MEDIA RELEASE PR35479
Qualcomm Announces Third Quarter Fiscal 2009 Results
SAN DIEGO, July 23 /PRNewswire-AsiaNet/ --
Revenues US$2.8 Billion, EPS US$0.44
Pro Forma EPS US$0.54
Raises Fiscal 2009 Revenue and Operating Income Guidance
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 2009 ended June 28, 2009.
Third Quarter Results (GAAP)
- Revenues: US$2.75 billion, compared to US$2.76 billion in the prior year
and US$2.46 billion in the prior quarter.
- Operating income: US$894 million, compared to US$824 million in the
prior year and an operating loss of US$10 million in the prior quarter.*
- Net income: US$737 million, compared to US$748 million in the prior year
and a net loss of US$289 million in the prior quarter.*
- Diluted earnings per share: US$0.44, compared to US$0.45 in the prior
year and diluted loss per share of US$0.18 in the prior quarter.*
- Effective tax rate: 25 percent for the quarter. Fiscal 2009 estimated
tax rate of approximately 33 percent.
- Operating cash flow: US$1.09 billion, up 47 percent year-over-year; 39
percent of revenues.
- Return of capital to stockholders: US$282 million, or US$0.17 per share
of cash dividends paid.
* The second quarter of fiscal 2009 results reflected a US$748 million
litigation settlement charge related to a settlement and patent agreement
with Broadcom Corporation.
Pro Forma Third Quarter Results
Pro forma results exclude the Qualcomm Strategic Initiatives (QSI)
segment, certain estimated share-based compensation, certain tax items
related to prior years and acquired in-process research and development (R&D)
expense.
- Revenues: US$2.74 billion, compared to US$2.76 billion in the prior year
and US$2.45 billion in the prior quarter.
- Operating income: US$1.12 billion, compared to US$1.06 billion in the
prior year and US$214 million in the prior quarter.*
- Net income: US$903 million, compared to US$915 million in the prior year
and a net loss of US$46 million in the prior quarter.*
- Diluted earnings per share: US$0.54, compared to US$0.55 in the prior
year and diluted loss per share of US$0.03 in the prior quarter.* The
current quarter excludes US$0.02 loss per share attributable to the QSI
segment and US$0.08 loss per share attributable to certain estimated
share-based compensation.
- Effective tax rate: 25 percent for the quarter. Fiscal 2009 estimated
tax rate of approximately 29 percent.
- Free cash flow: US$1.04 billion, up 23 percent year-over-year; 38
percent of revenues (defined as net cash from operating activities less
capital expenditures).
* The second quarter of fiscal 2009 results reflected a US$748 million
litigation settlement charge related to a settlement and patent agreement
with Broadcom.
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
"We delivered a strong quarter as the worldwide migration to 3G-enabled
products and services remains robust," said Dr. Paul E. Jacobs, chairman and
CEO of Qualcomm. "Our revenues were at the high end of our prior guidance,
and our operating income exceeded our prior guidance. Our financial results
reflect a record quarter for MSM chipset shipments, strong licensing and
royalty revenues based on healthy end market demand in the March quarter and
a 5 percent year-over-year reduction in combined R&D and SG&A expenses."
"Despite the global economic uncertainty, we anticipate another strong
quarter for our chipset shipments in the fourth fiscal quarter. We believe
the CDMA inventory channel has largely stabilized, yet remains near
historically low levels consistent with our prior forecast. We are raising
our fiscal 2009 revenue and operating income estimates given the strong
underlying fundamentals of our business."
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled
approximately US$15.7 billion at the end of the third quarter of fiscal 2009,
compared to US$14.0 billion at the end of the second quarter of fiscal 2009
and US$11.2 billion a year ago. On July 8, 2009, we announced a cash dividend
of US$0.17 per share, payable on September 25, 2009 to stockholders of record
at the close of business on August 28, 2009.
We recorded net other-than-temporary impairments of US$112 million, or
approximately one percent of the recorded values of our cash, cash
equivalents and marketable securities at June 28, 2009. Our net unrealized
losses on marketable securities decreased by US$873 million during the third
quarter of fiscal 2009, due primarily to recent improvements in financial
markets. As of June 28, 2009, we had net unrealized losses on marketable
securities of US$25 million as compared to US$898 million as of March 29,
2009.
Research and Development
(All amounts in US Dollars unless otherwise noted)
Estimated
Share-Based In-Process
($ in millions) Pro Forma Compensation R&D QSI GAAP
--------- ------------ ---------- --- ----
Third quarter fiscal
2009 $523 $72 $- $23 $618
As a % of revenues 19% N/M 22%
Third quarter fiscal
2008 $495 $64 $13 $24 $596
As a % of revenues 18% N/M 22%
Year-over-year change($) 6% 13% N/M (4%) 4%
N/M - Not Meaningful
Pro forma R&D expenses increased 6 percent year-over-year, primarily due
to an increase in costs related to the development of integrated circuit
products, next-generation CDMA and OFDMA technologies, 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(TM) subsidiary.
Selling, General and Administrative
Estimated
Share-Based
($ in millions) Pro Forma Compensation QSI GAAP
--------- ------------ ------ -----
Third quarter fiscal 2009 $285 $68 $24 $377
As a % of revenues 10% N/M 14%
Third quarter fiscal 2008 $357 $65 $31 $453
As a % of revenues 13% N/M 16%
Year-over-year change ($) (20%) 5% (23%) (17%)
Pro forma selling, general and administrative (SG&A) expenses decreased
by 20 percent year-over-year, primarily due to lower litigation-related
activities and cost reduction efforts. QSI SG&A expenses were primarily
related to FLO TV.
