Qualcomm Announces Fourth Quarter and Fiscal 2009 Results
Fiscal 2009 Revenues $10.4 Billion, EPS $0.95
Pro Forma EPS $1.31
SAN DIEGO, Nov. 4 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fourth fiscal quarter and year ended September 27, 2009.
"I am very pleased with the performance of our businesses this past year, despite a challenging and uncertain global economic environment," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Our revenues for fiscal year 2009 were in line with our guidance at the outset of the year. Our operating performance remained strong, driven by continued 3G growth, execution in our chipset business and disciplined management of operating expenses. I am also pleased to announce that we recently extended our license agreement with Samsung, covering both 3G and 4G."
"We continue to forecast growth for 3G CDMA in 2009, despite industry forecasts of a decline in the total handset market. We anticipate accelerated CDMA device growth in calendar year 2010 as the global migration to 3G continues. Our broad chipset portfolio continues to expand, including additional low-cost single-chip solutions to further enable the 3G migration as well as increased investments in software and application processors to strengthen our leadership position in supporting higher-end, feature-rich devices. We remain well positioned to drive innovation given our strong balance sheet and operating cash flow while maintaining our focus on overall operating expenses."
For comparison purposes, we note the following items:
-- The fourth quarter of fiscal 2009 results included a $230 million
charge, or $0.14 diluted loss per share, related to an estimated fine
expected to be levied by the Korea Fair Trade Commission.
-- Fiscal 2009 results included a $783 million charge, or $0.45 diluted
loss per share, related to a litigation settlement and patent agreement
with Broadcom Corporation, including $748 million, or $0.43 diluted loss
per share, recorded in the second quarter of fiscal 2009 and $35
million, or $0.02 diluted loss per share, recorded in the fourth quarter
of fiscal 2009 resulting from the write-off of assets that were
initially capitalized.
-- The fourth quarter of fiscal 2008 results included $560 million in
revenues, or $0.20 diluted earnings per share, as a result of the
execution of license and settlement agreements with Nokia
Corporation/Nokia Inc. (Nokia).
-- The fourth quarter of fiscal 2009 GAAP results included a $155 million
tax benefit, or $0.09 diluted earnings per share, related to prior years
as a result of tax audits. The tax benefit was excluded from our pro
forma results.
GAAP Results
Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
Fourth Quarter
-- Revenues: $2.69 billion, down 19 percent year-over-year and 2 percent
sequentially.
-- Operating income: $597 million, down 55 percent year-over-year and 33
percent sequentially.
-- Net income: $803 million, down 9 percent year-over-year and up 9
percent sequentially.
-- Diluted earnings per share: $0.48, down 8 percent year-over-year and up
9 percent sequentially.
-- Effective tax rate: Negative 8 percent for the quarter, primarily due
to the $155 million tax benefit related to prior years.
-- Operating cash flow: $1.32 billion, up 33 percent year-over-year; 49
percent of revenues.
-- Return of capital to stockholders: $283 million, or $0.17 per share, of
cash dividends paid.
Fiscal 2009
-- Revenues: $10.42 billion, down 7 percent year-over-year.
-- Operating income: $2.23 billion, down 40 percent year-over-year.
-- Net income: $1.59 billion, down 50 percent year-over-year.
-- Diluted earnings per share: $0.95, down 50 percent year-over-year.
-- Effective tax rate: 23 percent.
-- Operating cash flow: $7.17 billion, including a $2.5 billion payment
received from Nokia related to the license and settlement agreements.
-- Return of capital to stockholders: $1.38 billion, including $1.09
billion of cash dividends, or $0.66 per share; and $284 million to
repurchase 8.9 million shares of our common stock.
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: $2.68 billion, down 19 percent year-over-year and 2 percent
sequentially.
-- Operating income: $831 million, down 47 percent year-over-year and 26
percent sequentially.
-- Net income: $811 million, down 23 percent year-over-year and 10 percent
sequentially.
-- Diluted earnings per share: $0.48, down 24 percent year-over-year and
11 percent sequentially. The current quarter excludes $0.05 diluted
loss per share attributable to the QSI segment, $0.05 diluted loss per
share attributable to certain estimated share-based compensation and
$0.09 diluted earnings per share attributable to certain tax items
related to prior years.
-- Effective tax rate: 18 percent for the quarter.
-- Free cash flow: $1.29 billion, up 63 percent year-over-year; 48 percent
of revenues (defined as net cash from operating activities less capital
expenditures).
Fiscal 2009
-- Revenues: $10.39 billion, down 7 percent year-over-year.
-- Operating income: $3.15 billion, down 32 percent year-over-year.
-- Net income: $2.19 billion, down 42 percent year-over-year.
-- Diluted earnings per share: $1.31, down 42 percent year-over-year. The
current fiscal year excludes $0.15 diluted loss per share attributable
to the QSI segment, $0.27 diluted loss per share attributable to certain
estimated share-based compensation and $0.07 diluted earnings per share
attributable to certain tax items related to prior years.
