Qualcomm Announces Fourth Quarter and Fiscal 2011 Results

(1)

The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rate throughout this news release are from continuing operations (i.e., before discontinued operations and the adjustment for noncontrolling interests), unless otherwise stated.

(2)

Net income and diluted earnings per share throughout this news release are attributable to Qualcomm (i.e., after discontinued operations and adjustment for noncontrolling interests), unless otherwise stated.

($ in millions)

Non-GAAP

Share-Based
Compensation

QSI

GAAP

Fourth quarter fiscal 2011

$           731

$                119

$                1

$            851

As a % of revenues

18%

21%

Fourth quarter fiscal 2010*

$            547

$                  77

$                4

$            628

As a % of revenues

19%

21%

Year-over-year change ($)

34%

55%

N/M

36%

*As adjusted for discontinued operations 

N/M - Not Meaningful

($ in millions)

Non-GAAP

Share-Based
Compensation

Acquisition-
Related
Items

QSI

GAAP

Fourth quarter fiscal 2011

$        371

$            110

$           42

$   8

$531

As a % of revenues

9%

13%

Fourth quarter fiscal 2010*

$        364

$              68

$              -

$   8

$440

As a % of revenues

12%

15%

Year-over-year change ($)

2%

62%

N/M

N/M

21%

*As adjusted for discontinued operations 

N/M - Not Meaningful

Qualcomm's Business Outlook Summary

FIRST FISCAL QUARTER

Q1 FY11

Current Guidance

Results (1)

Q1 FY12 Estimates

Revenues

$3.35B

$4.35B - $4.75B

 Year-over-year change

increase 30% - 42%

Non-GAAP Diluted earnings per share (EPS)

$0.82

$0.86 - $0.92

 Year-over-year change

increase 5% - 12%

        Diluted EPS attributable to QSI

($0.05)

($0.02)

        Diluted EPS attributable to share-based compensation

($0.07)

($0.11)

        Diluted EPS attributable to acquisition-related items

$0.00

($0.03)

        Diluted EPS attributable to tax items

$0.02

$0.00

GAAP Diluted EPS

$0.71

$0.70 - $0.76

 Year-over-year change

decrease 1% - increase 7%

Metrics

MSM shipments

approx. 118M

approx. 146M - 154M

 Year-over-year change

increase 24% - 31%

Total reported device sales (2)

$34.0B*

$37.5B - $41.5B*

 Year-over-year change

increase 10% - 22%

*Est. sales in September quarter, reported in December quarter

FISCAL YEAR

FY 2011

Current Guidance

Results

FY 2012 Estimates

Revenues

$14.96B

$18.0B - $19.0B

 Year-over-year change

increase 20% - 27%

Non-GAAP Diluted EPS

$3.20

$3.42 - $3.62

 Year-over-year change

increase 7% - 13%

       Diluted EPS attributable to QSI

($0.23)

($0.04)

       Diluted EPS attributable to share-based compensation

($0.37)

($0.46)

       Diluted EPS attributable to acquisition-related items

($0.12)

($0.12)

       Diluted EPS attributable to tax items

$0.04

$0.00

GAAP Diluted EPS

$2.52

$2.80 - $3.00

 Year-over-year change

increase 11% - 19%

Metrics

Est. fiscal year* CDMA-based device average selling price range (2)

approx $203 - $209

approx $197 - $209

*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters

CALENDAR YEAR Device Estimates (2)

Prior Guidance
Calendar 2011
Estimates

Current Guidance
Calendar 2011
Estimates

Current Guidance
Calendar 2012
Estimates

Est. CDMA-based device shipments

March quarter

approx. 170M - 174M

approx. 170M - 174M

not provided

June quarter

not provided

approx. 187M - 191M

not provided

September quarter

not provided

not provided

not provided

December quarter

not provided

not provided

not provided

Est. Calendar year range (approx.)

