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 Third Quarter Fiscal 2008 Results
Revenues $2.8 Billion, EPS $0.45
Pro Forma EPS $0.55
SAN DIEGO — July 23, 2008 — Qualcomm Incorporated (Nasdaq: QCOM) today announced results for the third fiscal quarter of 2008 ended June 29, 2008.
Qualcomm’s third quarter fiscal 2008 earnings conference call has been re-scheduled to Thursday, July 24, 2008, beginning at 8:00 a.m. Eastern Daylight Time (5:00 a.m. Pacific Daylight Time). Conference call details are included herein.
Total Qualcomm (GAAP) Third Quarter Results
Total Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
  •   Revenues: $2.8 billion, up 19 percent year-over-year and 6 percent sequentially.
 
  •   Net income: $748 million, down 6 percent year-over-year and 2 percent sequentially.
 
  •   Diluted earnings per share: $0.45, down 4 percent year-over-year and sequentially.
 
  •   Effective tax rate: 15 percent for the quarter. Fiscal 2008 estimated tax rate of approximately 16 percent.
 
  •   Estimated share-based compensation: $94 million, net of tax, up 24 percent year-over-year and 7 percent sequentially.
 
  •   Operating cash flow: $739 million, down 25 percent year-over-year; 27 percent of revenues.
 
  •   Return of capital to stockholders: $261 million, or $0.16 per share, of cash dividends paid.
Qualcomm Pro Forma Third Quarter Results
Pro forma results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process research and development (R&D) expense.
  •   Revenues: $2.8 billion, up 19 percent year-over-year and 6 percent sequentially.
 
  •   Net income: $915 million, down 2 percent year-over-year and up 2 percent sequentially.
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Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 2 of 15               
  •   Diluted earnings per share: $0.55, even year-over-year and up 2 percent sequentially; excludes $0.04 loss per share attributable to the QSI segment, $0.06 loss per share attributable to certain estimated share-based compensation and $0.01 loss per share attributable to acquired in-process R&D. (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: 18 percent for the quarter. Fiscal 2008 estimated tax rate of approximately 19 percent.
 
  •   Free cash flow: $844 million, down 14 percent year-over-year; 31 percent of revenues (defined as net cash from operating activities less capital expenditures).
Detailed reconciliations between total Qualcomm (GAAP) results and cash flow and Qualcomm pro forma results and cash flow are included at the end of this news release. Prior period reconciliations are presented on Qualcomm’s Investor Relations web page at www.qualcomm.com.
“We are pleased to report another strong quarter as the migration to 3G-enabled products continues to accelerate,” said Dr. Paul E. Jacobs, chief executive officer of Qualcomm. “We delivered record revenues, up 19 percent year-over-year, and our pro forma earnings per share were at the high end of our prior estimate.
“I am also pleased to announce that we have reached a settlement agreement with Nokia that resolves all litigation between the companies and will allow both of us to focus our efforts on driving the global 3G and 4G markets forward. In addition to providing an up-front royalty payment and other benefits, Qualcomm will also receive on-going royalties for all CDMA standards, as well as single-mode OFDMA. I look forward to providing our updated guidance tomorrow morning.”
Cash and Marketable Securities
Qualcomm’s cash, cash equivalents and marketable securities totaled approximately $11.2 billion at the end of the third quarter of fiscal 2008, compared to $10.6 billion at the end of the second quarter of fiscal 2008 and $12.3 billion a year ago. On July 16, 2008, we announced a cash dividend of $0.16 per share payable on September 26, 2008 to stockholders of record at the close of business on August 29, 2008.

