Qualcomm Announces First Quarter Fiscal 2010 Results
Revenues $2.7 Billion, EPS $0.50
Pro Forma EPS $0.62
Reaffirms Fiscal 2010 Earnings Guidance
SAN DIEGO, Jan. 27 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the first quarter of fiscal 2010 ended December 27, 2009.
"We are pleased with our performance this quarter, driven by healthy demand for our chipsets, strong shipments of 3G devices by our licensees and lower operating expenses. We're executing on our strategic objectives and reaffirming our 2010 3G device forecast, an increase of 21 percent year-over-year," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "I am very encouraged by customer traction around Qualcomm technologies, including recent device announcements based on our industry-leading Snapdragon™ chipset and increased adoption of our Brew Mobile Platform™ operating system. As anticipated, we have seen a competitive pricing environment in the chipset market and are proactively managing within this dynamic to grow our market share. A subdued economic recovery in developed regions, including Europe and Japan, combined with relative strength at the lower end of the market, is changing our estimated 3G device average selling price and chipset mix for this fiscal year. Accordingly, we are modestly reducing our fiscal year revenue estimates to reflect this near-term market situation, but are maintaining our earnings per share guidance."
"The fundamental drivers of our business remain strong. We are confident that 3G will continue to develop as anticipated, and we continue to invest in innovative new products, such as Snapdragon, FLO TV™, mirasol™ and next-generation technologies, to enhance our leadership position and capitalize on this growth."
First Quarter Results (GAAP)
- Revenues: $2.67 billion, up 6 percent year-over-year and down 1 percent sequentially.
- Operating income: $879 million, up 18 percent year-over-year and 47 percent sequentially.
- Net income: $841 million, up 147 percent year-over-year and 5 percent sequentially.
- Diluted earnings per share: $0.50, up 150 percent year-over-year and 4 percent sequentially.
- Effective tax rate: 20 percent for the quarter. Fiscal 2010 estimated tax rate of approximately 21 percent.
- Operating cash flow: $1.24 billion, down 65 percent year-over-year; 46 percent of revenues.
- Return of capital to stockholders: $284 million, or $0.17 per share, of cash dividends paid.
Pro Forma First 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: $2.67 billion, up 6 percent year-over-year and down 1 percent sequentially.
- Operating income: $1.13 billion, up 15 percent year-over-year and 36 percent sequentially.
- Net income: $1.04 billion, up 100 percent year-over-year and 28 percent sequentially.
- Diluted earnings per share: $0.62, up 100 percent year-over-year and 29 percent sequentially. The current quarter excludes $0.03 loss per share attributable to the QSI segment, $0.07 loss per share attributable to certain share-based compensation and $0.02 loss per share attributable to certain tax items.
- Effective tax rate: 21 percent for the quarter. Fiscal 2010 estimated tax rate of approximately 21 to 22 percent.
- Free cash flow: $1.27 billion, down 63 percent year-over-year; 48 percent of revenues (defined as net cash from operating activities less capital expenditures).
The large increase in net income year-over-year was primarily due to a significant improvement in net investment income as our marketable securities recovered value and financial markets stabilized. The significant decrease in cash flows year-over-year was primarily due to the receipt of a $2.5 billion payment in the first quarter of fiscal 2009 related to the license and settlement agreements with Nokia.
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and pro forma results are included at the end of this news release. Prior period reconciliations are presented on Qualcomm's Investor Relations web page at www.qualcomm.com.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately $18.9 billion at the end of the first quarter of fiscal 2010, compared to $17.7 billion at the end of the fourth quarter of fiscal 2009 and $13.1 billion a year ago. On January 7, 2010, we announced a cash dividend of $0.17 per share payable on March 26, 2010 to stockholders of record as of February 26, 2010.
Research and Development
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
First quarter fiscal 2010 $503 $72 $21 $596
As a % of revenues 19% N/M 22%
First quarter fiscal 2009 $511 $69 $24 $604
As a % of revenues 20% N/M 24%
Year-over-year change ($) (2%) 4% (13%) (1%)
N/M - Not Meaningful
Pro forma R&D expenses primarily related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies, the expansion of our intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses were related to our FLO TV subsidiary.