-- Effective tax rate: 28 percent.
-- Free cash flow: $6.91 billion, including a $2.5 billion payment
received from Nokia related to the license and settlement agreements.
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and pro forma results 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.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $17.7 billion at the end of the fourth quarter of fiscal 2009, compared to $15.7 billion at the end of the third quarter of fiscal 2009 and $11.3 billion a year ago. On October 2, 2009, we announced a cash dividend of $0.17 per share, payable on December 23, 2009 to stockholders of record at the close of business on November 25, 2009.
The value of our marketable securities has improved significantly as financial markets have stabilized. At September 27, 2009, we had net unrealized gains on marketable securities of $674 million as compared to $25 million of net unrealized losses as of June 28, 2009.
Research and Development
Estimated
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
Fourth quarter fiscal
2009 $518 $71 $25 $614
As a % of revenues 19% N/M 23%
Fourth quarter fiscal
2008 $528 $69 $24 $621
As a % of revenues 16% N/M 19%
Year-over-year change($) (2%) 3% 4% (1%)
N/M - Not Meaningful
Pro forma R&D expenses primarily 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. Pro forma R&D expenses decreased 2 percent year-over-year, primarily due to cost reduction efforts and a decrease in other employee-related expenses. QSI R&D expenses were related to our FLO TV(TM) subsidiary.
Selling, General and Administrative
Estimated
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
Fourth quarter fiscal
2009 $300 $66 $24 $390
As a % of revenues 11% N/M 14%
Fourth quarter fiscal
2008 $346 $67 $43 $456
As a % of revenues 10% N/M 14%
Year-over-year change
($) (13%) (1%) (44%) (14%)
Pro forma selling, general and administrative (SG&A) expenses decreased by 13 percent year-over-year, primarily due to cost reduction efforts and a decrease in other employee-related expenses. QSI SG&A expenses were primarily related to FLO TV.
Effective Income Tax Rate
Our fiscal 2009 effective income tax rates were 23 percent for GAAP and 28 percent for pro forma. The fourth quarter and fiscal 2009 GAAP results included a $155 million tax benefit as a result of tax audits to adjust our estimates of uncertain tax positions for prior years. This tax benefit was excluded from our fiscal 2009 pro forma results to provide a clearer understanding of our ongoing tax rate and after tax earnings.
Qualcomm Strategic Initiatives
The QSI segment is composed of our strategic investments, including FLO TV. GAAP results for the fourth quarter of fiscal 2009 included a $0.05 diluted loss per share for the QSI segment. The fourth quarter of fiscal 2009 QSI results included $93 million in operating expenses, primarily related to FLO TV.
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 volatility in financial markets may continue to have an impact on the value of our marketable securities and net investment income (loss). While we do not forecast impairments, we have temporary unrealized losses on marketable securities that could be recognized as other-than-temporary losses in future periods if market conditions do not improve.
Our outlook does not include provisions for the consequences of injunctions, damages or fines related to any pending legal matters. 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.
The following table summarizes GAAP and pro forma guidance 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:
Qualcomm's Business Outlook Summary
FIRST FISCAL QUARTER
--------------------
Q1 FY09 Current Guidance
Results Q1 FY10 Estimates (3)
-------------------------------------------------------------------------
Pro Forma
Revenues $2.51B $2.55B - $2.75B
Year-over-year change Increase 2% - 10%
Diluted earnings per share (EPS) $0.31 $0.54 - $0.58
Year-over-year change Increase 74% - 87%
-------------------------------------------------------------------------
GAAP
Revenues $2.52B $2.55B - $2.75B
Year-over-year change increase 1% - 9%
Diluted EPS $0.20 $0.41 - $0.45
Year-over-year change increase 105% - 125%
Diluted EPS
attributable to QSI ($0.05) ($0.05)
Diluted EPS
attributable to estimated
share-based compensation ($0.06) ($0.06)
Diluted EPS
attributable to
certain tax items (4) n/a ($0.02)
-------------------------------------------------------------------------
Metrics
MSM shipments approx. 63M approx. 89M - 92M
CDMA/WCDMA devices shipped (1) approx. 125M* approx. 130M - 135M*
CDMA/WCDMA device
wholesale average
selling price (1) approx. $212* approx. $198*
*Shipments in Sept. quarter, reported in Dec. quarter
-------------------------------------------------------------------------
FISCAL YEAR
FY 2009 Current Guidance
Results (2) FY 2010 Estimates (3)
-------------------------------------------------------------------------
Pro Forma
Revenues $10.39B $10.50B - $11.30B
Year-over-year change increase 1% - 9%
Operating income $3.15B $4.00B - $4.50B
Year-over-year change increase 27% - 43%
Diluted EPS $1.31 $2.10 - $2.30
Year-over-year change increase 60% - 76%
-------------------------------------------------------------------------
GAAP
Revenues $10.42B $10.50B - $11.30B
Year-over-year change increase 1% - 8%
Operating income $2.23B $2.80B - $3.30B
Year-over-year change increase 26% - 48%
Operating income (loss)
attributable to QSI ($0.34B) ($0.50B)
Operating income (loss)
attributable to estimated
share-based compensation ($0.58B) ($0.70B)
Operating income (loss)
attributable to
in-process R&D ($0.01B) n/a
Diluted EPS $0.95 $1.56 - $1.76
Year-over-year change increase 64% - 85%
Diluted EPS
attributable to QSI ($0.15) ($0.19)
Diluted EPS
attributable to
estimated
share-based compensation ($0.27) ($0.28)
Diluted EPS
attributable to
in-process R&D $0.00 n/a
Diluted EPS
attributable to
certain tax items (4) $0.07 ($0.07)
-------------------------------------------------------------------------
Metrics
Fiscal year* CDMA/WCDMA
device wholesale average
selling price (1) approx. $200 approx. $189
*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
-------------------------------------------------------------------------
CDMA/WCDMA device shipments (1)
Prior Guidance Current Guidance Current Guidance
Calendar 2009 Calendar 2009 Calendar 2010
Estimates Estimates Estimates
-------------------------------------------------------------------------
March quarter approx. 111M approx. 111M not provided
June
quarter approx. 127 - 132M approx. 127M not provided
September approx.
