Qualcomm Announces Fourth Quarter And Fiscal 2009 Results
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Business - Finance Press Release5th November 2009, 02:26pm - Views: 703
 MEDIA RELEASE PR36952 Qualcomm Announces Fourth Quarter and Fiscal 2009 Results SAN DIEGO, Nov. 5 /PRNewswire-AsiaNet/ -- Fiscal 2009 Revenues US$10.4 Billion, EPS US$0.95 Pro Forma EPS US$1.31 Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fourth fiscal quarter and year ended September 27, 2009. "I am very pleased with the performance of our businesses this past year, despite a challenging and uncertain global economic environment," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Our revenues for fiscal year 2009 were in line with our guidance at the outset of the year. Our operating performance remained strong, driven by continued 3G growth, execution in our chipset business and disciplined management of operating expenses. I am also pleased to announce that we recently extended our license agreement with Samsung, covering both 3G and 4G." "We continue to forecast growth for 3G CDMA in 2009, despite industry forecasts of a decline in the total handset market. We anticipate accelerated CDMA device growth in calendar year 2010 as the global migration to 3G continues. Our broad chipset portfolio continues to expand, including additional low-cost single-chip solutions to further enable the 3G migration as well as increased investments in software and application processors to strengthen our leadership position in supporting higher-end, feature-rich devices. We remain well positioned to drive innovation given our strong balance sheet and operating cash flow while maintaining our focus on overall operating expenses." For comparison purposes, we note the following items: - The fourth quarter of fiscal 2009 results included a US$230 million charge, or US$0.14 diluted loss per share, related to an estimated fine expected to be levied by the Korea Fair Trade Commission. - Fiscal 2009 results included a US$783 million charge, or US$0.45 diluted loss per share, related to a litigation settlement and patent agreement with Broadcom Corporation, including US$748 million, or US$0.43 diluted loss per share, recorded in the second quarter of fiscal 2009 and US$35 million, or US$0.02 diluted loss per share, recorded in the fourth quarter of fiscal 2009 resulting from the write- off of assets that were initially capitalized. - The fourth quarter of fiscal 2008 results included US$560 million in revenues, or US$0.20 diluted earnings per share, as a result of the execution of license and settlement agreements with Nokia Corporation/Nokia Inc. (Nokia). - The fourth quarter of fiscal 2009 GAAP results included a US$155 million tax benefit, or US$0.09 diluted earnings per share, related to prior years as a result of tax audits. The tax benefit was excluded from our pro forma results. GAAP Results Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP). Fourth Quarter - Revenues: US$2.69 billion, down 19 percent year-over-year and 2 percent sequentially. - Operating income: US$597 million, down 55 percent year-over-year and 33 percent sequentially. - Net income: US$803 million, down 9 percent year-over-year and up 9 percent sequentially. - Diluted earnings per share: US$0.48, down 8 percent year-over-year and up 9 percent sequentially. - Effective tax rate: Negative 8 percent for the quarter, primarily due to the US$155 million tax benefit related to prior years. - Operating cash flow: US$1.32 billion, up 33 percent year-over-year; 49 percent of revenues. - Return of capital to stockholders: US$283 million, or US$0.17 per share, of cash dividends paid. Fiscal 2009 - Revenues: US$10.42 billion, down 7 percent year-over-year. - Operating income: US$2.23 billion, down 40 percent year-over-year. - Net income: US$1.59 billion, down 50 percent year-over-year. - Diluted earnings per share: US$0.95, down 50 percent year-over-year. - Effective tax rate: 23 percent. - Operating cash flow: US$7.17 billion, including a US$2.5 billion payment received from Nokia related to the license and settlement agreements. - Return of capital to stockholders: US$1.38 billion, including US$1.09 billion of cash dividends, or US$0.66 per share; and US$284 million to repurchase 8.9 million shares of our common stock. Pro Forma 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. Fourth Quarter - Revenues: US$2.68 billion, down 19 percent year-over-year and 2 percent sequentially. - Operating income: US$831 million, down 47 percent year-over-year and 26 percent sequentially. - Net income: US$811 million, down 23 percent year-over-year and 10 percent sequentially. - Diluted earnings per share: US$0.48, down 24 percent year-over-year and 11 percent sequentially. The current quarter excludes US$0.05 diluted loss per share attributable to the QSI segment, US$0.05 diluted loss per share attributable to certain estimated share-based compensation and US$0.09 diluted earnings per share attributable to certain tax items related to prior years. - Effective tax rate: 18 percent for the quarter. - Free cash flow: US$1.29 billion, up 63 percent year-over-year; 48 percent of revenues (defined as net cash from operating activities less capital expenditures). Fiscal 2009 - Revenues: US$10.39 billion, down 7 percent year-over-year. - Operating income: US$3.15 billion, down 32 percent year-over-year. - Net income: US$2.19 billion, down 42 percent year-over-year. - Diluted earnings per share: US$1.31, down 42 percent year-over-year. The current fiscal year excludes US$0.15 diluted loss per share attributable to the QSI segment, US$0.27 diluted loss per share attributable to certain estimated share-based compensation and US$0.07 diluted earnings per share attributable to certain tax items related to prior years. - Effective tax rate: 28 percent. - Free cash flow: US$6.91 billion, including a US$2.5 billion payment received from Nokia related to the license and settlement agreements. 