Selling, General and Administrative
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
First quarter fiscal 2010 $272 $68 $39 $379
As a % of revenues 10% N/M 14%
First quarter fiscal 2009 $305 $66 $42 $413
As a % of revenues 12% N/M 16%
Year-over-year change ($) (11%) 3% (7%) (8%)
Pro forma selling, general and administrative (SG&A) expenses decreased by 11 percent year-over-year, primarily due to a decrease in costs related to litigation and other legal matters. QSI SG&A expenses were primarily related to FLO TV.
Effective Income Tax Rate
Our fiscal 2010 effective income tax rates are estimated to be approximately 21 percent for GAAP and approximately 21 to 22 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. This tax expense 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. GAAP results for the first quarter of fiscal 2010 included a $0.03 diluted loss per share for the QSI segment. The first quarter of fiscal 2010 QSI results included $106 million in operating expenses, primarily related to FLO TV.
Business Outlook
The following statements are forward looking and actual results may differ materially. The "Note Regarding Forward-Looking Statements" at the end of this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.
The potential instability in financial markets may continue to have an impact on the value of our marketable securities and net investment income (loss). While we do not forecast impairments, we have temporary unrealized losses on marketable securities that could be recognized as other-than-temporary losses in future periods if financial conditions affecting those securities do not improve.
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 provided below is presented consistent with the presentation of pro forma results elsewhere herein.
The following estimates are approximations and are based on the current business outlook:
Qualcomm's Business Outlook Summary
SECOND FISCAL QUARTER
---------------------
Q2 FY09 Current Guidance
Results (2) Q2 FY10 Estimates
----------- -----------------
Pro Forma
Revenues $2.45B $2.40B - $2.60B
Year-over-year change decrease 2% - increase 6%
Diluted earnings per
share (EPS) ($0.03) $0.49 - $0.53
Year-over-year change N/M
GAAP
Revenues $2.46B $2.40B - $2.60B
Year-over-year change decrease 2% - increase 6%
Diluted EPS ($0.18) $0.35 - $0.39
Year-over-year change N/M
Diluted EPS attributable
to QSI ($0.03) ($0.05)
Diluted EPS attributable to
share-based compensation ($0.09) ($0.07)
Diluted EPS attributable
to certain tax items (3) ($0.02) ($0.02)
Diluted EPS attributable to
in-process R&D $0.00 N/A
Metrics
MSM shipments approx. 69M approx. 88M - 92M
CDMA/WCDMA devices
shipped (1) approx. 128M* approx. 144M - 149M*
CDMA/WCDMA device wholesale
average selling price (1) approx. $201* approx. $179*
*Shipments in December quarter, reported in March quarter
---------------------------------------------------------
FISCAL YEAR
-----------
FY 2009 Prior Guidance Current Guidance
Results (2) FY 2010 Estimates FY 2010 Estimates
----------- ----------------- -----------------
Pro Forma
Revenues $10.39B $10.50B - $11.30B $10.40B - $11.00B
Year-over-year
change increase 1% - 9% even - increase 6%
Diluted EPS $1.31 $2.10 - $2.30 $2.10 - $2.30
Year-over-year
change increase 60% - 76% increase 60% - 76%
GAAP
Revenues $10.42B $10.50B - $11.30B $10.40B - $11.00B
Year-over-year
change increase 1% - 8% even - increase 6%
Diluted EPS $0.95 $1.56 - $1.76 $1.56 - $1.76
Year-over-year
change increase 64% - 85% increase 64% - 85%
Diluted EPS
attributable
to QSI ($0.15) ($0.19) ($0.18)
Diluted EPS
attributable to
share-based
compensation ($0.27) ($0.28) ($0.28)
Diluted EPS
attributable
to in-process R&D $0.00 N/A N/A
Diluted EPS
attributable to
certain tax
items (3) $0.07 ($0.07) ($0.08)
Metrics
Fiscal year*
CDMA/WCDMA
device wholesale
average selling
price (1) approx. $200 approx. $189 approx. $181
*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
------------------------------------------------------------------------
CALENDAR YEAR Device Estimates (1)
----------------------------------
Prior Current Prior Current
Guidance Guidance Guidance Guidance
CDMA/WCDMA Calendar Calendar Calendar Calendar
device 2009 2009 2010 2010
shipments Estimates Estimates Estimates Estimates
-----------------------------------------------------------------------
March quarter approx. 111M approx. 111M not provided not provided
June quarter approx. 127M approx. 127M not provided not provided
September approx.