quarter not provided 130M - 135M not provided
December
quarter not provided not provided not provided
-------------------------------------------------------------------------
Calendar year
range (approx.) 540M - 590M 515M - 530M 600M - 650M
------------------------------------------------------------------------
Midpoint Midpoint Midpoint
CDMA/WCDMA
units approx. 565M approx. 523M approx. 625M
CDMA units approx. 217M approx. 213M approx. 231M
WCDMA units approx. 348M approx. 310M approx. 394M
-----------------------------------------------------------------------
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not reported
to Qualcomm.
(2) Fiscal 2009 results included a $783 million charge, or $0.45 diluted
loss per share, related to a litigation settlement and patent
agreement with Broadcom Corporation, as well as a $230 million
charge, or $0.14 diluted loss per share, related to an estimated fine
expected to be levied by the Korea Fair Trade Commission. Fiscal 2009
GAAP results reflected a $155 million tax benefit, or $0.09 diluted
earnings per share, related to prior years.
(3) While we do not forecast impairments, we do have unrealized losses on
marketable securities that could be recognized in future periods if
market conditions do not improve.
(4) Due to recently enacted California budget legislation, we anticipate
that fiscal 2010 GAAP results will be impacted by tax expense of
approximately $125 million related to the revaluation of certain
deferred tax assets to be recognized in future periods related to the
license and settlement agreements with Nokia.
Sums may not equal totals due to rounding.
Results of Business Segments (in millions, except per share data):
Fourth Quarter - Fiscal Year 2009
-------------------------------------------------------------------------
Segments QCT QTL QWI Pro Forma
Reconciling
Items
(1)(2)
-------------------------------------------------------------------------
Revenues $1,699 $837 $146 $1
-------------------------------------------------------------------------
Change from prior
year (4%) (39%) (23%) N/M
-------------------------------------------------------------------------
Change from prior
quarter (5%) 4% (1%) N/M
-------------------------------------------------------------------------
Operating income
(loss)
-------------------------------------------------------------------------
Change from prior
year
-------------------------------------------------------------------------
Change from prior
quarter
-------------------------------------------------------------------------
EBT $508 $693 $(5) $(211)
-------------------------------------------------------------------------
Change from prior
year 13% (44%) N/M N/M
-------------------------------------------------------------------------
Change from prior
quarter (7%) 5% (67%) N/M
-------------------------------------------------------------------------
EBT as a % of
revenues 30% 83% (3%) 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
Pro Share-Based Tax GAAP
Segments Forma (2) Compensation (3) Items (4) QSI (5) (2)
-------------------------------------------------------------------------
Revenues $2,683 $- $- $7 $2,690
-------------------------------------------------------------------------
Change from
prior year (19%) 40% (19%)
-------------------------------------------------------------------------
Change from
prior quarter (2%) (22%) (2%)
-------------------------------------------------------------------------
Operating income
(loss) $831 $(148) $- $(86) $597
---------------- --------------------------------------------------------
Change from
prior year (47%) (1%) 11% (55%)
-------------------------------------------------------------------------
Change from
prior quarter (26%) 2% (12%) (33%)
-------------------------------------------------------------------------
EBT $985 $(148) $- $(95) $742
-------------------------------------------------------------------------
Change from
prior year (27%) (1%) 9% (33%)
-------------------------------------------------------------------------
Change from
prior quarter (18%) 2% (44%) (25%)
-------------------------------------------------------------------------
EBT as a % of
revenues 37% N/M N/M N/M 28%
-------------------------------------------------------------------------
Net income
(loss) $811 $(85) $155 $(78) $803
-------------------------------------------------------------------------
Change from
prior year (23%) 13% N/M 5% (9%)
-------------------------------------------------------------------------
Change from
prior quarter (10%) 33% N/M (100%) 9%
-------------------------------------------------------------------------
Diluted EPS $0.48 $(0.05) $0.09 $(0.05) $0.48
-------------------------------------------------------------------------
Change from
prior year (24%) 17% N/M 0% (8%)
-------------------------------------------------------------------------
Change from
prior quarter (11%) 38% N/M (150%) 9%
-------------------------------------------------------------------------
Diluted shares
used 1,688 1,688 1,688 1,688 1,688
-------------------------------------------------------------------------
Third Quarter - Fiscal Year 2009
-------------------------------------------------------------------------
Pro Forma Estimated
Reconciling Share-Based
Items Pro Compensation QSI
Segments QCT QTL QWI (1) Forma (3) (5) GAAP
