Qualcomm Announces Fourth Quarter and Fiscal 2008 Results
Fiscal 2008 Revenues $11.1 Billion, EPS $1.90
Pro Forma EPS $2.25
SAN DIEGO, Nov. 6 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies and data solutions, today announced results for the fourth fiscal quarter and year ended September 28, 2008.
For comparison purposes, we note the following unique items:
-- The fourth quarter of fiscal 2008 results for total Qualcomm (GAAP)
and Qualcomm pro forma included $560 million in revenues, or $0.20
diluted earnings per share (EPS), as a result of the execution of new
license and settlement agreements with Nokia Corporation/Nokia Inc.
(Nokia). The fourth quarter of fiscal 2007 results for GAAP and pro
forma did not include royalty revenues from Nokia for sales of Nokia
products subsequent to April 9, 2007.
-- The fourth quarter of fiscal 2008 results included $327 million in
other-than-temporary impairments of marketable securities, or $0.15
negative GAAP impact and $0.14 negative pro forma impact on diluted
EPS, related to the impact of the recent disruption in the financial
markets on our marketable securities portfolio.
-- The fourth quarter of fiscal 2007 included a $331 million tax benefit,
or $0.20 in GAAP diluted EPS, as a result of completing audits of
prior years' tax returns.
Total Qualcomm (GAAP) Results
Total Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
Fourth Quarter
-- Revenues: $3.33 billion, up 45 percent year-over-year and 21 percent
sequentially.
-- Net income: $878 million, down 22 percent year-over-year and up 17
percent sequentially.
-- Diluted earnings per share: $0.52, down 22 percent year-over-year and
up 16 percent sequentially.
-- Effective tax rate: 21 percent.
-- Estimated share-based compensation: $98 million, net of tax, up 26
percent year-over-year and 4 percent sequentially.
-- Operating cash flow: $990 million, down 5 percent year-over-year; 30
percent of revenues.
-- Return of capital to stockholders: $266 million cash dividends in the
fourth quarter, or $0.16 per share.
Fiscal 2008
-- Revenues: $11.14 billion, up 26 percent year-over-year.
-- Net income: $3.16 billion, down 4 percent year-over-year.
-- Diluted earnings per share: $1.90, down 3 percent year-over-year.
-- Effective tax rate: 17 percent.
-- Estimated share-based compensation: $367 million, net of tax, up 13
percent year-over-year.
-- Operating cash flow: $3.56 billion, down 7 percent year-over-year; 32
percent of revenues.
-- Return of capital to stockholders: $2.65 billion, including $982
million of cash dividends, or $0.60 per share, and $1.67 billion to
repurchase 43 million shares of our common stock.
Qualcomm Pro Forma 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.
Fourth Quarter
-- Revenues: $3.33 billion, up 44 percent year-over-year and 21 percent
sequentially.
-- Net income: $1.06 billion, up 16 percent year-over-year and
sequentially.
-- Diluted earnings per share: $0.63, up 17 percent year-over-year and
15 percent sequentially; excludes $0.05 loss per share attributable to
the QSI segment and $0.06 loss per share attributable to certain
estimated share-based compensation.
-- Effective tax rate: 22 percent.
-- Free cash flow: $796 million, down 13 percent year-over-year; 24
percent of revenues (defined as net cash from operating activities
less capital expenditures).
Fiscal 2008
-- Revenues: $11.13 billion, up 25 percent year-over-year.
-- Net income: $3.74 billion, up 10 percent year-over-year.
-- Diluted earnings per share: $2.25, up 12 percent year-over-year;
excludes $0.12 loss per share attributable to the QSI segment, $0.22
loss per share attributable to certain estimated share-based
compensation and $0.01 loss per share attributable to acquired in-
process R&D.
-- Effective tax rate: 20 percent.
-- Free cash flow: $3.52 billion, even year-over-year; 32 percent of
revenues.