quarter 130M - 135M approx. 133M not provided not provided
December approx.
quarter not provided 144M - 149M not provided not provided
---------- ------------ ----------- ------------ ------------
Calendar
year range
(approx.) 515M - 530M 515M - 520M 600M - 650M 600M - 650M
---------- ----------- ----------- ----------- -----------
Midpoint Midpoint Midpoint Midpoint
CDMA/WCDMA
units approx. 523M approx. 518M approx. 625M approx. 625M
CDMA units approx. 213M approx. 210M approx. 231M approx. 231M
WCDMA units approx. 310M approx. 308M approx. 394M approx. 394M
-------------------------------------------------------------------------
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not
reported to Qualcomm.
(2) Fiscal 2009 results included a $783 million charge 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.
(3) 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.
Sums may not equal totals due to rounding.
N/M - Not Meaningful
Results of Business Segments (in millions, except per share data):
First Quarter - Fiscal Year 2010
Segments QCT QTL QWI
-------- --- --- ---
Revenues $1,608 $917 $142
-------- ------ ---- ----
Change from prior year 21% (9%) (16%)
---------------------- --- ---- ----
Change from prior quarter (5%) 10% (3%)
------------------------- --- --- ----
Operating income (loss)
-----------------------
Change from prior year
----------------------
Change from prior quarter
-------------------------
EBT $425 $772 $9
--- ---- ---- ---
Change from prior year 153% (12%) 200%
---------------------- --- ---- ---
Change from prior quarter (16%) 11% N/M
------------------------- --- --- ---
EBT as a % of revenues 26% 84% 6%
---------------------- --- --- ---
Net income (loss)
-----------------
Change from prior year
----------------------
Change from prior quarter
-------------------------
Diluted EPS
-----------
Change from prior year
----------------------
Change from prior quarter
-------------------------
Diluted shares used
-------------------
Pro Forma
Reconciling Share-Based
Segments Items (1) Pro Forma Compensation (2)
-------- ----------- --------- ----------------
Revenues $1 $2,668 $-
-------- --- ------ ---
Change from prior year N/M 6%
---------------------- --- ---
Change from prior quarter N/M (1%)
------------------------- --- ---
Operating income (loss) $1,134 $(151)
----------------------- ------ -----
Change from prior year 15% (4%)
---------------------- --- ---
Change from prior quarter 36% (2%)
------------------------- --- ----
EBT $104 $1,310 $(151)
--- ---- ------ -----
Change from prior year N/M 89% (4%)
---------------------- --- --- ---
Change from prior quarter N/M 33% (2%)
------------------------- --- --- ---
EBT as a % of revenues N/M 49% N/M
---------------------- --- --- ---
Net income (loss) $1,041 $(114)
----------------- ------ -----
Change from prior year 100% (15%)
---------------------- --- ----
Change from prior quarter 28% (34%)
------------------------- --- ----
Diluted EPS $0.62 $(0.07)
----------- ----- ------
Change from prior year 100% (17%)
---------------------- --- ----
Change from prior quarter 29% (40%)
------------------------- --- ----
Diluted shares used 1,691 1,691
------------------- ----- -----
Segments Tax Items (3) QSI (4) GAAP
-------- ------------- ------- ----
Revenues $- $2 $2,670
-------- --- --- ------
Change from prior year (67%) 6%
---------------------- ---- ---
Change from prior quarter (71%) (1%)
------------------------- ---- ---
Operating income (loss) $- $(104) $879
----------------------- --- ----- ----
Change from prior year (8%) 18%
---------------------- --- ---
Change from prior quarter (21%) 47%
------------------------- ---- ---
EBT $- $(107) $1,052
--- --- ----- ------
Change from prior year (9%) 133%
---------------------- --- ---
Change from prior quarter (13%) 42%
------------------------- ---- ---
EBT as a % of revenues N/M 39%
---------------------- --- ---
Net income (loss) $(32) $(54) $841
----------------- ---- ---- ----