-------------------------------------------------------------------------
Revenues $1,786 $807 $148 $3 $2,744 $- $9 $2,753
-------------------------------------------------------------------------
Operating
income
(loss) 1,122 (151) (77) 894
-------------------------------------------------------------------------
EBT 548 663 (3) (7) 1,201 (151) (66) 984
-------------------------------------------------------------------------
Net income
(loss) 903 (127) (39) 737
-------------------------------------------------------------------------
Diluted EPS $0.54 $(0.08) $(0.02) $0.44
-------------------------------------------------------------------------
Diluted shares
used 1,675 1,675 1,675 1,675
-------------------------------------------------------------------------
Fourth Quarter - Fiscal Year 2008
Pro Forma Estimated
Reconciling Share-Based
Items Pro Compensation QSI
Segments QCT QTL QWI (1) Forma (3) (5) GAAP
---------------------------------------------------------------------
Revenues $1,761 $1,374 $190 $4 $3,329 $- $5 $3,334
---------------------------------------------------------------------
Operating
income
(loss) 1,578 (146) (97) 1,335
---------------------------------------------------------------------
EBT 449 1,247 (24) (315) 1,357 (146) (104) 1,107
---------------------------------------------------------------------
Net income
(loss) 1,058 (98) (82) 878
---------------------------------------------------------------------
Diluted EPS $0.63 $(0.06) $(0.05) $0.52
---------------------------------------------------------------------
Diluted
shares used 1,678 1,678 1,678 1,678
---------------------------------------------------------------------
First Quarter - Fiscal Year 2009
Pro Forma Estimated
Reconciling Share-Based
Items Pro Compensation QSI
Segments QCT QTL QWI (1) Forma (3) (5) GAAP
---------------------------------------------------------------------
Revenues $1,334 $1,006 $170 $1 $2,511 $- $6 $2,517
---------------------------------------------------------------------
Operating
income
(loss) 986 (145) (96) 745
---------------------------------------------------------------------
EBT 168 874 3 (351) 694 (145) (98) 451
---------------------------------------------------------------------
Net income
(loss) 520 (99) (80) 341
---------------------------------------------------------------------
Diluted EPS $0.31 $(0.06) $(0.05) $0.20
---------------------------------------------------------------------
Diluted
shares
used 1,667 1,667 1,667 1,667
---------------------------------------------------------------------
Twelve Months - Fiscal Year 2009
--------------------------------------------------------------------
Pro Forma
Reconciling
Items
Segments QCT QTL QWI (1)(2)(6)
--------------------------------------------------------------------
Revenues $6,135 $3,605 $641 $6
--------------------------------------------------------------------
Change from prior
year (9%) 0% (18%) N/M
--------------------------------------------------------------------
Operating income
(loss)
--------------------------------------------------------------------
Change from prior
year
--------------------------------------------------------------------
EBT $1,441 $3,068 $20 $(1,502)
--------------------------------------------------------------------
Change from prior
year (21%) (2%) N/M N/M
--------------------------------------------------------------------
EBT as a % of
revenues 23% 85% 3% N/M
--------------------------------------------------------------------
Net income (loss)
--------------------------------------------------------------------
Change from prior
year
--------------------------------------------------------------------
Diluted EPS
--------------------------------------------------------------------
Change from prior
year
--------------------------------------------------------------------
Diluted shares used
--------------------------------------------------------------------
Estimated
Pro Share-Based Tax In-
Forma Compensation Items Process GAAP
Segments (2)(6) (3) (4)(7) R&D QSI (2)(6)
------------------------------------------------------------------------
Revenues $10,387 $- $- $- $29 $10,416
------------------------------------------------------------------------
Change from
prior year (7%) 142% (7%)
------------------------------------------------------------------------
Operating
income (loss) $3,153 $(584) $- $(6) $(337) $2,226
------------------------------------------------------------------------
Change from
prior year (32%) (8%) 57% (5%) (40%)
------------------------------------------------------------------------
EBT $3,027 $(584) $- $(6) $(361) $2,076
------------------------------------------------------------------------
Change from
prior year (35%) (8%) 57% (19%) (46%)
------------------------------------------------------------------------
EBT as a % of
revenues 29% N/M N/M N/M N/M 20%
------------------------------------------------------------------------
Net income
(loss) $2,187 $(455) $118 $(6) $(252) $1,592
------------------------------------------------------------------------
Change from
prior year (42%) (25%) N/M 54% (25%) (50%)
------------------------------------------------------------------------
Diluted EPS $1.31 $(0.27) $0.07 $- $(0.15) $0.95
------------------------------------------------------------------------
Change from
prior year (42%) (23%) N/M N/M (25%) (50%)