Effective Income Tax Rate
Our fiscal 2009 effective income tax rates are estimated to be 33 percent
for GAAP and 29 percent for pro forma. The third quarter effective tax rate
of 25 percent for both GAAP and pro forma differ from the annual rates due to
a $748 million pre-tax litigation settlement charge recorded in the second
fiscal quarter with a discrete tax benefit computed at a rate less than the
United States federal rate.
Qualcomm Strategic Initiatives
The QSI segment is composed of our strategic investments, including our
FLO TV subsidiary. GAAP results for the third quarter of fiscal 2009 included
a $0.02 loss per share for the QSI segment. The third quarter of fiscal 2009
QSI results included $86 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.
We expect that the uncertainty in the worldwide economy may continue to
impact demand for CDMA-based products in various regions. In addition, the
weakness in financial markets has had, and may continue to have, an impact on
the value of our marketable securities and net investment income. While we do
not forecast impairments, we have temporary unrealized losses on marketable
securities that could be recognized as other-than-temporary losses in future
periods if market conditions do not improve. Given the market volatility and
the significant judgments involved, accurately forecasting
other-than-temporary impairments associated with our marketable securities is
extremely difficult and actual results could vary materially. As a result,
while we are providing revenue, operating income and our other standard
guidance, we are not providing earnings per share guidance.
Moreover, our outlook does not include provisions for the consequences of
injunctions, damages or fines related to any pending legal matters. In
addition, due to their nature, certain income and expense items, such as
realized investment gains or losses, gains and losses on certain derivative
instruments or asset impairments, cannot be accurately forecast. Accordingly,
we exclude forecasts of such items from our business outlook, and actual
results may vary materially from the business outlook if we incur any such
income or expense items.
We are advised that the Korea Fair Trade Commission (KFTC) will issue a
decision in our case shortly. This follows seven days of hearings which
focused on claims contained in the Examiners' Report charging that certain of
our business practices in South Korea were anticompetitive. The practices at
issue relate to integration of certain functions on our chips as well as
rebates and discounts offered to our customers. The KFTC may order
modifications to some or all of those practices. However, until the order is
issued, we are unable to assess any impact. We are also anticipating that the
KFTC will impose a fine and, while we cannot estimate the amount or a
reasonable range of potential loss, we expect it will be substantial and
could have a material impact on our results of operations. This by no means
reflects our view of the merits of the case. We firmly believe that our
practices do not violate South Korean competition law, are grounded in sound
business practice and are consistent with our customers' desires. In the
event of an adverse decision and the issuance of a formal order, which may
take a number of months, we will seek a stay and pursue all avenues of
appeal.
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
FOURTH FISCAL QUARTER
---------------------
Q4'08 Current Guidance
Results(2) Q4'09 Estimates(3)
--------------------------------------------------------------------------
Pro Forma
Revenues $3.33B $2.55B - $2.75B
Year-over-year change decrease 17% - 23%
Operating income $1.58B $0.95B - $1.05B
Year-over-year change decrease 33% - 40%
--------------------------------------------------------------------------
GAAP
Revenues $3.33B $2.55B - $2.75B
Year-over-year change decrease 18% - 24%
Operating income $1.34B $0.70B - $0.80B
Year-over-year change decrease 40% - 48%
Operating income (loss)
attributable to QSI ($0.10B) ($0.10B)
Operating income (loss)
attributable to estimated
share-based compensation ($0.15B) ($0.15B)
--------------------------------------------------------------------------
Metrics
MSM shipments approx. 86M approx. 88M - 92M
CDMA/WCDMA
devices shipped (1) approx. 119M* approx. 127M - 132M*
CDMA/WCDMA device
wholesale average
selling price (1) approx. $216* approx. $189*
*Shipments in June quarter, reported in Sept. quarter
--------------------------------------------------------------------------
FISCAL YEAR
FY 2008 Prior Guidance Current Guidance
Results FY 2009 Estimates(3) FY 2009 Estimates(3)
--------------------------------------------------------------------------
Pro Forma
Revenues $11.13B $9.85B - $10.25B $10.25B - $10.45B
Year-over-year change decrease 8% - 12% decrease 6% - 8%
Operating income $4.60B $2.95B - $3.15B $3.30B - $3.40B
Year-over-year change decrease 32% - 36% decrease 26% - 28%
--------------------------------------------------------------------------
GAAP
Revenues $11.14B $9.85B - $10.25B $10.25B - $10.45B
Year-over-year change decrease 8% - 12% decrease 6% - 8%
Operating income $3.73B $1.95B - $2.15B $2.34B - $2.44B
Year-over-year change decrease 42% - 48% decrease 35% - 37%
Operating income (loss)
attributable to QSI ($0.32B) ($0.39B) ($0.35B)
Operating income (loss)
attributable to
estimated
share-based
compensation ($0.54B) ($0.60B) ($0.60B)
Operating income
(loss)
attributable to
in-process R&D ($0.01B) ($0.01B) ($0.01B)
--------------------------------------------------------------------------
Metrics
Fiscal year*
CDMA/WCDMA
device wholesale
average selling
price (1) approx. $219 approx. $199 approx. $199
* Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
--------------------------------------------------------------------------
CALENDAR YEAR Device Estimates (1)
--------------------------------------------------------------------------
CDMA/WCDMA device shipments
Prior Guidance Current Guidance
Calendar 2008 Calendar 2009 Calendar 2009
Estimates Estimates Estimates
--------------------------------------------------------------------------
March quarter approx. 107M approx. 109M - 111M approx. 111M
June quarter approx. 119M not provided approx. 127M - 132M
September
quarter approx. 125M not provided not provided
December
quarter approx. 128M not provided not provided
--------------------------------------------------------------------------
Calendar year
range (approx.) 480M 540M - 590M 540M - 590M
--------------------------------------------------------------------------
Midpoint Midpoint Midpoint
CDMA/WCDMA
units approx. 480M approx. 565M approx. 565M
CDMA units approx. 216M approx. 217M approx. 217M
WCDMA units approx. 264M approx. 348M approx. 348M
--------------------------------------------------------------------------
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not
reported to Qualcomm.