750M - 800M

755M - 795M

865M - 935M

Midpoint

Midpoint

Midpoint

Est. total CDMA-based units

approx. 775M

approx. 775M

approx. 900M

Est. CDMA units

approx. 245M

approx. 235M

not provided

Est. WCDMA units

approx. 530M

approx. 540M

not provided

(1)

As adjusted to reflect the reclassification of revenues related to FLO TV to discontinued operations.

(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 way (e.g., some licensees report selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time.  Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until such particular period.  

Sums may not equal totals due to rounding.

SEGMENTS

QCT

QTL

QWI

Non-GAAP
Reconciling
Items (1)

Non-GAAP

Share-Based
Compensation*

Tax Items 
(2)

Acquisition-
Related
Items (3)

QSI (4)*

GAAP*

Q4 - FISCAL 2011

Revenues

$2,587

$1,361

$163

$6

$4,117

$  -

$  -

$  -

$  -

$4,117

 Change from prior year

39%

48%

(5%)

N/M

39%

39%

 Change from prior quarter

18%

8%

(1%)

N/M

14%

14%

Operating income (loss)    

$1,624

($252)

$  -

($125)

($9)

$1,238

 Change from prior year

44%

(61%)

N/A

40%

29%

 Change from prior quarter

17%

(31%)

(62%)

10%

11%

EBT

$569

$1,193

($5)

($20)

$1,737

($252)

$  -

($125)

($34)

$1,326

 Change from prior year

10%

58%

N/M

N/M

28%

(61%)

N/A

(6%)

13%

 Change from prior quarter

32%

9%

62%

N/M

10%

(31%)

(62%)

(13%)

4%

EBT as a % of revenues

22%

88%

N/M

N/M

42%

32%

Discontinued operations, net of tax (5)

$  -

($1)

$  -

$  -

($5)

($6)

Net income (loss)

$ 1,372

($214)

$ 40

($120)

($22)

$1,056

 Change from prior year

24%

(78%)

N/M

N/A

73%

22%

 Change from prior quarter

11%

(46%)

N/M

(64%)

N/M

2%

Diluted EPS

$0.80

($0.12)

$0.02

($0.07)

($0.01)

$0.62

 Change from prior year

18%

(71%)

N/M

N/A

80%

17%

 Change from prior quarter

10%

(33%)

N/M

(75%)

N/M

2%

Diluted shares used

1,716

1,716

1,716

1,716

1,716

1,716

Q3 - FISCAL 2011

Revenues

$2,194

$1,257

$164

$8

$3,623

$  -

$  -

$  -

$  -

$3,623

Operating income (loss)

1,393

(193)

-

(77)

(10)

1,113

EBT

430

1,092

(13)

65

1,574

(193)

-

(77)

(30)

1,274

Discontinued operations, net of tax (5)

-

-

-

-

44

44

Net income (loss)

1,240

(147)

(4)

(73)

19

1,035

Diluted EPS

$0.73

($0.09)

$  -

($0.04)

$0.01

$0.61

Diluted shares used

1,709

1,709

1,709

1,709

1,709

1,709

Q1 - FISCAL 2011

Revenues

$2,116

$1,057

$172

$3

$3,348

$  -

$  -

$  -

$  -

$3,348

Operating income (loss)

1,416

(169)

-

-

-

1,247

EBT

640

892

-

128

1,660

(169)

-

-

(21)

1,470

Discontinued operations, net of tax (5)

-

(2)

-

-

(80)

(82)

Net income (loss)

1,345

(116)

28

-

(87)

1,170

Diluted EPS

$0.82

($0.07)

$0.02

$  -

($0.05)

$0.71

Diluted shares used

1,648

1,648

1,648

1,648

1,648

1,648

Q4 - FISCAL 2010

Revenues

$1,860

$921

$171

$  -

$2,952

$  -

$  -

$  -

$  -

$2,952

Operating income (loss)

1,130

(157)

-

-

(15)

