Qualcomm Announces Third Quarter Fiscal 2012 Results

Revenues $4.6 Billion

GAAP EPS $0.69, Non-GAAP EPS $0.85

News provided by

Qualcomm Incorporated

Jul 18, 2012, 04:00 ET

SAN DIEGO, July 18, 2012 /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 2012 ended June 24, 2012.

"Adoption of 3G and 3G/4G technologies continues around the world, driving strong year-over-year growth in our chipset and licensing businesses this quarter," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm.  "Looking forward, our growth estimates for 3G/4G device shipments in calendar 2012 have moderated slightly, and we now expect the demand profile of the calendar year to be more back-end loaded as new devices are launched for the holiday season.  Although our outlook for semiconductor volumes in the fiscal fourth quarter has been reduced from our prior expectations, we are ramping supply of our 28 nanometer chipsets to help enable what we expect to be a strong December quarter for our semiconductor business."

Third Quarter Results (GAAP)*

  • Revenues: (1) $4.63 billion, up 28 percent year-over-year (y-o-y) and down 6 percent sequentially.
  • Operating income: (1) $1.38 billion, up 24 percent y-o-y and down 9 percent sequentially.
  • Net income: (2) $1.21 billion, up 17 percent y-o-y and down 46 percent sequentially.
  • Diluted earnings per share: (2) $0.69, up 13 percent y-o-y and down 46 percent sequentially. 
  • Effective tax rate: (1) 24 percent for the quarter.
  • Operating cash flow:  $922 million, down 27 percent y-o-y; 20 percent of revenues.
  • Return of capital to stockholders:  $802 million, including $429 million, or $0.25 per share, of cash dividends paid, and $373 million to repurchase 6.6 million shares of our common stock.

(1) The results of FLO TV are presented as discontinued operations. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates 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.

Non-GAAP Third Quarter Results*

Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain share-based compensation, certain acquisition-related items and certain tax items. 

  • Revenues:  $4.63 billion, up 28 percent y-o-y and down 6 percent sequentially.
  • Operating income:  $1.72 billion, up 23 percent y-o-y and down 10 percent sequentially.
  • Net income:  $1.49 billion, up 20 percent y-o-y and down 16 percent sequentially.
  • Diluted earnings per share:  $0.85, up 16 percent y-o-y and down 16 percent sequentially.  Excludes $0.01 loss per share attributable to the QSI segment, $0.12 loss per share attributable to certain share-based compensation and $0.03 loss per share attributable to certain acquisition-related items.
  • Effective tax rate:  23 percent for the quarter. 
  • Free cash flow (defined as net cash from operating activities less capital expenditures):  $658 million, down 43 percent y-o-y; 14 percent of revenues.

Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and Non-GAAP results are included within this news release.  

* Note:  The following should be considered with regard to the above results and comparisons - the second quarter of fiscal 2012 GAAP results included $761 million in earnings, net of income taxes, for discontinued operations (as a result of a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum), as compared to a $3 million loss, net of income taxes, for discontinued operations in the third quarter of fiscal 2012.  Additionally, the third quarter of fiscal 2012 GAAP and Non-GAAP results included Qualcomm Atheros, Inc., which was acquired on May 24, 2011, as compared to the third quarter of fiscal 2011 GAAP and Non-GAAP results which only included Qualcomm Atheros, Inc. from the date of the acquisition.

Third Quarter Key Business Metrics

  • MSM™ chip shipments:  141 million units, up 18 percent y-o-y and down 7 percent sequentially.
  • March quarter total reported device sales:  approximately $47.8 billion, up 31 percent y-o-y and down 8 percent sequentially.
    • March quarter estimated 3G/4G device shipments:  approximately 206 to 211 million units, at an estimated average selling price of approximately $226 to $232 per unit.   

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled $26.5 billion at the end of the third quarter of fiscal 2012, compared to $20.2 billion a year ago and $26.6 billion at the end of the second quarter of fiscal 2012.  On July 6, 2012, we announced a cash dividend of $0.25 per share payable on September 26, 2012 to stockholders of record as of September 7, 2012.  Since June 24, 2012, we repurchased and retired 11.3 million shares of our common stock for $617 million. 

Research and Development

($ in millions)

Non-GAAP

QSI

Share-Based Compensation

Acquisition- Related Items

GAAP










Third quarter fiscal 2012

$         832

$        1

$           141

$            -

$     974

As % of revenues

18%






21%

Third quarter fiscal 2011

$         661

$        1

$             95

$            -

$     757

As % of revenues

18%






21%

Year-over-year change ($)

26%

 N/M 

48%

 N/M 

29%

N/M - Not Meaningful






Non-GAAP research and development (R&D) expenses increased 26 percent y-o-y primarily due to an increase in investments in the development of integrated circuit products (including connectivity products), next-generation technologies and other initiatives to support the acceleration of advanced wireless products and services.  