Change from prior year N/M 33% 147%
---------------------- --- --- ---
Change from prior quarter N/M 31% 5%
------------------------- --- --- ---
Diluted EPS $(0.02) $(0.03) $0.50
----------- ------ ------ -----
Change from prior year N/M 40% 150%
---------------------- --- --- ---
Change from prior quarter N/M 40% 4%
------------------------- --- --- ---
Diluted shares used 1,691 1,691 1,691
------------------- ----- ----- -----
Fourth Quarter - Fiscal Year 2009
Segments QCT QTL QWI
-------- --- --- ---
Revenues $1,699 $837 $146
-------- ------ ---- ----
Operating income (loss)
-----------------------
EBT 508 693 (5)
--- --- --- ---
Net income (loss)
-----------------
Diluted EPS
-----------
Diluted shares used
-------------------
Pro Forma
Reconciling Share-Based
Segments Items (1) Pro Forma Compensation (2)
-------- ----------- --------- ----------------
Revenues $1 $2,683 $-
-------- --- ------ ---
Operating income (loss) 831 (148)
----------------------- --- ----
EBT (211) 985 (148)
--- ---- --- ----
Net income (loss) 811 (85)
----------------- --- ---
Diluted EPS $0.48 $(0.05)
----------- ----- ------
Diluted shares used 1,688 1,688
------------------- ----- -----
Segments Tax Items QSI (4) GAAP
-------- --------- ------- ----
Revenues $- $7 $2,690
-------- --- --- ------
Operating income (loss) - (86) 597
----------------------- --- --- ---
EBT - (95) 742
--- --- --- ---
Net income (loss) 155 (78) 803
----------------- --- --- ---
Diluted EPS $0.09 $(0.05) $0.48
----------- ----- ------ -----
Diluted shares used 1,688 1,688 1,688
------------------- ----- ----- -----
First Quarter - Fiscal Year 2009
Segments QCT QTL QWI
-------- --- --- ---
Revenues $1,334 $1,006 $170
-------- ------ ------ ----
Operating income (loss)
-----------------------
EBT 168 874 3
--- --- --- ---
Net income (loss)
-----------------
Diluted EPS
-----------
Diluted shares used
-------------------
Pro Forma
Reconciling Share-Based
Segments Items (1) Pro Forma Compensation (2)
-------- ----------- --------- ----------------
Revenues $1 $2,511 $-
-------- --- ------ ---
Operating income (loss) 986 (145)
---------------- --- ----
EBT (351) 694 (145)
--- ---- --- ----
Net income (loss) 520 (99)
----------------- --- ---
Diluted EPS $0.31 $(0.06)
----------- ----- ------
Diluted shares used 1,667 1,667
------------------- ----- -----
Segments QSI (4) GAAP
-------- ------- ----
Revenues $6 $2,517
-------- --- ------
Operating income (loss) (96) 745
----------------------- --- ---
EBT (98) 451
--- --- ---
Net income (loss) (80) 341
----------------- --- ---
Diluted EPS $(0.05) $0.20
----------- ------ -----
Diluted shares used 1,667 1,667
------------------- ----- -----
Second Quarter - Fiscal Year 2009
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1)
-------- --- --- --- -----------
Revenues $1,316 $954 $176 $1
-------- ------ ---- ---- ---
Operating income (loss)
-----------------------
EBT 217 839 25 (934)
--- --- --- --- ----
Net (loss) income
-----------------
Diluted EPS
-----------
Diluted shares used
-------------------
Share-Based
Segments Pro Forma Compensation (2) Tax Items
-------- --------- ---------------- ---------
Revenues $2,447 $- $-
-------- ------ --- ---
Operating income (loss) 214 (140) -
----------------------- --- ---- ---
EBT 147 (140) -
--- --- ---- ---
Net (loss) income (46) (145) (36)
----------------- --- ---- ---
Diluted EPS $(0.03) $(0.09) $(0.02)
----------- ------ ------ ------
Diluted shares used 1,651 1,651 1,651
------------------- ----- ----- -----
In-Process
Segments R&D QSI (4) GAAP
-------- ---------- ------- ----
Revenues $- $8 $2,455
-------- --- --- ------
Operating income (loss) (6) (78) (10)
----------------------- --- --- ---
EBT (6) (102) (101)
--- --- ---- ----
Net (loss) income (6) (56) (289)
----------------- --- --- ----
Diluted EPS $- $(0.03) $(0.18)
----------- --- ------ ------
Diluted shares used 1,651 1,651 1,651
------------------- ----- ----- -----
Twelve Months - Fiscal Year 2009
