fiscal 2007 ended December 31, 2006.
Total QUALCOMM (GAAP) First Quarter Results
Total QUALCOMM results are reported in accordance with generally accepted accounting principles (GAAP).
  •   Revenues: $2.02 billion, up 16 percent year-over-year and 1 percent sequentially.
 
  •   Net income: $648 million, up 5 percent year-over-year and 6 percent sequentially.
 
  •   Diluted earnings per share: $0.38, up 6 percent year-over-year and 6 percent sequentially.
 
  •   Effective tax rate: 17 percent for the quarter. Fiscal 2007 estimated tax rate of approximately 21 percent.
 
  •   Estimated share-based compensation: $87 million, net of tax, up 6 percent year-over-year and 14 percent sequentially.
 
  •   Operating cash flow: $789 million, up 32 percent year-over-year; 39 percent of revenues.
 
  •   Return of capital to stockholders: in the quarter, dividends announced totaled $198 million, or $0.12 per share, which were paid on January 4, 2007, and $96 million related to the repurchase of our common stock.
QUALCOMM Pro Forma First Quarter Results
Pro forma results exclude the QUALCOMM Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax adjustments related to prior years and acquired in-process research and development (R&D) expense.
  •   Revenues: $2.02 billion, up 16 percent year-over-year and 1 percent sequentially.
 
  •   Net income: $722 million, up 8 percent year-over-year and 2 percent sequentially.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 2 of 16
  •   Diluted earnings per share: $0.43, up 10 percent year-over-year and 2 percent sequentially; excludes $0.01 loss per share attributable to the QSI segment, $0.05 loss per share attributable to estimated share-based compensation and $0.02 earnings per share attributable to certain tax adjustments related to prior years. (The sum of pro forma earnings per share and items excluded do not equal total QUALCOMM (GAAP) earnings per share due to rounding).
 
  •   Effective tax rate: 24 percent for the quarter. Fiscal 2007 estimated tax rate of approximately 25 percent.
 
  •   Free cash flow: $544 million, up 2 percent year-over-year; 27 percent of revenues. (Defined as net cash from operating activities less capital expenditures).
Detailed reconciliations between total QUALCOMM (GAAP) results and QUALCOMM pro forma results, and cash flow 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 this quarter were driven by record 3G handset and chipset shipments,” said Dr. Paul E. Jacobs, chief executive officer of QUALCOMM. “The worldwide migration to CDMA-based technologies is accelerating as we continue to execute with our partners to drive innovations into the marketplace.”
“An increasing number of subscribers and enterprise customers are benefiting from 3G’s higher data rates enabling new applications including multimedia, 3D gaming, downloadable navigation and access to the wireless Internet. It is evident that the innovation and competition our business model enables has benefited wireless consumers, operators and manufacturers globally.”
“Based on our current outlook for CDMA-based handset shipments, we are pleased to reaffirm our calendar year 2007 forecast which represents approximately 28% year-over-year growth. We are also reaffirming our most recent fiscal 2007 revenue and pro forma diluted earnings per share guidance as adjusted by our recently announced acquisitions.”

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 3 of 16
Cash and Marketable Securities
QUALCOMM’s cash, cash equivalents and marketable securities totaled approximately $10.5 billion at the end of the first quarter of fiscal 2007, compared to $9.9 billion at the end of fiscal 2006 and $9.4 billion a year ago. On January 12, 2007, we announced a cash dividend of $0.12 per common share payable on March 30, 2007 to stockholders of record at the close of business on March 2, 2007.
Estimated Share-Based Compensation
Total QUALCOMM (GAAP) net income for the first quarter of fiscal 2007 included estimated share-based compensation, net of tax, of $87 million, or $0.05 per share, compared to $82 million, or $0.05 per share in the prior year quarter.
Research and Development
                                 
            Estimated Share           Total
    QUALCOMM   Based           QUALCOMM
($ in millions)   Pro Forma   Compensation   QSI   (GAAP)
First quarter fiscal 2007
   $ 365     $ 58     $ 17     $ 440  
As a % of revenue
     18 %                     22 %
First quarter fiscal 2006
   $ 273     $ 52     $ 15     $ 340  
As a % of revenue
     16 %                     20 %
Year-over-year change ($)
     34 %     12 %     13 %     29 %
Pro forma R&D expenses increased 34 percent year-over-year, primarily due to additional engineering resources for the development of integrated circuit products and other initiatives to support low-cost phones, multimedia applications, high-speed wireless Internet access and multi-mode, multi-band, multi-network products and technologies.
Selling, General and Administrative
                                 