------------------------------------------------------------------------
Diluted shares
used 1,673 1,673 1,673 1,673 1,673 1,673
------------------------------------------------------------------------
Twelve Months - Fiscal Year 2008
Pro Forma Estimated
Reconciling Share-Based In-
Items Pro Compensation Process
Segments QCT QTL QWI (1) Forma (3) R&D QSI GAAP
--------------------------------------------------------------------------
Revenues $6,717 $3,622 $785 $6 $11,130 $- $- $12 $11,142
--------------------------------------------------------------------------
Operating
income
(loss) 4,604 (540) (14) (320) 3,730
--------------------------------------------------------------------------
EBT 1,833 3,142 (1)(290) 4,684 (540) (14) (304) 3,826
--------------------------------------------------------------------------
Net
income
(loss) 3,740 (365) (13) (202) 3,160
--------------------------------------------------------------------------
Diluted
EPS $2.25 $(0.22) $(0.01) $(0.12) $1.90
--------------------------------------------------------------------------
Diluted
shares
used 1,660 1,660 1,660 1,660 1,660
--------------------------------------------------------------------------
(1) Pro forma reconciling items related to revenues consist primarily of
other nonreportable segment revenues less intersegment eliminations.
Pro forma reconciling items related to earnings before taxes consist
primarily of certain investment income or losses, 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) The fourth quarter of fiscal 2009 included a $230 million charge, or
$0.14 diluted loss per share, related to an estimated fine expected to
be levied by the Korea Fair Trade Commission and a $35 million charge,
or $0.02 diluted loss per share, resulting from the write-off of
assets that were initially capitalized related to a litigation
settlement and patent agreement with Broadcom Corporation.
(3) 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.
(4) During the fourth quarter of fiscal 2009, the Company recorded a $155
million tax benefit, or $0.09 diluted earnings per share, to adjust
our estimates of uncertain tax positions for prior years as a result
of tax audits. The fiscal 2009 pro forma results exclude this tax
benefit related to prior years.
(5) 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
pro forma tax provision, the tax items column and the tax provisions
related to estimated share-based compensation and in-process R&D from
the GAAP tax provision.
(6) Fiscal 2009 results included a $783 million charge, or $0.45 diluted
loss per share, related to a litigation settlement and patent
agreement with Broadcom Corporation, including $748 million, or $0.43
diluted loss per share, recorded in the second quarter of fiscal 2009
and $35 million, or $0.02 diluted loss per share, recorded in the
fourth quarter of fiscal 2009 resulting from the write-off of assets
that were initially capitalized. We reconsidered the accounting for
these assets and concluded that, given the difficulty in reliably
estimating the value, the transaction was treated as a single
element and recorded in a manner that is consistent with its
predominant benefit to the Company, which was litigation settlement.
(7) During the second quarter of fiscal 2009, the Company recorded a $36
million tax expense, or $0.02 diluted loss per share, related to the
adjustment of net deferred tax assets that were recorded in prior
years to reflect the future impact of California budget legislation
enacted on February 20, 2009.
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's fourth quarter fiscal 2009 earnings conference call will be broadcast live on November 4, 2009, beginning at 2:30 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 November 4, 2009, beginning at approximately 6:30 p.m. PT through December 4, 2009 at 10:00 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 35746873. 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 web site 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 2009 FORTUNE 500® 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 (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 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 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 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 pro forma tax rate and after tax earnings. The Company decided to include the benefit of the retroactive extension of the federal research and development tax credit in pro forma results starting in fiscal 2009 because it recurs with relative frequency and would have been included in the Company's pro forma results for the prior year if it had been reenacted in the prior fiscal year. 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 GAAP results and pro forma results 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 and adoption of our technologies in wireless networks and of 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, services or applications and the value of our marketable securities; 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; our dependence on major customers and licensees; foreign currency fluctuations; strategic 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 FLO TV network and FLO((TM)) technology; the development and commercial acceptance of the IMOD display technology; as well as the other risks detailed from time-to-time in our SEC reports.