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 3 of 15               
Estimated Share-Based Compensation
Total Qualcomm (GAAP) net income for the third quarter of fiscal 2008 included estimated share-based compensation, net of tax, of $94 million, or $0.06 per diluted share. This compares to $76 million, or $0.04 per diluted share, in the prior year quarter.
Research and Development
                                         
            Estimated                
    Qualcomm Pro   Share-Based   In-Process           Total Qualcomm
($ in millions)   Forma   Compensation   R&D   QSI   (GAAP)
Third quarter fiscal 2008
   $ 495     $ 64     $ 13     $ 24     $ 596  
As a % of revenue
     18 %                     N/M       22 %
Third quarter fiscal 2007
   $ 385     $ 50     $ —     $ 19     $ 454  
As a % of revenue
     17 %                             20 %
Year-over-year change ($)
     29 %     28 %             26 %     31 %
 
N/M — Not Meaningful
Pro forma R&D expenses increased 29 percent year-over-year, primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies, the expansion of our intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services, including lower-cost devices, the integration of wireless technologies with consumer electronics and computing, the convergence of multiband, multimode, multinetwork products and technologies, third-party operating systems and services platforms. QSI R&D expenses were related to MediaFLO USA.
Selling, General and Administrative
                                 
            Estimated            
    Qualcomm Pro   Share-Based           Total Qualcomm
($ in millions)   Forma   Compensation   QSI   (GAAP)
Third quarter fiscal 2008
   $ 357     $ 65     $ 31     $ 453  
As a % of revenue
     13 %             N/M       16 %
Third quarter fiscal 2007
   $ 307     $ 54     $ 40     $ 401  
As a % of revenue
     13 %                     17 %
Year-over-year change ($)
     16 %     20 %     (23 %)     13 %

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 4 of 15               
Pro forma selling, general and administrative (SG&A) expenses increased 16 percent year-over-year, primarily attributable to an increase in certain professional fees, primarily related to patent activities, and employee-related expenses. QSI SG&A expenses were primarily related to MediaFLO USA.
Effective Income Tax Rate
Without the potential effect of our settlement with Nokia, our fiscal 2008 effective income tax rates are estimated to be 16 percent for total Qualcomm (GAAP) and 19 percent for Qualcomm pro forma. The third quarter total Qualcomm (GAAP) and Qualcomm pro forma effective tax rates of 15 percent and 18 percent, respectively, are lower than the estimated annual effective tax rates primarily due to the change in our estimate of foreign earnings taxed at less than the United States federal tax rate.
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 third quarter of fiscal 2008 included a $0.04 loss per share for the QSI segment. The third quarter of fiscal 2008 QSI results included $88 million in operating expenses, primarily related to MediaFLO USA.

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 5 of 15               
Results of Business Segments (in millions, except per share data):
                                                                                 
Third Quarter - Fiscal Year 2008
                                            Estimated                   Total        
                            Reconciling   Qualcomm Pro   Share-Based   In-Process           Qualcomm        
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   R&D   QSI (3)   (GAAP)        
Revenues
   $ 1,762     $ 803     $ 190     $ 3     $ 2,758     $ —     $ —     $ 4     $ 2,762          
Change from prior year
     29 %     5 %     (3 %)     N/M       19 %                     N/M       19 %        
Change from prior quarter
     9 %     1 %     (2 %)     N/M       6 %                     100 %     6 %        
EBT
   $ 487     $ 670     $ (1 )   $ (40 )   $ 1,116     $ (139 )   $ (13 )   $ (82 )   $ 882          
Change from prior year
     11 %     0 %     N/M       N/M       (5 %)     (22 %)     N/A       10 %     (9 %)        
Change from prior quarter
     14 %     (2 %)     N/M       N/M       2 %     (7 %)     N/A       (30 %)     (3 %)        
EBT as a % of revenues
     28 %     83 %     (1 %)     N/M       40 %     N/A       N/A       N/M       32 %        
Net income (loss)
                                   $ 915     $ (94 )   $ (13 )   $ (60 )   $ 748          
Change from prior year
                                     (2 %)     (25 %)     N/A       2 %     (6 %)        
Change from prior quarter
                                     2 %     (7 %)     N/A       (50 %)     (2 %)        
Diluted EPS
                                   $ 0.55     $ (0.06 )   $ (0.01 )   $ (0.04 )   $ 0.45          
Change from prior year
                                     0 %     (50 %)     N/A       0 %     (4 %)        
Change from prior quarter
                                     2 %     (20 %)     N/A       (100 %)     (4 %)        
Diluted shares used
                                     1,654       1,654       1,654       1,654       1,654          
 