(2) The fourth quarter of fiscal 2008 results included $560 million in
revenues, or $0.20 diluted EPS, as a result of the execution of the
license and settlement agreements with Nokia.
(3) While we do not forecast impairments, we do have unrealized losses
on marketable securities that could be recognized in future periods
if market conditions do not improve.
Sums may not equal totals due to rounding.
Results of Business Segments (in millions, except per share data):
Third Quarter - Fiscal Year 2009
Estimated
Pro Forma Share-
Reconciling Pro Based
Segments QCT QTL QWI Items (1) Forma Compensation(2) QSI(3) GAAP
--------------------------------------------------------------------------
Revenues $1,786 $807 $148 $3 $2,744 $- $9 $2,753
--------------------------------------------------------------------------
Change
from
prior
year 1% 0% (22%) N/M (1%) 125% 0%
--------------------------------------------------------------------------
Change
from
prior
quarter 36% (15%) (16%) N/M 12% 13% 12%
--------------------------------------------------------------------------
Operating
income
(loss) $1,122 $(151) $(77) $894
--------------------------------------------------------------------------
Change
from
prior
year 6% (9%) 8% 8%
--------------------------------------------------------------------------
Change
from
prior
quarter 424% (8%) 1% N/M
--------------------------------------------------------------------------
EBT $548 $663 $(3) $(7) $1,201 $(151) $(66) $984
--------------------------------------------------------------------------
Change
from
prior
year 13% (1%) N/M N/M 8% (9%) 20% 12%
--------------------------------------------------------------------------
Change
from
prior
quarter 153% (21%) N/M N/M N/M (8%) 35% N/M
--------------------------------------------------------------------------
EBT as
a % of
revenues 31% 82% (2%) N/M 44% N/M N/M 36%
--------------------------------------------------------------------------
Net (loss)
income $903 $(127) $(39) $737
--------------------------------------------------------------------------
Change
from
prior
year (1%) (35%) 35% (1%)
--------------------------------------------------------------------------
Change
from
prior
quarter N/M 12% 30% N/M
--------------------------------------------------------------------------
Diluted
EPS $0.54 $(0.08) $(0.02) $0.44
--------------------------------------------------------------------------
Change
from
prior
year (2%) (33%) 50% (2%)
--------------------------------------------------------------------------
Change
from
prior
quarter N/M 11% 33% N/M
--------------------------------------------------------------------------
Diluted
shares
used 1,675 1,675 1,675 1,675
--------------------------------------------------------------------------
Second Quarter - Fiscal Year 2009
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1)(4) Pro Forma (4)
----------------------------------------------------------------------
Revenues $1,316 $954 $176 $1 $2,447
----------------------------------------------------------------------
Operating income
(loss) 214
----------------------------------------------------------------------
EBT 217 839 25 (934) 147
----------------------------------------------------------------------
Net (loss) income (46)
----------------------------------------------------------------------
Diluted EPS $(0.03)
----------------------------------------------------------------------
Diluted shares used 1,651
----------------------------------------------------------------------
Estimated
Share-Based In-Process
Segments Compensation (2) Tax Items(5) R&D QSI (3) GAAP (4)
-------------------------------------------------------------------------
Revenues $- $- $- $8 $2,455
-------------------------------------------------------------------------
Operating
income (loss) (140) - (6) (78) (10)
-------------------------------------------------------------------------
EBT (140) - (6) (102) (101)
-------------------------------------------------------------------------
Net (loss)
income (145) (36) (6) (56) (289)
-------------------------------------------------------------------------
Diluted EPS $(0.09) $(0.02) $- $(0.03) $(0.18)
-------------------------------------------------------------------------
Diluted shares
used 1,651 1,651 1,651 1,651 1,651
-------------------------------------------------------------------------
Third Quarter - Fiscal Year 2008
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
--------------------------------------------------------------------
Revenues $1,762 $803 $190 $3 $2,758
--------------------------------------------------------------------
Operating income
(loss) 1,060
--------------------------------------------------------------------
EBT 487 670 (1) (40) 1,116
--------------------------------------------------------------------
Net income (loss) 915
--------------------------------------------------------------------
Diluted EPS $0.55
--------------------------------------------------------------------
Diluted shares used 1,654
--------------------------------------------------------------------
Estimated
Share-Based In-Process
Segments Compensation (2) R&D QSI (3) GAAP
------------------------------------------------------------
Revenues $- $- $4 $2,762
------------------------------------------------------------
Operating
income
(loss) (139) (13) (84) 824
------------------------------------------------------------
EBT (139) (13) (82) 882
------------------------------------------------------------
Net income
(loss) (94) (13) (60) 748
------------------------------------------------------------
Diluted EPS $(0.06) $(0.01) $(0.04) $0.45
------------------------------------------------------------
Diluted
shares used 1,654 1,654 1,654 1,654
------------------------------------------------------------
Fourth Quarter - Fiscal Year 2008
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
--------------------------------------------------------------------
Revenues $1,761 $1,374 $190 $4 $3,329
--------------------------------------------------------------------
Operating income
(loss) 1,578
--------------------------------------------------------------------
EBT 449 1,247 (24) (315) 1,357
--------------------------------------------------------------------
Net income (loss) 1,058
--------------------------------------------------------------------
Diluted EPS $0.63
--------------------------------------------------------------------
Diluted shares used 1,678
--------------------------------------------------------------------
Estimated
Share-Based
Segments Compensation(2) QSI(3) GAAP
-------------------------------------------------
Revenues $- $5 $3,334
-------------------------------------------------