Selling, General and Administrative

($ in millions)

Non-GAAP

QSI

Share-Based Compensation

Acquisition-Related Items

GAAP










Third quarter fiscal 2012

$         423

$      10

$           104

$            7

$     544

As % of revenues

9%






12%

Third quarter fiscal 2011

$         365

$        8

$             84

$          18

$     475

As % of revenues

10%






13%

Year-over-year change ($)

16%

 N/M 

24%

 N/M 

15%

N/M - Not Meaningful

Non-GAAP selling, general and administrative (SG&A) expenses increased 16 percent y-o-y primarily due to increases in costs relating to legal matters, employee-related expenses and patent-related expenses.    

Effective Income Tax Rates

Our estimated fiscal 2012 effective income tax rates increased to approximately 20 percent for both GAAP and Non-GAAP, as compared to our prior estimates of approximately 18 percent for GAAP and approximately 18 to 19 percent for Non-GAAP, primarily due to changes in our estimates related to foreign earnings taxed at rates that are less than the United States federal tax rate.  As a result, the third quarter GAAP tax rate of 24 percent and Non-GAAP tax rate of 23 percent were higher than the expected annual effective tax rates.  

Qualcomm Strategic Initiatives

The QSI segment makes strategic investments, many of which are in early-stage companies, and holds wireless spectrum.  QSI also includes the discontinued operations of our FLO TV business. GAAP results for the third quarter of fiscal 2012 included a $0.01 loss per share for the QSI segment. 

Business Outlook

The following statements are forward looking, and actual results may differ materially.  The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks. 

Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable.  Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast.  Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.

The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook.  The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.

Qualcomm's Business Outlook Summary

FOURTH FISCAL QUARTER




Q4 FY11

Current Guidance


Results

Q4 FY12 Estimates




 

Revenues

$4.12B

$4.45B - $4.85B

 

  Year-over-year change

increase 8% - 18%

 

Non-GAAP Diluted earnings per share (EPS)

$0.80

$0.78 - $0.84

 

  Year-over-year change

decrease 3% - increase 5%

 

         Diluted EPS attributable to QSI

($0.01)

$0.01

 

         Diluted EPS attributable to share-based compensation

($0.12)

($0.13)

 

         Diluted EPS attributable to acquisition-related items

($0.07)

($0.04)

 

         Diluted EPS attributable to tax items 

$0.02

n/a

 

GAAP Diluted EPS

$0.62

$0.62 - $0.68

 

  Year-over-year change

even - increase 10%



 

Metrics

 

MSM chip shipments

127M 

134M - 142M 

 

  Year-over-year change

increase 6% - 12%

 

Total reported device sales (1)

 approx. $39.1B*

  approx. $43.5B - $47.5B*

 

  Year-over-year change

increase 11% - 21%

 

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





FISCAL YEAR



FY 2011

Prior Guidance

Current Guidance

Results 

FY 2012 Estimates (2)

FY 2012 Estimates (2)

 

Revenues

$14.96B 

$18.7B - $19.7B

$18.7B - $19.1B

 

  Year-over-year change

increase 25% - 32%

increase 25% - 28%

 

Non-GAAP Diluted EPS

$3.20

$3.61 - $3.76

$3.61 - $3.67

 

  Year-over-year change

increase 13% - 18%

increase 13% - 15%

 

        Diluted EPS attributable to QSI

($0.23)

$0.39

$0.40

 

        Diluted EPS attributable to share-based compensation

($0.37)

($0.46)

($0.47)

 

        Diluted EPS attributable to acquisition-related items

($0.12)

($0.13)

($0.13)

 

        Diluted EPS attributable to tax items 

$0.04

n/a

n/a

 

GAAP Diluted EPS

$2.52

$3.41 - $3.56

$3.41 - $3.47

 

  Year-over-year change

increase 35% - 41%

increase 35% - 38%




 

Metrics


 

Est. fiscal year* 3G/4G device average selling price range (1)

approx. $203 - $209

approx. $207 - $217

approx. $216 - $222

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






CALENDAR YEAR Device Estimates (1)



Calendar 2011
Estimates

Prior Guidance
Calendar 2012
Estimates

Current Guidance
Calendar 2012
Estimates

 

Est. 3G/4G device shipments


 

March quarter

approx. 170M - 174M

not provided

approx. 206M - 211M

 

June quarter

approx. 187M - 191M

not provided

not provided

 

September quarter

approx. 191M - 195M

not provided

not provided

 

December quarter

approx. 239M - 243M

not provided

not provided

 

Est. calendar year range (approx.)