            Estimated           Total
    QUALCOMM   Share-Based           QUALCOMM
($ in millions)   Pro Forma   Compensation   QSI   (GAAP)
First quarter fiscal 2007
   $ 282     $ 62     $ 25     $ 369  
As a % of revenue
     14 %                     18 %
First quarter fiscal 2006
   $ 168     $ 58     $ 13     $ 239  
As a % of revenue
     10 %                     14 %
Year-over-year change ($)
     68 %     7 %     92 %     54 %

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 4 of 16
Pro forma selling, general and administrative (SG&A) expenses increased 68 percent year-over-year, largely attributable to increases in legal fees and employee related expenses. The year-over-year increase in QSI SG&A expenses is primarily related to MediaFLO™ USA.
Effective Income Tax Rate
Our fiscal 2007 effective income tax rates are estimated to be 21 percent for total QUALCOMM (GAAP) and 25 percent for QUALCOMM pro forma, compared to fiscal 2006 effective income tax rates of 22 percent for total QUALCOMM (GAAP) and 26 percent for QUALCOMM pro forma. During the first quarter of fiscal 2007, the federal research and development tax credit that expired on December 31, 2005 was extended by Congress for a period of two years beyond the prior expiration date. We recorded a tax benefit of $33 million, or $0.02 diluted earnings per share, related to fiscal 2006 in the first quarter of fiscal 2007 due to this retroactive extension. The effective tax rate for the first quarter of fiscal 2007 for total QUALCOMM (GAAP) was 17%, primarily as a result of this benefit. Our first quarter fiscal 2007 QUALCOMM pro forma results exclude this tax benefit attributable to fiscal 2006.
QUALCOMM Strategic Initiatives
The QSI segment includes our strategic investments, including our MediaFLO USA subsidiary, and related income and expenses. Total QUALCOMM (GAAP) results for the first quarter of fiscal 2007 include $0.01 loss per share for the QSI segment. The first quarter of fiscal 2007 QSI results included $42 million in operating expenses, primarily related to MediaFLO USA.
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. Due to their nature, certain income and expense items, such as realized investment gains or losses in QSI, gains and losses on certain derivative instruments or asset impairments, cannot be accurately forecast. Accordingly, the Company excludes forecasts of 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. Estimated share-based compensation in future periods may vary materially from the business

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 5 of 16
outlook as the methodology used to calculate this estimate is dependent on a variety of assumptions which are subject to market fluctuations and other factors.
The following table summarizes total QUALCOMM (GAAP) and QUALCOMM pro forma guidance for the second fiscal quarter and fiscal year 2007 based on the current business outlook. The pro forma business outlook provided below is presented consistent with the presentation of pro forma results provided elsewhere herein.
Our license agreement with Nokia Corp. expires in part on April 9, 2007, with Nokia having an option exercisable through the end of 2008 to extend the agreement. The table includes a footnote to size our estimate of the risk, approximately $0.04 to $0.06 diluted earnings per share, of Nokia not paying royalties in the fourth quarter of fiscal 2007 for June quarter shipments. Nokia has publicly stated that they intend to continue to use our patents but not pay royalties after the expiration of their rights under those patents on April 9, 2007 should a new license agreement (or extension of the existing agreement) not be reached by that time. As a result, under generally accepted accounting principles, we will be unable to record royalty revenue attributable to Nokia’s sales until a court awards damages or agreement with Nokia is reached. If we cannot conclude an extension or a new license agreement beyond April 9, 2007, Nokia’s rights to sell certain subscriber products (such as cellular phones and wireless personal digital assistant devices) under most of our patents will expire, as will our rights to sell integrated circuits under Nokia’s patents. We intend to pursue and obtain injunctions against Nokia’s sales as well as damages (which will include interest from the date of infringement) for Nokia’s unlicensed sales after April 9, 2007. While we will continue to work with Nokia to see if we can reach an agreement, there is no guarantee that we will be able to successfully resolve this matter before April 9, 2007 on terms which we find acceptable and little progress has been made to date. If we are unable to reach agreement, and Nokia continues to use our unlicensed intellectual property, we will aggressively pursue all our legal and business options and assume that Nokia will do likewise.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 6 of 16
The following estimates are approximations and are based on the current business outlook:
Business Outlook Summary
SECOND FISCAL QUARTER
                 
            Current Guidance
    Q2’06   Q2’07
    Results   Estimates (1)
 
QUALCOMM Pro Forma
                
Revenues
   $ 1.83B     $ 2.0B-$2.1B  
Year-over-year change
           increase 9% - 15%  
Diluted earnings per share (EPS)
   $ 0.41     $ 0.42-$0.44  
Year-over-year change
           increase 2% - 7%  
 