Operating income
(loss) (146) (97) 1,335
-------------------------------------------------
EBT (146) (104) 1,107
-------------------------------------------------
Net income (loss) (98) (82) 878
-------------------------------------------------
Diluted EPS $(0.06) $(0.05) $0.52
-------------------------------------------------
Diluted shares used 1,678 1,678 1,678
-------------------------------------------------
Twelve Months - Fiscal Year 2008
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
-------------------------------------------------------------------
Revenues $6,717 $3,622 $785 $6 $11,130
-------------------------------------------------------------------
Operating income
(loss) 4,604
-------------------------------------------------------------------
EBT 1,833 3,142 (1) (290) 4,684
-------------------------------------------------------------------
Net income (loss) 3,740
-------------------------------------------------------------------
Diluted EPS $2.25
-------------------------------------------------------------------
Diluted shares used 1,660
-------------------------------------------------------------------
Estimated
Share-Based In-Process
Segments Compensation(2) R&D QSI GAAP
------------------------------------------------------------
Revenues $- $- $12 $11,142
------------------------------------------------------------
Operating income
(loss) (540) (14) (320) 3,730
------------------------------------------------------------
EBT (540) (14) (304) 3,826
------------------------------------------------------------
Net income (loss) (365) (13) (202) 3,160
------------------------------------------------------------
Diluted EPS $(0.22) $(0.01) $(0.12) $1.90
------------------------------------------------------------
Diluted shares used 1,660 1,660 1,660 1,660
------------------------------------------------------------
Nine Months - Fiscal Year 2009
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1)(4) Pro Forma (4)
----------------------------------------------------------------------
Revenues $4,436 $2,769 $494 $5 $7,704
----------------------------------------------------------------------
Change from prior
year (10%) 23% (17%) N/M (1%)
----------------------------------------------------------------------
Operating income
(loss) $2,323
----------------------------------------------------------------------
Change from prior
year (23%)
----------------------------------------------------------------------
EBT $933 $2,376 $25 $(1,292) $2,042
----------------------------------------------------------------------
Change from prior
year (33%) 25% 9% N/M (39%)
----------------------------------------------------------------------
Net income (loss) $1,376
----------------------------------------------------------------------
Change from prior
year (49%)
----------------------------------------------------------------------
Diluted EPS $0.82
----------------------------------------------------------------------
Change from prior
year (49%)
----------------------------------------------------------------------
Diluted shares used 1,668
----------------------------------------------------------------------
Estimated
Share-Based In-Process
Segments Compensation (2) Tax Items(5) R&D QSI (3) GAAP (4)
--------------------------------------------------------------------------
Revenues $- $- $- $22 $7,726
--------------------------------------------------------------------------
Change from
prior year 214% (1%)
--------------------------------------------------------------------------
Operating
income (loss) $(436) $- $(6) $(251) $1,630
--------------------------------------------------------------------------
Change from
prior year (11%) N/M (13%) (32%)
--------------------------------------------------------------------------
EBT $(436) $- $(6) $(266) $1,334
--------------------------------------------------------------------------
Change from
prior year (11%) N/M (33%) (51%)
--------------------------------------------------------------------------
Net income
(loss) $(370) $(36) $(6) $(174) $790
--------------------------------------------------------------------------
Change from
prior year (39%) N/A N/M (45%) (65%)
--------------------------------------------------------------------------
Diluted EPS $(0.22) $(0.02) $- $(0.10) $0.47
--------------------------------------------------------------------------
Change from
prior year (38%) N/A N/M (43%) (66%)
--------------------------------------------------------------------------
Diluted shares
used 1,668 1,668 1,668 1,668 1,668
--------------------------------------------------------------------------
Nine Months - Fiscal Year 2008
Pro Forma
Reconciling
Segments QCT QTL QWI Items (1) Pro Forma
---------------------------------------------------------------------
Revenues $4,956 $2,248 $595 $2 $7,801
---------------------------------------------------------------------
Operating income
(loss) 3,025
---------------------------------------------------------------------
EBT 1,383 1,895 23 25 3,326
---------------------------------------------------------------------
Net income (loss) 2,682
---------------------------------------------------------------------
Diluted EPS $1.62
---------------------------------------------------------------------
Diluted shares used 1,654
---------------------------------------------------------------------
Estimated
Share-Based In-Process
Segments Compensation (2) R&D QSI (3) GAAP
------------------------------------------------------------
Revenues $- $- $7 $7,808
------------------------------------------------------------
Operating income
(loss) (394) (14) (223) 2,394
------------------------------------------------------------
EBT (394) (14) (200) 2,718
------------------------------------------------------------
Net income (loss) (267) (13) (120) 2,282
------------------------------------------------------------
Diluted EPS $(0.16) $(0.01) $(0.07) $1.38
------------------------------------------------------------
Diluted shares used 1,654 1,654 1,654 1,654
------------------------------------------------------------
(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 a litigation settlement expense 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) At fiscal year-end, the sum of the quarterly tax provisions for each
column, including QSI, equals the annual tax provisions for each
column computed in accordance with GAAP. In interim quarters, the
tax provision for the QSI operating segment is computed by
subtracting the pro forma tax provision, the tax items column
and the tax provisions related to estimated share-based compensation
and in-process R&D from the GAAP tax provision.
