Qualcomm Announces Second Quarter Fiscal 2011 Results
Record Revenues $3.9 Billion
GAAP EPS $0.59, Non-GAAP EPS $0.86
— Raises Fiscal 2011 Revenue and Earnings Guidance —
SAN DIEGO, April 20, 2011 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the second quarter of fiscal 2011 ended March 27, 2011.
"We are pleased to report record quarterly revenues, and we are raising our revenue and earnings guidance for the year as the demand for smartphones across an array of geographies and tiers continues to grow," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "In addition, we have resolved the second of the two previously disclosed licensee disputes. We continue to execute on our strategic priorities as our partners deploy our technologies and solutions to offer leading wireless products and services to consumers worldwide."
Second Quarter Results (GAAP)
-- Revenues: $3.88 billion, up 46 percent year-over-year (y-o-y) and 16
percent sequentially.
-- Operating income: $1.07 billion, up 38 percent y-o-y and down 3 percent
sequentially.
-- Net income:(1) $999 million, up 29 percent y-o-y and down 15 percent
sequentially.
-- Diluted earnings per share:(1) $0.59, up 28 percent y-o-y and down 17
percent sequentially.
-- Effective tax rate: 21 percent for the quarter.
-- Operating cash flow: $1.77 billion, up 123 percent y-o-y; 46 percent of
revenues.
-- Return of capital to stockholders: $316 million, or $0.19 per share, of
cash dividends paid.
(1) Net income and diluted earnings per share throughout this news release are
attributable to Qualcomm (i.e., after adjustment for noncontrolling
interests), unless otherwise stated.
Non-GAAP Second Quarter Results
Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain tax items that are not related to the current year and acquired in-process research and development (R&D) expense.
-- Revenues: $3.87 billion, up 45 percent y-o-y and 16 percent
sequentially.
-- Operating income: $1.65 billion, up 55 percent y-o-y and 17 percent
sequentially.
-- Net income: $1.45 billion, up 47 percent y-o-y and 8 percent
sequentially.
-- Diluted earnings per share: $0.86, up 46 percent y-o-y and 5 percent
sequentially. The current quarter excludes $0.18 loss per share
attributable to the QSI segment and $0.09 loss per share attributable to
certain share-based compensation.
-- Effective tax rate: 22 percent for the quarter.
-- Free cash flow: $1.85 billion, up 125 percent y-o-y; 48 percent of
revenues (defined as net cash from operating activities less capital
expenditures).
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and Non-GAAP results are included at the end of this news release.
In the comparisons summarized above, the following should be noted with respect to results for the second quarter of fiscal 2011: GAAP and Non-GAAP results included $401 million in revenues related to prior quarters as a result of agreements entered into with two licensees to settle ongoing disputes, including an arbitration proceeding with Panasonic Mobile Communications Co. Ltd.; GAAP results included $310 million in expenses in the QSI segment related to the FLO TV™ restructuring plan; and GAAP and Non-GAAP results included $120 million in impairment charges related to our Firethorn division, including $114 million in goodwill impairment.
Second Quarter Key Business Metrics
-- CDMA-based Mobile Station Modem™ (MSM™) shipments: approximately 118
million units, up 27 percent y-o-y and flat sequentially.
-- December quarter total reported device sales: approximately $40.0
billion, up 44 percent y-o-y and 18 percent sequentially.
o December quarter estimated CDMA-based device shipments: approximately
195 to 200 million units, at an estimated average selling price of
approximately $200 to $206 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $22.1 billion at the end of the second quarter of fiscal 2011, compared to $19.1 billion at the end of the first quarter of fiscal 2011 and $18.2 billion a year ago. On April 7, 2011, we announced a cash dividend of $0.215 per share payable on June 24, 2011 to stockholders of record as of May 27, 2011.
On January 5, 2011, we announced that we had entered into a definitive agreement under which we intend to acquire Atheros Communications, Inc. for $45 per share in cash, which represented an enterprise value of approximately $3.1 billion on that date. The transaction has received the approval of Atheros' stockholders and certain foreign regulators, and the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired. The completion of the merger remains subject to the satisfaction of certain closing conditions, including the receipt of an additional foreign regulatory approval. We continue to expect the merger to close in the third quarter of fiscal 2011.
Research and Development
Share-Based In-Process
($ in millions) Non-GAAP Compensation R&D QSI GAAP
Second quarter fiscal 2011 $ 633 $ 98 $ 6 $ 3 $ 740
As a % of revenues 16% N/M 19%
Second quarter fiscal 2010 $ 547 $ 75 $ 3 $ 23 $ 648
As a % of revenues 21% N/M 24%
Year-over-year change ($) 16% 31% N/M (87%) 14%
N/M - Not Meaningful
Non-GAAP R&D expenses increased 16 percent y-o-y primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses decreased 87 percent y-o-y primarily due to the shut down of our FLO TV business and network.