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 Cash and Marketable Securities Our cash, cash equivalents and marketable securities totaled approximately US$17.7 billion at the end of the fourth quarter of fiscal 2009, compared to US$15.7 billion at the end of the third quarter of fiscal 2009 and US$11.3 billion a year ago. On October 2, 2009, we announced a cash dividend of US$0.17 per share, payable on December 23, 2009 to stockholders of record at the close of business on November 25, 2009. The value of our marketable securities has improved significantly as financial markets have stabilized. At September 27, 2009, we had net unrealized gains on marketable securities of US$674 million as compared to US$25 million of net unrealized losses as of June 28, 2009. (All amounts in US dollars unless otherwise specified) Research and Development Estimated Share-Based ($ in millions) Pro Forma Compensation QSI GAAP --------- ------------ --- ---- Fourth quarter fiscal 2009 $518 $71 $25 $614 As a % of revenues 19% N/M 23% Fourth quarter fiscal 2008 $528 $69 $24 $621 As a % of revenues 16% N/M 19% Year-over-year change($) (2%) 3% 4% (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. Pro forma R&D expenses decreased 2 percent year-over-year, primarily due to cost reduction efforts and a decrease in other employee-related expenses. 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 --------- ------------ --- ---- Fourth quarter fiscal 2009 $300 $66 $24 $390 As a % of revenues 11% N/M 14% Fourth quarter fiscal 2008 $346 $67 $43 $456 As a % of revenues 10% N/M 14% Year-over-year change ($) (13%) (1%) (44%) (14%) Pro forma selling, general and administrative (SG&A) expenses decreased by 13 percent year-over-year, primarily due to cost reduction efforts and a decrease in other employee-related expenses. QSI SG&A expenses were primarily related to FLO TV. Effective Income Tax Rate Our fiscal 2009 effective income tax rates were 23 percent for GAAP and 28 percent for pro forma. The fourth quarter and fiscal 2009 GAAP results included a $155 million tax benefit as a result of tax audits to adjust our estimates of uncertain tax positions for prior years. This tax benefit was excluded from our fiscal 2009 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 fourth quarter of fiscal 2009 included a $0.05 diluted loss per share for the QSI segment. The fourth quarter of fiscal 2009 QSI results included $93 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 volatility 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 market conditions do not improve. 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. 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 FIRST FISCAL QUARTER -------------------- Q1 FY09 Current Guidance Results Q1 FY10 Estimates (3) ------------------------------------------------------------------------- Pro Forma Revenues $2.51B $2.55B - $2.75B Year-over-year change Increase 2% - 10% Diluted earnings per share (EPS) $0.31 $0.54 - $0.58 Year-over-year change Increase 74% - 87% ------------------------------------------------------------------------- GAAP Revenues $2.52B $2.55B - $2.75B Year-over-year change increase 1% - 9% Diluted EPS $0.20 $0.41 - $0.45 Year-over-year change increase 105% - 125% Diluted EPS attributable to QSI ($0.05) ($0.05) Diluted EPS attributable to estimated share-based compensation ($0.06) ($0.06) Diluted EPS attributable to certain tax items (4) n/a ($0.02) ------------------------------------------------------------------------- Metrics MSM shipments approx. 63M approx. 89M - 92M CDMA/WCDMA devices shipped (1) approx. 125M* approx. 130M - 135M* CDMA/WCDMA device wholesale average selling price (1) approx. $212* approx. $198* *Shipments in Sept. quarter, reported in Dec. quarter ------------------------------------------------------------------------- FISCAL YEAR FY 2009 Current Guidance Results (2) FY 2010 Estimates (3) ------------------------------------------------------------------------- Pro Forma Revenues $10.39B $10.50B - $11.30B Year-over-year change increase 1% - 9% Operating income $3.15B $4.00B - $4.50B Year-over-year change increase 27% - 43% Diluted EPS $1.31 $2.10 - $2.30 Year-over-year change increase 60% - 76% ------------------------------------------------------------------------- GAAP Revenues $10.42B $10.50B - $11.30B Year-over-year change increase 1% - 8% Operating income $2.23B $2.80B - $3.30B Year-over-year change increase 26% - 48% Operating income (loss) attributable to