Second Quarter - Fiscal Year 2008
                                            Estimated           Total                
                            Reconciling   Qualcomm Pro   Share-Based           Qualcomm                
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   QSI (3)   (GAAP)                
Revenues
   $ 1,620     $ 795     $ 194     $ (5 )   $ 2,604     $ —     $ 2     $ 2,606                  
EBT
     427       684       —       (12 )     1,099       (130 )     (63 )     906                  
Net income (loss)
                                     894       (88 )     (40 )     766                  
Diluted EPS
                                   $ 0.54     $ (0.05 )   $ (0.02 )   $ 0.47                  
Diluted shares used
                                     1,643       1,643       1,643       1,643                  
 
Third Quarter - Fiscal Year 2007
                                            Estimated           Total                
                            Reconciling   Qualcomm Pro   Share-Based           Qualcomm                
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   QSI (3)   (GAAP)                
Revenues
   $ 1,367     $ 766     $ 196     $ (4 )   $ 2,325     $ —     $ —     $ 2,325                  
EBT
     439       668       18       52       1,177       (114 )     (91 )     972                  
Net income (loss)
                                     934       (75 )     (61 )     798                  
Diluted EPS
                                   $ 0.55     $ (0.04 )   $ (0.04 )   $ 0.47                  
Diluted shares used
                                     1,704       1,704       1,704       1,704                  
 
Fourth Quarter - Fiscal Year 2007
                                            Estimated                   Total        
                            Reconciling   Qualcomm Pro   Share-Based   Tax Items           Qualcomm        
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   (4)   QSI (3)   (GAAP)        
Revenues
   $ 1,419     $ 647     $ 245     $ (6 )   $ 2,305     $ —     $ —     $ 1     $ 2,306          
EBT
     424       537       31       137       1,129       (117 )     —       (64 )     948          
Net income (loss)
                                     911       (77 )     331       (34 )     1,131          
Diluted EPS
                                   $ 0.54     $ (0.05 )   $ 0.20     $ (0.02 )   $ 0.67          
Diluted shares used
                                     1,689       1,689       1,689       1,689       1,689          
 
Twelve Months - Fiscal Year 2007
                                            Estimated                           Total
                            Reconciling   Qualcomm Pro   Share-Based   Tax Items   In-Process           Qualcomm
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   (4)   R&D   QSI   (GAAP)
Revenues
   $ 5,275     $ 2,772     $ 828     $ (5 )   $ 8,870     $ —     $ —     $ —     $ 1     $ 8,871  
EBT
     1,547       2,340       88       388       4,363       (487 )     —       (10 )     (240 )     3,626  
Net income (loss)
                                     3,406       (321 )     364       (9 )     (137 )     3,303  
Diluted EPS
                                   $ 2.01     $ (0.19 )   $ 0.22     $ (0.01 )   $ (0.08 )   $ 1.95  
Diluted shares used
                                     1,693       1,693       1,693       1,693       1,693       1,693  
 
Nine Months - Fiscal Year 2008
                                            Estimated                   Total        
                            Reconciling   Qualcomm Pro   Share-Based   In-Process           Qualcomm        
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   R&D   QSI (3)   (GAAP)        
Revenues
   $ 4,956     $ 2,248     $ 595     $ 2     $ 7,801     $ —     $ —     $ 7     $ 7,808          
Change from prior year
     29 %     6 %     2 %     N/M       19 %                     N/M       19 %        
EBT
   $ 1,383     $ 1,895     $ 23     $ 25     $ 3,326     $ (394 )   $ (14 )   $ (200 )   $ 2,718          
Change from prior year
     23 %     5 %     (60 %)     N/M       3 %     (6 %)     (40 %)     (14 %)     1 %        
Net income (loss)
                                   $ 2,682     $ (267 )   $ (13 )   $ (120 )   $ 2,282          
Change from prior year
                                     8 %     (9 %)     (44 %)     (17 %)     5 %        
Diluted EPS
                                   $ 1.62     $ (0.16 )   $ (0.01 )   $ (0.07 )   $ 1.38          
Change from prior year
                                     10 %     (14 %)     0 %     (17 %)     8 %        
Diluted shares used
                                     1,654       1,654       1,654       1,654       1,654          
 