787M - 803M

885M - 945M

875M - 935M

 

Est. calendar year midpoint (approx.) (3)

795M

915M

905M

(1)

Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based and multimode CDMA/OFDMA subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period (collectively, 3G/4G devices).  The reported quarterly estimated ranges of average selling prices (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.

(2)

Fiscal 2012 guidance for QSI and GAAP includes $0.44 diluted earnings per share related to a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum, which was recognized in discontinued operations in the second quarter of fiscal 2012 and was excluded from Non-GAAP results.  

(3)

The midpoints of the estimated calendar year ranges are identified for comparison purposes only and do not indicate a higher degree of confidence in the midpoints.

Sums may not equal totals due to rounding.

Results of Business Segments

The following table reconciles our Non-GAAP results to our GAAP results (in millions, except per share data):

SEGMENTS

QCT

QTL

QWI 

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)


Share-Based
Compensation (2)

Acquisition- Related Items (2) (3)

Tax Items

GAAP

Q3 - FISCAL 2012






Revenues 

$2,869

$1,593

$160

$4

$4,626

$  -

$  -

$  -

$  -

$4,626

  Change from prior year

31%

27%

(2%)

N/M

28%



28%

  Change from prior quarter 

(6%)

(8%)

1%

N/M

(6%)



(6%)

Operating income (loss)



$1,718

($11)

($264)

($61)

$  -

$1,382

  Change from prior year



23%

(10%)

(37%)

21%

24%

  Change from prior quarter 



(10%)

88%

(10%)

(7%)

(9%)

EBT

$472

$1,407

($6)

$49

$1,922

($16)

($264)

($61)

$  -

$1,581

  Change from prior year

10%

29%

N/M

N/M

22%

47%

(37%)

21%

24%

  Change from prior quarter 

(21%)

(9%)

N/M

N/M

(10%)

84%

(10%)

(7%)

(9%)

EBT as % of revenues

16%

88%

N/M

N/M

42%



34%

Discontinued operations, net of tax (4)

$  -

($3)

$  -

$  -

$  -

($3)

Net income (loss) 

$1,486

($11)

($210)

($58)

$  -

$1,207

  Change from prior year

20%

N/M

(43%)

21%

N/M

17%

  Change from prior quarter 

(16%)

N/M

(14%)

(12%)

N/A

(46%)

Diluted EPS

$0.85

($0.01)

($0.12)

($0.03)

$  -

$0.69

  Change from prior year

16%

N/M

(33%)

25%

N/M

13%

  Change from prior quarter 

(16%)

N/M

(9%)

0%

N/A

(46%)

Diluted shares used

1,758

1,758

1,758

1,758

1,758

1,758

Q2 - FISCAL 2012





Revenues 

$3,059

$1,723

$159

$2

$4,943

$  -

$  -

$  -

$  -

$4,943

Operating income (loss)



1,900

(89)

(240)

(57)

-

1,514

EBT

$599

$1,540

($10)

$1

2,130

(99)

(240)

(57)

-

1,734

Discontinued operations, net of tax (4)

-

761

-

-

-

761

Net income (loss)

1,759

707

(184)

(52)

-

2,230

Diluted EPS

$1.01

$0.41

($0.11)

($0.03)

$  -

$1.28

Diluted shares used

1,743

1,743

1,743

1,743

1,743

1,743

Q3 - FISCAL 2011





Revenues 

$2,194

$1,257

$164

$8

$3,623

$  -

$  -

$  -

$  -

$3,623

Operating income (loss)



1,393

(10)

(193)

(77)

-

1,113

EBT

$430

$1,092

($13)

$65

1,574

(30)

(193)

(77)

-

1,274

Discontinued operations, net of tax (4)

-

44

-

-

-

44

Net income (loss)

1,240

19

(147)

(73)

(4)

1,035

Diluted EPS

$0.73

$0.01

($0.09)

($0.04)

$0.00

$0.61

Diluted shares used

1,709

1,709

1,709

1,709

1,709

1,709

Q4 - FISCAL 2011





Revenues 

$2,587

$1,361

$163

$6

$4,117

$  -

$  -

$  -

$  -

$4,117

Operating income (loss)



1,624

(9)

(252)

(125)

-

1,238

EBT

$569

$1,193

($5)

($20)

1,737

(34)

(252)

(125)

-

1,326

Discontinued operations, net of tax (4)

-

(5)

(1)

-

-

(6)

Net income (loss)

1,372

(22)

(214)

(120)

40

1,056

Diluted EPS

$0.80

($0.01)

($0.12)

($0.07)

$0.02

$0.62

Diluted shares used

1,716

1,716

1,716

1,716

1,716

1,716

SEGMENTS

QCT

QTL

QWI 

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)


Share-Based
Compensation (2)

Acquisition- Related Items (2) (3)

Tax Items

GAAP 

9 MONTHS - FISCAL 2012






Revenues 

$9,012

$4,755

$471

$13

$14,251

$  -

$  -

$  -

$  -

$14,251

  Change from prior year

44%

17%

(4%)