958

EBT

519

754

(2)

90

1,361

(157)

-

-

(32)

1,172

Discontinued operations, net of tax (5)

-

(3)

-

-

(70)

(73)

Net income (loss)

1,105

(120)

(40)

-

(80)

865

Diluted EPS

$0.68

($0.07)

($0.02)

$  -

($0.05)

$0.53

Diluted shares used

1,621

1,621

1,621

1,621

1,621

1,621

12 MONTHS - FISCAL 2011

Revenues

$8,859

$5,422

$656

$20

$14,957

$  -

$  -

$  -

$  -

$14,957

 Change from prior year

32%

48%

4%

N/M

36%

36%

Operating income (loss)

$6,084

($813)

$  -

($208)

($37)

$5,026

 Change from prior year

41%

(36%)

N/M

N/M

35%

EBT

$2,056

$4,753

($152)

$183

$6,840

($813)

$  -

($208)

($132)

$5,687

 Change from prior year

21%

57%

N/M

(49%)

34%

(36%)

N/M

N/M

27%

Discontinued operations, net of tax (5)

$  -

($5)

$  -

$  -

($308)

($313)

Net income (loss)

$5,407

($624)

$62

($200)

($385)

$4,260

 Change from prior year

33%

(41%)

N/M

N/M

(75%)

31%

Diluted EPS

$3.20

($0.37)

$0.04

($0.12)

($0.23)

$2.52

 Change from prior year

30%

(37%)

N/M

N/M

(77%)

29%

Diluted shares used

1,691

1,691

1,691

1,691

1,691

1,691

12 MONTHS- FISCAL 2010

Revenues

$6,695

$3,659

$628

$  -

$10,982

$  -

$  -

$  -

$  -

$10,982

Operating income (loss)

4,316

(597)

-

(3)

11

3,727

EBT

1,693

3,020

12

361

5,086

(597)

-

(3)

7

4,493

Discontinued operations, net of tax (5)

-

(11)

-

-

(262)

(273)

Net income (loss)

4,071

(442)

(159)

(3)

(220)

3,247

Diluted EPS

$2.46

($0.27)

($0.10)

$  -

($0.13)

$1.96

Diluted shares used

1,658

1,658

1,658

1,658

1,658

1,658

(1)

Non-GAAP reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations.  Non-GAAP reconciling items related to earnings before taxes consist primarily of certain investment income or losses, interest expense, research and development expenses, sales and marketing expenses and other operating expenses that are not allocated to the segments for management reporting purposes, nonreportable segment results and the elimination of intersegment profit.

(2)

During the first quarter of fiscal 2011, we recorded a tax benefit of $32 million related to fiscal 2010 due to the retroactive extension of the federal R&D tax credit. During the fourth quarter of fiscal 2011, we recorded a tax benefit of $44 million related to an agreement reached on a component of our fiscal 2006 through 2010 state tax returns.  Also, during the first, second, third and fourth quarters of fiscal 2011, we recorded $3 million, $3 million, $4 million and $4 million, respectively, in state tax expense because deferred revenues related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower. Our quarterly and fiscal 2011 Non-GAAP results exclude these items.

(3)

Beginning in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During the third and fourth quarters of fiscal 2011, Non-GAAP results excluded $45 million and $37 million, respectively, related to the step-up of inventories to fair value and $32 million and $88 million, respectively, in amortization of intangible assets that resulted from acquisitions completed in the third and fourth quarters of fiscal 2011.

(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 Non-GAAP tax provision, the tax items column and the tax provision related to share-based compensation from the GAAP tax provision.

(5)

During fiscal 2011, we shut down the FLO TV business and network. The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly.