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.
"I am very pleased with the performance of our businesses this past year, particularly the strong execution of our chipset business and our successful settlement with Nokia. While we continue to see strong growth in 3G CDMA, the current macroeconomic conditions and potential for further economic slowdown creates an uncertain business environment for the next few quarters," said Dr. Paul E. Jacobs, chief executive officer of Qualcomm. "As a result of the credit crisis and the economic uncertainty, our guidance reflects slower end- market device growth for 2009 than previously anticipated and a significant contraction in channel inventory in the first and second fiscal quarters. While we are estimating strong growth for CDMA-based devices in calendar year 2009, driven by a shift to emerging markets, this growth is meaningfully less than we would have forecast just a few weeks ago."
"Although the full impact of the current economic environment is impossible to predict, our balance sheet remains strong and our business operations continue to generate strong cash flow. Our investments in innovative research and development programs, such as Snapdragon(TM), Gobi(TM), mobile TV, mobile commerce and next-generation technologies continue to grow our industry-leading product and intellectual property portfolio and open up exciting new markets for future growth. We are well positioned to navigate through these uncertain times and will continue to focus on our long- term strategic objectives."
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $11.3 billion at the end of the fourth quarter of fiscal 2008, compared to $11.2 billion at the end of the third quarter of fiscal 2008 and $11.8 billion a year ago. In October 2008, we received a non-refundable payment of $2.5 billion related to new license and settlement agreements with Nokia. On October 22, 2008, we announced a cash dividend of $0.16 per share payable on January 7, 2009 to stockholders of record at the close of business on December 11, 2008.
There has been a major disruption in U.S. and foreign credit and financial markets that has depressed securities values, and our investments in marketable securities have been impacted. As a result, during the quarter ended September 28, 2008, we recorded other-than-temporary impairments on marketable securities of $327 million, which is approximately 3 percent of the recorded value of our cash, cash equivalents and marketable securities balance at September 28, 2008. In addition, at September 28, 2008 and October 31, 2008, we had net unrealized losses on marketable securities of $347 million and $1.26 billion, respectively.
Research and Development
Qualcomm Estimated Total
Pro Share-Based Qualcomm
($ in millions) Forma Compensation QSI (GAAP)
Fourth quarter fiscal 2008 $528 $69 $24 $621
As a % of revenues 16% N/M 19%
Fourth quarter fiscal 2007 $410 $55 $16 $481
As a % of revenues 18% N/M 21%
Year-over-year change ($) 29% 25% 50% 29%
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
Qualcomm Estimated Total
Pro Share-Based Qualcomm
($ in millions) Forma Compensation QSI (GAAP)
Fourth quarter fiscal 2008 $346 $67 $43 $456
As a % of revenues 10% N/M 14%
Fourth quarter fiscal 2007 $248 $53 $22 $323
As a % of revenues 11% N/M 14%
Year-over-year change ($) 40% 26% 95% 41%
Pro forma selling, general and administrative (SG&A) expenses increased 40 percent year-over-year, primarily attributable to an increase in employee- related expenses in the fourth quarter of fiscal 2008 combined with the impact of a gain on the sale of a building in the fourth quarter of fiscal 2007. QSI SG&A expenses were primarily related to MediaFLO USA.
Effective Income Tax Rate
Our fiscal 2008 effective income tax rate for total Qualcomm (GAAP) was 17 percent compared with our prior estimate of 16 percent. Our fiscal 2008 pro forma effective tax rate was 20 percent compared with our prior estimate of 19 percent. The fiscal 2008 total Qualcomm (GAAP) and pro forma effective tax rates are higher than our prior estimates primarily due to increased income taxed at the United States federal rate.
Qualcomm Strategic Initiatives
The QSI segment is composed of our strategic investments, including our MediaFLO USA subsidiary. Total Qualcomm (GAAP) results for the fourth quarter of fiscal 2008 included a $0.05 loss per share for the QSI segment. The fourth quarter of fiscal 2008 QSI results included $102 million in operating expenses, primarily related to MediaFLO USA.