(4) The second quarter of fiscal 2009 included a $748 million litigation
settlement charge related to a settlement and patent agreement with
Broadcom.
(5) During the second quarter of fiscal 2009, the Company recorded a tax
expense related to the adjustment of net deferred tax assets that
were recorded in prior years to reflect the future impact of
California budget legislation enacted on February 20, 2009.
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's third quarter fiscal 2009 earnings conference call will be
broadcast live on July 22, 2009 beginning at 1:45 p.m. Pacific Daylight Time
may contain forward-looking financial information. The conference call 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
audio replay will be available via telephone on July 22, 2009, beginning at
approximately 5:30 p.m. PDT through August 22, 2009 at 9:00 p.m. PDT. To
listen to the replay, U.S. callers may dial +1-800-642-1687 and international
callers may dial +1-706-645-9291. U.S. and international callers should use
reservation number 16320448. An audio replay of the conference call will be
following the live call.
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(R) company. For more information, please visit
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by
management (i) to evaluate, assess and benchmark the Company's operating
results on a consistent and comparable basis, (ii) to measure the performance
and efficiency of the Company's ongoing core operating businesses, including
the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm
Wireless & Internet segments and (iii) to compare the performance and
efficiency of these segments against each other and against competitors
outside the Company. Pro forma measurements of the following financial data
are used by the Company's management: revenues, R&D expenses, SG&A expenses,
total operating expenses, operating income (loss), net investment income
(loss), income (loss) before income taxes, effective tax rate, net income
(loss), diluted earnings (loss) per share, operating cash flow and free cash
flow. Management is able to assess what it believes is a more meaningful and
comparable set of financial performance measures for the Company and its
business segments by using pro forma information. As a result, management
compensation decisions and the review of executive compensation by the
Compensation Committee of the Board of Directors focus primarily on pro forma
financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the QSI segment,
certain estimated share-based compensation, certain tax items related to
prior years and acquired in-process R&D. The QSI segment is excluded because
the Company expects to exit its strategic investments at various times, and
the effects of fluctuations in the value of such investments are viewed by
management as unrelated to the Company's operational performance. Estimated
share-based compensation, other than amounts related to share-based awards
granted under a bonus program that may result in the issuance of unrestricted
shares of the Company's common stock, is excluded because management views
such share-based compensation as unrelated to the Company's operational
performance. Moreover, it is generally not an expense that requires or will
require cash payment by the Company. Further, share-based compensation
related to options is affected by factors that are subject to change,
including the Company's stock price, stock market volatility, expected option
life, risk-free interest rates and expected dividend payouts in future years.
Certain tax items related to prior years are excluded in order to provide a
clearer understanding of the Company's ongoing pro forma tax rate and after
tax earnings. The Company decided to include the benefit of the retroactive
extension of the federal research and development tax credit in pro forma
results starting in fiscal 2009 because it recurs with relative frequency and
would have been included in the Company's pro forma results for the prior
year if it had been reenacted in the prior fiscal year. Acquired in-process
R&D is excluded because such expense is viewed by management as unrelated to
the operating activities of the Company's ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by
operating activities less capital expenditures, to facilitate an
understanding of the amount of cash flow generated that is available to grow
its business and to create long-term shareholder value. The Company believes
that this presentation is useful in evaluating its operating performance and
financial strength. In addition, management uses this measure to evaluate the
Company's performance, to value the Company and to compare its operating
performance with other companies in the industry.
The non-GAAP pro forma financial information presented herein should be
considered in addition to, not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. In addition, "pro forma" is not
a term defined by GAAP, and, as a result, the Company's measure of pro forma
results might be different than similarly titled measures used by other
companies. Reconciliations between GAAP results and pro forma results are
presented herein.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this news
release contains forward-looking statements that are subject to risks and
uncertainties. Actual results may differ substantially from those referred to
herein due to a number of factors, including but not limited to risks
associated with: the rate of deployment and adoption of our technologies in
wireless networks and of wireless communications, equipment and services,
including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and
internationally; the current uncertainty of global economic conditions and
its potential impact on demand for our products, services or applications and
the value of our marketable securities; attacks on our business model,
including results of current and future litigation and arbitration
proceedings, as well as actions of governmental or quasi-governmental bodies,
and the costs we incur in connection therewith, including potentially damaged
relationships with customers and operators who may be impacted by the results
of these proceedings; our dependence on major customers and licensees;
foreign currency fluctuations; strategic loans, investments and transactions
we have or may pursue; our dependence on third-party manufacturers and
suppliers; our ability to maintain and improve operational efficiencies and
profitability; the development, deployment and commercial acceptance of the
FLO TV network and FLO(TM) technology; as well as the other risks detailed
from time-to-time in our SEC reports.
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO and FLO
TV are trademarks of Qualcomm Incorporated. CDMA2000 is a registered
trademark of the Telecommunications Industry Association (TIA USA). All other
trademarks are the property of their respective owners.