Selling, General and Administrative
Share-Based
($ in millions) Non-GAAP Compensation QSI GAAP
Second quarter fiscal 2011 $ 432 $ 87 $ 66 $ 585
As a % of revenues 11% N/M 15%
Second quarter fiscal 2010 $ 305 $ 69 $ 56 $ 430
As a % of revenues 11% N/M 16%
Year-over-year change ($) 42% 26% 18% 36%
Non-GAAP selling, general and administrative (SG&A) expenses increased 42 percent y-o-y primarily due to an increase in charitable donations, employee-related costs and professional fees. QSI SG&A expenses increased 18 percent y-o-y primarily due to increased costs related to the shut down of our FLO TV business and network.
Effective Income Tax Rate
Our fiscal 2011 effective income tax rates are estimated to be approximately 17 percent for GAAP and approximately 21 percent for Non-GAAP. The second quarter rates of 21 percent for GAAP and 22 percent for Non-GAAP are higher than the estimated annual rates primarily due to additional U.S. income resulting from the settlement of ongoing disputes with two licensees during the second quarter of fiscal 2011.
Qualcomm Strategic Initiatives
The QSI segment manages our strategic investment activities, including FLO TV, and makes strategic investments in early-stage and other companies and in wireless spectrum, such as the Broadband Wireless Access (BWA) spectrum won in the India auction. GAAP results for the second quarter of fiscal 2011 included an $0.18 loss per share for the QSI segment. The second quarter of fiscal 2011 QSI results included $376 million in operating expenses and restructuring charges primarily related to FLO TV.
We have agreed to sell substantially all of our 700 MHz spectrum for $1.9 billion, subject to the satisfaction of customary closing conditions, including approval by the U.S. Federal Communications Commission. The agreement follows our previously announced plan to restructure and evaluate strategic options related to the FLO TV business and network. Under the restructuring plan, the FLO TV business and network were shut down on March 27, 2011, and we are no longer pursuing the MediaFLO Technologies business. Restructuring activities under this plan were initiated in the fourth quarter of fiscal 2010 and are expected to be substantially complete by the end of fiscal 2012. The spectrum was classified as held for sale at March 27, 2011.
In the second quarter of fiscal 2011, restructuring and restructuring-related charges related to this plan included in QSI results were $310 million. We estimate that we will incur future restructuring and restructuring-related charges associated with this plan of up to $65 million, which are primarily related to lease exit and other costs.
Business Outlook
The following statements are forward looking and actual results may differ materially. The "Note Regarding Forward-Looking Statements" at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.
Our outlook does not include provisions for future asset impairments or the consequences of injunctions, damages or fines related to any pending legal matters unless awarded or imposed by a court, governmental entity or other regulatory body. Further, due to their nature, certain income and expense items, such as realized investment gains or losses, or gains and losses on certain derivative instruments, cannot be accurately forecast. Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.
In addition to our ongoing operating costs, our business outlook for fiscal 2011 includes restructuring and restructuring-related charges attributable to FLO TV that are currently expected to be incurred.
We have not included any estimates related to the Atheros business in our third fiscal quarter or fiscal 2011 outlook. The transaction is expected to close in the third quarter of fiscal 2011.
The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook. The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.
Qualcomm's Business Outlook Summary
THIRD FISCAL
QUARTER
Q3 FY10 Current Guidance
Q3 FY11
Results Estimates
Non-GAAP
Revenues $2.70B $3.35B - $3.65B
Year-over-year increase 24%-
change 35%
Diluted
earnings per
share (EPS) $0.57 $0.68 - $0.72
Year-over-year increase 19%-
change 26%
GAAP
Revenues $2.71B $3.35B - $3.65B
