2008-07-23 18:28:00
Qualcomm Announces Third Quarter Fiscal 2008 Results
Revenues $2.8 Billion, EPS $0.45
Pro Forma EPS $0.55
SAN DIEGO, July 23 /EMWNews/ -- Qualcomm Incorporated
(Nasdaq: QCOM) today announced results for the third fiscal quarter of 2008
ended June 29, 2008.
Qualcomm's third quarter fiscal 2008 earnings conference call has been
rescheduled to Thursday, July 24, 2008, beginning at 8:00 a.m. Eastern
Daylight Time (5:00 a.m. Pacific Daylight Time). Conference call details
are included herein.
Total Qualcomm (GAAP) Third Quarter Results
Total Qualcomm results are reported in accordance with generally
accepted accounting principles (GAAP).
-- Revenues: $2.8 billion, up 19 percent year-over-year and 6 percent
sequentially.
-- Net income: $748 million, down 6 percent year-over-year and 2 percent
sequentially.
-- Diluted earnings per share: $0.45, down 4 percent year-over-year and
sequentially.
-- Effective tax rate: 15 percent for the quarter. Fiscal 2008 estimated
tax rate of approximately 16 percent.
-- Estimated share-based compensation: $94 million, net of tax, up 24
percent year-over-year and 7 percent sequentially.
-- Operating cash flow: $739 million, down 25 percent year-over-year; 27
percent of revenues.
-- Return of capital to stockholders: $261 million, or $0.16 per share,
of cash dividends paid.
Qualcomm 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: $2.8 billion, up 19 percent year-over-year and 6 percent
sequentially.
-- Net income: $915 million, down 2 percent year-over-year and up 2
percent sequentially.
-- Diluted earnings per share: $0.55, even year-over-year and up 2
percent sequentially; excludes $0.04 loss per share attributable to
the QSI segment, $0.06 loss per share attributable to certain
estimated share-based compensation and $0.01 loss per share
attributable to acquired in-process R&D. (The sum of pro forma
earnings per share and items excluded do not equal total Qualcomm
(GAAP) earnings per share due to rounding.)
-- Effective tax rate: 18 percent for the quarter. Fiscal 2008 estimated
tax rate of approximately 19 percent.
-- Free cash flow: $844 million, down 14 percent year-over-year; 31
percent of revenues (defined as net cash from operating activities
less capital expenditures).
Detailed reconciliations between total Qualcomm (GAAP) results and cash
flow and Qualcomm pro forma results and cash flow are included at the end
of this news release. Prior period reconciliations are presented on
Qualcomm's Investor Relations web page at http://www.qualcomm.com.
"We are pleased to report another strong quarter as the migration to
3G-enabled products continues to accelerate," said Dr. Paul E. Jacobs,
chief executive officer of Qualcomm. "We delivered record revenues, up 19
percent year-over-year, and our pro forma earnings per share were at the
high end of our prior estimate.
"I am also pleased to announce that we have reached a settlement
agreement with Nokia that resolves all litigation between the companies and
will allow both of us to focus our efforts on driving the global 3G and 4G
markets forward. In addition to providing an up-front royalty payment and
other benefits, Qualcomm will also receive ongoing royalties for all CDMA
standards, as well as single-mode OFDMA. I look forward to providing our
updated guidance tomorrow morning."
Cash and Marketable Securities
Qualcomm's cash, cash equivalents and marketable securities totaled
approximately $11.2 billion at the end of the third quarter of fiscal 2008,
compared to $10.6 billion at the end of the second quarter of fiscal 2008
and $12.3 billion a year ago. On July 16, 2008, we announced a cash
dividend of $0.16 per share payable on September 26, 2008 to stockholders
of record at the close of business on August 29, 2008.
Estimated Share-Based Compensation
Total Qualcomm (GAAP) net income for the third quarter of fiscal 2008
included estimated share-based compensation, net of tax, of $94 million, or
$0.06 per diluted share. This compares to $76 million, or $0.04 per diluted
share, in the prior year quarter.
Research and Development
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
($ in millions) Forma Compensation R&D QSI (GAAP)
Third quarter
fiscal 2008 $495 $64 $13 $24 $596
As a % of
revenue 18% N/M 22%
Third quarter
fiscal 2007 $385 $50 $- $19 $454
As a % of
revenue 17% 20%
Year-over-year
change ($) 29% 28% 26% 31%
N/M - Not Meaningful
Pro forma R&D expenses increased 29 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,
including lower-cost devices, the integration of wireless technologies with
consumer electronics and computing, the convergence of multiband,
multimode, multinetwork products and technologies, third-party operating
systems and services platforms. QSI R&D expenses were related to MediaFLO
USA.
Selling, General and Administrative
Estimated Total
Qualcomm Pro Share-Based Qualcomm
($ in millions) Forma Compensation QSI (GAAP)
Third quarter
fiscal 2008 $357 $65 $31 $453
As a % of revenue 13% N/M 16%
Third quarter
fiscal 2007 $307 $54 $40 $401
As a % of revenue 13% 17%
Year-over-year change($) 16% 20% (23%) 13%
Pro forma selling, general and administrative (SG&A) expenses increased
16 percent year-over-year, primarily attributable to an increase in certain
professional fees, primarily related to patent activities, and
employee-related expenses. QSI SG&A expenses were primarily related to
MediaFLO USA.