Total QUALCOMM (GAAP)
               
Revenues
   $ 1.83B     $ 2.0B-$2.1B  
Year-over-year change
           increase 9% - 15%  
Diluted earnings per share (EPS)
   $ 0.34     $ 0.35-$0.37  
Year-over-year change
           increase 3% - 9%  
Diluted EPS attributable to QSI
     ($0.01 )     ($0.02 )
Diluted EPS attributable to estimated share-based compensation
     ($0.05 )     ($0.05 )
Diluted EPS attributable to in-process R&D
     ($0.01 )     n/a  
 
Metrics
           
MSM Shipments
   approx. 49M     approx. 55M - 57M  
CDMA/WCDMA handset units shipped
   approx. 67M*     approx. 82M - 86M*  
CDMA/WCDMA handset unit wholesale average selling price
   approx. $208*     approx. $217*  
 
*Shipments in Dec. quarter, reported in Mar. quarter
FISCAL YEAR
                         
            Prior Guidance   Current Guidance
    FY 2006   FY 2007   FY 2007
    Results   Estimates (2)(3)   Estimates (2)
 
QUALCOMM Pro Forma
                        
Revenues
   $ 7.53B     $ 8.1B-$8.6B          
Year-over-year change
           increase 8% - 14%     Reaffirm Prior Revenue
Diluted earnings per share (EPS)
   $ 1.64     $ 1.72-$1.77     and EPS Guidance
Year-over-year change
           increase 5% - 8%          
 
Total QUALCOMM (GAAP)
                        
Revenues
   $ 7.53B     $ 8.1B-$8.6B     Reaffirm Prior Revenue
Year-over-year change
           increase 8% - 14%     Guidance 
Diluted earnings per share (EPS)
   $ 1.44     $ 1.41-$1.46     $ 1.44-$1.49  
Year-over-year change
           decrease 2% - increase 1%     even - increase 3%  
Diluted EPS attributable to in-process R&D
     ($0.01 )     n/a       n/a  
Diluted EPS attributable to QSI
     ($0.02 )     ($0.11 )     ($0.10 )
Diluted EPS attributable to estimated share-based compensation
     ($0.19 )     ($0.20 )     ($0.20 )
Diluted EPS attributable to tax items related to prior years
   $ 0.02       n/a     $ 0.02  
 
Metrics
                        
Fiscal year* CDMA/WCDMA handset unit wholesale average selling price
   approx. $215     approx. $205     approx. $210  
 
*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
CALENDAR YEAR Handset Estimates
                                 
    Prior Guidance   Current Guidance           Current Guidance
    Calendar 2006   Calendar 2006   Prior Guidance Calendar   Calendar 2007
CDMA/WCDMA handset unit shipments   Estimates   Estimates   2007 Estimates   Estimates
 
March quarter
   approx. 66M   approx. 66M   not provided   not provided
June quarter
   approx. 70M   approx. 70M   not provided   not provided
September quarter
   approx. 74M - 76M   approx. 76M   not provided   not provided
December quarter
   not provided   approx. 82M - 86M   not provided   not provided
 
Calendar year range (approx.)
     290M - 298M       294M - 298M       368M - 388M          
         
 
   Midpoint   Midpoint   Midpoint   Reaffirm Prior
CDMA/WCDMA units
   approx. 294M   approx. 296M   approx. 378M   Calendar 2007
CDMA units
   approx. 196M   approx. 198M   approx. 203M   Guidance
WCDMA units
   approx. 98M   approx. 98M   approx. 175M        
 
(1)   Current Q2’07 estimates incorporate the expected results related to acquisitions completed in the first quarter of fiscal 2007.
 
(2)   FY 2007 estimates do not reflect the potential adverse impact on our results, approximately $0.04 to $0.06 diluted earnings per share, of Nokia not paying royalties in the fourth quarter of fiscal 2007 for June quarter shipments. Further details are included in the introductory paragraph which precedes this Business Outlook table.
 
(3)   Prior Guidance presented above incorporates the $0.04 dilution estimate for FY 2007 provided on December 3, 2006 related to the acquisitions completed in the first quarter of fiscal 2007.
 