Nine Months - Fiscal Year 2007
                                            Estimated                           Total
                            Reconciling   Qualcomm Pro   Share-Based           In-Process           Qualcomm
Segments   QCT   QTL   QWI   Items (1)   Forma   Compensation (2)   Tax Items   R&D   QSI (3)   (GAAP)
Revenues
   $ 3,856     $ 2,125     $ 583     $ 1     $ 6,565     $ —     $ —     $ —     $ —     $ 6,565  
EBT
     1,123       1,803       58       250       3,234       (370 )     —       (10 )     (176 )     2,678  
Net income (loss)
                                     2,494       (244 )     33       (9 )     (103 )     2,171  
Diluted EPS
                                   $ 1.47     $ (0.14 )   $ 0.02     $ (0.01 )   $ (0.06 )   $ 1.28  
Diluted shares used
                                     1,694       1,694       1,694       1,694       1,694       1,694  

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 6 of 15               
 
(1)   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 intersegment profit.
 
(2)   Certain share-based compensation is included in operating expenses as part of employee-related costs but is not allocated to the Company’s segments as such costs are not considered relevant by management in evaluating segment performance.
 
(3)   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 items column and the tax provisions related to estimated share-based compensation and in-process R&D from the tax provision for total Qualcomm (GAAP).
 
(4)   During the fourth quarter of fiscal 2007, the Company recorded a $331 million tax benefit, or $0.20 diluted earnings per share, related to tax expense recorded in prior years resulting from the completion of tax audits during the fourth fiscal quarter. The fiscal 2007 Qualcomm pro forma results excluded this tax benefit attributable to prior years.
N/M — Not Meaningful
N/A — Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm’s third quarter fiscal 2008 earnings conference call will be broadcast live on July 24, 2008 beginning at 5:00 a.m. Pacific Daylight Time (PDT) 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 July 24, 2008, beginning at approximately 6:00 a.m. PDT through August 23, 2008 at 9:00 p.m. PDT. 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 57610454. 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.
Editor’s Note: To view the web slides that accompany this earnings release and conference call, please go to 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

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 7 of 15               
500 Index and is a 2008 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 using pro forma information. 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 QSI segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process R&D. 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 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 a bonus program that may result in the issuance of unrestricted shares of the Company’s common stock, is excluded because management views the valuation of options and other share-based compensation as theoretical and unrelated to the Company’s operational performance. Further, share-based compensation is affected by factors that are subject to change, 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 generally not an expense that requires or will require cash payment by the

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 8 of 15               
Company. Certain tax items 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 is excluded because such expense 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 evaluate the Company’s performance, 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 between 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 risks associated with: the rate of deployment of our technologies in wireless networks and of 3G wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and internationally; attacks on our business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; fluctuations in the demand for products, services or applications based on our technologies; our

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 9 of 15               
dependence on major customers and licensees; foreign currency fluctuations; strategic loans, investments and transactions we have 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 our SEC reports.
###
© 2008 Qualcomm Incorporated. All rights reserved. Qualcomm is a registered trademark of Qualcomm Incorporated. MediaFLO and FLO are trademarks 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 Third Quarter Fiscal 2008 Results   Page 10 of 15               
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from Qualcomm
Pro Forma results to Total Qualcomm (GAAP) results
(In millions, except per share data)
(Unaudited)
                                         
    Three Months Ended June 29, 2008  
            Estimated                     Total  
    Qualcomm Pro     Share-Based     In-Process             Qualcomm  
    Forma     Compensation     R&D     QSI     (GAAP)  
Revenues:
                                        