Year-over-year increase 24%-
change 35%
Diluted EPS $0.47 $0.60 - $0.64
Year-over-year increase 28%-
change 36%
Diluted EPS
attributable to
QSI $0.00 $0.00
Diluted EPS
attributable to
share-based
compensation ($0.07) ($0.08)
Diluted EPS
attributable to
certain tax
items ($0.03) $0.00
Metrics
approx. 115M -
MSM shipments approx. 103M 119M
Year-over-year increase 12%-
change 16%
Total reported
device sales
(1) $25.2B* $35.5B - $38.5B*
Year-over-year increase 41%-
change 53%
Est. CDMA-based
devices shipped approx. 134M -
(1) 138M* not provided
Est. CDMA-based
device average
selling price approx. $183 -
(1) $189* not provided
*Est. sales in
March quarter,
reported in
June quarter
FISCAL YEAR
FY 2010 Prior Guidance Current Guidance
FY 2011 FY 2011
Results Estimates Estimates
Non-GAAP
Revenues $10.98B $13.6B - $14.2B $14.1B - $14.7B
Year-over-year increase 24% - increase 28%-
change 29% 34%
Diluted EPS $2.46 $2.91 - $3.05 $3.05 - $3.13
Year-over-year increase 18% - increase 24%-
change 24% 27%
GAAP
Revenues $10.99B $13.6B - $14.2B $14.1B - $14.7B
Year-over-year increase 24% - increase 28%-
change 29% 34%
Diluted EPS $1.96 $2.32 - $2.46 $2.51 - $2.59
Year-over-year increase 18% - increase 28%-
change 26% 32%
Diluted EPS
attributable to
QSI ($0.13) ($0.27) ($0.22)
Diluted EPS
attributable to
share-based
compensation ($0.27) ($0.33) ($0.33)
Diluted EPS
attributable to
certain tax
items ($0.10) $0.01 $0.01
Diluted EPS
attributable to
in-process R&D $0.00 $0.00 $0.00
Metrics
Est. fiscal year* CDMA-based
device average selling price approx. $183 - approx. $190 - approx. $199 -
range (1) $189 $200 $209
*Shipments in Sept. to June
quarters, reported in Dec. to
Sept. quarters
CALENDAR YEAR
Device Estimates
(1)
Current
Prior Guidance Guidance Prior Guidance Current Guidance
Calendar 2010 Calendar 2010 Calendar 2011 Calendar 2011
Estimates Estimates Estimates Estimates
Est. CDMA-based
device
shipments
approx. 134M - approx. 134M -
March quarter 138M 138M not provided not provided
approx. 153M - approx. 153M -
June quarter 157M 157M not provided not provided
September approx. 165M - approx. 165M -
quarter 169M 169M not provided not provided
December approx. 195M -
quarter not provided 200M not provided not provided
Est. Calendar
year range (2)
(approx.) 640M - 660M 646M - 663M 750M - 800M 750M - 800M
Midpoint Midpoint Midpoint Midpoint
Est. total
CDMA-based
units approx. 650M approx. 655M approx. 775M approx. 775M
Est. CDMA units approx. 238M approx. 238M approx. 250M approx. 250M
Est. WCDMA
units approx. 412M approx. 417M approx. 525M approx. 525M
(1) Total reported device sales is the sum of all reported sales in U.S.
dollars (as reported to us by our licensees) of all licensed CDMA-based
subscriber devices (including handsets, modules, modem cards and other
subscriber devices) by our licensees during a particular period. The
reported quarterly estimated ranges of ASPs and unit shipments are
determined based on the information as reported to us by our licensees
during the relevant period and our own estimates of the selling prices and
unit shipments for licensees that do not provide such information. Not all
licensees report sales, selling prices and/or unit shipments the same way
(e.g., some licensees report selling prices net of permitted deductions,
such as transportation, insurance and packing costs, while other licensees
report selling prices and then identify the amount of permitted deductions
in their reports), and the way in which licensees report such information
may change from time to time. Total reported device sales, estimated unit
shipments and estimated ASPs for a particular period may include prior
period activity that is reported with the activity for the particular
period.
(2) Sums may not equal totals due to rounding.
Results of Business Segments (in millions, except per share data):
Non-GAAP
Tax
Reconciling Share-Based Items
In-Process
SEGMENTS QCT QTL QWI Items (1) Non-GAAP Compensation (2) R&D QSI (3) GAAP
Q2 -
FISCAL
2011
Revenues $1,962 $1,746 $157 $ 5 $3,870 $ - $ - $ - $ 5 $3,875
Change
from
prior
year 28% 79% 3% N/M 45% 150% 46%
Change
from
prior
quarter (7%) 65% (9%) N/M 16% N/M 16%
Operating
income
(loss) $1,652 ($202) $ - ($6) ($371) $1,073