* As adjusted for discontinued operations

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Supplemental Information for the Three Months Ended September 25, 2011

(Unaudited)

Acquisition-

Non-GAAP

Share-Based

Tax

Related

GAAP

Results

Compensation

Items

Items (a)

QSI

Results

($ in millions except per share data)

Cost of equipment and services revenues

$         1,391

$              23

$      -

$        83

$      -

$         1,497

R&D

731

119

-

-

1

851

SG&A

371

110

-

42

8

531

Operating income (loss)

1,624

(252)

-

(125)

(9)

1,238

Investment income (loss), net

113

(b)

         -

-

                               -

(25)

(c)

88

Tax rate

21%

15%

N/A

N/M

N/M

20%

Net income (loss)

$         1,372

$          (214)

$    40

(d)

$     (120)

$   (22)

$         1,056

Diluted earnings (loss) per share (EPS)

$           0.80

$         (0.12)

$ 0.02

$    (0.07)

$(0.01)

$           0.62

Operating cash flow

$         1,886

$            (16)

$      -

$           -

$   (50)

$         1,820

Operating cash flow as % of revenues

46%

N/A

N/A

N/A

N/A

44%

Free cash flow (e)

$         1,692

$            (16)

$      -

$           -

$   (50)

$         1,626

Free cash flow as a % of revenues

41%

N/A

N/A

N/A

N/A

39%

(a)

Included $37 million related to the step-up of inventories to fair value and $88 million in amortization of intangible assets that resulted from acquisitions completed in the third and fourth quarters of fiscal 2011.

(b)

Included $112 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments, and $33 million in net realized gains on investments, partially offset by $23 million in other-than-temporary losses on investments, $5 million in losses on derivatives and $4 million in interest expense.

(c)

Included $27 million in interest expense and $4 million in other-than-temporary losses on investments, partially offset by $6 million in interest and dividend income related to cash, cash equivalents and marketable securities.

(d)

Included a $44 million tax benefit related to an agreement reached on a component of our fiscal 2006 through 2010 state tax returns, partially offset by $4 million in state tax expense because deferred revenue related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower.

(e)

Free cash flow is calculated as net cash provided by operating activities less capital expenditures.  Reconciliation of these amounts is included in the "Reconciliation of Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures" for the three months ended September 25, 2011, included herein.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Supplemental Information for the Twelve Months Ended September 25, 2011

(Unaudited)

Acquisition-

Non-GAAP

Share-Based

Tax

Related

GAAP

Results

Compensation (a)

Items

Items (b)

QSI (a)

Results

($ in millions except per share data)

Cost of equipment and services revenues

$ 4,662

$                         67

$       -

$   143

$       5

$ 4,877

R&D

2,585

397

-

6

7

2,995

SG&A

1,512

349

-

59

25

1,945

Operating income (loss)

6,084

(c)

(813)

-

(208)

(37)

5,026

Investment income (loss), net

756

(d)

-

-

-

(95)

(e)

661

Tax rate

21%

24%

N/A

N/M

N/M

20%

Net income (loss)

$ 5,407

$                      (624)

$    62

(f)

$  (200)

$  (385)

$ 4,260

Diluted earnings (loss) per share (EPS)

$   3.20

$                     (0.37)

$ 0.04

$ (0.12)

$ (0.23)

$   2.52

Operating cash flow

$ 5,418

$                      (183)

$       -

$        -

$  (335)

$ 4,900

Operating cash flow as % of revenues

36%

N/A

N/A

N/A

N/A

33%

Free cash flow (g)

$ 4,830

$                      (183)

$       -

$        -

$  (340)

$ 4,307

Free cash flow as a % of revenues

32%

N/A

N/A

N/A

N/A

29%

(a)

During fiscal 2011, the Company shut down the FLO TV business and network. The results of FLO TV are presented as discontinued operations, and prior period amounts have been adjusted accordingly.

(b)

Beginning in the third quarter of fiscal 2011, Non-GAAP results exclude certain items related to acquisitions. During fiscal 2011, Non-GAAP results excluded $82 million related to the step-up of inventories to fair value and $120 million in amortization of intangible assets that resulted from acquisitions completed in the third and fourth quarters of fiscal 2011.  In addition, fiscal 2011 Non-GAAP results excluded $6 million in acquired in-process research and development expense.