QSI ($0.34B) ($0.50B) Operating income (loss) attributable to estimated share-based compensation ($0.58B) ($0.70B) Operating income (loss) attributable to in-process R&D ($0.01B) n/a Diluted EPS $0.95 $1.56 - $1.76 Year-over-year change increase 64% - 85% Diluted EPS attributable to QSI ($0.15) ($0.19) Diluted EPS attributable to estimated share-based compensation ($0.27) ($0.28) Diluted EPS attributable to in-process R&D $0.00 n/a Diluted EPS attributable to certain tax items (4) $0.07 ($0.07) ------------------------------------------------------------------------- Metrics Fiscal year* CDMA/WCDMA device wholesale average selling price (1) approx. $200 approx. $189 *Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters ------------------------------------------------------------------------- CDMA/WCDMA device shipments (1) Prior Guidance Current Guidance Current Guidance Calendar 2009 Calendar 2009 Calendar 2010 Estimates Estimates Estimates ------------------------------------------------------------------------- March quarter approx. 111M approx. 111M not provided June quarter approx. 127 - 132M approx. 127M not provided September approx. quarter not provided 130M - 135M not provided December quarter not provided not provided not provided ------------------------------------------------------------------------- Calendar year range (approx.) 540M - 590M 515M - 530M 600M - 650M ------------------------------------------------------------------------ Midpoint Midpoint Midpoint CDMA/WCDMA units approx. 565M approx. 523M approx. 625M CDMA units approx. 217M approx. 213M approx. 231M WCDMA units approx. 348M approx. 310M 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, or $0.45 diluted loss per share, related to a litigation settlement and patent agreement with Broadcom Corporation, as well as a $230 million charge, or $0.14 diluted loss per share, related to an estimated fine expected to be levied by the Korea Fair Trade Commission. Fiscal 2009 GAAP results reflected a $155 million tax benefit, or $0.09 diluted earnings per share, related to prior years. (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. (4) Due to recently enacted California budget legislation, we anticipate that fiscal 2010 GAAP results will be impacted by tax expense of approximately $125 million related to the revaluation of certain deferred tax assets to be recognized in future periods related to the license and settlement agreements with Nokia. Sums may not equal totals due to rounding. Results of Business Segments (in millions, except per share data): Fourth Quarter - Fiscal Year 2009 ------------------------------------------------------------------------- Segments QCT QTL QWI Pro Forma Reconciling Items (1)(2) ------------------------------------------------------------------------- Revenues $1,699 $837 $146 $1 ------------------------------------------------------------------------- Change from prior year (4%) (39%) (23%) N/M ------------------------------------------------------------------------- Change from prior quarter (5%) 4% (1%) N/M ------------------------------------------------------------------------- Operating income (loss) ------------------------------------------------------------------------- Change from prior year ------------------------------------------------------------------------- Change from prior quarter ------------------------------------------------------------------------- EBT $508 $693 $(5) $(211) ------------------------------------------------------------------------- Change from prior year 13% (44%) N/M N/M ------------------------------------------------------------------------- Change from prior quarter (7%) 5% (67%) N/M ------------------------------------------------------------------------- EBT as a % of revenues 30% 83% (3%) N/M ------------------------------------------------------------------------- Net income (loss) ------------------------------------------------------------------------- Change from prior year ------------------------------------------------------------------------- Change from prior quarter ------------------------------------------------------------------------- Diluted EPS ------------------------------------------------------------------------- Change from prior year ------------------------------------------------------------------------- Change from prior quarter ------------------------------------------------------------------------- Diluted shares used ------------------------------------------------------------------------- Estimated Pro Share-Based Tax GAAP Segments Forma (2) Compensation (3) Items (4) QSI (5) (2) ------------------------------------------------------------------------- Revenues $2,683 $- $- $7 $2,690 ------------------------------------------------------------------------- Change from prior year (19%) 40% (19%) ------------------------------------------------------------------------- Change from prior quarter (2%) (22%) (2%) ------------------------------------------------------------------------- Operating income (loss) $831 $(148) $- $(86) $597 ---------------- -------------------------------------------------------- Change from prior year (47%) (1%) 