Change
from
prior
year 55% (31%) N/M (181%) 38%
Change
from
prior
quarter 17% (17%) N/A (177%) (3%)
EBT $417 $1,575 $(135) $13 $1,870 ($202) $ - ($6) ($404) $1,258
Change
from
prior
year 21% 92% N/M N/M 49% (31%) N/M (197%) 30%
Change
from
prior
quarter (35%) 77% N/M N/M 13% (17%) N/A (154%) (5%)
EBT as a
% of
revenues 21% 90% N/M N/M 48% N/M N/M N/M 32%
Net
income
(loss) $1,450 ($146) ($3) ($6) ($296) $999
Change
from
prior
year 47% (49%) N/M N/M (265%) 29%
Change
from
prior
quarter 8% (26%) N/M N/A (240%) (15%)
Diluted
EPS $0.86 ($0.09) $ - $ - ($0.18) $0.59
Change
from
prior
year 46% (50%) N/M N/M (260%) 28%
Change
from
prior
quarter 5% (29%) N/M N/A (260%) (17%)
Diluted
shares
used 1,689 1,689 1,689 1,689 1,689 1,689
Q1 -
FISCAL
2011
Revenues $2,116 $1,057 $172 $ 3 $3,348 $ - $ - $ - $ - $3,348
Operating
income
(loss) 1,416 (172) - - (134) 1,110
EBT 640 892 - 128 1,660 (172) - - (159) 1,329
Net
income
(loss) 1,345 (116) 28 - (87) 1,170
Diluted
EPS $0.82 ($0.07) $0.02 $ - ($0.05) $0.71
Diluted
shares
used 1,648 1,648 1,648 1,648 1,648 1,648
Q2 -
FISCAL
2010
Revenues $1,537 $974 $152 ($2) $2,661 $ - $ - $ - $2 $2,663
Operating
income
(loss) 1,065 (154) - (3) (132) 776
EBT 344 821 (1) 94 1,258 (154) - (3) (136) 965
Net
income
(loss) 989 (98) (33) (3) (81) 774
Diluted
EPS $0.59 ($0.06) ($0.02) $ - ($0.05) $0.46
Diluted
shares
used 1,678 1,678 1,678 1,678 1,678 1,678
Q3 -
FISCAL
2010
Revenues $1,691 $847 $162 $ - $2,700 $ - $ - $ - $6 $2,706
Operating
income
(loss) 991 (149) - - (50) 792
EBT 404 673 6 78 1,161 (149) - - (41) 971
Net
income
(loss) 936 (111) (54) - (4) 767
Diluted
EPS $0.57 ($0.07) ($0.03) $ - $ - $0.47
Diluted
shares
used 1,642 1,642 1,642 1,642 1,642 1,642
6 MONTHS
- FISCAL
2011
Revenues $4,078 $2,803 $329 $ 7 $7,217 $ - $ - $ - $5 $7,222
Change
from
prior
year 30% 48% 12% N/M 35% 25% 35%
Operating
income
(loss) $3,067 ($373) - ($6) ($506) $2,182
Change
from
prior
year 40% (23%) N/M N/M (114%) 32%
EBT $1,057 $2,467 ($135) $139 $3,528 ($373) - ($6) ($563) $2,586
Change
from
prior
year 37% 55% N/M N/M 37% (23%) N/M N/M (132%) 28%
Net
income
(loss) $2,794 ($262) $25 ($6) ($383) $2,168
Change
from
prior
year 38% (24%) N/M N/M (182%) 34%
Diluted
EPS $1.67 ($0.16) $0.01 $ - ($0.23) $1.30
Change
from
prior
year 38% (23%) N/M N/M (188%) 35%
Diluted
shares
used 1,669 1,669 1,669 1,669 1,669 1,669
6 MONTHS
- FISCAL
2010
Revenues $3,144 $1,891 $294 $ - $5,329 $ - $ - $ - $4 $5,333
Operating
income
(loss) 2,198 (304) - (3) (236) 1,655
EBT 769 1,594 8 195 2,566 (304) - (3) (243) 2,016
Net
income
(loss) 2,030 (211) (65) (3) (136) 1,615
Diluted
EPS $1.21 ($0.13) ($0.04) $ - ($0.08) $0.96
Diluted
shares
used 1,685 1,685 1,685 1,685 1,685 1,685
12 MONTHS
- FISCAL
2010
Revenues $6,695 $3,659 $628 $ - $10,982 $ - $ - $ - $9 $10,991
Operating
income
(loss) 4,316 (614) - (3) (416) 3,283
EBT 1,693 3,020 12 361 5,086 (614) - (3) (435) 4,034
Net
income
(loss) 4,071 (442) (159) (3) (220) 3,247
Diluted
EPS $2.46 ($0.27) ($0.10) $ - ($0.13) $1.96
Diluted
shares
used 1,658 1,658 1,658 1,658 1,658 1,658
(1) Non-GAAP reconciling items related to revenues consist primarily of other
nonreportable segment revenues less intersegment eliminations. Non-GAAP
reconciling items related to earnings before taxes consist primarily of
certain investment income or losses, interest expense, research and
development expenses, sales and marketing expenses and other operating
expenses that are not allocated to the segments for management reporting
purposes, nonreportable segment results and the elimination of intersegment
profit.
(2) During the first quarter of fiscal 2011, we recorded a tax benefit of $32
million, or $0.02 diluted earnings per share, related to fiscal 2010 due to
the retroactive reenactment of the federal R&D tax credit. Also, during
each of the first and second quarters of fiscal 2011, we recorded $3
million in state tax expense because deferred revenue related to the
license agreement signed in the first quarter of fiscal 2010 with Samsung
is taxable in fiscal 2011 but the resulting deferred tax asset will reverse
in future years when our state tax rate will be lower. Our first and second
quarter fiscal 2011 Non-GAAP results exclude these items.