Equipment and services
   $ 1,863     $ —     $ —     $ 4     $ 1,867  
Licensing and royalty fees
     895       —       —       —       895  
 
                              
Total revenues
     2,758       —       —       4       2,762  
 
                              
 
                                        
Operating expenses:
                                        
Cost of equipment and services revenues
     846       10       —       33       889  
Research and development
     495       64       13       24       596  
Selling, general and administrative
     357       65       —       31       453  
 
                              
Total operating expenses
     1,698       139       13       88       1,938  
 
                              
 
                                        
Operating income (loss)
     1,060       (139 )     (13 )     (84 )     824  
 
                                        
Investment income, net
     56 (a)     —       —       2 (b)     58  
 
                              
Income (loss) before income taxes
     1,116       (139 )     (13 )     (82 )     882  
Income tax (expense) benefit
     (201 )(c)     45       —       22 (d)     (134 )(c)
 
                              
Net income (loss)
   $ 915     $ (94 )   $ (13 )   $ (60 )   $ 748  
 
                              
 
                                        
Earnings (loss) per common share:
                                        
Diluted
   $ 0.55     $ (0.06 )   $ (0.01 )   $ (0.04 )   $ 0.45  
 
                              
 
                                        
Shares used in per share calculations:
                                        
Diluted
     1,654       1,654       1,654       1,654       1,654  
 
                              
 
                                        
Supplemental Financial Data:
                                        
Operating Cash Flow
   $ 1,020     $ (209 )(f)   $ (13 )   $ (59 )   $ 739  
Operating Cash Flow as a % of Revenues
     37 %                     N/M       27 %
Free Cash Flow (e)
   $ 844     $ (209 )(f)   $ (13 )   $ (438 )   $ 184  
Free Cash Flow as a % of Revenues
     31 %                     N/M       7 %
 
(a)   Included $105 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of the Company’s strategic investment portfolio, and $24 million in net realized gains on investments, partially offset by $71 million in other-than-temporary losses on investments and $2 million in interest expense.
 
(b)   Included $15 million in net realized gains on investments and $3 million interest and dividend income, partially offset by $12 million in other-than-temporary losses on investments, $2 million in equity in losses of investees and $2 million in interest expense.
 
(c)   The third quarter of fiscal 2008 effective tax rates were approximately 15% for total Qualcomm (GAAP) and approximately 18% for Qualcomm pro forma.
 
(d)   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 items column and the tax provisions related to estimated share-based compensation and in-process R&D from the tax provision for total Qualcomm (GAAP).
 
(e)   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 Total Qualcomm (GAAP) net cash provided by operating activities and other supplemental disclosures for the three months ended June 29, 2008, included herein.
 
(f)   Incremental tax benefits from stock options exercised during the period.

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 11 of 15               
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from Qualcomm
Pro Forma results to Total Qualcomm (GAAP) results
(In millions, except per share data)
(Unaudited)
                                         
    Nine Months Ended June 29, 2008  
            Estimated                     Total  
    Qualcomm Pro     Share-Based     In-Process             Qualcomm  
    Forma     Compensation (a)     R&D     QSI     (GAAP)  
Revenues:
                                        
Equipment and services
   $ 5,288     $ —     $ —     $ 7     $ 5,295  
Licensing and royalty fees
     2,513       —       —       —       2,513  
 
                              
Total revenues
     7,801       —       —       7       7,808  
 
                              
 
                                        
Operating expenses:
                                        
Cost of equipment and services revenues
     2,379       29       —       85       2,493  
Research and development
     1,397       182       14       67       1,660  
Selling, general and administrative
     1,000       183       —       78       1,261  
 
                              
Total operating expenses
     4,776       394       14       230       5,414  
 
                              
 
                                        
Operating income (loss)
     3,025       (394 )     (14 )     (223 )     2,394  
 
                                        
Investment income, net
     301 (b)     —       —       23 (c)     324  
 
                              
Income (loss) before income taxes
     3,326       (394 )     (14 )     (200 )     2,718  
Income tax (expense) benefit
     (644 )(d)     127       1       80 (e)     (436 )(d)
 
