Qualcomm Announces Third Quarter Fiscal 2010 Results
Revenues $2.7 Billion, EPS $0.47
Pro Forma EPS $0.57
Reports Record MSM Shipments; Raises Financial Guidance
SAN DIEGO, July 21 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the third quarter of fiscal 2010 ended June 27, 2010.
"Our financial performance this quarter exceeded our prior expectations, driven by record MSM chipset shipments, favorable product mix and continued strong demand for 3G devices around the world," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Looking forward, we continue to see healthy CDMA-based device growth of approximately 23 percent in calendar year 2010, and are raising both our revenue and earnings guidance for the fiscal year."
Third Quarter Results (GAAP)
-- Revenues: $2.71 billion, down 2 percent year-over-year and up 2 percent
sequentially.
-- Operating income: $792 million, down 11 percent year-over-year and up 2
percent sequentially.
-- Net income: $767 million, up 4 percent year-over-year and down 1 percent
sequentially.
-- Diluted earnings per share: $0.47, up 7 percent year-over-year and 2
percent sequentially.
-- Effective tax rate: 21 percent for the quarter.
-- Operating cash flow: $951 million, down 13 percent year-over-year; 35
percent of revenues.
-- Return of capital to stockholders: $1.49 billion, including $309
million, or $0.19 per share, of cash dividends paid, and $1.18 billion
to repurchase 32.4 million shares of our common stock.
Pro Forma Third Quarter Results
Pro forma results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain tax items that are not related to the current year and acquired in-process research and development (R&D) expense.
-- Revenues: $2.70 billion, down 2 percent year-over-year and up 1 percent
sequentially.
-- Operating income: $991 million, down 12 percent year-over-year and 7
percent sequentially.
-- Net income: $936 million, up 4 percent year-over-year and down 5 percent
sequentially.
-- Diluted earnings per share: $0.57, up 6 percent year-over-year and down
3 percent sequentially. The current quarter excludes $0.07 loss per
share attributable to certain share-based compensation and $0.03 loss
per share attributable to certain tax items.
-- Effective tax rate: 19 percent for the quarter.
-- Free cash flow: $954 million, down 8 percent year-over-year; 35 percent
of revenues (defined as net cash from operating activities less capital
expenditures).
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and pro forma results are included at the end of this news release.
Third Quarter Key Business Metrics
-- CDMA-based Mobile Station Modem™ (MSM™) shipments: approximately 103
million units, up 10 percent year-over-year and 11 percent sequentially.
-- March quarter total reported device sales: approximately $25.2 billion,
up 19 percent year-over-year and down 9 percent sequentially.
o March quarter estimated CDMA-based device shipments: approximately 134
to 138 million units at an estimated average selling price of
approximately $183 to $189 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $17.6 billion at the end of the third quarter of fiscal 2010, compared to $18.2 billion at the end of the second quarter of fiscal 2010 and $15.7 billion a year ago. On July 8, 2010, we announced a cash dividend of $0.19 per share payable on September 24, 2010 to stockholders of record as of August 27, 2010.
Research and Development
Share-Based In-Process
($ in millions) Pro Forma Compensation R&D QSI GAAP
Third quarter fiscal 2010 $ 546 $ 74 $ - $ 29 $ 649
As a % of revenues 20% N/M 24%
Third quarter fiscal 2009 $ 523 $ 72 $ - $ 23 $ 618
As a % of revenues 19% N/M 22%
Year-over-year change ($) 4% 3% N/M 26% 5%
N/M - Not Meaningful
Pro forma R&D expenses increased 4 percent year-over-year, primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies, and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses were primarily related to our FLO TV™ subsidiary.