(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 Non-GAAP tax
provision, the tax items column and the tax provision related to
share-based compensation from the GAAP tax provision.
N/M – Not Meaningful
N/A – Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's second quarter fiscal 2011 earnings conference call will be broadcast live on April 20, 2011, beginning at 1:30 p.m. Pacific Time (PT) on the Company's web site at: www.qualcomm.com. This conference call may contain forward-looking financial information and 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 April 20, 2011, beginning at approximately 5:00 p.m. PT through May 20, 2011 at 9:00 p.m. PT. 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 56703245. An audio replay of the conference call will be available on the Company's web site at www.qualcomm.com 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 (Nasdaq: QCOM) is a world leader in 3G and next-generation mobile technologies. For more than 25 years, Qualcomm ideas and inventions have driven the evolution of wireless communications, connecting people more closely to information, entertainment and each other. Today, Qualcomm technologies are powering the convergence of mobile communications and consumer electronics, making wireless devices and services more personal, affordable and accessible to people everywhere. For more information, please visit www.qualcomm.com
Note Regarding Use of Non-GAAP Financial Measures
The Company presents Non-GAAP 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. Non-GAAP 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 (loss), net investment income (loss), income (loss) before income taxes, effective tax rate, net income (loss), diluted earnings (loss) 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 Non-GAAP 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 Non-GAAP financial measures applicable to the Company and its business segments.
Non-GAAP information used by management excludes the QSI segment, certain share-based compensation, certain tax items 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. 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 such share-based compensation as unrelated to the Company's operational performance. Further, share-based compensation related to stock options 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. Certain tax items that were recorded in reported earnings in each fiscal year presented, but were unrelated to the fiscal year in which they were recorded, are excluded in order to provide a clearer understanding of the Company's ongoing Non-GAAP tax rate and after tax earnings. In fiscal 2009, the Company included the benefit of the retroactive extension of the federal R&D tax credit in Non-GAAP results because it had previously occurred with relative frequency and was included in the Company's business outlook for fiscal 2009 as the credit had been extended prior to the release of the fiscal 2009 business outlook. In fiscal 2011, however, the Company did not include the benefit of the retroactive extension of the federal R&D tax credit in Non-GAAP results because the Company had not included the potential extension of the credit in its previously released fiscal 2011 business outlook due to uncertainty as to whether and when the federal R&D tax credit would be retroactively extended. 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 stockholder 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 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, "Non-GAAP" is not a term defined by GAAP, and, as a result, the Company's measure of Non-GAAP results might be different than similarly titled measures used by other companies. Reconciliations between GAAP results and Non-GAAP results are presented in the following tables.
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 and adoption of, and demand for, our technologies in wireless networks and wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA, TD-SCDMA and OFDMA; the uncertainty of global economic conditions and its potential impact on demand for our products, services or applications and the value of our marketable securities; competition; our dependence on major customers and licensees; attacks on our licensing 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; our dependence on third-party manufacturers and suppliers; foreign currency fluctuations; strategic investments and transactions we have or may pursue; defects or errors in our products and services; the development and commercial success of our QMT division's mirasol® display technology; as well as the other risks detailed from time-to-time in our SEC reports, including the report on Form 10-K for the year ended September 26, 2010 and most recent Form 10-Q. The Company undertakes no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.
Qualcomm is a registered trademark of Qualcomm Incorporated. Mobile Station Modem, MSM, FLO TV and MediaFLO are trademarks of Qualcomm Incorporated. mirasol is a registered trademark of Qualcomm MEMS Technologies, Inc. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.
Qualcomm Contact:
Warren Kneeshaw
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
Qualcomm Incorporated
Supplemental Information for the Three Months Ended March 27, 2011
(Unaudited)
Non-GAAP Share-Based Tax In-process GAAP
Results Compensation Items R&D QSI Results
($ in millions
except per share
data)
R&D $ 633 $ 98 $ - $ 6 $ 3 $ 740
SG&A 432 87 - - 66 585
Operating income
(loss) 1,652(a) (202) - (6) (371) 1,073
Investment income
(loss), net 217(b) - - - (32)(c) 185
Tax rate 22% N/M N/M N/M N/M 21%
Net income (loss) $ 1,450 $ (146) $ (3)(d) $ (6) $ (296) $ 999
Diluted earnings
(loss) per share
(EPS) $ 0.86 $ (0.09) $ - $ - $ (0.18) $ 0.59
Operating cash flow $ 1,926 $ (87) $ - $ - $ (71) $ 1,768
Operating cash flow
as % of revenues 50% N/A N/A N/M 46%
Free cash flow (e) $ 1,851 $ (87) $ - $ - $ (75) $ 1,689
Free cash flow as a
% of revenues 48% N/A N/A N/M 44%
(a) During the second quarter of fiscal 2011, we recorded impairment charges of
$120 million related to our Firethorn division, including $114 million in
goodwill impairment.