                              
Net income (loss)
   $ 2,682     $ (267 )   $ (13 )   $ (120 )   $ 2,282  
 
                              
 
                                        
Earnings (loss) per common share:
                                        
Diluted
   $ 1.62     $ (0.16 )   $ (0.01 )   $ (0.07 )   $ 1.38  
 
                              
 
                                        
Shares used in per share calculations:
                                        
Diluted
     1,654       1,654       1,654       1,654       1,654  
 
                              
 
                                        
Supplemental Financial Data:
                                        
Operating Cash Flow
   $ 3,090     $ (310 )(g)   $ (14 )   $ (199 )   $ 2,567  
Operating Cash Flow as a % of Revenue
     40 %                     N/M       33 %
Free Cash Flow (f)
   $ 2,722     $ (310 )(g)   $ (14 )   $ (814 )   $ 1,584  
Free Cash Flow as a % of Revenue
     35 %                     N/M       20 %
 
(a)   Estimated share-based compensation presented above and excluded from pro forma results did not include $1 million, net of tax, related to share-based awards granted under a bonus program.
 
(b)   Included $374 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of the Company’s strategic investment portfolio, $108 million in net realized gains on investments and $6 million in gains on derivative instruments from put options related to our share repurchase program, partially offset by $175 million in other-than-temporary losses on investments and $12 million in interest expense.
 
(c)   Included $50 million in net realized gains on investments, $4 million in interest and dividend income and $1 million in equity in earnings of investees, partially offset by $27 million in other-than-temporary losses on investments and $5 million in interest expense.
 
(d)   The effective tax rates for the nine months ended June 29, 2008 were approximately 16% for total Qualcomm (GAAP) and approximately 19% for Qualcomm pro forma.
 
(e)   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 items column and the tax provisions related to estimated share-based compensation and in-process R&D 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 Total Qualcomm (GAAP) net cash provided by operating activities and other supplemental disclosures for the nine months ended June 29, 2008, included herein.
 
(g)   Incremental tax benefits from stock options exercised during the period.

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 12 of 15               
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 June 29, 2008  
            Estimated                     Total  
    Qualcomm     Share-Based     In-Process             Qualcomm  
    Pro Forma     Compensation     R&D     QSI     (GAAP)  
     
Net cash provided (used) by operating activities
   $ 1,020     $ (209 )(a)   $ (13 )   $ (59 )   $ 739  
Less: capital expenditures
     (176 )     —       —       (379 )     (555 )
 
                              
Free cash flow
   $ 844     $ (209 )   $ (13 )   $ (438 )   $ 184  
 
                              
 
                                        
Other supplemental cash disclosures:
                                        
Cash transfers from QSI (1)
   $ 30     $ —     $ —     $ (30 )   $ —  
Cash transfers to QSI (2)
     (446 )     —       —       446       —  
 
                              
Net cash transfers
   $ (416 )   $ —     $ —     $ 416     $ —  
 
                              
                                         
    Nine Months Ended June 29, 2008  
            Estimated                     Total  
    Qualcomm     Share-Based     In-Process             Qualcomm  
    Pro Forma     Compensation     R&D     QSI     (GAAP)  
     
Net cash provided (used) by operating activities
   $ 3,090     $ (310 )(a)   $ (14 )   $ (199 )   $ 2,567  
Less: capital expenditures (3)
     (368 )     —       —       (615 )     (983 )
 
                              
Free cash flow
   $ 2,722     $ (310 )   $ (14 )   $ (814 )   $ 1,584  
 
                              
 
                                        
Other supplemental cash disclosures:
                                        
Cash transfers from QSI (1)
   $ 59     $ —     $ —     $ (59 )   $ —  
Cash transfers to QSI (2)
     (842 )     —       —       842       —  
 
                              
Net cash transfers
   $ (783 )   $ —     $ —     $ 783     $ —  
 
                              
 
(1)   Cash from sale of equity securities.
 