Selling, General and Administrative
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
Third quarter fiscal 2010 $ 321 $ 65 $ (26) $ 360
As a % of revenues 12% N/M 13%
Third quarter fiscal 2009 $ 285 $ 68 $ 24 $ 377
As a % of revenues 10% N/M 14%
Year-over-year change ($) 13% (4%) (208%) (5%)
Pro forma selling, general and administrative (SG&A) expenses increased 13 percent year-over-year primarily due to an increase in patent-related costs. Third quarter fiscal 2010 QSI SG&A expenses included a $62 million gain on the sale of our Australia spectrum license. Other QSI SG&A expenses increased by $12 million primarily due to selling and marketing expenses related to FLO TV.
Effective Income Tax Rate
Our fiscal 2010 effective income tax rates are estimated to be approximately 20 percent for GAAP and approximately 20 to 21 percent for pro forma. Our estimate of the fiscal 2010 GAAP effective tax rate includes tax expense of approximately $130 million that arises because deferred revenue related to the 2008 license and settlement agreements with Nokia is taxable in fiscal 2010, but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower as a result of California tax legislation enacted in 2009. During the third quarter of fiscal 2010, we recorded $20 million of tax expense as a result of prior year tax audits completed during the third fiscal quarter. The tax expense related to these items was excluded from our 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 and the Broadband Wireless Access (BWA) spectrum recently won in the auction in India. GAAP results for the third quarter of fiscal 2010 included a net loss of $4 million for the QSI segment. The third quarter of fiscal 2010 QSI results included $118 million in operating expenses, primarily related to FLO TV, partially offset by a $62 million gain on the sale of our Australia spectrum license. In June 2010, in connection with the India BWA spectrum purchase, we entered into a bank loan agreement that is payable in full in Indian rupees in December 2010. At the end of the third quarter of fiscal 2010, the carrying value of the loan was $1.06 billion.
Business Outlook
The following statements are forward looking and actual results may differ materially. The "Note Regarding Forward-Looking Statements" at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.
Our outlook does not include provisions for the consequences of injunctions, damages or fines related to any pending legal matters unless awarded or imposed by a court, governmental entity or other regulatory body. 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 presented below is 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
FOURTH FISCAL
QUARTER
Q4 FY09 Current Guidance
Results Q4 FY10 Estimates
Pro Forma
Revenues $2.68B $2.67B - $2.93B
Year-over-year even - increase
change 9%
Diluted earnings
per share (EPS) $0.48 $0.55 - $0.59
Year-over-year increase 15% -
change 23%
GAAP
Revenues $2.69B $2.67B - $2.93B
Year-over-year decrease 1% -
change increase 9%
Diluted EPS $0.48 $0.39 - $0.43
Year-over-year decrease 10% -
change 19%
Diluted EPS
attributable to
QSI ($0.05) ($0.07)
Diluted EPS attributable
to share-based
compensation ($0.05) ($0.07)
Diluted EPS
attributable to
certain tax items
(1) $0.09 ($0.02)
Metrics
approx. 106M -
MSM shipments approx. 91M 111M
Year-over-year increase 16% -
change 22%
Total reported
device sales (2) $24.9B* $26.5B - $28.5B*
Est. CDMA-based
devices shipped approx. 120M-
(2) 124M* not provided
Est. CDMA-based device approx.