    Sums may not equal totals due to rounding.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 7 of 16
Results of Business Segments
The following tables, which present segment information, have been adjusted to reflect the 2007 segment presentation (Notes 1 and 2) (in millions, except per share data):
First Quarter — Fiscal Year 2007
                                                                         
                                            Estimated Share-                   Total
                            Reconciling   QUALCOMM Pro   Based                   QUALCOMM
Segments   QCT(1)   QTL(1)   QWI (2)   Items (1)(2)(3)   Forma   Compensation (4)   Tax Items (5)   QSI (6)   (GAAP)
 
Revenues
   $ 1,230     $ 600     $ 188     $ 1     $ 2,019     $ —     $ —     $ —     $ 2,019  
Change from prior year
     19 %     14 %     5 %     N/M       16 %     —       —       —       16 %
Change from prior quarter
     7 %     (9 %)     (4 %)     N/M       1 %     —       —       —       1 %
EBT
   $ 316     $ 498     $ 20     $ 118     $ 952     $ (130 )   $ —     $ (43 )   $ 779  
Change from prior year
     (7 %)     4 %     18 %     N/M       5 %     N/M       N/M       N/M       6 %
Change from prior quarter
     (2 %)     (16 %)     (23 %)     N/M       (1 %)     N/M       N/M       N/M       (4 %)
Net income (loss)
                                   $ 722     $ (86 )   $ 33     $ (21 )   $ 648  
Change from prior year
                                     8 %     N/M       N/M       N/M       5 %
Change from prior quarter
                                     2 %     N/M       N/M       N/M       6 %
Diluted EPS
                                   $ 0.43     $ (0.05 )   $ 0.02     $ (0.01 )   $ 0.38  
Change from prior year
                                     10 %     N/M       N/M       N/M       6 %
Change from prior quarter
                                     2 %     N/M       N/M       N/M       6 %
Diluted shares used
                                     1,685       1,685       1,685       1,685       1,685  
Fourth Quarter — Fiscal Year 2006
                                                                                 
                            Reconciling           Estimated                           Total
                Items   QUALCOMM   Share-Based       In-Process       QUALCOMM
Segments   QCT(1)   QTL(1)   QWI (2)   (1)(2)(3)   Pro Forma   Compensation (4)   Tax Items (7)   R&D (8)   QSI (6)   (GAAP)
 
Revenues
   $ 1,147     $ 661     $ 196     $ (5 )   $ 1,999     $ —     $ —     $ —     $ —     $ 1,999  
EBT
     323       591       26       21       961       (127 )     —       (1 )     (23 )     810  
Net income (loss)
                                     705       (76 )     (16 )     (1 )     2       614  
Diluted EPS
                                   $ 0.42     $ (0.05 )   $ (0.01 )   $ —     $ —     $ 0.36  
Diluted shares used
                                     1,693       1,693       1,693       1,693       1,693       1,693  
First Quarter — Fiscal Year 2006
                                                                         
                                            Estimated Share-                   Total
                            Reconciling   QUALCOMM Pro   Based                   QUALCOMM
Segments   QCT(1)   QTL(1)   QWI (2)   Items (1)(2)(3)   Forma   Compensation (4)   Tax Items (9)   QSI (6)   (GAAP)
 
Revenues
   $ 1,033     $ 526     $ 179     $ 3     $ 1,741     $ —     $ —     $ —     $ 1,741  
EBT
     338       479       17       72       906       (122 )     —       (48 )     736  
Net income (loss)
                                     667       (82 )     56       (21 )     620  
Diluted EPS
                                   $ 0.39     $ (0.05 )   $ 0.03     $ (0.01 )   $ 0.36  
Diluted shares used
                                     1,702       1,702       1,702       1,702       1,702  
Second Quarter — Fiscal Year 2006
                                                                         
                                            Estimated Share-                   Total
                            Reconciling   QUALCOMM Pro   Based   In-Process           QUALCOMM
Segments   QCT(1)   QTL(1)   QWI (2)   Items (1)(2)(3)   Forma   Compensation (4)   R&D (8)   QSI (6)   (GAAP)
 
Revenues
   $ 1,018     $ 640     $ 178     $ (2 )   $ 1,834     $ —     $ —     $ —     $ 1,834  
EBT
     291       587       16       68       962       (120 )     (21 )     (36 )     785  
Net income (loss)
                                     706       (78 )     (21 )     (14 )     593  
Diluted EPS
                                   $ 0.41     $ (0.05 )   $ (0.01 )   $ (0.01 )   $ 0.34  
Diluted shares used
                                     1,721       1,721       1,721       1,721       1,721  
Twelve Months — Fiscal Year 2006
                                                                                 
                            Reconciling           Estimated                           Total
                Items   QUALCOMM   Share-Based       In-Process       QUALCOMM
Segments   QCT(1)   QTL(1)   QWI (2)   (1)(2)(3)   Pro Forma   Compensation (4)   Tax Items (7)   R&D (8)   QSI   (GAAP)
 