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.
The recent financial disruption affecting the banking system and financial markets has resulted in extreme volatility in fixed income, credit and equity markets. The resulting credit crisis has depressed global economic conditions which have the potential to adversely affect our operating results by lowering consumer demand for CDMA-based devices.
In addition, the financial disruption has, and may continue to have, an impact on the value of our marketable securities portfolio and net investment income. Given unprecedented daily market volatility and the significant judgments involved, accurately forecasting other-than-temporary impairments associated with our marketable securities portfolio is extremely difficult and actual results could vary materially. While we do not forecast impairments, our net unrealized losses on marketable securities have increased to $1.26 billion at October 31, 2008, and portions of that amount could be impaired in future periods if market conditions do not improve.
Our outlook does not include provisions for the consequences of injunctions or significant possible damages related to litigation matters, unless damages or injunctions have been awarded by a court. In addition, due to their nature, certain income and expense items, such as realized investment gains or losses, gains and losses on certain derivative instruments or asset impairments, cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our business outlook, and actual results may vary materially from the business outlook if we incur any such income or expense items.
We entered into new license and settlement agreements with Nokia that cover GSM/GPRS/EDGE, CDMA2000, WCDMA (including HSPA), TD-SCDMA, OFDMA (including LTE, UMB and WiMAX) and other products and resolve all pending litigation between the parties. During the fourth quarter of fiscal 2008, we recognized $560 million (attributable to both fiscal 2008 and 2007) in licensing and royalty revenues as a result of the execution of the agreements. Consideration provided to us under the new license agreement with Nokia included, among other things, a non-refundable up-front payment of $2.5 billion, ongoing royalties and the assignment of patents that we recorded in intangible assets in the amount of $1.8 billion. At September 28, 2008, unearned revenues included $3.9 billion related to upfront consideration that resulted from the execution of the new agreements that will be recognized over the remaining term of the license agreement of approximately 14 years. Beginning on the date the patents were assigned in October 2008, the intangible assets will be amortized on a straight-line basis over their estimated useful life of approximately 15 years.
The following table summarizes total Qualcomm (GAAP) and Qualcomm pro forma guidance for the first fiscal quarter and fiscal 2009 based on the current business outlook. The pro forma business outlook provided below is presented consistent with the presentation of pro forma results elsewhere herein.
The following estimates are approximations and are based on the current
business outlook:
Business Outlook Summary
FIRST FISCAL QUARTER
Q1'08 Current Guidance
Results (2) Q1'09 Estimates (3)
Qualcomm Pro Forma
Revenues $2.44B $2.3B - $2.5B
Year-over-year change decrease 6% - increase 3%
Diluted earnings per share (EPS) $0.52 $0.46 - $0.50
Year-over-year change decrease 4% - 12%
Total Qualcomm (GAAP)
Revenues $2.44B $2.3B - $2.5B
Year-over-year change decrease 6% - increase 2%
Diluted earnings per share (EPS) $0.46 $0.35 - $0.39
Year-over-year change decrease 15% - 24%
Diluted EPS attributable to QSI ($0.01) ($0.04)
Diluted EPS attributable to
estimated share-based compensation ($0.05) ($0.07)
Metrics
MSM shipments approx. 79M approx. 60M - 65M
CDMA/WCDMA devices shipped (1) approx. 95M* approx. 121M - 126M*
CDMA/WCDMA device wholesale
average selling price(1) approx. $211* approx. $205*
* Shipments in September
quarter, reported in
December quarter
FISCAL YEAR
FY 2008 Current Guidance
Results FY 2009 Estimates (3)
Qualcomm Pro Forma
Revenues $11.13B $10.2B - $10.8B
Year-over-year change decrease 3% - 8%
Diluted earnings per share (EPS) $2.25 $2.00 - $2.10
Year-over-year change decrease 7% - 11%
Total Qualcomm (GAAP)
Revenues $11.14B $10.2B - $10.8B
Year-over-year change decrease 3% - 8%
Diluted earnings per share (EPS) $1.90 $1.61 - $1.71
Year-over-year change decrease 10% - 15%
Diluted EPS attributable to QSI ($0.12) ($0.14)
Diluted EPS attributable to
estimated share-based compensation ($0.22) ($0.25)
Diluted EPS attributable to
in-process R&D ($0.01) n/a
Metrics
Fiscal year* CDMA/WCDMA device
wholesale average selling
price(1) approx. $219 approx. $195
* Shipments in Sept. to June
quarters, reported in Dec.