average selling price (2) $200-$206* not provided
*Est. sales in
June quarter,
reported in
September
quarter
FISCAL YEAR
FY 2009 Prior Guidance Current Guidance
Results FY 2010 Estimates FY 2010 Estimates
Pro Forma
Revenues $10.39B $10.4B - $11.0B $10.7B - $11.0B
Year-over-year even - increase
change 6% increase 3% - 6%
Diluted EPS $1.31 $2.21 - $2.32 $2.33 - $2.37
Year-over-year increase 69% - increase 78% -
change 77% 81%
GAAP
Revenues $10.42B $10.4B - $11.0B $10.7B - $11.0B
Year-over-year even - increase
change 6% increase 3% - 6%
Diluted EPS $0.95 $1.71 - $1.82 $1.82 - $1.86
Year-over-year increase 80% - increase 92% -
change 92% 96%
Diluted EPS
attributable to
QSI ($0.15) ($0.15) ($0.15)
Diluted EPS attributable
to share-based
compensation ($0.27) ($0.27) ($0.27)
Diluted EPS
attributable to
certain tax items
(1) $0.07 ($0.08) ($0.09)
Metrics
Est. fiscal year*
CDMA-based device average approx. $202 - approx. $182 - approx. $184 -
selling price range (2) $208 $188 $188
*Shipments in Sept. to
June quarters, reported
in Dec. to Sept. quarters
CALENDAR YEAR Device Estimates (2)
Prior Guidance Current Guidance
Calendar 2009 Calendar 2010 Calendar 2010
Estimates Estimates Estimates
Est. CDMA-based
device shipments
approx. 106M - approx. 134M -
March quarter 110M not provided 138M
approx. 120M -
June quarter 124M not provided not provided
September approx. 126M -
quarter 130M not provided not provided
approx. 148M -
December quarter 152M not provided not provided
Est. Calendar year
range (approx.) 500M - 516M 600M - 650M 600M - 650M
Midpoint Midpoint Midpoint
Est. total
CDMA-based units approx. 508M approx. 625M approx. 625M
Est. CDMA units approx. 213M approx. 236M approx. 236M
Est. WCDMA units approx. 295M approx. 389M approx. 389M
(1) The estimate of our fiscal 2010 GAAP effective tax rate includes tax expense of approximately $130 million that arises because deferred revenue related to the 2008 license and settlement agreements with Nokia is taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower as a result of California tax legislation enacted in 2009. (2) Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period. The reported quarterly estimated ranges of ASPs and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same (e.g., some licensees report selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that is reported with the activity for the particular period. For results using assumptions in effect for quarters prior to the second quarter of fiscal 2010, please refer to the "Changes to QTL Metrics" table of our April 21, 2010 earnings release that was furnished to the Securities and Exchange Commission on Form 8-K.
Results of Business Segments (in millions, except per share data):
Pro Forma
Reconciling Pro Share-Based Tax In-
Items (1) Forma Compensation Items Process GAAP
SEGMENTS QCT QTL QWI (5) (5) (2) (3) R&D QSI (4) (5)
Q3 -
FISCAL
2010
Revenues $1,691 $847 $162 $- $2,700 $ - $ - $ - $6 $2,706
Change
from
prior
year (5%) 5% 9% N/M (2%) (33%) (2%)
Change
from
prior
quarter 10% (13%) 7% N/M 1% 200% 2%
Operating
income
(loss) $991 ($149) $ - $ - ($50) $792
Change
from
prior
year (12%) 1% N/A 35% (11%)
Change
from
prior
quarter (7%) 3% N/M 62% 2%
EBT $404 $673 $6 $78 $1,161 ($149) $ - $ - ($41) $971
Change
from
prior
year (26%) 2% N/M N/M (3%) 1% N/A 38% (1%)
Change
from
prior
quarter 17% (18%) N/M N/M (8%) 3% N/M 70% 1%
EBT as a
% of
revenues 24% 79% 4% N/M 43% N/M N/M N/M 36%
Net
income
(loss) $936 ($111) ($54) $ - ($4) $767
Change
from
prior
year 4% 13% N/A N/A 90% 4%
Change
from
prior
