Qualcomm Announces Third Quarter Fiscal 2008 Results
Revenues $2.8 Billion, EPS $0.45
Pro Forma EPS $0.55
SAN DIEGO, July 23 /PRNewswire-FirstCall/ -- 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 rescheduled 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. -- 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 ongoing 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.
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 $0.04 per diluted share, in the prior year quarter.
Research and Development Estimated Total Qualcomm Pro Share-Based In-Process Qualcomm ($ 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 Total Qualcomm Pro Share-Based 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%
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 agreement 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.
Results of Business Segments (in millions, except per share data): Third Quarter - Fiscal Year 2008 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $1,762 $803 $190 $3 $2,758 Change from prior year 29% 5% (3%) N/M 19% Change from prior quarter 9% 1% (2%) N/M 6% EBT $487 $670 $(1) $(40) $1,116 Change from prior year 11% 0% N/M N/M (5%) Change from prior quarter 14% (2%) N/M N/M 2% EBT as a % of revenues 28% 83% (1%) N/M 40% Net income (loss) $915 Change from prior year (2%) Change from prior quarter 2% Diluted EPS $0.55 Change from prior year 0% Change from prior quarter 2% Diluted shares used 1,654 Estimated Total Share-Based In-Process Qualcomm Segments Compensation(2) R&D QSI(3) (GAAP) Revenues $- $- $4 $2,762 Change from prior year N/M 19% Change from prior quarter 100% 6% EBT $(139) $(13) $(82) $882 Change from prior year (22%) N/A 10% (9%) Change from prior quarter (7%) N/A (30%) (3%) EBT as a % of revenues N/A N/A N/M 32% Net income (loss) $(94) $(13) $(60) $748 Change from prior year (25%) N/A 2% (6%) Change from prior quarter (7%) N/A (50%) (2%) Diluted EPS $(0.06) $(0.01) $(0.04) $0.45 Change from prior year (50%) N/A 0% (4%) Change from prior quarter (20%) N/A (100%) (4%) Diluted shares used 1,654 1,654 1,654 1,654 Second Quarter - Fiscal Year 2008 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $1,620 $795 $194 $(5) $2,604 EBT 427 684 - (12) 1,099 Net income (loss) 894 Diluted EPS $0.54 Diluted shares used 1,643 Estimated Total Share-Based Qualcomm Segments Compensation(2) QSI(3) (GAAP) Revenues $- $2 $2,606 EBT (130) (63) 906 Net income (loss) (88) (40) 766 Diluted EPS $(0.05) $(0.02) $0.47 Diluted shares used 1,643 1,643 1,643 Third Quarter - Fiscal Year 2007 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $1,367 $766 $196 $(4) $2,325 EBT 439 668 18 52 1,177 Net income (loss) 934 Diluted EPS $0.55 Diluted shares used 1,704 Estimated Total Share-Based Qualcomm Segments Compensation(2) QSI(3) (GAAP) Revenues $- $- $2,325 EBT (114) (91) 972 Net income (loss) (75) (61) 798 Diluted EPS $(0.04) $(0.04) $0.47 Diluted shares used 1,704 1,704 1,704 Fourth Quarter - Fiscal Year 2007 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $1,419 $647 $245 $(6) $2,305 EBT 424 537 31 137 1,129 Net income (loss) 911 Diluted EPS $0.54 Diluted shares used 1,689 Estimated Total Share-Based Tax Items Qualcomm Segments Compensation(2) (4) QSI(3) (GAAP) Revenues $- $- $1 $2,306 EBT (117) - (64) 948 Net income (loss) (77) 331 (34) 1,131 Diluted EPS $(0.05) $0.20 $(0.02) $0.67 Diluted shares used 1,689 1,689 1,689 1,689 Twelve Months - Fiscal Year 2007 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $5,275 $2,772 $828 $(5) $8,870 EBT 1,547 2,340 88 388 4,363 Net income (loss) 3,406 Diluted EPS $2.01 Diluted shares used 1,693 Estimated Total Share-Based Tax Items In-Process Qualcomm Segments Compensation(2) (4) R&D QSI (GAAP) Revenues $- $- $- $1 $8,871 EBT (487) - (10) (240) 3,626 Net income (loss) (321) 364 (9) (137) 3,303 Diluted EPS $(0.19) $0.22 $(0.01) $(0.08) $1.95 Diluted shares used 1,693 1,693 1,693 1,693 1,693 Nine Months - Fiscal Year 2008 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $4,956 $2,248 $595 $2 $7,801 Change from prior year 29% 6% 2% N/M 19% EBT $1,383 $1,895 $23 $25 $3,326 Change from prior year 23% 5% (60%) N/M 3% Net income (loss) $2,682 Change from prior year 8% Diluted EPS $1.62 Change from prior year 10% Diluted shares used 1,654 Estimated Total Share-Based In-Process Qualcomm Segments Compensation(2) R&D QSI(3) (GAAP) Revenues $- $- $7 $7,808 Change from prior year N/M 19% EBT $(394) $(14) $(200) $2,718 Change from prior year (6%) (40%) (14%) 1% Net income (loss) $(267) $(13) $(120) $2,282 Change from prior year (9%) (44%) (17%) 5% Diluted EPS $(0.16) $(0.01) $(0.07) $1.38 Change from prior year (14%) 0% (17%) 8% Diluted shares used 1,654 1,654 1,654 1,654 Nine Months - Fiscal Year 2007 Qualcomm Reconciling Pro Segments QCT QTL QWI Items (1) Forma Revenues $3,856 $2,125 $583 $1 $6,565 EBT 1,123 1,803 58 250 3,234 Net income (loss) 2,494 Diluted EPS $1.47 Diluted shares used 1,694 Estimated Total Share-Based In-Process Qualcomm Segments Compensation(2) Tax Items R&D QSI(3) (GAAP) Revenues $- $- $- $- $6,565 EBT (370) - (10) (176) 2,678 Net income (loss) (244) 33 (9) (103) 2,171 Diluted EPS $(0.14) $0.02 $(0.01) $(0.06) $1.28 Diluted shares used 1,694 1,694 1,694 1,694 1,694 (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 500 Index and is a 2008 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
Note Regarding Use of Non-GAAP Financial Measures
The Company presents 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 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 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(TM) technology; as well as the other risks detailed from time-to-time in our SEC reports.
(C) 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 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 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 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 Pro Share-Based In-Process Qualcomm 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 Pro Share-Based In-Process Qualcomm 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 Pro Share-Based Qualcomm 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 Pro Share-Based In-Process Qualcomm 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 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 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 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 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
SOURCE Qualcomm Incorporated
Released July 23, 2008