N/M

31%



31%

Operating income (loss)



$5,489

($112)

($751)

($178)

$  -

$4,448

  Change from prior year



23%

N/M

(34%)

N/M

17%

EBT

$1,810

$4,215

($15)

$105

$6,115

($149)

($751)

($178)

-

$5,037

  Change from prior year

22%

18%

N/M

N/M

20%

(54%)

(34%)

N/M

15%

EBT as % of revenues

20%

89%

N/M

N/M

43%



35%

Discontinued operations, net of tax (4)

$  -

$754

$(1)

$  -

$  -

$753

Net income (loss) 



$4,917

$675

($589)

($165)

$  -

$4,838

  Change from prior year



22%

N/M

(44%)

N/M

N/M

51%

Diluted EPS



$2.83

$0.39

($0.34)

($0.09)

$  -

$2.78

  Change from prior year



18%

N/M

(42%)

N/M

N/M

46%

Diluted shares used



1,740

1,740

1,740

1,740

1,740

1,740

9 MONTHS - FISCAL 2011








Revenues 

$6,272

$4,061

$493

$14

$10,840

$  -

$  -

$  -

$  -

$10,840

Operating income (loss)



4,461

(28)

(561)

(83)

-

3,789

EBT

$1,487

$3,559

($147)

$205

5,104

(97)

(561)

(83)

-

4,363

Discontinued operations, net of tax (4)

-

(303)

(4)

-

-

(307)

Net income (loss)



4,036

(364)

(410)

(79)

21

3,204

Diluted EPS



$2.40

($0.22)

($0.24)

($0.05)

$0.01

$1.90

Diluted shares used



1,682

1,682

1,682

1,682

1,682

1,682

12 MONTHS - FISCAL 2011








Revenues 

$8,859

$5,422

$656

$20

$14,957

$  -

$  -

$  -

$  -

$14,957

Operating income (loss)



6,084

(37)

(813)

(208)

-

5,026

EBT

$2,056

$4,753

($152)

$183

6,840

(132)

(813)

(208)

-

5,687

Discontinued operations, net of tax (4)

-

(308)

(5)

-

-

(313)

Net income (loss)



5,407

(385)

(624)

(200)

62

4,260

Diluted EPS



$3.20

($0.23)

($0.37)

($0.12)

$0.04

$2.52

Diluted shares used



1,691

1,691

1,691

1,691

1,691

1,691

(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 costs of equipment and services revenues, research and development expenses, sales and marketing expenses, other operating expenses and certain investment income or losses and interest expense that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit.

(2)

At fiscal year end, the sum of the quarterly tax provisions (benefits) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP.  In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and starting in fiscal 2012, this difference is allocated to tax provisions (benefits) among the columns.  In interim quarters of prior years, it was included in QSI because variability in QSI results was considered the primary driver of the difference.

(3)

In addition to our historical practice of excluding acquired in-process research and development expenses, starting with acquisitions completed in the third quarter of fiscal 2011, Non-GAAP results also exclude other items related to acquisitions.  During fiscal 2012, acquisition-related items consisted of amortization of certain intangible assets.

(4)

 During fiscal 2011, we shut down the FLO TV business and network.  The results of FLO TV are presented as discontinued operations.

N/M – Not Meaningful

N/A – Not Applicable

Sums may not equal totals due to rounding.

Conference Call

Qualcomm's third quarter of fiscal 2012 earnings conference call will be broadcast live on July 18, 2012, beginning at 1:45 p.m. Pacific Time (PT) at www.qualcomm.com/investor.  This conference call will include a discussion of "Non-GAAP financial measures" as defined in Regulation G.  The most directly comparable GAAP financial measures and GAAP reconciliation information, as well as the other material financial and statistical information to be discussed on the conference call, will be posted at www.qualcomm.com/investor immediately prior to commencement of the call.  An audio replay will be available at www.qualcomm.com/investor and via telephone for 30 days shortly following the live call.  To listen to the replay via telephone, U.S. callers may dial (855) 859-2056, and international callers may dial (404) 537-3406.  Callers should use reservation number 94423621.

Note Regarding Use of Non-GAAP Financial Measures

The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.  In addition, "Non-GAAP" is not a term defined by GAAP, and as a result, the Company's measure of Non-GAAP results might be different than similarly titled measures used by other companies.  Reconciliations between GAAP and Non-GAAP results are presented herein.

The Company uses Non-GAAP financial information (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company.  Non-GAAP measurements of the following financial data are used by the Company:  revenues, cost of revenues, R&D expenses, SG&A expenses, other 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.  The Company is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information.  As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments.  The Company presents Non-GAAP financial information to provide greater transparency to investors with respect to its use of such information in financial and operational decision-making.