(b) Included $122 million in interest and dividend income related to cash, cash
equivalents and marketable securities, which were not part of the Company's
strategic investments, and $102 million in net realized gains on
investments, partially offset by $4 million in other-than-temporary losses
on investments and $3 million in interest expense.
(c) Included $31 million in interest expense, $4 million in equity in losses of
investees and $1 million in other-than-temporary losses on investments,
partially offset by $4 million in interest and dividend income related to
cash, cash equivalents and marketable securities.
(d) During the second quarter of fiscal 2011, we recorded $3 million in state
tax expense because deferred revenue related to the license agreement
signed in the first quarter of fiscal 2010 with Samsung is taxable in
fiscal 2011 but the resulting deferred tax asset will reverse in future
years when our state tax rate will be lower. Our second quarter fiscal 2011
Non-GAAP results exclude this item.
(e) Free cash flow is calculated as net cash provided by operating activities
less capital expenditures. Reconciliation of these amounts is included in
the "Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by
Operating Activities (GAAP) and Other Supplemental Disclosures" for the
three months ended March 27, 2011, included herein.
N/M – Not Meaningful
N/A – Not Applicable
Sums may not equal totals due to rounding.
Qualcomm Incorporated
Supplemental Information for the Six Months Ended March 27, 2011
(Unaudited)
Non-GAAP Share-Based Tax In-process GAAP
Results Compensation Items R&D QSI Results
($ in millions except
per share data)
R&D $ 1,193 $ 184 $ - $ 6 $ 28 $ 1,411
SG&A 774 159 - - 89 1,022
Operating income
(loss) 3,067(a) (373) - (6) (506) 2,182
Investment income
(loss), net 462(b) - - - (58)(c) 404
Tax rate 21% N/M N/M N/M N/M 16%
Net income (loss) $ 2,794 $ (262) $ 25(d) $ (6) $ (383) $ 2,168
Diluted earnings
(loss) per share
(EPS) $ 1.67 $ (0.16) $ 0.01 $ - $ (0.23) $ 1.30
Operating cash flow $ 2,153 $ (132) $ - $ - $ (205) $ 1,816
Operating cash flow
as % of revenues 30% N/A N/A N/M 25%
Free cash flow (e) $ 1,978 $ (132) $ - $ - $ (211) $ 1,635
Free cash flow as a
% of revenues 27% N/A N/A N/M 23%
(a) During the first six months of fiscal 2011, we recorded impairment charges
of $120 million related to our Firethorn division, including $114 million
in goodwill impairment.
(b) Included $251 million in interest and dividend income related to cash, cash
equivalents and marketable securities, which were not part of our strategic
investments, and $230 million in net realized gains on investments,
partially offset by $11 million in other-than-temporary losses on
investments and $8 million in interest expense.
(c) Included $54 million in interest expense, $5 million in
other-than-temporary losses on investments and $5 million in equity in
losses of investees, partially offset by $5 million in interest and
dividend income related to cash, cash equivalents and marketable securities
and $1 million in net realized gains on investments.
(d) During the first six months of fiscal 2011, we recorded a tax benefit of
$32 million, or $0.02 diluted earnings per share, related to fiscal 2010
due to the retroactive reenactment of the federal R&D tax credit. Also,
during the first six months of fiscal 2011, we recorded $6 million in state
tax expense because deferred revenue related to the license agreement
signed in the first quarter of fiscal 2010 with Samsung is taxable in
fiscal 2011 but the resulting deferred tax asset will reverse in future
years when our state tax rate will be lower. Our Non-GAAP results for the
first six months of fiscal 2011 excluded these items.
(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 Non-GAAP Free Cash Flows to Net Cash Provided by
Operating Activities (GAAP) and Other Supplemental Disclosures" for the six
months ended March 27, 2011, included herein.
N/M – Not Meaningful
N/A – Not Applicable
Sums may not equal totals due to rounding.