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1)
-------- --- --- --- -----------
Revenues $6,135 $3,605 $641 $6
-------- ------ ------ ---- ---
Operating income (loss)
-----------------------
EBT 1,441 3,068 20 (1,502)
--- ----- ----- --- ------
Net income (loss)
-----------------
Diluted EPS
-----------
Diluted shares used
-------------------
Share-Based
Segments Pro Forma Compensation (2) Tax Items
-------- --------- ---------------- ---------
Revenues $10,387 $- $-
-------- ------- --- ---
Operating income (loss) 3,153 (584) -
----------------------- ----- ---- ---
EBT 3,027 (584) -
--- ----- ---- ---
Net income (loss) 2,187 (455) 118
----------------- ----- ---- ---
Diluted EPS $1.31 $(0.27) $0.07
----------- ----- ------ -----
Diluted shares used 1,673 1,673 1,673
------------------- ----- ----- -----
In-Process
Segments R&D QSI GAAP
-------- ---------- --- ----
Revenues $- $29 $10,416
-------- --- --- -------
Operating income (loss) (6) (337) 2,226
----------------------- --- ---- -----
EBT (6) (361) 2,076
--- --- ---- -----
Net income (loss) (6) (252) 1,592
----------------- --- ---- -----
Diluted EPS $- $(0.15) $0.95
----------- --- ------ -----
Diluted shares used 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 quarter of fiscal 2010, the Company recorded 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.
(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.
N/M – Not Meaningful
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's first quarter fiscal 2010 earnings conference call will be broadcast live on January 27, 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 January 27, 2010, beginning at approximately 5:30 p.m. PT through February 27, 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 50788237. An audio replay of the conference call will be available on the Company's web site at www.qualcomm.com for two weeks following the live call.
Editor's Note: To view the web slides that accompany this earnings release and conference call, please go to the Qualcomm Investor Relations website at http://investor.qualcomm.com/results.cfm.
Qualcomm Incorporated (Nasdaq: QCOM) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., Qualcomm is included in the S&P 100 Index, the S&P 500 Index and is a 2009 FORTUNE 500® company. For more information, please visit www.qualcomm.com.
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by management (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Pro forma measurements of the following financial data are used by the Company's management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income (loss), net investment income (loss), income (loss) before income taxes, effective tax rate, net income (loss), diluted earnings (loss) per share, operating cash flow and free cash flow. Management is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using pro forma information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on pro forma financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the QSI segment, certain 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. Moreover, it is generally not an expense that requires or will require cash payment by the Company. 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 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 current uncertainty of global economic conditions and its potential impact on demand for our products, services or applications and the value of our marketable securities; attacks on our business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; our dependence on major customers and licensees; our dependence on third-party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the development, deployment and commercial acceptance of the FLO TV network and FLO™ technology; the development and commercial acceptance of the IMOD display technology; foreign currency fluctuations; strategic investments and transactions we have or may pursue; as well as the other risks detailed from time-to-time in our SEC reports.