Non-GAAP information used by management excludes the QSI segment, certain share-based compensation, certain acquisition-related items and certain tax items.  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 and realized gains or losses are viewed by management as unrelated to the Company's operational performance.  Certain share-based compensation is excluded because management has concluded that such expenses should not be considered when assessing operational performance as they are deemed to be unrelated to the operating activities of the Company's ongoing core businesses.  Further, share-based compensation expense relates primarily to restricted stock and stock option awards.  The fair values of share-based awards are affected by factors that are variable on each grant date, which may include the Company's stock price, stock market volatility, expected award life, risk-free interest rates and expected dividend payouts in future years.  In addition to its historical practice of excluding acquired in-process research and development expenses from Non-GAAP results, the Company began excluding amortization of certain intangible assets, recognition of the step-up of inventories to fair value and the related tax effects of these items starting with acquisitions completed in the third quarter of fiscal 2011, as well as any tax effects of restructuring the ownership of such acquired assets.  These certain acquisition-related items are excluded and no longer allocated to the Company's segments because management has concluded that such expenses should not be considered when assessing segment performance as they are deemed to be unrelated to the operating activities of the Company's ongoing core businesses.  In addition, these charges are significantly impacted by the size and timing of acquisitions, potentially obscuring period to period comparisons of the Company's operating businesses.  Certain tax items that were recorded in each fiscal year presented, but that were unrelated to the fiscal year in which they were recorded, are excluded in order to provide a clearer understanding of the Company's ongoing Non-GAAP tax rate and after tax earnings.  However, the Company excludes any benefit resulting from the retroactive extensions of the federal R&D tax credit from Non-GAAP results because the Company does not include the potential extension of the credit in its business outlook due to uncertainty as to whether and when the federal R&D tax credit will be retroactively extended. 

The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term stockholder value.  The Company believes that this presentation is useful in evaluating its operating performance and financial strength.  In addition, management uses this measure to evaluate the Company's performance and to compare its operating performance with other companies in the industry. 

About Qualcomm

Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G and next-generation mobile technologies.  For more than 25 years, Qualcomm ideas and inventions have driven the evolution of digital communications, linking people everywhere more closely to information, entertainment and each other.  For more information, visit www.qualcomm.com.

Note Regarding Forward-Looking Statements

In addition to the historical information contained herein, this news release contains forward-looking statements that are inherently subject to risks and uncertainties, including but not limited to statements regarding the global adoption of 3G and 3G/4G technologies; the growth of 3G/4G device shipments in calendar 2012; expectations for the demand profile of the calendar year; expectations for the fourth fiscal quarter and December quarter for the Company's semiconductor business; the Company's business outlook; and estimates and guidance related to revenues, GAAP and Non-GAAP diluted earnings per share, effective income tax rates, MSM chip shipments, 3G/4G device shipments, device sales and 3G/4G device average selling price ranges.  Forward-looking statements are generally identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "guidance" and similar expressions.  Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to risks associated with the commercial deployment of, and demand for, our technologies in communications products and services; the uncertainty of global economic conditions and their potential impacts on demand for our products, services or applications and on the value of our marketable securities; competition; our dependence on a small number of customers and licensees; attacks on our licensing business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; our dependence on third-party suppliers, including the potential impact of supply constraints; the commercial success of our QMT division's IMOD display technology; foreign currency fluctuations; strategic investments and transactions we have or may pursue, including our investment in the BWA spectrum in India; and failures and defects or errors in our products and services or in the products of our customers.  These and other risks are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 25, 2011 and Quarterly Report on Form 10-Q for the fiscal quarter ended June 24, 2012 filed with the SEC.  Our reports filed with the SEC are available on our website at www.qualcomm.com.  We undertake 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 and MSM are registered trademarks of Qualcomm Incorporated, registered in the United States and other countries.  All other trademarks are the property of their respective owners.

Qualcomm Incorporated

Supplemental Information for the Three Months Ended June 24, 2012

(Unaudited)





Acquisition-

Non-GAAP

Share-Based

Related

GAAP

Results

QSI

Compensation

Items (a)

Results

 ($ in millions, except per share data)














 

Cost of equipment and services revenues

$     1,646

$          -

$               19

$          54

$     1,719










 

R&D 

832

1

141

-

974










 

SG&A

423

10

104

7

544










 

Other operating expenses

7

-

-

-

7










 

Operating income (loss)

1,718

(11)

(264)

(61)

1,382










 

Investment income (loss), net

$        204

(b)

$       (5)

(c)

$                 -

$             -

$        199










 

Tax rate

23%

25%

20%

5%

24%










 

Net income (loss)

$     1,486

$     (11)

$           (210)

$         (58)

$     1,207










 

Diluted earnings (loss) per share (EPS)

$       0.85

$  (0.01)

$          (0.12)

$      (0.03)

$       0.69










 

Operating cash flow

$        972

$     (21)

$             (29)

$             -

$        922

 

Operating cash flow as % of revenues

21%

N/A

N/A

N/A

20%










 

Free cash flow(d)

$        658

$   (106)

$             (29)

$             -

$        523

 

Free cash flow as % of revenues

14%

N/A

N/A

N/A

11%










(a) 

During the third quarter of fiscal 2012, acquisition-related items consisted of amortization of certain intangible assets.