to Sept. quarters
CALENDAR YEAR Device Estimates (1)
Prior Current Current
Guidance Guidance Guidance
Calendar Calendar Calendar
CDMA/WCDMA device 2008 2008 2009
shipments Estimates Estimates Estimates
March quarter approx. 107M approx. 107M not provided
June quarter approx. 114M - 118M approx. 119M not provided
September quarter not provided approx. 121M - 126M not provided
December quarter not provided not provided not provided
Calendar year
range (approx.) 488M - 518M 475M - 485M 580M - 620M
Midpoint Midpoint Midpoint
CDMA/WCDMA units approx. 503M approx. 480M approx. 600M
CDMA units approx. 229M approx. 213M approx. 230M
WCDMA units approx. 274M approx. 267M approx. 370M
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not
reported to Qualcomm.
(2) Our Q1'08 results do not include royalty revenues attributable to
Nokia's sales after April 9, 2007.
(3) While we do not forecast impairments, our net unrealized losses on
marketable securities have increased to $1.26 billion at October 31,
2008, and portions of that amount could be impaired in future periods
if market conditions do not improve.
Sums may not equal totals due to rounding.
Results of Business Segments (in millions, except per share data):
Fourth Quarter - Fiscal Year 2008
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $1,761 $1,374 $190 $4
Change from prior year 24% 112% (22%) N/M
Change from prior quarter 0% 71% 0% N/M
EBT $449 $1,247 $(24) $(315)
Change from prior year 6% 132% (177%) N/M
Change from prior quarter (8%) 86% N/M N/M
EBT as a % of revenues 25% 91% (13%) N/M
Net income (loss)
Change from prior year
Change from prior quarter
Diluted EPS
Change from prior year
Change from prior quarter
Diluted shares used
Estimated Total
Qualcomm Share-Based Qualcomm
Segments Pro Forma Compensation(2) QSI(4) (GAAP)
Revenues $3,329 $- $5 $3,334
Change from prior year 44% 400% 45%
Change from prior quarter 21% 25% 21%
EBT $1,357 $(146) $(104) $1,107
Change from prior year 20% (25%) (63%) 17%
Change from prior quarter 22% (5%) (27%) 26%
EBT as a % of revenues 41% N/M N/M 33%
Net income (loss) $1,058 $(98) $(82) $878
Change from prior year 16% (27%) (141%) (22%)
Change from prior quarter 16% (4%) (37%) 17%
Diluted EPS $0.63 $(0.06) $(0.05) $0.52
Change from prior year 17% (20%) (150%) (22%)
Change from prior quarter 15% 0% (25%) 16%
Diluted shares used 1,678 1,678 1,678 1,678
Third Quarter - Fiscal Year 2008
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $1,762 $803 $190 $3
EBT 487 670 (1) (40)
Net income (loss)
Diluted EPS
Diluted shares used
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Segments Pro Forma Compensation(2) R&D QSI(4) (GAAP)
Revenues $2,758 $- $- $4 $2,762
EBT 1,116 (139) (13) (82) 882
Net income
(loss) 915 (94) (13) (60) 748
Diluted EPS $0.55 $(0.06) $(0.01) $(0.04) $0.45
Diluted shares
used 1,654 1,654 1,654 1,654 1,654
Fourth Quarter - Fiscal Year 2007
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $1,419 $647 $245 $(6)
EBT 424 537 31 137
Net income (loss)
Diluted EPS
Diluted shares used
Estimated Total
Qualcomm Share-Based Tax Items Qualcomm
Segments Pro Forma Compensation(2) (3) QSI(4) (GAAP)
Revenues $2,305 $- $- $1 $2,306
EBT 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