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO and FLO TV 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 Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Three Months Ended September 27, 2009
-----------------------------------------------
Estimated
Pro Share-Based Tax
Forma Compensation Items QSI GAAP
Revenues:
Equipment and
services $1,762 $- $- $7 $1,769
Licensing and
royalty fees 921 - - - 921
--- --- --- --- ---
Total revenues 2,683 - - 7 2,690
----- --- --- --- -----
Operating
expenses:
Cost of equipment
and services
revenues 769 11 - 44 824
Research and
development 518 71 - 25 614
Selling, general
and
administrative 300 66 - 24 390
Other 265 (a) - - - 265 (a)
--- --- --- --- ---
Total operating
expenses 1,852 148 - 93 2,093
----- --- --- --- -----
Operating income
(loss) 831 (148) - (86) 597
Investment income
(loss), net 154 (b) - - (9) (c) 145
--- --- --- --- ---
Income (loss) before
income taxes 985 (148) - (95) 742
Income tax
(expense)
benefit (174)(d) 63 155 (e) 17 (f) 61 (d)
---- --- --- --- ---
Net income (loss) $811 $(85) $155 $(78) $803
==== ==== ==== ===== ====
Earnings (loss) per
common share:
Diluted $0.48 $(0.05) $0.09 $(0.05) $0.48
===== ====== ===== ====== =====
Shares used in per
share calculations:
Diluted 1,688 1,688 1,688 1,688 1,688
===== ===== ===== ===== =====
Supplemental
Financial Data:
----------------
Operating
cash flow $1,411 $(25) (h) $- $(65) $1,321
Operating
cash flow
as a % of revenues 53% N/M 49%
Free cash flow (g) $1,294 $(25) (h) $- $(92) $1,177
Free cash flow as a %
of revenues 48% N/M 44%
---------------------------------------------------------------------
(a) Included a $230 million charge, or $0.14 diluted loss per share,
related to an estimated fine expected to be levied by the Korea Fair
Trade Commission and a $35 million charge, or $0.02 diluted loss per
share, resulting from the write-off of assets that were initially
capitalized related to a litigation settlement and patent agreement
with Broadcom Corporation.
(b) Included $127 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 $72 million in net
realized gains on investments, partially offset by $36 million in
other-than-temporary losses on investments, $5 million in interest
expense and $4 million in losses on derivatives.
(c) Included $10 million in other-than-temporary losses on investments, $4
million in interest expense and $3 million in equity in losses of
investees, partially offset by $8 million in net realized gains on
investments.
(d) The fourth quarter effective tax rates were approximately 8% benefit
for GAAP and approximately 18% expense for pro forma.
(e) Included a $155 million tax benefit, or $0.09 diluted earnings per
share, to adjust our estimates of uncertain tax positions for prior
years as a result of tax audits. The fiscal 2009 pro forma results
exclude this tax benefit related to prior years.
(f) 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
pro forma tax provision, the tax items column and the tax provisions
related to estimated share-based compensation and in-process R&D from
the GAAP tax provision.
(g) Free cash flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these amounts
is included in the Reconciliation of Pro Forma Free Cash Flows to Net
Cash Provided by Operating Activities (GAAP) and other supplemental
disclosures for the three months ended September 27, 2009, included
herein.
(h) 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
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Twelve Months Ended September 27, 2009
------------------------------------------------------
Estimated In-
Share-Based Tax Process
Pro Forma Compensation Items R&D QSI GAAP
-------------------------------------------------------
Revenues:
Equipment and
services $6,437 $- $- $- $29 $6,466
Licensing and
royalty fees 3,950 - - - - 3,950
----- --- --- --- --- -----
Total
revenues 10,387 - - - 29 10,416
------ --- --- --- --- ------
Operating
expenses:
Cost of
equipment and
services
revenues 2,983 41 - - 157 3,181
Research and
development 2,058 280 - 6 96 2,440
Selling,
general and
administrative 1,180 263 - - 113 1,556
Other 1,013 (a) - - - - 1,013 (a)
----- --- --- --- --- -----
Total operating
expenses 7,234 584 - 6 366 8,190
----- --- --- --- --- -----
Operating
income (loss) 3,153 (584) - (6) (337) 2,226
Investment
loss, net (126) (b) - - - (24)(c) (150)
---- --- --- --- --- ----
Income (loss)
before income
taxes 3,027 (584) - (6) (361) 2,076 (d)
Income tax
(expense)
benefit (840) (d) 129 118 (e) - 109 (484)
---- --- --- --- --- ----
Net income
(loss) $2,187 $(455) $118 $(6) $(252) $1,592
====== ====== ==== ==== ===== ======
Earnings (loss)
per common
share:
Diluted $1.31 $(0.27) $0.07 $(0.00) $(0.15) $0.95
===== ====== ===== ====== ====== =====
Shares used in
per share
calculations:
Diluted 1,673 1,673 1,673 1,673 1,673 1,673
===== ===== ===== ===== ===== =====
Supplemental
Financial
Data:
------------
Operating cash
flow $7,556 $(79)(g) $- $- $(305) $7,172
Operating cash
flow as a % of
revenues 73% N/M 69%
Free cash flow
(f) $6,907 $(79)(g) $- $- $(417) $6,411
Free cash flow
as a % of
revenues 66% N/M 62%
-------------------------------------------------------------------------
(a) Included a $783 million charge, or $0.45 diluted loss per share,
related to a litigation settlement and patent agreement with Broadcom
Corporation, including $748 million, or $0.43 diluted loss per share,
recorded in the second quarter of fiscal 2009 and $35 million, or
$0.02 diluted loss per share, recorded in the fourth quarter of fiscal
2009 resulting from the write-off of assets that were initially
capitalized. We reconsidered the accounting for these assets and
concluded that, given the difficulty in reliably estimating
the value, the transaction was treated as a single element and
recorded in a manner that is consistent with its predominant benefit
to the Company, which was litigation settlement. Also included a $230
million charge, or $0.14 diluted loss per share, related to an
estimated fine expected to be levied by the Korea Fair Trade
Commission recorded in the fourth quarter of fiscal 2009.