(2)   Funding for strategic debt and equity investments, capital expenditures and other QSI operating expenses.
 
(3)   Upon receipt of licenses from the FCC for additional 700 MHz spectrum for use in our MediaFLO USA business, the deposit made in the second quarter of fiscal 2008 of $195 million was reclassified from Qualcomm pro forma capital expenditures to QSI capital expenditures. The total license fee included in QSI capital expenditures for fiscal 2008 was $555 million.
                                 
    Three Months Ended July 1, 2007  
            Estimated             Total  
    Qualcomm     Share-Based             Qualcomm  
    Pro Forma     Compensation     QSI     (GAAP)  
     
Net cash provided (used) by operating activities
   $ 1,122     $ (80 )(a)   $ (54 )   $ 988  
Less: capital expenditures
     (145 )     —       (12 )     (157 )
 
                        
Free cash flow
   $ 977     $ (80 )   $ (66 )   $ 831  
 
                        
                                         
    Nine Months Ended July 1, 2007  
            Estimated                     Total  
    Qualcomm     Share-Based     In-Process             Qualcomm  
    Pro Forma     Compensation     R&D     QSI     (GAAP)  
     
 
                                        
Net cash provided (used) by operating activities
   $ 3,116     $ (199 )(a)   $ (10 )   $ (139 )   $ 2,768  
Less: capital expenditures
     (506 )     —       —       (65 )     (571 )
 
                              
Free cash flow
   $ 2,610     $ (199 )   $ (10 )   $ (204 )   $ 2,197  
 
                              
 
(a)   Incremental tax benefits from stock options exercised during the period.

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 13 of 15               
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
                 
    June 29,     September 30,  
    2008     2007  
Current assets:
                
Cash and cash equivalents
   $ 2,970     $ 2,411  
Marketable securities
     3,644       4,170  
Accounts receivable, net
     917       715  
Inventories
     618       469  
Deferred tax assets
     358       435  
Collateral held under securities lending
     326       421  
Other current assets
     228       200  
 
            
Total current assets
     9,061       8,821  
Marketable securities
     4,567       5,234  
Property, plant and equipment, net
     1,912       1,788  
Goodwill
     1,520       1,325  
Deferred tax assets
     870       318  
Other assets
     1,667       1,009  
 
            
Total assets
   $ 19,597     $ 18,495  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
                
Trade accounts payable
   $ 653     $ 635  
Payroll and other benefits related liabilities
     356       311  
Unearned revenues
     186       218  
Income taxes payable
     15       119  
Obligations under securities lending
     326       421  
Other current liabilities
     575       554  
 
            
Total current liabilities
     2,111       2,258  
Unearned revenues
     124       142  
Income taxes payable
     222       —  
Other liabilities
     314       260  
 
            
Total liabilities
     2,771       2,660  
 
            
 
                
Stockholders’ equity:
                
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at June 29, 2008 and September 30, 2007
     —       —  
Common stock, $0.0001 par value; 6,000 shares authorized; 1,640 and 1,646 shares issued and outstanding at June 29, 2008 and September 30, 2007, respectively
     —       —  
Paid-in capital
     6,783       7,057  
Retained earnings
     10,104       8,541  
Accumulated other comprehensive (loss) income
     (61 )     237  
 
            
Total stockholders’ equity
     16,826       15,835  
 
            
Total liabilities and stockholders’ equity
   $ 19,597     $ 18,495  
 
            

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 14 of 15               
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    June 29,     July 1,     June 29,     July 1,  
    2008     2007     2008     2007  
 
                                
Revenues:
                                
Equipment and services
   $ 1,867     $ 1,484     $ 5,295     $ 4,196  
Licensing and royalty fees
     895       841       2,513       2,369  
 
                        
Total revenues
     2,762       2,325       7,808       6,565  
 
                        
 
                                
Operating expenses:
                                
Cost of equipment and services revenues
     889       688       2,493       1,956  
Research and development
     596       454       1,660       1,348  
Selling, general and administrative
     453       401       1,261       1,155  
 