11% (55%) ------------------------------------------------------------------------- Change from prior quarter (26%) 2% (12%) (33%) ------------------------------------------------------------------------- EBT $985 $(148) $- $(95) $742 ------------------------------------------------------------------------- Change from prior year (27%) (1%) 9% (33%) ------------------------------------------------------------------------- Change from prior quarter (18%) 2% (44%) (25%) ------------------------------------------------------------------------- EBT as a % of revenues 37% N/M N/M N/M 28% ------------------------------------------------------------------------- Net income (loss) $811 $(85) $155 $(78) $803 ------------------------------------------------------------------------- Change from prior year (23%) 13% N/M 5% (9%) ------------------------------------------------------------------------- Change from prior quarter (10%) 33% N/M (100%) 9% ------------------------------------------------------------------------- Diluted EPS $0.48 $(0.05) $0.09 $(0.05) $0.48 ------------------------------------------------------------------------- Change from prior year (24%) 17% N/M 0% (8%) ------------------------------------------------------------------------- Change from prior quarter (11%) 38% N/M (150%) 9% ------------------------------------------------------------------------- Diluted shares used 1,688 1,688 1,688 1,688 1,688 ------------------------------------------------------------------------- Third Quarter - Fiscal Year 2009 ------------------------------------------------------------------------- Pro Forma Estimated Reconciling Share-Based Items Pro Compensation QSI Segments QCT QTL QWI (1) Forma (3) (5) GAAP ------------------------------------------------------------------------- Revenues $1,786 $807 $148 $3 $2,744 $- $9 $2,753 ------------------------------------------------------------------------- Operating income (loss) 1,122 (151) (77) 894 ------------------------------------------------------------------------- EBT 548 663 (3) (7) 1,201 (151) (66) 984 ------------------------------------------------------------------------- Net income (loss) 903 (127) (39) 737 ------------------------------------------------------------------------- Diluted EPS $0.54 $(0.08) $(0.02) $0.44 ------------------------------------------------------------------------- Diluted shares used 1,675 1,675 1,675 1,675 ------------------------------------------------------------------------- Fourth Quarter - Fiscal Year 2008 Pro Forma Estimated Reconciling Share-Based Items Pro Compensation QSI Segments QCT QTL QWI (1) Forma (3) (5) GAAP --------------------------------------------------------------------- Revenues $1,761 $1,374 $190 $4 $3,329 $- $5 $3,334 --------------------------------------------------------------------- Operating income (loss) 1,578 (146) (97) 1,335 --------------------------------------------------------------------- EBT 449 1,247 (24) (315) 1,357 (146) (104) 1,107 --------------------------------------------------------------------- Net income (loss) 1,058 (98) (82) 878 --------------------------------------------------------------------- Diluted EPS $0.63 $(0.06) $(0.05) $0.52 --------------------------------------------------------------------- Diluted shares used 1,678 1,678 1,678 1,678 --------------------------------------------------------------------- First Quarter - Fiscal Year 2009 Pro Forma Estimated Reconciling Share-Based Items Pro Compensation QSI Segments QCT QTL QWI (1) Forma (3) (5) GAAP --------------------------------------------------------------------- Revenues $1,334 $1,006 $170 $1 $2,511 $- $6 $2,517 --------------------------------------------------------------------- Operating income (loss) 986 (145) (96) 745 --------------------------------------------------------------------- EBT 168 874 3 (351) 694 (145) (98) 451 --------------------------------------------------------------------- Net income (loss) 520 (99) (80) 341 --------------------------------------------------------------------- Diluted EPS $0.31 $(0.06) $(0.05) $0.20 --------------------------------------------------------------------- Diluted shares used 1,667 1,667 1,667 1,667 --------------------------------------------------------------------- Twelve Months - Fiscal Year 2009 -------------------------------------------------------------------- Pro Forma Reconciling Items Segments QCT QTL QWI (1)(2)(6) -------------------------------------------------------------------- Revenues $6,135 $3,605 $641 $6 -------------------------------------------------------------------- Change from prior year (9%) 0% (18%) N/M -------------------------------------------------------------------- Operating income (loss) -------------------------------------------------------------------- Change from prior year -------------------------------------------------------------------- EBT $1,441 $3,068 $20 $(1,502) -------------------------------------------------------------------- Change from prior year (21%) (2%) N/M N/M -------------------------------------------------------------------- EBT as a % of revenues 23% 85% 3% N/M -------------------------------------------------------------------- Net income (loss) -------------------------------------------------------------------- Change