Revenues
   $ 4,332     $ 2,467     $ 731     $ (4 )   $ 7,526     $ —     $ —     $ —     $ —     $ 7,526  
EBT
   $ 1,298     $ 2,233     $ 78     $ 197     $ 3,806     $ (495 )   $ —     $ (22 )   $ (133 )   $ 3,156  
Net income (loss)
                                   $ 2,804     $ (320 )   $ 40     $ (22 )   $ (32 )   $ 2,470  
Diluted EPS
                                   $ 1.64     $ (0.19 )   $ 0.02     $ (0.01 )   $ (0.02 )   $ 1.44  
Diluted shares used
                                     1,711       1,711       1,711       1,711       1,711       1,711  
 
(1)   During the first quarter of fiscal 2007, the Company reassessed the intersegment royalty charged to QCT by QTL and determined that the royalty should be eliminated starting in fiscal 2007 for management reporting purposes to, among other reasons, recognize other value that QTL has increasingly been realizing from QCT. As a result, QCT did not record a royalty to QTL in the first quarter of fiscal 2007, and prior period segment information has been adjusted in the same manner for comparative purposes.
 
(2)   During the first quarter of fiscal 2007, the Company reorganized the QUALCOMM Wireless Systems (QWS) division, which sells products and services to Globalstar, into the QWBS division in the QWI segment. Revenues and operating results relating to the QWS business were included in reconciling items through the end of fiscal 2006. Prior period segment information has been adjusted to conform to the new segment presentation.
 
(3)   Reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations. Reconciling items related to earnings before taxes consist primarily of certain investment income, research and development expenses and marketing expenses that are not allocated to the segments for management reporting purposes, nonreportable segment results and the elimination of intercompany profit.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 8 of 16
 
(4)   Certain share-based compensation is included in operating expenses as part of employee-related costs but is not allocated to our segments as such costs are not considered relevant by management in evaluating segment performance. Estimated share-based compensation, presented above and excluded from pro forma results, does not include $1 million, net of tax, related to share-based awards granted under the executive bonus program.
 
(5)   During the first quarter of fiscal 2007, the federal R&D tax credit that expired on December 31, 2005 was extended by Congress for a period of two years beyond the prior expiration date. We recorded a tax benefit of $33 million, or $0.02 diluted earnings per share, related to fiscal 2006 in the first quarter of fiscal 2007 due to this retroactive extension. The effective tax rate for the first quarter of fiscal 2007 for total QUALCOMM (GAAP) was 17% primarily as a result of this benefit. Our first quarter fiscal 2007 QUALCOMM pro forma results exclude this tax benefit attributable to 2006.
 
(6)   At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, equals the annual tax provisions for each column computed in accordance with GAAP. In interim quarters, the tax provision for the QSI operating segment is computed by subtracting the tax provision for QUALCOMM pro forma, the tax adjustment column and the tax provision related to estimated share-based compensation from the tax provision for total QUALCOMM (GAAP).
 
(7)   During the fourth quarter of fiscal 2006, the Company refined its estimate of R&D costs allocable to the Company’s foreign operations to reflect actual results and updated its forecast of future benefits under an intercompany cost sharing agreement. Due to this adjustment, the effective tax rate in the fourth quarter of fiscal 2006 for total QUALCOMM (GAAP) includes $33 million of tax expense, or $0.02 per diluted share, related to fiscal 2004. In addition, the Company recorded a $17 million tax benefit, or $0.01 diluted earnings per share, related to the impact of prior year tax audits completed during the fourth quarter of fiscal 2006. For fiscal 2006 pro forma presentation, results were adjusted to exclude these tax adjustments related to prior years.
 
(8)   During fiscal 2006, the Company recorded $22 million of expenses related to acquired in-process R&D associated with three acquisitions completed during the year. $21 million of this expense was recorded in the second quarter of fiscal 2006 and $1 million was recorded in the fourth quarter of fiscal 2006. For fiscal 2006 pro forma presentation, results were adjusted to exclude these expenses.
 