(b) 

Included $149 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments, $68 million in net realized gains on investments and $9 million in gains on derivatives, partially offset by $19 million in other-than-temporary losses on investments and $3 million in interest expense.

(c) 

Included $15 million in interest expense, $2 million in other-than-temporary losses on investments and $1 million of equity in losses of investees, partially offset by $7 million in interest and dividend income related to cash, cash equivalents and marketable securities, $4 million in gains on derivatives and $2 million in net realized gains on investments.

(d) 

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 June 24, 2012 included herein.


N/A – Not Applicable

Sums may not equal totals due to rounding.


Qualcomm Incorporated

Supplemental Information for the Nine Months Ended June 24, 2012

(Unaudited)


















Acquisition-


Non-GAAP

Share-Based

Related

GAAP


Results

QSI

Compensation

Items (a)

Results

 ($ in millions, except per share data)


















 

Cost of equipment and services revenues

$     5,043

$          -

$               55

$        157

$     5,255










 

R&D 

2,401

6

394

-

2,801










 

SG&A

1,295

25

302

21

1,643










 

Other operating expenses

23

81

(b)

-

-

104










 

Operating income (loss)

5,489

(112)

(751)

(178)

4,448










 

Investment income (loss), net

$        626

(c)

$     (37)

(d)

$                 -

$             -

$        589










 

Tax rate

20%

19%

22%

7%

20%










 

Net income (loss)

$     4,917

$     675

$           (589)

$       (165)

$     4,838










 

Diluted earnings (loss) per share (EPS)

$       2.83

$    0.39

$          (0.34)

$      (0.09)

$       2.78










 

Operating cash flow

$     4,906

$   (190)

$           (127)

$             -

$     4,589

 

Operating cash flow as % of revenues

34%

N/A

N/A

N/A

32%










 

Free cash flow(e)

$     3,957

$   (275)

$           (127)

$             -

$     3,555

 

Free cash flow as % of revenues

28%

N/A

N/A

N/A

25%










(a) 

During fiscal 2012, acquisition-related items consisted of amortization of certain intangible assets.

(b) 

QSI results for the first nine months of fiscal 2012 included $81 million in other operating expenses associated with a payment made to the Indian government in connection with the issuance of the BWA spectrum license.

(c) 

Included $413 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of our strategic investments, $185 million in net realized gains on investments, $79 million in gains on derivatives (primarily due to gains from put options sold as part of our stock repurchase program) and $1 million of equity in earnings of investees, partially offset by $44 million in other-than-temporary losses on investments and $8 million in interest expense.

(d) 

Included $66 million in interest expense, $20 million in other-than-temporary losses on investments and $6 million of equity in losses of investees, partially offset by $29 million in net realized gains on investments, $18 million in interest and dividend income related to cash, cash equivalents and marketable securities and $8 million in gains on derivatives.

(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 nine months ended June 24, 2012, included herein.


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 June 24, 2012






Share-Based



Non-GAAP

QSI

Compensation

GAAP

Net cash provided (used) by operating activities

$          972

$        (21)

$                  (29)

 (a) 

$          922

Less:  capital expenditures

(314)

(85)

-

(399)

Free cash flow

$          658

$      (106)

$                  (29)

$          523









Revenues

$       4,626

$            -

$                      -

$       4,626

Free cash flow as % of revenues

14%

 N/A 

 N/A 

11%









Other supplemental cash disclosures:







   Cash transfers from QSI (b)

$          132

$      (132)

$                    -

$            -

   Cash transfers to QSI (c)

(137)

137

-

-

   Net cash transfers

$             (5)

$           5

$                    -

$            -




















Nine Months Ended June 24, 2012






Share-Based



Non-GAAP

QSI

Compensation

GAAP

Net cash provided (used) by operating activities

$       4,906

$      (190)

$                (127)

 (a) 

$       4,589

Less:  capital expenditures

(949)

(85)

-

(1,034)

Free cash flow

$       3,957

$      (275)

$                (127)

$       3,555









Revenues

$     14,251

$            -

$                      -

$     14,251

Free cash flow as % of revenues

28%

 N/A 

 N/A 

25%









Other supplemental cash disclosures:







   Cash transfers from QSI (d)

$       2,098

$   (2,098)