First Quarter - Fiscal Year 2008
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $1,574 $650 $210 $5
EBT 470 541 24 76
Net income (loss)
Diluted EPS
Diluted shares used
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Segments Pro Forma Compensation(2) R&D QSI(4) (GAAP)
Revenues $2,439 $- $- $1 $2,440
EBT 1,111 (124) (2) (55) 930
Net income
(loss) 872 (84) (1) (20) 767
Diluted EPS $0.52 $(0.05) $- $(0.01) $0.46
Diluted shares
used 1,664 1,664 1,664 1,664 1,664
Twelve Months - Fiscal Year 2008
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $6,717 $3,622 $785 $6
Change from prior year 27% 31% (5%) N/M
EBT $1,833 $3,142 $(1) $(290)
Change from prior year 18% 34% (101%) N/M
EBT as a % of revenues 27% 87% 0% N/M
Net income (loss)
Change from prior year
Diluted EPS
Change from prior year
Diluted shares used
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Segments Pro Forma Compensation(2) R&D QSI (GAAP)
Revenues $11,130 $- $- $12 $11,142
Change from
prior year 25% N/M 26%
EBT $4,684 $(540) $(14) $(304) $3,826
Change from
prior year 7% (11%) (40%) (27%) 6%
EBT as a % of
revenues 42% N/M N/M N/M 34%
Net income
(loss) $3,740 $(365) $(13) $(202) $3,160
Change from
prior year 10% (14%) (44%) (47%) (4%)
Diluted EPS $2.25 $(0.22) $(0.01) $(0.12) $1.90
Change from
prior year 12% (16%) 0% (50%) (3%)
Diluted shares
used 1,660 1,660 1,660 1,660 1,660
Twelve Months - Fiscal Year 2007
Reconciling
Segments QCT QTL QWI Items (1)
Revenues $5,275 $2,772 $828 $(5)
EBT 1,547 2,340 88 388
Net income (loss)
Diluted EPS
Diluted shares used
Estimated
Share-
Qualcomm Based Tax In- Total
Pro Compen- Items Process Qualcomm
Segments Forma sation(2) (3) R&D QSI (GAAP)
Revenues $8,870 $- $- $- $1 $8,871
EBT 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
(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) 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.
(4) 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).
N/M - Not Meaningful
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's fourth quarter fiscal 2008 earnings conference call will be broadcast live on November 6, 2008 beginning at 1:45 p.m. Pacific Standard Time (PST) on the Company's web site at: www.qualcomm.com. This conference call may contain forward-looking financial information. The conference call will include a discussion of "non-GAAP financial measures" as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as the other material financial and statistical information to be discussed in the conference call, will be posted on the Company's Investor Relations web site at www.qualcomm.com immediately prior to commencement of the call. A taped audio replay will be available via telephone on November 6, 2008, beginning at approximately 5:30 p.m. PST through December 6, 2008 at 9:00 p.m. PST. To listen to the replay, U.S. callers may dial (800) 642-1687 and international callers may dial (706) 645-9291. U.S. and international callers should use reservation number 67351049. 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 (Nasdaq: QCOM) 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 100 Index, the S&P 500 Index and is a 2008 FORTUNE 500(R) company. For more information, please visit www.qualcomm.com.