(9)   During the first quarter of fiscal 2006, the Company recorded a $56 million tax benefit, or $0.03 diluted earnings per share, related to the expected impact of prior year tax audits completed during that quarter. For fiscal 2006 pro forma presentation, results were adjusted to exclude this tax adjustment attributable to prior years.
N/M – Not Meaningful
Sums may not equal totals due to rounding.
Conference Call
QUALCOMM’s first quarter fiscal 2007 earnings conference call will be broadcast live on January 24, 2007 beginning at 1:45 p.m. Pacific Standard Time (PST) 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 24, 2007 beginning at approximately 5:30 p.m. (PST) through February 7, 2007 at 9:00 p.m. (PST). To listen to the replay, U.S. callers may dial (800) 642-1687 and international callers may dial (706) 645-9291. U.S. and international callers should use reservation number 4455735. 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 Announces First Quarter Fiscal 2007 Results   Page 9 of 16
Editor’s Note: If you would like to view the web slides that accompany this earnings release and conference call, please view the QUALCOMM Investor Relations website at http://investor.qualcomm.com/results.cfm.
QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2006 FORTUNE 500® company traded on The Nasdaq Stock Market® under the ticker symbol QCOM.
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by management (i) to evaluate, assess and benchmark the Company’s operating results on a consistent and comparable basis, (ii) to measure the performance and efficiency of the Company’s ongoing core operating businesses, including the QUALCOMM CDMA Technologies, QUALCOMM Technology Licensing and QUALCOMM Wireless & Internet segments, and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Pro forma measurements of the following financial data are used by the Company’s management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income, net investment income, income before income taxes, effective tax rate, net income, diluted earnings per share, operating cash flow and free cash flow. Management is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by eliminating the episodic impact of strategic investments in QSI and items such as acquired in-process R&D, as well as the inherent, non-operational volatility of share-based compensation. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on pro forma financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the QUALCOMM Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax adjustments related to prior years and acquired in-process R&D expense. The QSI segment is excluded because the Company expects to exit its strategic investments at various times and the effects of fluctuations in the value

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 10 of 16
of such investments are viewed by management as unrelated to the Company’s operational performance. Estimated share-based compensation, other than amounts related to share-based awards granted under the executive bonus program, is excluded because management views the valuation of options and other share-based compensation as theoretical and unrelated to the Company’s operational performance as it is affected by factors that are subject to change on each grant date, including the Company’s stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts in future years. Moreover, it is not an expense that requires or will require cash payment by the Company. Certain tax adjustments related to prior years are excluded in order to provide a clearer understanding of the Company’s ongoing tax rate and after tax earnings. Acquired in-process R&D expense in fiscal 2006 is excluded because such expense is incurred infrequently and is viewed by management as unrelated to the operating activities of the Company’s ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term shareholder value. The Company believes that this presentation is useful in evaluating its operating performance and financial strength. In addition, management uses this measure to value the Company and to compare its operating performance with other companies in the industry.
The non-GAAP pro forma financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, pro forma is not a term defined by GAAP, and, as a result, the Company’s measure of pro forma results might be different than similarly titled measures used by other companies. Reconciliations between total QUALCOMM (GAAP) results and QUALCOMM pro forma results and total QUALCOMM (GAAP) cash flow and QUALCOMM pro forma cash flow are presented herein.
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

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 11 of 16
risks associated with: the rate of development, deployment and commercial acceptance of CDMA-based networks and CDMA-based technology, including CDMA2000 1X, 1xEV-DO, WCDMA and HSDPA both domestically and internationally; our dependence on major customers and licensees; attacks on our licensing business model, including results of current and future litigation as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith; 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; our dependence on third party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the development, deployment and commercial acceptance of the MediaFLO USA network and FLO™ technology; as well as the other risks detailed from time-to-time in the Company’s SEC reports.
###
© 2007 QUALCOMM Incorporated. All rights reserved. QUALCOMM is a registered trademark of QUALCOMM Incorporated. CDMA2000® is a registered trademark of the Telecommunications Industry Association. All other trademarks are the property of their respective owners.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 12 of 16
QUALCOMM Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
PRO FORMA RESULTS TO TOTAL QUALCOMM RESULTS
(In millions, except per share data)
(Unaudited)
                                         
    Three Months Ended December 31, 2006  
            Estimated                     Total  
    QUALCOMM     Share-Based                     QUALCOMM  
    Pro Forma     Compensation (a)     Tax Items     QSI     (GAAP)  
Revenues:
                                        
Equipment and services
   $ 1,342     $ —     $ —     $ —     $ 1,342  
Licensing and royalty fees
     677       —       —       —       677  
 
                              
Total revenues
     2,019       —       —       —       2,019  
 
                              
 
                                        
Operating expenses:
                                        
Cost of equipment and services revenues
     624       10       —       —       634  
Research and development
     365       58       —       17       440  
Selling, general and administrative
     282       62       —       25       369  
 
                              
Total operating expenses
     1,271       130       —       42       1,443  
 
                              
 