Qualcomm Contact:
John Gilbert
Phone: +1-858-658-4813
e-mail: ir@qualcomm.com
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Three Months Ended June 28, 2009
--------------------------------------------
Estimated
Share-Based
Pro Forma Compensation QSI GAAP
--------- ------------- -------- -------
Revenues:
Equipment and
services $1,853 $- $9 $1,862
Licensing and
royalty fees 891 - - 891
--------- ------------- -------- -------
Total revenues 2,744 - 9 2,753
--------- ------------- -------- -------
Operating expenses:
Cost of equipment
and services
revenues 814 11 39 864
Research and
development 523 72 23 618
Selling, general and
administrative 285 68 24 377
--------- ------------- -------- -------
Total operating
expenses 1,622 151 86 1,859
--------- ------------- -------- -------
Operating income
(loss) 1,122 (151) (77) 894
Investment income
(loss), net:
Total
other-than-temporary
impairment losses (120) - (4) (124)
Noncredit portion of
losses recognized
in other comprehensive
income 8 - - 8
--------- ------------- -------- -------
Net impairment
losses recognized
in earnings (112) - (4) (116)
Other investment
income, net 191(a) - 15(b) 206
--------- ------------- -------- -------
Total investment
income, net 79 - 11 90
--------- ------------- -------- -------
Income (loss) before
income taxes 1,201 (151) (66) 984
Income tax (expense)
benefit (298)(c) 24 27(d) (247)(c)
--------- ------------- -------- -------
Net income (loss) $903 $(127) $(39) $737
========= ============= ======== =======
Earnings (loss) per
common share:
Diluted $0.54 $(0.08) $(0.02) $0.44
========= ============= ========= =======
Shares used in per
share calculations:
Diluted 1,675 1,675 1,675 1,675
========= ============= ========= =======
Supplemental
Financial Data:
--------------------------------------------------------------------------
Operating cash flow $1,157 $(22)(f) $(48) $1,087
Operating cash flow
as a % of revenues 42% N/M 39%
Free cash flow (e) $1,039 $(22)(f) $(79) $938
Free cash flow as a
% of revenues 38% N/M 34%
--------------------------------------------------------------------------
(a) Included $130 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, $73 million in net
realized gains on investments, partially offset by $7 million losses
on derivatives and $5 million in interest expense.
(b) Included $17 million in net realized gains on investments and $2
million in interest and dividend income, partially offset by $3
million in interest expense and $1 million in equity in losses of
investees.
(c) The third quarter effective tax rate of 25% for both GAAP and pro
forma differ from the annual rates of 33% and 29%, respectively,
primarily due to a $748 million pre-tax litigation settlement charge
recorded in the second fiscal quarter with a discrete tax benefit
computed at a rate less than the United States federal rate.
(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 provisions related to estimated share-based compensation and in-
process R&D from the GAAP tax provision.
(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 Pro Forma Free Cash Flows to Net
Cash Provided by Operating Activities (GAAP) and other supplemental
disclosures for the three months ended June 28, 2009, included
herein.
(f) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Nine Months Ended June 28, 2009
------------------------------------------------------------
Estimated
Share-Based In-Process
Pro Forma Compensation Tax Items R&D QSI GAAP
--------- ------------ --------- ---------- ------ -------
Revenues:
Equipment
and
services $4,676 $- $- $- $22 $4,698
Licensing
and
royalty
fees 3,028 - - - - 3,028
--------- ------------ --------- ---------- ----- ------
Total
revenues 7,704 - - - 22 7,726
--------- ------------ --------- ---------- ----- ------
Operating
expenses:
Cost of
equipment
and
services
revenues 2,213 30 - - 114 2,357
Research
and
development 1,541 209 - 6 70 1,826
Selling,
general
and
administrative 879 197 - - 89 1,165
Litigation
settlement 748(a) - - - - 748(a)
--------- ------------ --------- ---------- ----- ------
Total
operating
expenses 5,381 436 - 6 273 6,096
--------- ------------ --------- ---------- ----- ------
Operating
income
(loss) 2,323 (436) - (6) (251) 1,630
Investment loss,
net:
Total other-
than-temporary
impairment
losses (707) - - - (18) (725)
Noncredit
portion of
loss recognized
in other
comprehensive
income 8 - - - - 8
--------- ------------ --------- ---------- ----- ------
Net
impairment
losses
recognized
in
earnings (699) - - - (18) (717)
Other
investment
income, net 418(b) - - - 3(c) 421
--------- ------------ --------- ---------- ----- ------
Total
investment
loss, net (281) - - - (15) (296)
--------- ------------ --------- ---------- ----- ------
Income
(loss)
before
income
taxes 2,042 (436) - (6) (266) 1,334
Income tax
(expense)
benefit (666)(d) 66(e) (36)(e) - 92(f) (544)(d)
--------- ------------ --------- -------- ----- ------
Net
income
(loss) $1,376 $(370) $(36) $(6) $(174) $790
========= ============ ========= ======== ===== ========
Earnings
(loss)
per common
share:
Diluted $0.82 $(0.22) $(0.02) $(0.00) $(0.10) $0.47
========= ============ ========= ======== ===== =======
Shares used
in per share
calculations:
Diluted 1,668 1,668 1,668 1,668 1,668 1,668
========= ============ ========= ======== ===== =======
Supplemental
Financial
Data:
--------------------------------------------------------------------------
Operating
cash flow $6,145 $(54)(h) $- $- $(240) $5,851
Operating
cash flow as
a % of revenues 80% N/M 76%
Free cash
flow (g) $5,612 $(54)(h) $- $- $(324) $5,234
Free cash flow
as a % of
revenues 73% N/M 68%
--------------------------------------------------------------------------
(a) The second quarter of fiscal 2009 included a $748 million
litigation settlement charge related to a settlement and patent
agreement with Broadcom.