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 such share-based compensation as unrelated to the Company's operational performance. Moreover, it is generally not an expense that requires or will require cash payment by the Company. Further, share-based compensation related to 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 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; the current uncertainty of global economic conditions and its potential impact on demand for our products and our marketable securities portfolio; 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.
Qualcomm is a registered trademark of Qualcomm Incorporated. Snapdragon, Gobi and FLO are trademarks of Qualcomm Incorporated. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.
Qualcomm Contact:
John Gilbert
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
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 September 28, 2008
Estimated Total
Qualcomm Share-Based Qualcomm
Pro Forma Compensation QSI (GAAP)
Revenues:
Equipment and services $1,861 $- $5 $1,866
Licensing and royalty fees 1,468 - - 1,468
Total revenues 3,329 - 5 3,334
Operating expenses:
Cost of equipment and
services revenues 877 10 35 922
Research and development 528 69 24 621
Selling, general and
administrative 346 67 43 456
Total operating
expenses 1,751 146 102 1,999
Operating income (loss) 1,578 (146) (97) 1,335
Investment loss, net (221)(a) - (7)(b) (228)
Income (loss) before income
taxes 1,357 (146) (104) 1,107
Income tax (expense) benefit (299)(c) 48 22 (d) (229)(c)
Net income (loss) $1,058 $(98) $(82) $878
Earnings (loss) per common
share:
Diluted $0.63 $(0.06) $(0.05) $0.52
Shares used in per share
calculations:
Diluted 1,678 1,678 1,678 1,678
Supplemental Financial Data:
Operating Cash Flow $1,153 $(98)(f) $(65) $990
Operating Cash Flow as a %
of Revenues 35% N/M 30%
Free Cash Flow (e) $796 $(98)(f) $(122) $576
Free Cash Flow as a % of
Revenues 24% N/M 17%
(a) Included $327 million in other-than-temporary losses on investments,
which were not part of the Company's strategic investment portfolio,
$4 million in net realized losses on investments and $2 million in
interest expense, partially offset by $112 million in interest and
dividend income related to cash, cash equivalents and marketable
securities.
(b) Included $5 million in other-than-temporary losses on investments, $2
million in interest expense and $1 million in equity in losses of
investees, partially offset by $1 million in net realized gains on
investments
(c) The fourth quarter of fiscal 2008 effective tax rates were
approximately 21% for total Qualcomm (GAAP) and approximately 22% 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 September 28, 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)
Twelve Months Ended September 28, 2008
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Pro Forma Compensation(a) R&D QSI (GAAP)
Revenues:
Equipment and
services $7,148 $- $- $12 $7,160
Licensing and
royalty fees 3,982 - - - 3,982
Total
revenues 11,130 - - 12 11,142
Operating
expenses:
Cost of
equipment and
services
revenues 3,255 39 - 120 3,414
Research and
development 1,926 250 14 91 2,281
Selling,
general
and
adminis-
trative 1,345 251 - 121 1,717
Total
operating
expenses 6,526 540 14 332 7,412
Operating
income (loss) 4,604 (540) (14) (320) 3,730
Investment
income, net 80(b) - - 16(c) 96
Income (loss)
before income
taxes 4,684 (540) (14) (304) 3,826
Income tax
(expense)
benefit (944)(d) 175 1 102 (666)(d)
Net income
(loss) $3,740 $(365) $(13) $(202) $3,160
Earnings
(loss) per
common share:
Diluted $2.25 $(0.22) $(0.01) $(0.12) $1.90
Shares used in
per share
calculations:
Diluted 1,660 1,660 1,660 1,660 1,660
Supplemental Financial
Data:
Operating
Cash Flow $4,243 $(408)(f) $(14) $(263) $3,558
Operating
Cash Flow
as a % of
Revenue 38% N/M 32%
Free Cash
Flow(e) $3,518 $(408)(f) $(14) $(935) $2,161
Free Cash
Flow as a
% of Revenue 32% N/M 19%
(a) Estimated share-based compensation presented above and excluded from
pro forma results did not include $2 million, net of tax, related to
share-based awards granted under a bonus program.