                                        
Operating income (loss)
     748       (130 )     —       (42 )     576  
 
                                        
Investment income, net
     204 (b)     —       —       (1 )(c)     203  
 
                              
Income (loss) before income taxes
     952       (130 )     —       (43 )     779  
Income tax (expense) benefit
     (230 ) (d)     44       33       22 (e)     (131 ) (d)
 
                              
Net income (loss)
   $ 722     $ (86 )   $ 33     $ (21 )   $ 648  
 
                              
 
                                        
Earnings (loss) per common share:
                                        
Diluted
   $ 0.43     $ (0.05 )   $ 0.02     $ (0.01 )   $ 0.38  
 
                              
 
                                        
Shares used in per share calculations:
                                        
Diluted
     1,685       1,685       1,685       1,685       1,685  
 
                              
 
                                        
Supplemental Financial Data:
                                        
Operating Cash Flow
   $ 834     $ (32 )(g)   $ —     $ (13 )   $ 789  
Operating Cash Flow as a % of Revenues
     41 %                             39 %
Free Cash Flow (f)
   $ 544     $ (32 )(g)   $ —     $ (45 )   $ 467  
Free Cash Flow as a % of Revenues
     27 %                             23 %
 
(a)   Estimated share-based compensation presented above and excluded from pro forma results does not include $1 million, net of tax, related to share-based awards granted under the executive bonus program.
 
(b)   Includes $142 million in interest and dividend income related to cash, cash equivalents and marketable securities, which are not part of the Company’s strategic investment portfolio, and $63 million in net realized gains on investments, partially offset by $1 million in interest expense.
 
(c)   Includes $1 million in losses on derivatives, $1 million in interest expense and $1 million in other-than-temporary losses on investments, partially offset by $1 million in net realized gains on investments and $1 million in interest and dividend income.
 
(d)   The first quarter of fiscal 2007 tax rates are approximately 17% for total QUALCOMM (GAAP) and approximately 24% for QUALCOMM pro forma.
 
(e)   At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, will equal the annual tax provisions for each column computed in accordance with GAAP. In interim quarters, the tax provision for the QSI operating segment is computed by subtracting the tax provision for QUALCOMM pro forma and the tax provision related to estimated share-based compensation from the tax provision for total QUALCOMM (GAAP).
 
(f)   Free Cash Flow is calculated as net cash provided by operating activities less capital expenditures. Reconciliation of these amounts is included in the Reconciliation of Pro Forma Free Cash Flows to Net Cash Provided by Operating Activities for Total QUALCOMM for the three months ended December 31, 2006, included herein.
 
(g)   Tax benefits from stock options exercised during the quarter.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 13 of 16
QUALCOMM Incorporated
RECONCILIATION OF PRO FORMA FREE CASH FLOWS TO
TOTAL QUALCOMM (GAAP) NET CASH PROVIDED BY OPERATING ACTIVITIES
AND OTHER SUPPLEMENTAL DISCLOSURES
(In millions)
(Unaudited)
                                 
    Three Months Ended December 31, 2006  
            Estimated             Total  
    QUALCOMM     Share-Based             QUALCOMM  
    Pro Forma     Compensation     QSI     (GAAP)  
     
Net cash provided (used) by operating activities
   $ 834     $ (32 )(a)   $ (13 )   $ 789  
Less: capital expenditures
     (290 )     —       (32 )     (322 )
 
                        
Free cash flow
   $ 544     $ (32 )   $ (45 )   $ 467  
 
                        
 
                                
Other supplemental cash disclosures:
                                
Cash transfers from QSI (1)
   $ 7     $ —     $ (7 )   $ —  
Cash transfers to QSI (2)
     (95 )     —       95       —  
 
                        
Net cash transfers from (to)/from QSI
   $ (88 )   $ —     $ 88     $ —  
 
                        
 
(1)   Cash from loan payments and sale of equity securities.
 
(2)   Funding for strategic debt and equity investments and other QSI operating expenses.
                                 
    Three Months Ended December 25, 2005  
            Estimated             Total  
    QUALCOMM     Share-Based             QUALCOMM  
    Pro Forma     Compensation     QSI     (GAAP)  
     
Net cash provided (used) by operating activities
   $ 713     $ (101 )(a)   $ (16 )   $ 596  
Less: capital expenditures
     (182 )     —       (31 )     (213 )
 
                        
Free cash flow
   $ 531     $ (101 )   $ (47 )   $ 383  
 
                        
 
(a)   Tax benefits from stock options exercised during the period.