from prior year -------------------------------------------------------------------- Diluted EPS -------------------------------------------------------------------- Change from prior year -------------------------------------------------------------------- Diluted shares used -------------------------------------------------------------------- Estimated Pro Share-Based Tax In- Forma Compensation Items Process GAAP Segments (2)(6) (3) (4)(7) R&D QSI (2)(6) ------------------------------------------------------------------------ Revenues $10,387 $- $- $- $29 $10,416 ------------------------------------------------------------------------ Change from prior year (7%) 142% (7%) ------------------------------------------------------------------------ Operating income (loss) $3,153 $(584) $- $(6) $(337) $2,226 ------------------------------------------------------------------------ Change from prior year (32%) (8%) 57% (5%) (40%) ------------------------------------------------------------------------ EBT $3,027 $(584) $- $(6) $(361) $2,076 ------------------------------------------------------------------------ Change from prior year (35%) (8%) 57% (19%) (46%) ------------------------------------------------------------------------ EBT as a % of revenues 29% N/M N/M N/M N/M 20% ------------------------------------------------------------------------ Net income (loss) $2,187 $(455) $118 $(6) $(252) $1,592 ------------------------------------------------------------------------ Change from prior year (42%) (25%) N/M 54% (25%) (50%) ------------------------------------------------------------------------ Diluted EPS $1.31 $(0.27) $0.07 $- $(0.15) $0.95 ------------------------------------------------------------------------ Change from prior year (42%) (23%) N/M N/M (25%) (50%) ------------------------------------------------------------------------ Diluted shares used 1,673 1,673 1,673 1,673 1,673 1,673 ------------------------------------------------------------------------ Twelve Months - Fiscal Year 2008 Pro Forma Estimated Reconciling Share-Based In- Items Pro Compensation Process Segments QCT QTL QWI (1) Forma (3) R&D QSI GAAP -------------------------------------------------------------------------- Revenues $6,717 $3,622 $785 $6 $11,130 $- $- $12 $11,142 -------------------------------------------------------------------------- Operating income (loss) 4,604 (540) (14) (320) 3,730 -------------------------------------------------------------------------- EBT 1,833 3,142 (1)(290) 4,684 (540) (14) (304) 3,826 -------------------------------------------------------------------------- Net income (loss) 3,740 (365) (13) (202) 3,160 -------------------------------------------------------------------------- Diluted EPS $2.25 $(0.22) $(0.01) $(0.12) $1.90 -------------------------------------------------------------------------- Diluted shares used 1,660 1,660 1,660 1,660 1,660 -------------------------------------------------------------------------- (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) The fourth quarter of fiscal 2009 included a $230 million charge, or $0.14 diluted loss per share, related to an estimated fine expected to be levied by the Korea Fair Trade Commission and a $35 million charge, or $0.02 diluted loss per share, resulting from the write-off of assets that were initially capitalized related to a litigation settlement and patent agreement with Broadcom Corporation. (3) 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. (4) During the fourth quarter of fiscal 2009, the Company recorded a $155 million tax benefit, or $0.09 diluted earnings per share, to adjust our estimates of uncertain tax positions for prior years as a result of tax audits. The fiscal 2009 pro forma results exclude this tax benefit related to prior years. (5) 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. (6) Fiscal 2009 results included a $783 million charge, or $0.45 diluted loss per share, related to a litigation settlement and patent agreement with Broadcom Corporation, including $748 million, or $0.43 diluted loss per share, recorded in the second quarter of fiscal 2009 and $35 million, or $0.02 diluted loss per share, recorded in the fourth quarter of fiscal 2009 resulting from the write-off of assets that were initially capitalized. We reconsidered the accounting for these assets and concluded that, given the difficulty in reliably estimating the value, the transaction was treated as a single element and recorded in a manner that is consistent with its predominant benefit to the Company, which was litigation settlement. (7) During the second quarter of fiscal 2009, the Company recorded a $36 million tax expense, or $0.02 diluted loss per share, 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 fourth quarter fiscal 2009 earnings conference call will be broadcast live on November 4, 2009, beginning at 2:30 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 November 4, 2009, beginning at approximately 6:30 p.m. PT through December 4, 2009 at 10:00 p.m. PT. 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 35746873. 