quarter (5%) (13%) N/M N/M 95% (1%)
Diluted
EPS $0.57 ($0.07) ($0.03) $ - $ - $0.47
Change
from
prior
year 6% 13% N/A N/A N/M 7%
Change
from
prior
quarter (3%) (17%) N/M N/M N/M 2%
Diluted
shares
used 1,642 1,642 1,642 1,642 1,642 1,642
Q2 -
FISCAL
2010
Revenues $1,537 $974 $152 ($2) $2,661 $ - $ - $ - $2 $2,663
Operating
income
(loss) 1,065 (154) - (3) (132) 776
EBT 344 821 (1) 94 1,258 (154) - (3) (136) 965
Net
income
(loss) 989 (98) (33) (3) (81) 774
Diluted
EPS $0.59 ($0.06) ($0.02) $ - ($0.05) $0.46
Diluted
shares
used 1,678 1,678 1,678 1,678 1,678 1,678
Q3 -
FISCAL
2009
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 1,675 1,675
Q4 -
FISCAL
2009
Revenues $1,699 $837 $146 $1 $2,683 $ - $ - $ - $7 $2,690
Operating
income
(loss) 831 (148) - - (86) 597
EBT 508 693 (5) (211) 985 (148) - - (95) 742
Net
income
(loss) 811 (85) 155 - (78) 803
Diluted
EPS $0.48 ($0.05) $ 0.09 $ - ($0.05) $0.48
Diluted
shares
used 1,688 1,688 1,688 1,688 1,688 1,688
9 MONTHS
- FISCAL
2010
Revenues $4,835 $2,738 $456 $1 $8,030 $ - $ - $ - $9 $8,039
Change
from
prior
year 9% (1%) (8%) N/M 4% (59%) 4%
Operating
income
(loss) $3,189 ($453) $ - ($3) ($286) $2,447
Change
from
prior
year 37% (4%) N/M (14%) 50%
EBT $1,173 $2,266 $14 $274 $3,727 ($453) $ - ($3) ($283) $2,988
Change
from
prior
year 26% (5%) (44%) N/M 83% (4%) N/M (6%) 124%
Net
income
(loss) $2,967 ($322) ($119) ($3) ($141) $2,382
Change
from
prior
year 116% 13% N/M N/M 19% 202%
Diluted
EPS $1.78 ($0.19) ($0.07) $ - ($0.08) $1.43
Change
from
prior
year 117% 14% N/M N/M 20% 204%
Diluted
shares
used 1,670 1,670 1,670 1,670 1,670 1,670
9 MONTHS
- FISCAL
2009
Revenues $4,436 $2,769 $494 $5 $7,704 $ - $ - $ - $22 $7,726
Operating
income
(loss) 2,323 (436) - (6) (251) 1,630
EBT 933 2,376 25 (1,292) 2,042 (436) - (6) (266) 1,334
Net
income
(loss) 1,376 (370) (36) (6) (174) 790
Diluted
EPS $0.82 ($0.22) ($0.02) $ - ($0.10) $0.47
Diluted
shares
used 1,668 1,668 1,668 1,668 1,668 1,668
FISCAL
YEAR 2009
Revenues $6,135 $3,605 $641 $6 $10,387 $ - $ - $ - $29 $10,416
Operating
income
(loss) 3,153 (584) - (6) (337) 2,226
EBT 1,441 3,068 20 (1,502) 3,027 (584) - (6) (361) 2,076
Net
income
(loss) 2,187 (455) 118 (6) (252) 1,592
Diluted
EPS $1.31 ($0.27) $0.07 $ - ($0.15) $0.95
Diluted
shares
used 1,673 1,673 1,673 1,673 1,673 1,673
(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) 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 first, second and third quarters of fiscal 2010, the Company recorded $32 million, $33 million and $32 million in state tax expense, respectively, or $0.02 diluted loss per share for each quarter, that arises because deferred revenue related to the license and settlement agreements with Nokia is taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company's state tax rate will be lower. During the third quarter of fiscal 2010, the Company recorded $22 million of tax expense, or $0.01 diluted loss per share, as a result of prior year tax audits completed during the third quarter. (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 pro forma tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision. (5) Fiscal 2009 results included a $783 million charge related to a litigation settlement and patent agreement with Broadcom Corporation, including $748 million recorded in the second quarter of fiscal 2009 and $35 million recorded in the fourth quarter of 2009. The fourth quarter of fiscal 2009 results also included a $230 million charge related to a fine that had been announced by the Korea Fair Trade Commission. N/M – Not Meaningful Sums may not equal totals due to rounding.