Qualcomm Incorporated
Reconciliation of Non-GAAP Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and Other Supplemental Disclosures
(In millions)
(Unaudited)
Three Months Ended March 27, 2011
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used) by
operating activities $ 1,926 $ (87) (a) $ (71) $ 1,768
Less: capital expenditures (75) - (4) (79)
Free cash flow $ 1,851 $ (87) $ (75) $ 1,689
Revenues $ 3,870 $ - $ 5 $ 3,875
Free cash flow as a % of revenues 48% N/A N/M 44%
Other supplemental cash
disclosures:
Cash transfers from QSI (1) $ 63 $ - $ (63) $ -
Cash transfers to QSI (2) (87) - 87 -
Net cash transfers $ (24) $ - $ 24 $ -
Six Months Ended March 27, 2011
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used) by
operating activities $ 2,153 $ (132) (a) $ (205) $ 1,816
Less: capital expenditures (175) - (6) (181)
Free cash flow $ 1,978 $ (132) $ (211) $ 1,635
Revenues $ 7,217 $ - $ 5 $ 7,222
Free cash flow as a % of revenues 27% N/A N/M 23%
Other supplemental cash
disclosures:
Cash transfers from QSI (1) $ 71 $ - $ (71) $ -
Cash transfers to QSI (2) (241) - 241 -
Net cash transfers $ (170) $ - $ 170 $ -
Three Months Ended March 28, 2010
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used) by
operating activities $ 908 $ (18) (a) $ (97) $ 793
Less: capital expenditures (85) - (23) (108)
Free cash flow $ 823 $ (18) $ (120) $ 685
Six Months Ended March 28, 2010
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used) by
operating activities $ 2,246 $ (31) (a) $ (183) $ 2,032
Less: capital expenditures (152) - (44) (196)
Free cash flow $ 2,094 $ (31) $ (227) $ 1,836
(a) Incremental tax benefits from stock options exercised during the period.
(1) Cash primarily from the issuance of subsidiary shares to noncontrolling
interests.
(2) Primarily funding for strategic debt and equity investments and QSI
operating expenses.
N/M - Not Meaningful
N/A - Not Applicable
Qualcomm Incorporated
Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate
(in millions)
(Unaudited)
Three Months Ended March 27, 2011
Non-GAAP Share-Based In-Process GAAP
Tax Items
Results Compensation (a) R&D QSI (b) Results
Income (loss)
before income
taxes $ 1,870 $ (202) $ - $ (6) $ (404) $ 1,258
Income tax
(expense)
benefit (420) 56 (3) - 104 (263)
Net income
(loss) 1,450 (146) (3) (6) (300) 995
Net loss
attributable
to
noncontrolling
interests - - - - 4 4
Net income
attributable
to Qualcomm $ 1,450 $ (146) $ (3) $ (6) $ (296) $ 999
Tax rate 22% 28% N/A N/M N/M 21%
Six Months Ended March 27, 2011
Non-GAAP Share-Based In-Process GAAP
Tax Items
Results Compensation (a) R&D QSI (b) Results
Income (loss)
before income
taxes $ 3,528 $ (373) $ - $ (6) $ (563) $ 2,586
Income tax
(expense)
benefit (734) 111 25 - 176 (422)
Net income
(loss) 2,794 (262) 25 (6) (387) 2,164
Net loss
attributable
to
noncontrolling
interests - - - - 4 4
Net income
attributable
to Qualcomm $ 2,794 $ (262) $ 25 $ (6) $ (383) $ 2,168
Tax rate 21% 30% N/M N/M N/M 16%
(a) During the first quarter of fiscal 2011, we recorded a tax benefit of $32
million, or $0.02 diluted earnings per share, related to fiscal 2010 due to
the retroactive reenactment of the federal R&D tax credit. Also, during
each of the first and second quarters of fiscal 2011, we recorded $3
million in state tax expense because deferred revenue related to the
license agreement signed in the first quarter of fiscal 2010 with Samsung
is taxable in fiscal 2011 but the resulting deferred tax asset will reverse
in future years when our state tax rate will be lower. Our Non-GAAP results
excluded these items.
(b) 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 Non-GAAP tax
provision, the tax items column and the tax provision related to
share-based compensation from the GAAP tax provision.