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 14 of 16
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
                 
    December 31,     September 24,  
    2006     2006  
ASSETS
Current assets:
                
Cash and cash equivalents
   $ 2,649     $ 1,607  
Marketable securities
     3,298       4,114  
Accounts receivable, net
     693       700  
Inventories
     330       250  
Deferred tax assets
     229       235  
Other current assets
     180       143  
 
            
Total current assets
     7,379       7,049  
Marketable securities
     4,598       4,228  
Property, plant and equipment, net
     1,559       1,482  
Goodwill
     1,320       1,230  
Deferred tax assets
     441       512  
Other assets
     1,041       707  
 
            
Total assets
   $ 16,338     $ 15,208  
 
            
 
                

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                
Trade accounts payable
   $ 471     $ 420  
Payroll and other benefits related liabilities
     205       273  
Dividend payable
     198       —  
Unearned revenue
     253       197  
Other current liabilities
     631       532  
 
            
Total current liabilities
     1,758       1,422  
Unearned revenue
     144       141  
Other liabilities
     261       239  
 
            
Total liabilities
     2,163       1,802  
 
            
 
                
Stockholders’ equity:
                
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at December 31, 2006 and September 24, 2006
     —       —  
Common stock, $0.0001 par value; 6,000 shares authorized; 1,655 and 1,652 shares issued and outstanding at December 31, 2006 and September 24, 2006, respectively
     —       —  
Paid-in capital
     7,427       7,242  
Retained earnings
     6,549       6,100  
Accumulated other comprehensive income
     199       64  
 
            
Total stockholders’ equity
     14,175       13,406  
 
            
Total liabilities and stockholders’ equity
   $ 16,338     $ 15,208  
 
            

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 15 of 16
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
                 
    Three Months Ended  
    December 31,     December 25,  
    2006     2005  
Revenues:
                
Equipment and services
   $ 1,342     $ 1,150  
Licensing and royalty fees
     677       591  
 
            
Total revenues
     2,019       1,741  
 
            
 
                
Operating expenses:
                
Cost of equipment and services revenues
     634       517  
Research and development
     440       340  
Selling, general and administrative
     369       239  
 
            
Total operating expenses
     1,443       1,096  
 
            
 
                
Operating income
     576       645  
 
                
Investment income, net
     203       91  
 
            
Income before income taxes
     779       736  
Income tax expense
     (131 )     (116 )
 
            
Net income
   $ 648     $ 620  
 
            
 
                
Basic earnings per common share
   $ 0.39     $ 0.38  
 
            
Diluted earnings per common share
   $ 0.38     $ 0.36  
 
            
 
                
Shares used in per share calculations:
                
Basic
     1,653       1,645  
 
            
Diluted
     1,685       1,702  
 
            
 
                
Dividends per share paid
   $ —     $ —  
 
            
Dividends per share announced
   $ 0.12     $ 0.09  
 
            

 

 

QUALCOMM Announces First Quarter Fiscal 2007 Results   Page 16 of 16
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                 
    Three Months Ended  
    December 31,     December 25,  
    2006     2005  
Operating Activities:
                
Net income
   $ 648     $ 620  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Depreciation and amortization
     91       58  
Non-cash portion of share-based compensation expense
     130       122  
Incremental tax benefits from stock options exercised
     (32 )     (101 )
Net realized gains on marketable securities and other investments
     (64 )     (20 )
Equity in losses of investees
     —       20  
Non-cash income tax expense
     54       104  
Other items, net
     5       (16 )
Changes in assets and liabilities, net of effects of acquisitions:
                
Accounts receivable, net
     (9 )     (171 )
Inventories
     (81 )     (18 )
Other assets
     (98 )     16  
Trade accounts payable
     47       87  
Payroll, benefits and other liabilities
     38       (86 )
Unearned revenue
     60       (19 )
 
            
Net cash provided by operating activities
     789       596  
 
            
Investing Activities:
                
Capital expenditures
     (322 )     (213 )
Purchases of available-for-sale securities
     (1,673 )     (3,318 )
Proceeds from sale of available-for-sale securities
     2,436       2,160  
Other investments and acquisitions, net of cash acquired
     (220 )     (6 )
Other items, net
     (2 )     4  
 
            
Net cash provided (used) by investing activities
     219       (1,373 )
 
            
Financing Activities:
                
Proceeds from issuance of common stock
     97       181  
Repurchase and retirement of common stock
     (96 )     —  
Incremental tax benefits from stock options exercised
     32       101  
 
            
Net cash provided by financing activities
     33       282  
 
            
Effect of exchange rate changes on cash
     1       2  
 
            
Net increase (decrease) in cash and cash equivalents
     1,042       (493 )
Cash and cash equivalents at beginning of period
     1,607       2,070  
 
            
Cash and cash equivalents at end of period
   $ 2,649     $ 1,577