(c)

Operating income during fiscal 2011 included impairment charges of $120 million related to our Firethorn division, including $114 million in goodwill impairment.

(d)

Included $480 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments,  $335 million in net realized gains on investments and $1 million in equity in earnings of investees, partially offset by $39 million in other-than-temporary losses on investments, $15 million in interest expense and $6 million in losses on derivatives.

(e)

Included $99 million in interest expense, $13 million in other-than-temporary losses on investments and $8 million in equity in losses of investees, partially offset by $20 million in interest and dividend income related to cash, cash equivalents and marketable securities, $3 million in gains on derivatives and $2 million in net realized gains on investments.

(f)

Included a tax benefit of $44 million related to an agreement reached on a component of our fiscal 2006 through 2010 state tax returns and a $32 million tax benefit related to fiscal 2010 due to the retroactive extension of the federal R&D tax credit, partially offset by $14 million in state tax expense because deferred revenues related to the license agreement signed in the first quarter of fiscal 2010 with Samsung is taxable in fiscal 2011 but the resulting deferred tax asset will reverse in future years when our state tax rate will be lower.

(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 Non-GAAP Free Cash Flows to Net Cash Provided by Operating Activities (GAAP) and Other Supplemental Disclosures" for the twelve months ended September 25, 2011, included herein.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Qualcomm Incorporated

Reconciliation of Non-GAAP Free Cash Flows to

Net Cash Provided by Operating Activities (GAAP)

and Other Supplemental Disclosures

(In millions)

(Unaudited)

Three Months Ended September 25, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities               

$       1,886

$               (16)

(a)

$       (50)

$       1,820

Less:  capital expenditures

(194)

-

-

(194)

Free cash flow

$       1,692

$               (16)

$       (50)

$       1,626

Revenues

$       4,117

$                 -

$         -

$       4,117

Free cash flow as a % of revenues

41%

N/A

N/A

39%

Other supplemental cash disclosures:

  Cash transfers from QSI

$              2

$                 -

$         (2)

$            -

  Cash transfers to QSI (b)

(62)

-

62

-

  Net cash transfers

$           (60)

$                 -

$         60

$            -

Twelve Months Ended September 25, 2011

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       5,418

$             (183)

(a)

$     (335)

$       4,900

Less:  capital expenditures

(588)

-

(5)

(593)

Free cash flow

$       4,830

$             (183)

$     (340)

$       4,307

Revenues

$     14,957

$                 -

$         -

$     14,957

Free cash flow as a % of revenues

32%

N/A

N/A

29%

Other supplemental cash disclosures:

  Cash transfers from QSI (c)

$            69

$                 -

$       (69)

$            -

  Cash transfers to QSI (b)

(392)

-

392

-

  Net cash transfers

$         (323)

$                 -

$       323

$            -

Three Months Ended September 26, 2010

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       1,214

$               (11)

(a)

$     (110)

$       1,093

Less:  capital expenditures

(101)

-

(12)

(113)

Free cash flow

$       1,113

$               (11)

$     (122)

$          980

Twelve Months Ended September 26, 2010

Share-Based

Non-GAAP

Compensation

QSI

GAAP

Net cash provided (used) by operating activities

$       4,511

$               (45)

(a)

$     (390)

$       4,076

Less:  capital expenditures

(350)

-

(76)

(426)

Free cash flow

$       4,161

$               (45)

$     (466)

$       3,650

(a) Incremental tax benefits from stock options exercised during the period.

(b) Primarily funding for strategic debt and equity investments and QSI operating expenses.

(c) Primarily from the issuance of subsidiary shares to noncontrolling interests.

N/A - Not Applicable

Qualcomm Incorporated

Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate

(in millions)

(Unaudited)

Three Months Ended September 25, 2011