Qualcomm is a registered trademark of Qualcomm Incorporated. Snapdragon, mirasol, FLO TV and FLO are trademarks of Qualcomm Incorporated. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.
Qualcomm Contact: |
|
Warren Kneeshaw |
|
Phone: 1-858-658-2983 |
|
e-mail: [email protected] |
|
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 December 27, 2009
------------------------------------
Pro Share-Based Tax
Forma Compensation Items QSI GAAP
----- ------------ ----- --- ----
Revenues:
Equipment and
services $1,661 $- $- $2 $1,663
Licensing and
royalty fees 1,007 - - - 1,007
----- --- --- --- -----
Total revenues 2,668 - - 2 2,670
----- --- --- --- -----
Operating expenses:
Cost of equipment
and services
revenues 759 11 - 46 816
Research and
development 503 72 - 21 596
Selling, general
and administrative 272 68 - 39 379
--- --- --- --- ---
Total operating
expenses 1,534 151 - 106 1,791
----- --- --- --- -----
Operating income
(loss) 1,134 (151) - (104) 879
Investment income
(loss), net 176(a) - - (3)(b) 173
--- --- --- --- ---
Income (loss)
before income
taxes 1,310 (151) - (107) 1,052
Income tax
(expense) benefit (269)(c) 37 (32)(e) 53(d) (211)(c)
---- --- --- --- ----
Net income (loss) $1,041 $(114) $(32) $(54) $841
====== ===== ==== ==== ====
Earnings (loss) per
common share:
Diluted $0.62 $(0.07) $(0.02) $(0.03) $0.50
===== ====== ====== ====== =====
Shares used in per
share calculations:
Diluted 1,691 1,691 1,691 1,691 1,691
===== ===== ===== ===== =====
Supplemental
Financial Data:
----------------
Operating Cash Flow $1,338 $(13)(g) $- $(86) $1,239
Operating Cash Flow
as a % of Revenues 50% N/M 46%
Free Cash Flow (f) $1,271 $(13)(g) $- $(107) $1,151
Free Cash Flow as a
% of Revenues 48% N/M 43%
------------------- --- --- ---
(a) Included $145 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 $91 million in net
realized gains on investments, partially offset by $51 million in
other-than-temporary losses on investments, $5 million in interest
expense and $4 million in losses on derivatives.
(b) Included $6 million in other-than-temporary losses on investments,
$4 million in interest expense and $4 million in equity in losses of
investees, partially offset by $11 million in net realized gains on
investments.
(c) The first quarter of fiscal 2010 effective tax rates were
approximately 20% for GAAP and approximately 21% 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 first quarter of fiscal 2010, the Company recorded 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.
(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 December 27,
2009, included herein.
(g) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
Reconciliation of Pro Forma Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and other supplemental disclosures
(In millions)
(Unaudited)
Three Months Ended December 27, 2009
Share-Based
Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
Net cash provided (used)
by operating activities $1,338 $(13)(a) $(86) $1,239
Less: capital
expenditures (67) - (21) (88)
--- --- --- ---
Free cash flow $1,271 $(13) $(107) $1,151
====== ==== ===== ======
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $12 $- $(12) $-
Cash transfers
to QSI (2) (113) - 113 -
---- --- --- ---
Net cash transfers $(101) $- $101 $-
===== === ==== ===
(1) Cash from sale of equity investments.