$                    -

$            -

   Cash transfers to QSI (c)

(355)

355

-

-

   Net cash transfers

$       1,743

$   (1,743)

$                    -

$            -





























Three Months Ended June 26, 2011






Share-Based



Non-GAAP

QSI

Compensation

GAAP

Net cash provided (used) by operating activities

$       1,379

$        (80)

$                  (35)

 (a) 

$       1,264

Less:  capital expenditures

(219)

-

-

(219)

Free cash flow

$       1,160

$        (80)

$                  (35)

$       1,045




















Nine Months Ended June 26, 2011






Share-Based



Non-GAAP

QSI

Compensation

GAAP

Net cash provided (used) by operating activities

$       3,532

$      (285)

$                (167)

 (a) 

$       3,080

Less:  capital expenditures

(394)

(6)

-

(400)

Free cash flow

$       3,138

$      (291)

$                (167)

$       2,680









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





(b) Primarily cash from issuance of subsidiary shares to noncontrolling interest and borrowings under loans and debentures. 

(c) Primarily funding for strategic debt and equity investments, other investing activities and QSI operating and capital expenditures.

(d) Primarily cash from sale of wireless spectrum, issuance of subsidiary shares to noncontrolling interest, borrowings under loans and debentures and sale of equity securities. 

N/A - Not Applicable



Qualcomm Incorporated

Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)

(in millions)

(Unaudited)











Three Months Ended June 24, 2012







Acquisition-


Non-GAAP


Share-Based

Related

GAAP

Results

QSI

 Compensation

Items

Results










Income (loss) from continuing operations          










before income taxes

$ 1,922

$ (16)

$ (264)

$ (61)

$ 1,581

Income tax (expense) benefit

(436)

4

54

3

(375)

  Income (loss) from continuing operations

$      1,486

$          (12)

$         (210)

$        (58)

$     1,206










Tax rate

23%

25%

20%

5%

24%


Nine Months Ended June 24, 2012







Acquisition-


Non-GAAP


Share-Based

Related

GAAP

Results

QSI

Compensation

Items

Results










Income (loss) from continuing operations








before income taxes

$ 6,115

$ (149)

$ (751)

$ (178)

$ 5,037

Income tax (expense) benefit

(1,198)

29

163

13

(993)

  Income (loss) from continuing operations

$      4,917

$        (120)

$         (588)

$      (165)

$     4,044










Tax rate

20%

19%

22%

7%

20%

(a) 

At fiscal year end, the sum of the quarterly tax provisions (benefits) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is allocated to tax provisions (benefits) among the columns.  

Sums may not equal totals due to rounding.



Qualcomm Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

ASSETS


June 24,

September 25,


2012

2011

Current assets:



  Cash and cash equivalents

$          3,412

$          5,462

  Marketable securities

9,983

6,190

  Accounts receivable, net

1,250

993

  Inventories

820

765

  Deferred tax assets

512

537

  Other current assets 

400

346

          Total current assets

16,377

14,293

Marketable securities

13,152

9,261

Deferred tax assets

1,677

1,703

Assets held for sale

-

746

Property, plant and equipment, net

2,888

2,414

Goodwill

3,843

3,432

Other intangible assets, net

3,845

3,099

Other assets

663

1,474

          Total assets

$        42,445

$        36,422





LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:



  Trade accounts payable

$          1,116

$             969

  Payroll and other benefits related liabilities

608

644

  Unearned revenues

547

610

  Loans and debentures

968

994

  Other current liabilities

2,277

2,072

         Total current liabilities

5,516

5,289

Unearned revenues

3,809

3,541

Other liabilities

515

620

         Total liabilities

9,840

9,450










Stockholders' equity:



Qualcomm stockholders' equity:



  Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding

-

-

  Common stock, $0.0001 par value; 6,000 shares authorized; 1,712



    and 1,681 shares issued and outstanding, respectively

-

-

  Paid-in capital

12,096

10,394

  Retained earnings

19,868

16,204

  Accumulated other comprehensive income

620

353

         Total Qualcomm stockholders' equity

32,584

26,951

Noncontrolling interests

21

21

         Total stockholders' equity

32,605

26,972

            Total liabilities and stockholders' equity

$        42,445

$        36,422


Qualcomm Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)












Three Months Ended

Nine Months Ended


June 24,

June 26,

June 24,

June 26,


2012

2011

2012

2011










Revenues:








  Equipment and services

$         2,948

$         2,297

$         9,253

$         6,550

  Licensing

1,678

1,326

4,998

4,290

Total revenues

4,626

3,623

14,251

10,840










Operating expenses:







  Cost of equipment and services revenues

1,719

1,278

5,255

3,380

  Research and development

974

757

2,801

2,144

  Selling, general and administrative

544

475

1,643

1,413

  Other

7

-

104

114

      Total operating expenses

3,244

2,510

9,803

7,051










Operating income 

1,382

1,113

4,448

3,789










Investment income, net

199

161

589

574

  Income from continuing operations before income taxes

1,581

1,274

5,037

4,363

Income tax expense 

(375)

(289)

(993)

(862)

  Income from continuing operations

1,206

985

4,044

3,501

Discontinued operations, net of income taxes

(3)

44

753

(307)

  Net income

1,203

1,029

4,797

3,194

Net loss attributable to noncontrolling interests

4

6

41

10

  Net income attributable to Qualcomm

$         1,207

$         1,035

$         4,838

$         3,204










Basic earnings (loss) per share attributable to Qualcomm:







  Continuing operations

$           0.70

$           0.59

$           2.40

$           2.13

  Discontinued operations

-

0.03

0.45

(0.19)

  Net income

$           0.70

$           0.62

$           2.85

$           1.94

Diluted earnings (loss) per share attributable to Qualcomm:







  Continuing operations

$           0.69

$           0.58

$           2.35

$           2.09

  Discontinued operations

-

0.03

0.43

(0.19)

  Net income

$           0.69

$           0.61

$           2.78

$           1.90

Shares used in per share calculations:







  Basic

1,715

1,673

1,699

1,650

  Diluted

1,758

1,709

1,740

1,682










Dividends per share announced

$         0.250

$         0.215

$         0.680

$         0.595


Qualcomm Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)












Three Months Ended

Nine Months Ended


June 24,
2012

June 26,
2011

June 24,
2012

June 26,
2011

Operating Activities:








Net income

$         1,203

$         1,029

$         4,797

$         3,194

Adjustments to reconcile net income to net cash provided by








operating activities:








   Depreciation and amortization

221

185

640

820

   Gain on sale of spectrum

-

-

(1,179)

-

   Goodwill impairment

7

-

23

114

   Revenues related to non-monetary exchanges

(31)

(31)

(92)

(93)

   Income tax provision (less than) in excess of income tax payments

(261)

116

239

(1,218)

   Non-cash portion of share-based compensation expense

264

193

752

568

   Incremental tax benefit from stock options exercised

(29)

(35)

(127)

(167)

   Net realized gains on marketable securities and other investments

(70)

(73)

(214)

(304)

   Gains on derivative instruments

(13)

(1)

(87)

(1)

   Other items, net

44

16

90

50

Changes in assets and liabilities, net of effects of acquisitions:








   Accounts receivable, net

(54)

(2)

(249)

21

   Inventories

(32)

38

(53)

(43)

   Other assets

(21)

(17)

(31)

(36)

   Trade accounts payable

(90)

(46)

197

(191)

   Payroll, benefits and other liabilities

(151)

(59)

(412)

210

   Unearned revenues

(65)

(49)

295

156

  Net cash provided by operating activities

922

1,264

4,589

3,080

Investing Activities:








   Capital expenditures

(399)

(219)

(1,034)

(400)

   Purchases of available-for-sale securities

(4,768)

(2,426)

(11,804)

(8,271)

   Proceeds from sale of available-for-sale securities

2,231

3,888

5,774

9,355

   Purchase of trading securities

(641)

-

(2,280)

-

   Proceeds from sale of trading securities

646

-

1,297

-

   Proceeds from sale of spectrum

-

-

1,925

-

   Acquisitions and other investments, net of cash acquired

(348)

(3,136)

(677)

(3,225)

   Other items, net

(23)

(45)

(76)

(22)

  Net cash used by investing activities

(3,302)

(1,938)

(6,875)

(2,563)

Financing Activities:








   Borrowing under loans and debentures

478

-

710

1,260

   Repayment of loans payable

(440)

-

(591)

(1,260)

   Proceeds from issuance of common stock

223

368

1,358

2,392

   Incremental tax benefit from stock options exercised

29

35

127

167

   Proceeds from issuance of subsidiary shares of noncontrolling interests

85

-

85

62

   Repurchase and retirement of common stock

(373)

-

(472)

-

   Dividends paid

(429)

(360)

(1,158)

(985)

   Change in obligation under securities lending

242

12

203

42

   Other items, net

(2)

(2)

(2)

(6)

  Net cash (used) provided by financing activities

(187)

53

260

1,672

  Effect of exchange rate changes on cash

(19)

-

(24)

10

Net (decrease) increase in cash and cash equivalents

(2,586)

(621)

(2,050)

2,199

Cash and cash equivalents at beginning of period

5,998

6,367

5,462

3,547

Cash and cash equivalents at end of period

$         3,412

$         5,746

$         3,412

$         5,746

Qualcomm Contact:
Warren Kneeshaw
Phone: 1-858-658-4813
e-mail: [email protected]

SOURCE Qualcomm Incorporated

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