Conference Call
Qualcomm's third quarter fiscal 2010 earnings conference call will be broadcast live on July 21, 2010 beginning at 1:45 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 July 21, 2010, beginning at approximately 5:30 p.m. PT through August 21, 2010 at 9:00 p.m. PT. To listen to the replay, U.S. callers may dial (800) 642-1687 and international callers may dial (706) 645-9291. U.S. and international callers should use reservation number 83946397. An audio replay of the conference call will be available on the Company's web site at www.qualcomm.com following the live call.
Editor's Note: To view the web slides that accompany this earnings release and conference call, please go to the Qualcomm Investor Relations website at: http://investor.qualcomm.com/results.cfm
Qualcomm Incorporated (Nasdaq: QCOM) is the world leader in next-generation mobile technologies. For 25 years, Qualcomm ideas and inventions have driven the evolution of wireless communications, connecting people more closely to information, entertainment and each other. Today, Qualcomm technologies are powering the convergence of mobile communications and consumer electronics, making wireless devices and services more personal, affordable and accessible to people everywhere. For more information, please visit www.qualcomm.com
Note Regarding Use of Non-GAAP Financial Measures
The Company presents 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 share-based compensation, certain tax items and acquired in-process R&D. The QSI segment is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments are viewed by management as unrelated to the Company's operational performance. Share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company's common stock, is excluded because management views such share-based compensation as unrelated to the Company's operational performance. Further, share-based compensation related to stock options is affected by factors that are subject to change, including the Company's stock price, stock market volatility, expected option life, risk-free interest rates and expected dividend payouts in future years. Certain tax items that were recorded in reported earnings in each fiscal year presented, but were unrelated to the fiscal year in which they were recorded, are excluded in order to provide a clearer understanding of the Company's ongoing pro forma 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 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, and demand for, our technologies in wireless networks and of wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA, TD-SCDMA and OFDMA both domestically and internationally; the uncertainty of global economic conditions and its potential impact on demand for our products, services or applications and the value of our marketable securities; 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; our dependence on third-party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; foreign currency fluctuations; strategic investments and transactions we have or may pursue; the development, deployment and commercial acceptance of the FLO TV network and MediaFLO™ technology; the development and commercial acceptance of the mirasol® display technology; as well as the other risks detailed from time-to-time in our SEC reports, including the report on Form 10-K for the year ended September 27, 2009 and most recent Form 10-Q. The Company undertakes no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO TV and MediaFLO are trademarks of Qualcomm Incorporated. mirasol is a registered trademark of Qualcomm MEMS Technologies, Inc. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.
Qualcomm 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 June 27, 2010
Pro Share-Based Tax
Forma Compensation Items QSI GAAP
Revenues:
Equipment and
services $ 1,766 $ - $ - $ 6 $ 1,772
Licensing and
royalty fees 934 - - - 934
Total revenues 2,700 - - 6 2,706
Operating
expenses:
Cost of
equipment and
services
revenues 842 10 - 53 905
Research and
development 546 74 - 29 649
Selling,
general and
administrative 321 65 - (26) 360
Total
operating
expenses 1,709 149 - 56 1,914
Operating
income (loss) 991 (149) - (50) 792
Investment
income (loss),
net 170 (a) - - 9 (b) 179
Income (loss)
before income
taxes 1,161 (149) - (41) 971
Income tax
(expense)
benefit (225) (c) 38 (h) (54) (e) 37 (d) (204) (c)
Net income
(loss) $ 936 $ (111) $ (54) $ (4) $ 767
Earnings
(loss) per
common share:
$
Diluted $ 0.57 $ (0.07) (0.03) $ (0.00) $ 0.47
Shares used in
per share
calculations:
Diluted 1,642 1,642 1,642 1,642 1,642
Supplemental
Financial
Data:
Operating Cash
Flow $ 1,051 $ (3) (g) $ - $ (97) $ 951
Operating Cash
Flow as a % of
Revenues 39% N/M 35%
Free Cash Flow