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 web 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 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 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. 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 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; the development and commercial acceptance of the IMOD display 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 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 September 27, 2009 ----------------------------------------------- Estimated Pro Share-Based Tax Forma Compensation Items QSI GAAP Revenues: Equipment and services $1,762 $- $- $7 $1,769 Licensing and royalty fees 921 - - - 921 --- --- --- --- --- Total revenues 2,683 - - 7 2,690 ----- --- --- --- ----- Operating expenses: Cost of equipment and services revenues 769 11 - 44 824 Research and development 518 71 - 25 614 Selling, general and administrative 300 66 - 24 390 Other 265 (a) - - - 265 (a) --- --- --- --- --- Total operating expenses 1,852 148 - 93 2,093 ----- --- --- --- ----- Operating income (loss) 831 (148) - (86) 597 Investment income (loss), net 154 (b) - - (9) (c) 145 --- --- --- --- --- Income (loss) before income taxes 985 (148) - (95) 742 Income tax (expense) benefit (174)(d) 63 155 (e) 17 (f) 61 (d) ---- --- --- --- --- Net income (loss) $811 $(85) $155 $(78) $803 ==== ==== ==== ===== ==== Earnings (loss) per common share: Diluted $0.48 $(0.05) $0.09 $(0.05) $0.48 ===== ====== ===== ====== ===== Shares used in per share calculations: Diluted 1,688 1,688 1,688 1,688 1,688 ===== ===== ===== ===== ===== Supplemental Financial Data: ---------------- Operating cash flow $1,411 $(25) (h) $- $(65) $1,321 Operating cash flow as a % of revenues 53% N/M 49% Free cash flow (g) $1,294 $(25) (h) $- $(92) $1,177 Free cash flow as a % of revenues 48% N/M 44% --------------------------------------------------------------------- (a) Included a $230 million charge, or $0.14 diluted loss per share, related to an estimated fine expected to be levied by the Korea Fair Trade Commission and a $35 million charge, or $0.02 diluted loss per share, resulting from the write-off of assets that were initially capitalized related to a litigation settlement and patent agreement with Broadcom Corporation. (b) Included $127 million in interest and dividend income related to cash, cash equivalents and marketable securities, which were not part of the Company's strategic investment portfolio, and $72 million in net realized gains on investments, partially offset by $36 million in other-than-temporary losses on investments, $5 million in interest expense and $4 million in losses on derivatives. (c) Included $10 million in other-than-temporary losses on investments, $4 million in interest expense and $3 million in equity in losses of investees, partially offset by $8 million in net realized gains on investments. (d) The fourth quarter effective tax rates were approximately 8% benefit for GAAP and approximately 18% expense for pro forma. (e) Included a $155 million tax benefit, or $0.09 diluted earnings per share, to adjust our estimates of uncertain tax positions for prior years as a result of tax audits. The fiscal 2009 pro forma results exclude this tax benefit related to prior years. (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 three months ended September 27, 2009, included herein. (h) 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) Twelve Months Ended September 27, 2009 ------------------------------------------------------ Estimated In- Share-Based Tax Process Pro Forma Compensation Items R&D QSI GAAP ------------------------------------------------------- Revenues: Equipment and services $6,437 $- $- $- $29 $6,466 Licensing and royalty fees 3,950 - - - - 3,950 ----- --- --- --- --- ----- Total revenues 10,387 - - - 29 10,416 ------ --- --- --- --- ------ Operating expenses: Cost of equipment and services revenues 2,983 41 - - 157 3,181 Research and development 2,058 280 - 6 96 2,440 Selling, general and administrative 1,180 263 - - 113 1,556 Other 1,013 (a) - - - - 1,013 (a) ----- --- --- --- --- ----- Total operating expenses 7,234 584 - 6 366 8,190 ----- --- --- --- --- ----- Operating income (loss) 3,153 (584) - (6) (337) 2,226 Investment loss, net (126) (b) - - - (24)(c) (150) ---- --- --- --- --- ---- Income (loss) before income taxes 3,027 (584) - (6) (361) 2,076 (d) Income tax (expense) benefit (840) (d) 129 118 (e) - 109 (484) ---- --- --- --- --- ---- Net income (loss) $2,187 $(455) $118 $(6) $(252) $1,592 ====== ====== ==== ==== ===== ====== Earnings (loss) per common share: Diluted $1.31 $(0.27) $0.07 $(0.00) $(0.15) $0.95 ===== ====== ===== ====== ====== ===== Shares used in per share calculations: Diluted 1,673 1,673 1,673 1,673 1,673 1,673 ===== ===== ===== ===== ===== ===== Supplemental Financial Data: ------------ Operating cash flow $7,556 $(79)(g) $- $- $(305) $7,172 Operating cash flow as a % of revenues 73% N/M 69% Free cash flow (f) $6,907 $(79)(g) $- $- $(417) $6,411 Free cash flow as a % of revenues 66% N/M 62% ------------------------------------------------------------------------- (a) Included a $783 million charge, or $0.45 diluted loss per share, related to a litigation settlement and patent agreement with Broadcom Corporation, including $748 million, or $0.43 diluted loss per share, recorded in the second quarter of fiscal 2009 and $35 million, or $0.02 diluted loss per share, recorded in the fourth quarter of fiscal 2009 resulting from the write-off of assets that were initially capitalized. We reconsidered the accounting for these assets and concluded that, given the difficulty in reliably estimating the value, the transaction was treated as a single element and recorded in a manner that is consistent with its predominant benefit to the Company, which was litigation settlement. Also included a $230 million charge, or $0.14 diluted loss per share, related to an estimated fine expected to be levied by the Korea Fair Trade Commission recorded in the fourth quarter of fiscal 2009. (b) Included $734 million in other-than-temporary losses on investments, which were not part of the Company's strategic investment portfolio and $13 million in interest expense, partially offset by $513 million in interest and dividend income related to cash, cash equivalents and marketable securities, $107 million in net realized gains on investments and $1 million in gains on derivatives. (c) Included $29 million in other-than-temporary losses on investments, $17 million in equity in losses of investees and $11 million in interest expense, partially offset by $30 million in net realized gains on investments and $3 million in interest and dividend income. (d) The effective tax rates for the twelve months ended September 27, 2009 were approximately 23% for GAAP and approximately 28% for pro forma. (e) Included a tax expense related to the adjustment of net deferred tax assets that were recorded in prior years to reflect the changes in California law. In addition, included a $155 million tax benefit, or $0.09 diluted earnings per share, to adjust our estimates of uncertain tax positions for prior years as a result of tax audits. The fiscal 2009 pro forma results exclude this tax benefit related to prior years. (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 twelve months ended September 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 September 27, 2009 ---------------------------------------- Estimated Pro Share-Based Forma Compensation QSI GAAP ---------------------------------------------- Net cash provided (used) by operating activities $1,411 $(25) (a) $(65) $1,321 Less: capital expenditures (117) - (27) (144) --- --- --- --- Free cash flow $1,294 $(25) $(92) $1,177 ====== ==== ==== ====== Other supplemental cash disclosures: Cash transfers from QSI (1) $9 $- $(9) $- Cash transfers to QSI (2) (99) - 99 - --- --- --- --- Net cash transfers $(90) $- $90 $- ==== === === === Twelve Months Ended September 27, 2009 ----------------------------------------- Estimated Pro Share-Based Forma Compensation QSI GAAP ------------------------------------------------ Net cash provided (used) by operating activities $7,556 $(79) (a) $(305) $7,172 Less: capital expenditures (649) - (112) (761) --- --- --- --- Free cash flow $6,907 $(79) $(417) $6,411 ====== ==== ===== ====== Other supplemental cash disclosures: Cash transfers from QSI (3) $35 $- $(35) $- Cash transfers to QSI (2) (460) - 460 - --- --- --- --- Net cash transfers $(425) $- $425 $- ===== === ==== === (1) Cash from sale of strategic debt and equity investments. (2) Funding for strategic debt and equity investments, capital expenditures and other QSI operating expenses. (3) Cash from sale of strategic debt and equity investments and partial settlement of investment receivables. Three Months Ended September 28, 2008 ------------------------------------------- Estimated Pro Share-Based Forma Compensation QSI GAAP --------------------------------------------------- Net cash provided (used) by operating activities $1,153 $(98) (a) $(65) $990 Less: capital expenditures (357) - (57) (414) --- --- --- --- Free cash flow $796 $(98) $(122) $576 ==== ==== ===== ==== Twelve Months Ended September 28, 2008 -------------------------------------------- Estimated Pro Share-Based In-Process Forma Compensation R&D QSI GAAP --------------------------------------------------- Net cash provided (used) by operating activities $4,243 $(408) (a) $(14) $(263) $3,558 Less: capital expenditures (725) - - (672) (1,397) --- --- --- --- ----- Free cash flow $3,518 $(408) $(14) $(935) $2,161 ====== ===== ==== ===== ====== (a) Incremental tax benefits from stock options exercised during the period. Qualcomm Incorporated CONSOLIDATED BALANCE SHEETS (In millions, except per share data) (Unaudited) ASSETS September September 27, 28, 2009 2008 ---- ---- Current assets: Cash and cash equivalents $2,717 $1,840 Marketable securities 8,352 4,571 Accounts receivable, net 700 4,187 Inventories 453 521 Deferred tax assets 149 289 Other current assets 199 464 --- --- Total current assets 12,570 11,872 Marketable securities 6,673 4,858 Deferred tax assets 843 830 Property, plant and equipment, net 2,387 2,162 Goodwill 1,492 1,517 Other intangible assets, net 3,065 3,104 Other assets 415 369 --- --- Total assets $27,445 $24,712 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $636 $570 Payroll and other benefits related liabilities 480 406 Unearned revenues 441 394 Other current liabilities 1,256 1,070 ----- ----- Total current