(b) Included $487 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, $104 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 $502 million in other-than-temporary losses on
investments and $15 million in interest expense.
(c) Included $51 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 $33 million in other-than-temporary
losses on investments and $7 million in interest expense.
(d) The effective tax rates for the twelve months ended September 28,
2008 were approximately 17% for total Qualcomm (GAAP) and
approximately 20% for Qualcomm pro forma.
(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 twelve months
ended September 28, 2008, included herein.
(f) 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 September 28, 2008
Estimated Total
Qualcomm Share-Based Qualcomm
Pro Forma Compensation QSI (GAAP)
Net cash provided
(used) by operating
activities $1,153 $(98)(a) $(65) $990
Less: capital
expenditures (357) - (57) (414)
Free cash flow $796 $(98) $(122) $576
Other supplemental cash
disclosures:
Cash transfers from
QSI (1) $2 $- $(2) $-
Cash transfers to
QSI (2) (128) - 128 -
Net cash transfers $(126) $- $126 $-
Twelve Months Ended September 28, 2008
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Pro Forma Compensation R&D QSI (GAAP)
Net cash
provided
(used)
by operating
activities $4,243 $(408)(a) $(14) $(263) $3,558
Less: capital
expenditures (725) - - (672) (1,397)
Free cash flow $3,518 $(408) $(14) $(935) $2,161
Other supplemental
cash
disclosures:
Cash transfers
from QSI(1) $61 $- $- $(61) $-
Cash transfers
to QSI(2) (970) - - 970 -
Net cash
transfers $(909) $- $- $909 $-
(1) Cash from sale of strategic debt and equity investments.
(2) Funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
Three Months Ended September 30, 2007
Estimated Total
Qualcomm Share-Based Qualcomm
Pro Forma Compensation QSI (GAAP)
Net cash provided (used) by
operating activities $1,136 $(41)(a) $(52) $1,043
Less: capital expenditures (220) - (27) (247)
Free cash flow $916 $(41) $(79) $796
Twelve Months Ended September 30, 2007
Estimated Total
Qualcomm Share-Based In-Process Qualcomm
Pro Forma Compensation R&D QSI (GAAP)
Net cash provided
(used)
by operating
activities $4,252 $(240)(a) $(10) $(191) $3,811
Less: capital
expenditures (726) - - (92) (818)
Free cash flow $3,526 $(240) $(10) $(283) $2,993
(a) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
September 28, September 30,
2008 2007
Current assets:
Cash and cash equivalents $1,840 $2,411
Marketable securities 4,571 4,170
Accounts receivable, net 4,038 715
Inventories 521 469
Deferred tax assets 289 435
Collateral held under
securities lending 173 421
Other current assets 291 200
Total current assets 11,723 8,821
Marketable securities 4,858 5,234
Deferred tax assets 830 318
Property, plant and equipment,
net 2,162 1,788
Goodwill 1,517 1,325
Other intangible assets, net 3,104 664
Other assets 369 345
Total assets $24,563 $18,495
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $570 $635
Payroll and other benefits
related liabilities 406 311
Income taxes payable 20 119
Unearned revenues 394 218
Obligations under securities lending 173 421
Other current liabilities 728 554
Total current liabilities 2,291 2,258
Unearned revenues 3,768 142
Income taxes payable 227 -
Other liabilities 333 260
Total liabilities 6,619 2,660
Stockholders' equity:
Preferred stock, $0.0001 par value;
issuable in series; 8 shares authorized;
none outstanding at September 28,
2008 and September 30, 2007 - -
Common stock, $0.0001 par value;
6,000 shares authorized; 1,656 and
1,646 shares issued and outstanding at