(b) Included $387 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, $35 million
in net realized gains on investments and $5 million gains on
derivatives, partially offset by $9 million in interest expense.
(c) Included $22 million in net realized gains on investments and $2
million in interest and dividend income, partially offset by $14
million in equity in losses of investees and $7 million in interest
expense.
(d) The first nine months of fiscal 2009 GAAP and pro forma effective
tax rates of 41% and 33%, respectively, are higher than the
estimated annual rates of 33% and 29%, respectively, primarily due
to a $748 million pre-tax litigation settlement charge recorded in
the second fiscal quarter with a discrete tax benefit computed at a
rate less than the United States federal rate.
(e) During the second quarter of fiscal 2009, the Company recorded a tax
expense related to the adjustment of net deferred tax assets that
were recorded in prior years to reflect the future impact of
California budget legislation enacted on February 20, 2009.
(f) At fiscal year-end, the sum of the quarterly tax provisions for
each column, including QSI, equals the annual tax provisions for
each column computed in accordance with GAAP. In interim quarters,
the tax provision for the QSI operating segment is computed by
subtracting the pro forma tax provision, the tax items column and
the tax provisions related to estimated share-based compensation
and in-process R&D from the GAAP tax provision.
(g) Free cash flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these
amounts is included in the Reconciliation of Pro Forma Free Cash
Flows to Net Cash Provided by Operating Activities (GAAP) and other
supplemental disclosures for the nine months ended June 28, 2009,
included herein.
(h) 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 June 28, 2009
--------------------------------------------------
Estimated In-
Share-Based Tax Process
Pro Forma Compensation Items R&D QSI GAAP
--------- -------- ----- --- ---- ----
Net cash
provided (used) by
operating activities $1,157 $(22)(a) $- $- $(48) $1,087
Less: capital
expenditures (118) - - - (31) (149)
--------- -------- ----- --- ---- ----
Free cash flow $1,039 $(22) $- $- $(79) $938
========= ======== ===== === ==== ====
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $3 $- $- $- $(3) $-
Cash transfers
to QSI (2) (88) - - - 88 $-
--------- -------- ----- --- ---- ----
Net cash transfers $(85) $- $- $- $85 $-
========= ======== ===== === ==== ====
Nine Months Ended June 28, 2009
-------------------------------------------------
Estimated In-
Share-Based Tax Process
Pro Forma Compensation Items R&D QSI GAAP
--------- -------- ----- --- ---- ----
Net cash provided
(used) by
operating
activities $6,145 $(54)(a) $- $- $(240) $5,851
Less: capital
expenditures (533) - - - (84) (617)
--------- -------- ----- --- ---- ----
Free cash flow $5,612 $(54) $- $- $(324) $5,234
========= ======== ===== === ==== ====
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $26 $- $- $- $(26) $-
Cash transfers
to QSI (2) (361) - - - 361 -
--------- -------- ----- --- ---- ----
Net cash transfers $(335) $- $- $- $335 $-
========= ======== ===== === ==== ====
(1) Cash from sale of strategic debt and equity investments and partial
settlement of investment receivables.
(2) Funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
Three Months Ended June 29, 2008
--------------------------------------------
Estimated In-
Share-Based Process
Pro Forma Compensation R&D QSI GAAP
--------- ------------ ---- --- ----
Net cash provided
(used) by
operating
activities $1,020 $(209)(a) $(13) $(59) $739
Less: capital
expenditures (176) - - (379) (555)
--------- ------------ ---- --- ----
Free cash flow $844 $(209) $(13) $(438) $184
========= ============ ==== ===== ====
Nine Months Ended June 29, 2008
-------------------------------------------
Estimated In-
Share-Based Process
Pro Forma Compensation R&D QSI GAAP
--------- ------------ --- --- ----
Net cash provided
(used) by
operating
activities $3,090 $(310)(a) $(14) $(199) $2,567
Less: capital
expenditures (368) - - (615) (983)
--------- ------------ ---- --- ----
Free cash flow $2,722 $(310) $(14) $(814) $1,584
========= ============ ==== ===== ====
(a) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
June 28, September 28,
2009 2008
---------- -------------
Current assets:
Cash and cash equivalents $3,721 $1,840
Marketable securities 6,159 4,571
Accounts receivable, net 943 4,038
Inventories 375 521
Deferred tax assets 286 289
Other current assets 247 464
---------- -------------
Total current assets 11,731 11,723
Marketable securities 5,801 4,858
Deferred tax assets 822 830
Property, plant and equipment, net 2,311 2,162
Goodwill 1,512 1,517
Other intangible assets, net 3,138 3,104
Other assets 398 369
---------- -------------
Total assets $25,713 $24,563
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $561 $570
Payroll and other benefits related
liabilities 459 406
Unearned revenues 447 394
Other current liabilities 905 921
---------- -------------
Total current liabilities 2,372 2,291
Unearned revenues 3,528 3,768
Income taxes payable 263 227
Other liabilities 839 333
---------- -------------
Total liabilities 7,002 6,619
---------- -------------
Stockholders' equity:
Preferred stock, $0.0001 par value;