(2) Funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
Three Months Ended December 28, 2008
Share-Based
Pro Forma Compensation QSI GAAP
--------- ------------ --- ----
Net cash provided (used)
by operating activities $3,629 $(16)(a) $(112) $3,501
Less: capital expenditures (210) - (24) (234)
---- --- --- ----
Free cash flow $3,419 $(16) $(136) $3,267
====== ==== ===== ======
(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
December 27, September 27,
2009 2009
------------ -------------
Current assets:
Cash and cash equivalents $3,660 $2,717
Marketable securities 8,504 8,352
Accounts receivable, net 616 700
Inventories 350 453
Deferred tax assets 199 149
Other current assets 245 199
--- ---
Total current assets 13,574 12,570
Marketable securities 6,764 6,673
Deferred tax assets 1,118 843
Property, plant and equipment, net 2,384 2,387
Goodwill 1,490 1,492
Other intangible assets, net 3,142 3,065
Other assets 431 415
--- ---
Total assets $28,903 $27,445
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $415 $636
Payroll and other benefits related
liabilities 385 480
Unearned revenues 567 441
Income taxes payable 458 29
Other current liabilities 1,123 1,227
----- -----
Total current liabilities 2,948 2,813
Unearned revenues 3,775 3,464
Other liabilities 827 852
--- ---
Total liabilities 7,550 7,129
----- -----
Stockholders' equity:
Preferred stock, $0.0001 par value;
issuable in series; 8 shares authorized;
none outstanding at December 27, 2009
and September 27, 2009 - -
Common stock, $0.0001 par value; 6,000
shares authorized; 1,674 and 1,669 shares
issued and outstanding at December 27, 2009
and September 27, 2009, respectively - -
Paid-in capital 8,817 8,493
Retained earnings 11,792 11,235
Accumulated other comprehensive income 744 588
--- ---
Total stockholders' equity 21,353 20,316
------ ------
Total liabilities and stockholders'
equity $28,903 $27,445
======= =======
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended
------------------
December 27, December 28,
2009 2008
------------ ------------
Revenues:
Equipment and services $1,663 $1,423
Licensing and royalty fees 1,007 1,094
----- -----
Total revenues 2,670 2,517
----- -----
Operating expenses:
Cost of equipment and services
revenues 816 755
Research and development 596 604
Selling, general and
administrative 379 413
--- ---
Total operating expenses 1,791 1,772
----- -----
Operating income 879 745
Investment income (loss), net 173 (294)
--- ----
Income before income taxes 1,052 451
Income tax expense (211) (110)
---- ----
Net income $841 $341
==== ====
Basic earnings per common share $0.50 $0.21
===== =====
Diluted earnings per common share $0.50 $0.20
===== =====
Shares used in per share calculations:
Basic 1,672 1,653
===== =====
Diluted 1,691 1,667
===== =====
Dividends per share paid $0.17 $-
===== ===
Dividends per share announced $0.17 $0.16
===== =====
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
------------------
December 27, December 28,
2009 2008
------------- -------------
Operating Activities:
Net income $841 $341
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 162 152
Revenues related to non-monetary exchanges (37) (29)
Non-cash portion of income tax expense 32 45
Non-cash portion of share-based
compensation expense 151 145
Incremental tax benefit from stock
options exercised (13) (16)
Net realized (gains) losses on marketable
securities and other investments (102) 33
Net impairment losses on marketable
securities and other investments 57 392
Other items, net 4 (14)
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net 87 2,716
Inventories 101 65
Other assets (32) (19)
Trade accounts payable (226) (192)
Payroll, benefits and other liabilities (124) (54)
Unearned revenues 338 (64)
--- ---
Net cash provided by operating
activities 1,239 3,501
----- -----
Investing Activities:
Capital expenditures (88) (234)
Purchases of available-for-sale securities (2,098) (2,586)
Proceeds from sale of available-for-sale
securities 2,013 1,373
Cash received for partial settlement
of investment receivables 8 202
Other investments and acquisitions,
net of cash acquired (6) (14)
Change in collateral held under
securities lending - 162
Other items, net (1) (4)
--- ---
Net cash used by investing
activities (172) (1,101)
---- ------
Financing Activities:
Proceeds from issuance of common stock 152 26
Incremental tax benefit from stock
options exercised 13 16
Repurchase and retirement of common stock - (285)
Dividends paid (284) -
Change in obligations under securities
lending - (162)
Other items, net (1) (1)
--- ---
Net cash used by financing
activities (120) (406)
---- ----
Effect of exchange rate changes on cash (4) (8)
--- ---
Net increase in cash and cash
equivalents 943 1,986
Cash and cash equivalents at beginning
of period 2,717 1,840
----- -----
Cash and cash equivalents at end of
period $3,660 $3,826
====== ======
SOURCE Qualcomm Incorporated
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