September 28, 2008 and September 30, 2007,
respectively - -
Paid-in capital 7,511 7,057
Retained earnings 10,717 8,541
Accumulated other
comprehensive (loss) income (284) 237
Total stockholders' equity 17,944 15,835
Total liabilities and
stockholders' equity $24,563 $18,495
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
Revenues:
Equipment and services $1,866 $1,569 $7,160 $5,765
Licensing and royalty fees 1,468 737 3,982 3,106
Total revenues 3,334 2,306 11,142 8,871
Operating expenses:
Cost of equipment and
services revenues 922 725 3,414 2,681
Research and development 621 481 2,281 1,829
Selling, general and
administrative 456 323 1,717 1,478
Total operating expenses 1,999 1,529 7,412 5,988
Operating income 1,335 777 3,730 2,883
Investment (expense) income, net (228) 171 96 743
Income before income taxes 1,107 948 3,826 3,626
Income tax (expense) benefit (229) 183 (666) (323)
Net income $878 $1,131 $3,160 $3,303
Basic earnings per common
share $0.53 $0.68 $1.94 $1.99
Diluted earnings per common
share $0.52 $0.67 $1.90 $1.95
Shares used in per share
calculations:
Basic 1,650 1,660 1,632 1,660
Diluted 1,678 1,689 1,660 1,693
Dividends per share paid $0.16 $0.14 $0.60 $0.52
Dividends per share announced $0.16 $0.14 $0.60 $0.52
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Twelve Months
Ended Ended
September September September September
28, 30, 28, 30,
2008 2007 2008 2007
Operating Activities:
Net income $878 $1,131 $3,160 $3,303
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 120 100 456 383
Revenues related to non-monetary
exchanges (172) (172) -
Non-cash income tax expense
(benefit) 158 (274) 306 91
Non-cash portion of share-based
compensation expense 148 117 541 488
Incremental tax benefits from
stock options exercised (98) (41) (408) (240)
Net realized losses (gains) on
marketable securities
and other investments 3 (49) (155) (222)
Other-than-temporary losses on
marketable securities
and other investments 332 16 535 27
Other items, net 2 (47) 3 (43)
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (475) 46 (653) (16)
Inventories 95 (87) (47) (234)
Other assets (52) 41 (17) (96)
Trade accounts payable (59) 82 (63) 209
Payroll, benefits and other
liabilities 149 70 161 139
Unearned revenues (39) (62) (89) 22
Net cash provided by operating
activities 990 1,043 3,558 3,811
Investing Activities:
Capital expenditures (414) (247) (1,397) (818)
Purchases of available-for-sale
securities (2,736) (2,571) (7,680) (8,492)
Proceeds from sale of available-
for-sale securities 1,141 1,744 6,689 7,998
Increase in receivables for
settlement of investments (406) - (406) -
Other investments and acquisitions,
net of cash acquired (15) (19) (298) (249)
Change in collateral held under
securities lending 153 (268) 248 (421)
Other items, net (5) 71 25 84
Net cash used by investing
activities (2,282) (1,290) (2,819) (1,898)
Financing Activities:
Proceeds from issuance of common
stock 484 82 1,184 556
Incremental tax benefits from
stock options exercised 98 41 408 240
Repurchase and retirement of
common stock - (1,218) (1,670) (1,482)
Dividends paid (266) (230) (982) (862)
Change in obligations under
securities lending (153) 268 (248) 421
Other items, net 2 (1) 1 16
Net cash provided (used) by
financing activities 165 (1,058) (1,307) (1,111)
Effect of exchange rate changes
on cash (3) - (3) 2
Net (decrease) increase in cash
and cash equivalents (1,130) (1,305) (571) 804
Cash and cash equivalents at
beginning of period 2,970 3,716 2,411 1,607
Cash and cash equivalents at
end of period $1,840 $2,411 $1,840 $2,411
SOURCE Qualcomm Incorporated
Released November 6, 2008