(b) Included $734 million in other-than-temporary losses on investments,
which were not part of the Company's strategic investment portfolio
and $13 million in interest expense, partially offset by $513 million
in interest and dividend income related to cash, cash equivalents and
marketable securities, $107 million in net realized gains on
investments and $1 million in gains on derivatives.
(c) Included $29 million in other-than-temporary losses on investments,
$17 million in equity in losses of investees and $11 million in
interest expense, partially offset by $30 million in net realized
gains on investments and $3 million in interest and dividend income.
(d) The effective tax rates for the twelve months ended September 27, 2009
were approximately 23% for GAAP and approximately 28% for pro forma.
(e) Included a tax expense related to the adjustment of net deferred tax
assets that were recorded in prior years to reflect the changes in
California law. In addition, included a $155 million tax benefit, or
$0.09 diluted earnings per share, to adjust our estimates of uncertain
tax positions for prior years as a result of tax audits. The fiscal
2009 pro forma results exclude this tax benefit related to prior
years.
(f) Free cash flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these amounts
is included in the Reconciliation of Pro Forma Free Cash Flows to Net
Cash Provided by Operating Activities (GAAP) and other supplemental
disclosures for the twelve months ended September 27, 2009, included
herein.
(g) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
Reconciliation of Pro Forma Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and other supplemental disclosures
(In millions)
(Unaudited)
Three Months Ended September 27, 2009
---------------------------------------
Estimated
Pro Share-Based
Forma Compensation QSI GAAP
----------------------------------------------
Net cash provided
(used) by operating
activities $1,411 $(25) (a) $(65) $1,321
Less:
capital expenditures (117) - (27) (144)
--- --- --- ---
Free cash flow $1,294 $(25) $(92) $1,177
====== ==== ==== ======
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $9 $- $(9) $-
Cash transfers
to QSI (2) (99) - 99 -
--- --- --- ---
Net cash transfers $(90) $- $90 $-
==== === === ===
Twelve Months Ended September 27, 2009
-----------------------------------------
Estimated
Pro Share-Based
Forma Compensation QSI GAAP
------------------------------------------------
Net cash provided
(used) by operating
activities $7,556 $(79) (a) $(305) $7,172
Less: capital
expenditures (649) - (112) (761)
--- --- --- ---
Free cash flow $6,907 $(79) $(417) $6,411
====== ==== ===== ======
Other supplemental
cash disclosures:
Cash transfers
from QSI (3) $35 $- $(35) $-
Cash transfers
to QSI (2) (460) - 460 -
--- --- --- ---
Net cash
transfers $(425) $- $425 $-
===== === ==== ===
(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.
(3) Cash from sale of strategic debt and equity investments and partial
settlement of investment receivables.