N/M – Not Meaningful
Sums may not equal totals due to rounding
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
March 27, September 26,
2011 2010
Current assets:
Cash and cash equivalents $ 6,367 $ 3,547
Marketable securities 6,658 6,732
Accounts receivable, net 715 730
Inventories 606 528
Deferred tax assets 330 321
Other current assets 174 275
Total current assets 14,850 12,133
Marketable securities 9,081 8,123
Deferred tax assets 1,917 1,922
Assets held for sale 746 -
Property, plant and equipment, net 2,114 2,373
Goodwill 1,417 1,488
Other intangible assets, net 2,174 3,022
Other assets 1,525 1,511
Total assets $ 33,824 $ 30,572
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 666 $ 764
Payroll and other benefits related liabilities 558 467
Unearned revenues 518 623
Loans payable 1,100 1,086
Income taxes payable 69 1,443
Other current liabilities 1,474 1,085
Total current liabilities 4,385 5,468
Unearned revenues 3,733 3,485
Other liabilities 705 761
Total liabilities 8,823 9,714
Stockholders' equity:
Qualcomm Incorporated (Qualcomm) Stockholders' equity:
Preferred stock, $0.0001 par value; issuable in
series;
8 shares authorized; none outstanding at
March 27, 2011 and September 26, 2010 - -
Common stock, $0.0001 par value; 6,000 shares
authorized;
1,666 and 1,612 shares issued and outstanding at
March 27, 2011 and September 26, 2010, respectively - -
Paid-in capital 9,325 6,856
Retained earnings 14,840 13,305
Accumulated other comprehensive income 802 697
Total Qualcomm stockholders' equity 24,967 20,858
Noncontrolling interests 34 -
Total stockholders' equity 25,001 20,858
Total liabilities and stockholders equity $ 33,824 $ 30,572
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
March 27, March 28, March 27, March 28,
2011 2010 2011 2010
Revenues:
Equipment and services $ 2,044 $ 1,595 $ 4,257 $ 3,257
Licensing and royalty fees 1,831 1,068 2,965 2,076
Total revenues 3,875 2,663 7,222 5,333
Operating expenses:
Cost of equipment and services
revenues 1,363 809 2,493 1,624
Research and development 740 648 1,411 1,244
Selling, general and administrative 585 430 1,022 810
Goodwill impairment 114 - 114 -
Total operating expenses 2,802 1,887 5,040 3,678
Operating income 1,073 776 2,182 1,655
Investment income, net 185 189 404 361
Income before income taxes 1,258 965 2,586 2,016
Income tax expense (263) (191) (422) (401)
Net income 995 774 2,164 1,615
Net loss attributable to
noncontrolling interests 4 - 4 -
Net income attributable to Qualcomm $ 999 $ 774 $ 2,168 $ 1,615
Earnings per common share
attributable to Qualcomm:
Basic $ 0.60 $ 0.47 $ 1.32 $ 0.97
Diluted $ 0.59 $ 0.46 $ 1.30 $ 0.96
Shares used in per share
calculations:
Basic 1,654 1,662 1,639 1,667
Diluted 1,689 1,678 1,669 1,685
Dividends per share paid $ 0.19 $ 0.17 $ 0.38 $ 0.34
Dividends per share announced $ 0.19 $ 0.17 $ 0.38 $ 0.34
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
March 27, March 28, March 27, March 28,
2011 2010 2011 2010
Operating Activities:
Net income $ 995 $ 774 $ 2,164 $ 1,615
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 434 167 635 329
Goodwill impairment 114 - 114 -
Revenues related to non-monetary
exchanges (31) (31) (62) (68)
Income tax provision in excess of
(less than) income tax payments 140 (38) (1,334) (6)
Non-cash portion of share-based
compensation expense 201 153 375 304
Incremental tax benefit from stock
options exercised (87) (18) (132) (31)
Net realized gains on marketable
securities and other investments (102) (80) (231) (182)
Impairment losses on marketable
securities and other investments 5 16 16 73
Other items, net 18 (8) 19 (4)
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (53) (52) 23 35
Inventories (36) (49) (81) 52
Other assets 4 (38) (19) (70)
Trade accounts payable 89 145 (145) (81)
Payroll, benefits and other
liabilities 248 (115) 269 (239)
Unearned revenues (171) (33) 205 305
Net cash provided by operating
activities 1,768 793 1,816 2,032
Investing Activities:
Capital expenditures (79) (108) (181) (196)
Purchases of available-for-sale
securities (3,536) (2,382) (5,845) (4,480)
Proceeds from sale of
available-for-sale securities 2,443 2,228 5,467 4,241
Cash received for partial settlement
of investment receivables 18 25 18 33
Other investments and acquisitions,
net of cash acquired (23) (22) (89) (28)
Other items, net (2) 4 5 3
Net cash used by investing
activities (1,179) (255) (625) (427)
Financing Activities:
Borrowing under loans payable 177 - 1,260 -
Repayment of loans payable (177) - (1,260) -
Proceeds from issuance of common
stock 1,233 332 2,024 484
Proceeds from issuance of subsidiary
shares to noncontrolling interests 62 - 62 -
Incremental tax benefit from stock
options exercised 87 18 132 31
Repurchase and retirement of common
stock - (1,715) - (1,715)
Dividends paid (316) (279) (625) (563)
Change in obligation under
securities lending (8) - 30 -
Other items, net - - (4) (1)
Net cash provided (used) by
financing activities 1,058 (1,644) 1,619 (1,764)
Effect of exchange rate changes on
cash 9 (1) 10 (5)
Net increase (decrease) in cash and
cash equivalents 1,656 (1,107) 2,820 (164)
Cash and cash equivalents at
beginning of period 4,711 3,660 3,547 2,717
Cash and cash equivalents at end of
period $ 6,367 $ 2,553 $ 6,367 $ 2,553
SOURCE Qualcomm Incorporated
Released April 20, 2011