liabilities 2,813 2,440 Unearned revenues 3,464 3,768 Income taxes payable 47 227 Other liabilities 805 333 --- --- Total liabilities 7,129 6,768 ----- ----- Stockholders' equity: Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at September 27, 2009 and September 28, 2008 - - Common stock, $0.0001 par value; 6,000 shares authorized; 1,669 and 1,656 shares issued and outstanding at September 27, 2009 and September 28, 2008, respectively - - Paid-in capital 8,493 7,511 Retained earnings 11,235 10,717 Accumulated other comprehensive income (loss) 588 (284) --- ---- Total stockholders' equity 20,316 17,944 ------ ------ Total liabilities and stockholders' equity $27,445 $24,712 ======= ======= Qualcomm Incorporated CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three Months Ended Twelve Months Ended ----------------- ------------------- September September September September 27, 28, 27, 28, 2009 2008 2009 2008 ------- ------- ------- ------- Revenues: Equipment and services $1,769 $1,866 $6,466 $7,160 Licensing and royalty fees 921 1,468 3,950 3,982 --- ----- ----- ----- Total revenues 2,690 3,334 10,416 11,142 ----- ----- ------ ------ Operating expenses: Cost of equipment and services revenues 824 922 3,181 3,414 Research and development 614 621 2,440 2,281 Selling, general and administrative 390 456 1,556 1,717 Other 265 - 1,013 - --- --- ----- --- Total operating expenses 2,093 1,999 8,190 7,412 ----- ----- ----- ----- Operating income 597 1,335 2,226 3,730 Total investment income (loss), net 145 (228) (150) 96 --- ---- ---- --- Income before income taxes 742 1,107 2,076 3,826 Income tax benefit (expense) 61 (229) (484) (666) --- ---- ---- ---- Net income $803 $878 $1,592 $3,160 ==== ==== ====== ====== Basic earnings per common share $0.48 $0.53 $0.96 $1.94 ===== ===== ===== ===== Diluted earnings per common share $0.48 $0.52 $0.95 $1.90 ===== ===== ===== ===== Shares used in per share calculations: Basic 1,666 1,650 1,656 1,632 ===== ===== ===== ===== Diluted 1,688 1,678 1,673 1,660 ===== ===== ===== ===== Dividends per share paid $0.17 $0.16 $0.66 $0.60 ===== ===== ===== ===== Dividends per share announced $0.17 $0.16 $0.66 $0.60 ===== ===== ===== ===== Qualcomm Incorporated CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended Twelve Months Ended ------------------ ------------------- September September September September 27, 28, 27, 28, 2009 2008 2009 2008 ------- ------- ------- ------- Operating Activities: Net income $803 $878 $1,592 $3,160 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 175 120 635 456 Revenues related to non-monetary exchanges (29) (172) (114) (172) Non-cash portion of income tax (benefit) expense (255) 158 (33) 306 Non-cash portion of share-based compensation expense 148 148 584 541 Non-cash portion of interest and dividend income (24) (21) (68) (26) Incremental tax benefit from stock options exercised (25) (98) (79) (408) Net realized (gains) losses on marketable securities and other investments (80) 3 (137) (155) Net impairment losses on marketable securities and other investments 46 332 763 535 Other items, net 14 23 36 29 Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable, net 366 (501) 3,083 (802) Inventories (74) 95 69 (47) Other assets (41) (52) (58) (17) Trade accounts payable 65 (59) 57 (63) Payroll, benefits and other liabilities 273 175 984 310 Unearned revenues (41) (39) (142) (89) --- --- ---- --- Net cash provided by operating activities 1,321 990 7,172 3,558 ----- --- ----- ----- Investing Activities: Capital expenditures (144) (414) (761) (1,397) Purchases of available-for-sale securities (3,946) (2,736) (10,443) (7,680) Proceeds from sale of available-for-sale securities 1,668 1,141 5,274 6,689 Increase in receivables for settlement of investments - (406) - (406) Cash received for partial settlement of investment receivables - - 349 - Other investments and acquisitions, net of cash acquired (7) (15) (54) (298) Change in collateral held under securities lending - 153 173 248 Other items, net (1) (5) 5 25 --- --- --- --- Net cash used by investing activities (2,430) (2,282) (5,457) (2,819) ------ ------ ------ ------ Financing Activities: Proceeds from issuance of common stock 366 484 642 1,184 Incremental tax benefit from stock options exercised 25 98 79 408 Repurchase and retirement of common stock - - (285) (1,670) Dividends paid (283) (266) (1,093) (982) Change in obligations under securities lending - (153) (173) (248) Other items, net (3) 2 (3) 1 --- --- --- --- Net cash provided (used) by financing activities 105 165 (833) (1,307) --- --- ---- ------ Effect of exchange rate changes on cash - (3) (5) (3) --- --- --- --- Net (decrease) increase in cash and cash equivalents (1,004) (1,130) 877 (571) Cash and cash equivalents at beginning of period 3,721 2,970 1,840 2,411 ----- ----- ----- ----- Cash and cash equivalents at end of period $2,717 $1,840 $2,717 $1,840 ====== ====== ====== ====== Qualcomm Contact: John Gilbert Phone: +1-858-658-4813 e-mail: ir@qualcomm.com SOURCE: Qualcomm Incorporated CONTACT: John Gilbert, Qualcomm, +1-858-658-4813, ir@qualcomm.com To view this and other AsiaNet releases please visit http://www.asianetnews.net |
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