Three Months Ended September 28, 2008
-------------------------------------------
Estimated
Pro Share-Based
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
==== ==== ===== ====
Twelve Months Ended September 28, 2008
--------------------------------------------
Estimated
Pro Share-Based In-Process
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
====== ===== ==== ===== ======
(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 September
27, 28,
2009 2008
---- ----
Current assets:
Cash and cash equivalents $2,717 $1,840
Marketable securities 8,352 4,571
Accounts receivable, net 700 4,187
Inventories 453 521
Deferred tax assets 149 289
Other current assets 199 464
--- ---
Total current assets 12,570 11,872
Marketable securities 6,673 4,858
Deferred tax assets 843 830
Property, plant and equipment, net 2,387 2,162
Goodwill 1,492 1,517
Other intangible assets, net 3,065 3,104
Other assets 415 369
--- ---
Total assets $27,445 $24,712
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $636 $570
Payroll and other benefits related
liabilities 480 406
Unearned revenues 441 394
Other current liabilities 1,256 1,070
----- -----
Total current liabilities 2,813 2,440
Unearned revenues 3,464 3,768
Income taxes payable 47 227
Other liabilities 805 333
--- ---
Total liabilities 7,129 6,768
----- -----
Stockholders' equity:
Preferred stock, $0.0001 par value;
issuable in series; 8 shares authorized;
none outstanding at September 27, 2009 and
September 28, 2008 - -
Common stock, $0.0001 par value; 6,000
shares authorized; 1,669 and 1,656 shares
issued and outstanding at September 27,
2009 and September 28, 2008, respectively - -
Paid-in capital 8,493 7,511
Retained earnings 11,235 10,717
Accumulated other comprehensive income
(loss) 588 (284)
--- ----
Total stockholders' equity 20,316 17,944
------ ------
Total liabilities and stockholders'
equity $27,445 $24,712
======= =======
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
----------------- -------------------
September September September September
27, 28, 27, 28,
2009 2008 2009 2008
------- ------- ------- -------
Revenues:
Equipment and
services $1,769 $1,866 $6,466 $7,160
Licensing and
royalty fees 921 1,468 3,950 3,982
--- ----- ----- -----
Total revenues 2,690 3,334 10,416 11,142
----- ----- ------ ------
Operating expenses:
Cost of equipment and
services revenues 824 922 3,181 3,414
Research and
development 614 621 2,440 2,281
Selling, general and
administrative 390 456 1,556 1,717
Other 265 - 1,013 -
--- --- ----- ---
Total operating
expenses 2,093 1,999 8,190 7,412
----- ----- ----- -----
Operating income 597 1,335 2,226 3,730
Total investment income
(loss), net 145 (228) (150) 96
--- ---- ---- ---
Income before income
taxes 742 1,107 2,076 3,826
Income tax benefit
(expense) 61 (229) (484) (666)
--- ---- ---- ----
Net income $803 $878 $1,592 $3,160
==== ==== ====== ======
Basic earnings per
common share $0.48 $0.53 $0.96 $1.94
===== ===== ===== =====
Diluted earnings per
common share $0.48 $0.52 $0.95 $1.90
===== ===== ===== =====
Shares used in per share
calculations:
Basic 1,666 1,650 1,656 1,632
===== ===== ===== =====
Diluted 1,688 1,678 1,673 1,660
===== ===== ===== =====
Dividends per share paid $0.17 $0.16 $0.66 $0.60
===== ===== ===== =====
Dividends per share
announced $0.17 $0.16 $0.66 $0.60
===== ===== ===== =====
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------ -------------------
September September September September
27, 28, 27, 28,
2009 2008 2009 2008
------- ------- ------- -------
Operating Activities:
Net income $803 $878 $1,592 $3,160
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 175 120 635 456
Revenues related to non-monetary
exchanges (29) (172) (114) (172)
Non-cash portion of income tax
(benefit) expense (255) 158 (33) 306
Non-cash portion of share-based
compensation expense 148 148 584 541
Non-cash portion of interest
and dividend income (24) (21) (68) (26)
Incremental tax benefit from
stock options exercised (25) (98) (79) (408)
Net realized (gains) losses on
marketable securities and other
investments (80) 3 (137) (155)
Net impairment losses on
marketable securities and
other investments 46 332 763 535
Other items, net 14 23 36 29
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net 366 (501) 3,083 (802)
Inventories (74) 95 69 (47)
Other assets (41) (52) (58) (17)
Trade accounts payable 65 (59) 57 (63)
Payroll, benefits and other
liabilities 273 175 984 310
Unearned revenues (41) (39) (142) (89)
--- --- ---- ---
Net cash provided by
operating activities 1,321 990 7,172 3,558
----- --- ----- -----
Investing Activities:
Capital expenditures (144) (414) (761) (1,397)
Purchases of available-for-sale
securities (3,946) (2,736) (10,443) (7,680)
Proceeds from sale of
available-for-sale securities 1,668 1,141 5,274 6,689
Increase in receivables for
settlement of investments - (406) - (406)
Cash received for partial
settlement of investment
receivables - - 349 -
Other investments and
acquisitions, net of cash
acquired (7) (15) (54) (298)
Change in collateral held under
securities lending - 153 173 248
Other items, net (1) (5) 5 25
--- --- --- ---
Net cash used by investing
activities (2,430) (2,282) (5,457) (2,819)
------ ------ ------ ------
Financing Activities:
Proceeds from issuance of
common stock 366 484 642 1,184
Incremental tax benefit from
stock options exercised 25 98 79 408
Repurchase and retirement of
common stock - - (285) (1,670)
Dividends paid (283) (266) (1,093) (982)
Change in obligations under
securities lending - (153) (173) (248)
Other items, net (3) 2 (3) 1
--- --- --- ---
Net cash provided (used) by
financing activities 105 165 (833) (1,307)
--- --- ---- ------
Effect of exchange rate changes
on cash - (3) (5) (3)
--- --- --- ---
Net (decrease) increase
in cash and cash
equivalents (1,004) (1,130) 877 (571)
Cash and cash equivalents at
beginning of period 3,721 2,970 1,840 2,411
----- ----- ----- -----
Cash and cash equivalents
at end of period $2,717 $1,840 $2,717 $1,840
====== ====== ====== ======
Qualcomm Contact:
John Gilbert
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
SOURCE Qualcomm Incorporated
Released November 4, 2009