                        
Total operating expenses
     1,938       1,543       5,414       4,459  
 
                        
 
                                
Operating income
     824       782       2,394       2,106  
 
                                
Investment income, net
     58       190       324       572  
 
                        
Income before income taxes
     882       972       2,718       2,678  
Income tax expense
     (134 )     (174 )     (436 )     (507 )
 
                        
Net income
   $ 748     $ 798     $ 2,282     $ 2,171  
 
                        
 
                                
Basic earnings per common share
   $ 0.46     $ 0.48     $ 1.40     $ 1.31  
 
                        
Diluted earnings per common share
   $ 0.45     $ 0.47     $ 1.38     $ 1.28  
 
                        
 
                                
Shares used in per share calculations:
                                
Basic
     1,626       1,670       1,626       1,661  
 
                        
Diluted
     1,654       1,704       1,654       1,694  
 
                        
 
                                
Dividends per share paid
   $ 0.16     $ 0.14     $ 0.44     $ 0.38  
 
                        
Dividends per share announced
   $ 0.16     $ 0.14     $ 0.44     $ 0.38  
 
                        

 

 

Qualcomm Announces Third Quarter Fiscal 2008 Results   Page 15 of 15               
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    June 29,     July 1,     June 29,     July 1,  
    2008     2007     2008     2007  
Operating Activities:
                                
Net income
   $ 748     $ 798     $ 2,282     $ 2,171  
Adjustments to reconcile net income to net cash provided by operating activities:
                                
Depreciation and amortization
     117       99       336       283  
Non-cash income tax expense
     66       136       148       365  
Non-cash portion of share-based compensation expense
     138       114       393       371  
Incremental tax benefits from stock options exercised
     (209 )     (80 )     (310 )     (199 )
Net realized gains on marketable securities and other investments
     (39 )     (53 )     (158 )     (173 )
Other-than-temporary losses on marketable securities and other investments
     83       8       202       11  
Other items, net
     11       7       1       5  
Changes in assets and liabilities, net of effects of acquisitions:
                                
Accounts receivable, net
     (186 )     (45 )     (178 )     (62 )
Inventories
     (7 )     (49 )     (142 )     (147 )
Other assets
     (7 )     10       35       (137 )
Trade accounts payable
     (24 )     (7 )     (4 )     127  
Payroll, benefits and other liabilities
     78       68       12       69  
Unearned revenues
     (30 )     (18 )     (50 )     84  
 
                        
Net cash provided by operating activities
     739       988       2,567       2,768  
 
                        
Investing Activities:
                                
Capital expenditures
     (555 )     (157 )     (983 )     (571 )
Purchases of available-for-sale securities
     (1,984 )     (2,340 )     (4,944 )     (5,921 )
Proceeds from sale of available-for-sale securities
     1,559       1,909       5,548       6,254  
Other investments and acquisitions, net of cash acquired
     (8 )     (3 )     (283 )     (230 )
Change in collateral held under securities lending
     8       (153 )     95       (153 )
Other items, net
     4       12       30       13  
 
                        
Net cash used by investing activities
     (976 )     (732 )     (537 )     (608 )
 
                        
Financing Activities:
                                
Proceeds from issuance of common stock
     464       220       700       474  
Incremental tax benefits from stock options exercised
     209       80       310       199  
Dividends paid
     (261 )     (234 )     (716 )     (632 )
Repurchase and retirement of common stock
     —       (129 )     (1,670 )     (264 )
Proceeds from put options
     —       17       —       17  
Change in obligations under securities lending
     (8 )     153       (95 )     153  
 
                        
Net cash provided (used) by financing activities
     404       107       (1,471 )     (53 )
 
                        
Effect of exchange rate changes on cash
     —       —       —       2  
 
                        
Net increase in cash and cash equivalents
     167       363       559       2,109  
Cash and cash equivalents at beginning of period
     2,803       3,353       2,411       1,607  
 
                        
Cash and cash equivalents at end of period
   $ 2,970     $ 3,716     $ 2,970     $ 3,716