issuable in series; 8 shares authorized; none
outstanding at June 28, 2009 and September 28,
2008 - -
Common stock, $0.0001 par value;
6,000 shares authorized;
1,659 and 1,656 shares issued and
outstanding at June 28, 2009 and September 28,
2008, respectively - -
Paid-in capital 7,988 7,511
Retained earnings 10,716 10,717
Accumulated other comprehensive
income (loss) 7 (284)
---------- -------------
Total stockholders' equity 18,711 17,944
---------- -------------
Total liabilities and stockholders'
equity $25,713 $24,563
========== =============
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
----------------- -----------------
June 28, June 29, June 28, June 29,
2009 2008 2009 2008
-------- -------- -------- --------
Revenues:
Equipment and services $1,862 $1,867 $4,698 $5,295
Licensing and royalty
fees 891 895 3,028 2,513
-------- -------- -------- --------
Total revenues 2,753 2,762 7,726 7,808
-------- -------- -------- --------
Operating expenses:
Cost of equipment and
services revenues 864 889 2,357 2,493
Research and
development 618 596 1,826 1,660
Selling, general and
administrative 377 453 1,165 1,261
Litigation settlement - - 748 -
-------- -------- -------- --------
Total operating
expenses 1,859 1,938 6,096 5,414
-------- -------- -------- --------
Operating income 894 824 1,630 2,394
Investment income
(loss), net:
Total
other-than-temporary
impairment losses (124) (83) (725) (202)
Noncredit portion of
loss recognized in
other comprehensive
income 8 - 8 -
-------- -------- -------- --------
Net impairment losses
recognized in earnings (116) (83) (717) (202)
Other investment
income, net 206 141 421 526
-------- -------- -------- --------
Total investment income
(loss), net 90 58 (296) 324
-------- -------- -------- --------
Income before income
taxes 984 882 1,334 2,718
Income tax expense (247) (134) (544) (436)
-------- -------- -------- --------
Net income $737 $748 $790 $2,282
======== ======== ======== ========
Basic earnings per
common share $0.45 $0.46 $0.48 $1.40
======== ======== ======== ========
Diluted earnings per
common share $0.44 $0.45 $0.47 $1.38
======== ======== ======== ========
Shares used in per
share calculations:
Basic 1,656 1,626 1,653 1,626
======== ======== ======== ========
Diluted 1,675 1,654 1,668 1,654
======== ======== ======== ========
Dividends per share
paid $0.17 $0.16 $0.49 $0.44
======== ======== ======== ========
Dividends per share
announced $0.17 $0.16 $0.49 $0.44
======== ======== ======== ========
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ ------------------
June 28, June 29, June 28, June 29,
2009 2008 2009 2008
--------- -------- -------- ---------
Operating Activities:
Net income $737 $748 $790 $2,282
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 154 117 460 336
Revenues related to
non-monetary exchanges (29) - (86) -
Non-cash portion of income
tax expense 56 66 222 148
Non-cash portion of share-based
compensation expense 151 138 436 393
Incremental tax benefit from
stock options exercised (22) (209) (54) (310)
Net realized gains on marketable
securities and other investments (90) (39) (57) (158)
Net impairment losses on
marketable securities
and other investments 116 83 717 202
Other items, net (1) 11 (22) 1
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (133) (186) 2,691 (178)
Inventories 30 (7) 143 (142)
Other assets 13 (7) (17) 35
Trade accounts payable 95 (24) (8) (4)
Payroll, benefits and other
liabilities 27 78 737 12
Unearned revenues (17) (30) (101) (50)
--------- -------- -------- ---------
Net cash provided by
operating activities 1,087 739 5,851 2,567
--------- -------- -------- ---------
Investing Activities:
Capital expenditures (149) (555) (617) (983)
Purchases of available-
for-sale securities (2,201) (1,984) (6,497) (4,944)
Proceeds from sale of
available-for-sale securities 1,145 1,559 3,606 5,548
Cash received for partial
settlement of investment
receivables 32 - 349 -
Other investments and
acquisitions, net of cash
acquired (7) (8) (47) (283)
Change in collateral held
under securities lending - 8 173 95
Other items, net - 4 6 30
--------- -------- -------- ---------
Net cash used by investing
activities (1,180) (976) (3,027) (537)
--------- -------- -------- ---------
Financing Activities:
Proceeds from issuance of
common stock 175 464 276 700
Incremental tax benefit from
stock options exercised 22 209 54 310
Dividends paid (282) (261) (810) (716)
Repurchase and retirement of
common stock - - (285) (1,670)
Change in obligations under
securities lending - (8) (173) (95)
Other items, net 3 - - -
--------- -------- -------- ---------
Net cash (used) provided by
financing activities (82) 404 (938) (1,471)
--------- -------- -------- ---------
Effect of exchange rate
changes on cash 4 - (5) -
--------- -------- -------- ---------
Net (decrease) increase in
cash and cash equivalents (171) 167 1,881 559
Cash and cash equivalents at
beginning of period 3,892 2,803 1,840 2,411
--------- -------- -------- ---------
Cash and cash equivalents at
end of period $3,721 $2,970 $3,721 $2,970
========= ======== ======== =========
SOURCE: Qualcomm Incorporated
CONTACT: John Gilbert of Qualcomm Incorporated,
+1-858-658-4813,
ir@qualcomm.com
NOTE TO EDITORS: To view the web slides that accompany this earnings release and conference call, please
NEWS 