(f) $ 954 $ (3) (g) $ - $ (117) $ 834
Free Cash Flow
as a % of
Revenues 35% N/M 31%
(a) 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 $78 million in net realized gains on investments, partially offset by $28 million in other-than-temporary losses on investments, $5 million in interest expense and $2 million in losses on derivatives. (b) Included $14 million in net realized gains on investments, $4 million in interest and dividend income related to cash, cash equivalents and marketable securities and $1 million in equity in earnings of investees, partially offset by $9 million in interest expense and $1 million in other-than-temporary losses on investments. (c) The third quarter of fiscal 2010 effective tax rates were 21% for GAAP and 19% for 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 pro forma tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision. (e) During the third quarter of fiscal 2010, the Company recorded (i) a $32 million state tax expense, or $0.02 diluted loss per share, that arises because deferred revenue related to the license and settlement agreements with Nokia is taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company's state tax rate will be lower, and (ii) a $22 million tax expense, or $0.01 diluted loss per share, as a result of prior year tax audits completed during the third quarter of fiscal 2010. (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 three months ended June 27, 2010, included herein. (g) Incremental tax benefits from stock options exercised during the period. (h) The third quarter of fiscal 2010 tax benefit related to share-based compensation includes a $2 million tax benefit as a result of prior year tax audits completed during the third quarter of fiscal 2010.
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)
Nine Months Ended June 27, 2010
Pro Share-Based Tax In-Process
Forma Compensation Items R&D QSI GAAP
Revenues:
Equipment and $ $
services 5,021 $ - $ - $ - $ 9 5,030
Licensing and
royalty fees 3,009 - - - - 3,009
Total revenues 8,030 - - - 9 8,039
Operating
expenses:
Cost of
equipment and
services
revenues 2,345 30 - - 154 2,529
Research and
development 1,594 221 - 3 74 1,892
Selling,
general and
administrative 902 202 - - 67 1,171
Total
operating
expenses 4,841 453 - 3 295 5,592
Operating
income (loss) 3,189 (453) - (3) (286) 2,447
Investment
income (loss),
net 538 (a) - - - 3 (b) 541
Income (loss)
before income
taxes 3,727 (453) - (3) (283) 2,988
Income tax
(expense)
benefit (760) (c) 131 (h) (119) (e) - 142 (d) (606) (c)
Net income $ $ $ $
(loss) 2,967 $ (322) (119) $ (3) (141) 2,382
Earnings
(loss) per
common share:
$ $ $ $
Diluted 1.78 $ (0.19) (0.07) $ (0.00) (0.08) 1.43
Shares used in
per share
calculations:
Diluted 1,670 1,670 1,670 1,670 1,670 1,670
Supplemental
Financial
Data:
Operating Cash $ $ $
Flow 3,297 $ (34) (g) $ - $ - (280) 2,983
Operating Cash
Flow as a % of
Revenues 41% N/M 37%
Free Cash Flow $ $ $
(f) 3,048 $ (34) (g) $ - $ - (344) 2,670
Free Cash Flow
as a % of
Revenues 38% N/M 33%
(a) Included $401 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 $249 million in net realized gains on investments, partially offset by $94 million in other-than-temporary losses on investments, $15 million in interest expense and $3 million in losses on derivatives. (b) Included $25 million in net realized gains on investments and $4 million in interest and dividend income related to cash, cash equivalents and marketable securities, partially offset by $15 million in interest expense, $8 million in other-than-temporary losses on investments and $3 million in equity in losses of investees. (c) The effective tax rates for the first nine months of fiscal 2010 were 20% for both GAAP and 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 pro forma tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision. (e) During the first nine months of fiscal 2010, the Company recorded (i) a $97 million state tax expense, or $0.06 diluted loss per share, that arises because deferred revenue related to the license and settlement agreements with Nokia is taxable in fiscal 2010 but the resulting deferred tax asset will reverse in future years when the Company's state tax rate will be lower, and (ii) a $22 million tax expense, or $0.01 diluted loss per share, as a result of prior year tax audits completed during the third quarter of fiscal 2010. (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 nine months ended June 27, 2010, included herein. (g) Incremental tax benefits from stock options exercised during the period. (h) The first nine months of fiscal 2010 tax benefit related to share-based compensation includes a $2 million tax benefit as a result of prior year tax audits completed during the third quarter of fiscal 2010.
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 June 27, 2010
Share-Based Tax In-Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided (used)
by operating
activities $ 1,051 $ (3) (a) $ - $ - $ (97) $ 951
Less: capital
expenditures (97) - - - (20) (117)
Free cash flow $ 954 $ (3) $ - $ - $ (117) $ 834
Other
supplemental
cash
disclosures:
Cash transfers
from QSI (1) $ 104 $ - $ - $ - $ (104) $ -
Cash transfers
to QSI (2) (133) - - - 133 -
Net cash
transfers $ (29) $ - $ - $ - $ 29 $ -
Nine Months Ended June 27, 2010
Share-Based Tax In-Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided (used)
by operating
activities $ 3,297 $ (34) (a) $ - $ - $ (280) $ 2,983
Less: capital
expenditures (249) - - - (64) (313)
Free cash flow $ 3,048 $ (34) $ - $ - $ (344) $ 2,670
Other
supplemental
cash
disclosures:
Cash transfers
from QSI (1) $ 117 $ - $ - $ - $ (117) $ -
Cash transfers
to QSI (2) (376) - - - 376 -
Net cash
transfers $ (259) $ - $ - $ - $ 259 $ -
(1) Cash from sale of equity investments and Australia spectrum license.
(2) Funding for strategic debt and equity investments, capital expenditures and
other QSI operating expenses.
Three Months Ended June 28, 2009
Share-Based Tax In-Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided (used)
by operating
activities $ 1,157 $ (22) (a) $ - $ - $ (48) $ 1,087
Less: capital
expenditures (118) - - - (31) (149)
Free cash flow $ 1,039 $ (22) $ - $ - $ (79) $ 938
Nine Months Ended June 28, 2009
Share-Based Tax In-Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided (used)
by operating
activities $ 6,145 $ (54) (a) $ - $ - $ (240) $ 5,851
Less: capital
expenditures (533) - - - (84) (617)
Free cash flow $ 5,612 $ (54) $ - $ - $ (324) $ 5,234
(a) Incremental tax benefits from stock options exercised during the period.
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
June 27, September 27,
2010 2009
Current assets:
Cash and cash equivalents $ 2,541 $ 2,717
Marketable securities 7,427 8,352
Accounts receivable, net 798 700
Inventories 446 453
Deferred tax assets 213 149
Other current assets 189 199
Total current assets 11,614 12,570
Marketable securities 7,618 6,673
Deferred tax assets 1,774 843
Property, plant and equipment, net 2,382 2,387
Goodwill 1,476 1,492
Other intangible assets, net 3,040 3,065
Other assets 1,497 415
Total assets $ 29,401 $ 27,445
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 640 $ 636
Payroll and other benefits related liabilities 433 480
Unearned revenues 601 441
Loan payable to banks 1,061 -
Income taxes payable 1,135 29
Other current liabilities 1,320 1,227
Total current liabilities 5,190 2,813
Unearned revenues 3,587 3,464
Other liabilities 738 852
Total liabilities 9,515 7,129
Stockholders' equity:
Preferred stock, $0.0001 par value; issuable in series;
8 shares authorized; none outstanding at
June 27, 2010 and September 27, 2009 - -
Common stock, $0.0001 par value; 6,000 shares
authorized;
1,609 and 1,669 shares issued and outstanding at
June 27, 2010 and September 27, 2009, respectively - -
Paid-in capital 6,611 8,493
Retained earnings 12,746 11,235
Accumulated other comprehensive income 529 588
Total stockholders' equity 19,886 20,316
Total liabilities and stockholders' equity $ 29,401 $ 27,445
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Revenues:
Equipment and services $ 1,772 $ 1,862 $ 5,030 $ 4,698
Licensing and royalty fees 934 891 3,009 3,028
Total revenues 2,706 2,753 8,039 7,726
Operating expenses:
Cost of equipment and services revenues 905 864 2,529 2,357
Research and development 649 618 1,892 1,826
Selling, general and administrative 360 377 1,171 1,165
Litigation settlement, patent license
and other related items - - - 748
Total operating expenses 1,914 1,859 5,592 6,096
Operating income 792 894 2,447 1,630
Investment income (loss), net 179 90 541 (296)
Income before income taxes 971 984 2,988 1,334
Income tax expense (204) (247) (606) (544)
Net income $ 767 $ 737 $ 2,382 $ 790
Basic earnings per common share $ 0.47 $ 0.45 $ 1.44 $ 0.48
Diluted earnings per common share $ 0.47 $ 0.44 $ 1.43 $ 0.47
Shares used in per share calculations:
Basic 1,629 1,656 1,654 1,653
Diluted 1,642 1,675 1,670 1,668
Dividends per share paid $ 0.19 $ 0.17 $ 0.53 $ 0.49
Dividends per share announced $ 0.19 $ 0.17 $ 0.53 $ 0.49
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
June 27, June 28, June 27, June 28,
2010 2009 2010 2009
Operating Activities:
Net income $ 767 $ 737 $ 2,382 $ 790
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization 166 154 495 460
Revenues related to non-monetary
exchanges (31) (29) (99) (86)
Income tax provision in excess of income
tax payments 86 56 80 222
Non-cash portion of share-based
compensation expense 149 151 453 436
Incremental tax benefit from stock
options exercised (3) (22) (34) (54)
Net realized gains on marketable
securities and other investments (92) (90) (274) (57)
Impairment losses on marketable
securities and other investments 29 116 102 717
Other items, net (66) (1) (70) (22)
Changes in assets and liabilities, net
of effects of acquisitions:
Accounts receivable, net (126) (133) (91) 2,691
Inventories (45) 30 7 143
Other assets (1) 13 (71) (17)
Trade accounts payable 104 95 23 (8)
Payroll, benefits and other liabilities 78 27 (161) 737
Unearned revenues (64) (17) 241 (101)
Net cash provided by operating
activities 951 1,087 2,983 5,851
Investing Activities:
Capital expenditures (117) (149) (313) (617)
Advance payment on spectrum (1,064) - (1,064) -
Purchases of available-for-sale
securities (2,569) (2,201) (7,049) (6,497)
Proceeds from sale of available-for-sale
securities 3,113 1,145 7,354 3,606
Cash received for partial settlement of
investment receivables - 32 33 349
Other investments and acquisitions, net
of cash acquired (17) (7) (45) (47)
Change in collateral held under
securities lending - - - 173
Other items, net 85 - 88 6
Net cash used by investing activities (569) (1,180) (996) (3,027)
Financing Activities:
Borrowing under loan payable to banks 1,064 - 1,064 -
Proceeds from issuance of common stock 35 175 519 276
Incremental tax benefit from stock
options exercised 3 22 34 54
Repurchase and retirement of common
stock (1,178) - (2,893) (285)
Dividends paid (309) (282) (872) (810)
Change in obligations under securities
lending - - - (173)
Other items, net (1) 3 (2) -
Net cash used by financing activities (386) (82) (2,150) (938)
Effect of exchange rate changes on cash (8) 4 (13) (5)
Net (decrease) increase in cash and cash
equivalents (12) (171) (176) 1,881
Cash and cash equivalents at beginning
of period 2,553 3,892 2,717 1,840
Cash and cash equivalents at end of
period $ 2,541 $ 3,721 $ 2,541 $ 3,721
SOURCE Qualcomm Incorporated
Released July 21, 2010