Effective Income Tax Rate
Without the potential effect of our settlement agreement with Nokia,
our fiscal 2008 effective income tax rates are estimated to be 16 percent
for total Qualcomm (GAAP) and 19 percent for Qualcomm pro forma. The third
quarter total Qualcomm (GAAP) and Qualcomm pro forma effective tax rates of
15 percent and 18 percent, respectively, are lower than the estimated
annual effective tax rates, primarily due to the change in our estimate of
foreign earnings taxed at less than the United States federal tax rate.
Qualcomm Strategic Initiatives
The QSI segment includes our strategic investments, including our
MediaFLO USA subsidiary, and related income and expenses. Total Qualcomm
(GAAP) results for the third quarter of fiscal 2008 included a $0.04 loss
per share for the QSI segment. The third quarter of fiscal 2008 QSI results
included $88 million in operating expenses, primarily related to MediaFLO
USA.
Results of Business Segments (in millions, except per share data):
Third Quarter - Fiscal Year 2008
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $1,762 $803 $190 $3 $2,758
Change from prior year 29% 5% (3%) N/M 19%
Change from prior quarter 9% 1% (2%) N/M 6%
EBT $487 $670 $(1) $(40) $1,116
Change from prior year 11% 0% N/M N/M (5%)
Change from prior quarter 14% (2%) N/M N/M 2%
EBT as a % of revenues 28% 83% (1%) N/M 40%
Net income (loss) $915
Change from prior year (2%)
Change from prior quarter 2%
Diluted EPS $0.55
Change from prior year 0%
Change from prior quarter 2%
Diluted shares used 1,654
Estimated Total
Share-Based In-Process Qualcomm
Segments Compensation(2) R&D QSI(3) (GAAP)
Revenues $- $- $4 $2,762
Change from prior year N/M 19%
Change from prior quarter 100% 6%
EBT $(139) $(13) $(82) $882
Change from prior year (22%) N/A 10% (9%)
Change from prior quarter (7%) N/A (30%) (3%)
EBT as a % of revenues N/A N/A N/M 32%
Net income (loss) $(94) $(13) $(60) $748
Change from prior year (25%) N/A 2% (6%)
Change from prior quarter (7%) N/A (50%) (2%)
Diluted EPS $(0.06) $(0.01) $(0.04) $0.45
Change from prior year (50%) N/A 0% (4%)
Change from prior quarter (20%) N/A (100%) (4%)
Diluted shares used 1,654 1,654 1,654 1,654
Second Quarter - Fiscal Year 2008
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $1,620 $795 $194 $(5) $2,604
EBT 427 684 - (12) 1,099
Net income (loss) 894
Diluted EPS $0.54
Diluted shares used 1,643
Estimated Total
Share-Based Qualcomm
Segments Compensation(2) QSI(3) (GAAP)
Revenues $- $2 $2,606
EBT (130) (63) 906
Net income (loss) (88) (40) 766
Diluted EPS $(0.05) $(0.02) $0.47
Diluted shares used 1,643 1,643 1,643
Third Quarter - Fiscal Year 2007
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $1,367 $766 $196 $(4) $2,325
EBT 439 668 18 52 1,177
Net income (loss) 934
Diluted EPS $0.55
Diluted shares used 1,704
Estimated Total
Share-Based Qualcomm
Segments Compensation(2) QSI(3) (GAAP)
Revenues $- $- $2,325
EBT (114) (91) 972
Net income (loss) (75) (61) 798
Diluted EPS $(0.04) $(0.04) $0.47
Diluted shares used 1,704 1,704 1,704
Fourth Quarter - Fiscal Year 2007
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $1,419 $647 $245 $(6) $2,305
EBT 424 537 31 137 1,129
Net income (loss) 911
Diluted EPS $0.54
Diluted shares used 1,689
Estimated Total
Share-Based Tax Items Qualcomm
Segments Compensation(2) (4) QSI(3) (GAAP)
Revenues $- $- $1 $2,306
EBT (117) - (64) 948
Net income (loss) (77) 331 (34) 1,131
Diluted EPS $(0.05) $0.20 $(0.02) $0.67
Diluted shares used 1,689 1,689 1,689 1,689
Twelve Months - Fiscal Year 2007
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $5,275 $2,772 $828 $(5) $8,870
EBT 1,547 2,340 88 388 4,363
Net income (loss) 3,406
Diluted EPS $2.01
Diluted shares used 1,693
Estimated Total
Share-Based Tax Items In-Process Qualcomm
Segments Compensation(2) (4) R&D QSI (GAAP)
Revenues $- $- $- $1 $8,871
EBT (487) - (10) (240) 3,626
Net income (loss) (321) 364 (9) (137) 3,303
Diluted EPS $(0.19) $0.22 $(0.01) $(0.08) $1.95
Diluted shares used 1,693 1,693 1,693 1,693 1,693
Nine Months - Fiscal Year 2008
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $4,956 $2,248 $595 $2 $7,801
Change from prior year 29% 6% 2% N/M 19%
EBT $1,383 $1,895 $23 $25 $3,326
Change from prior year 23% 5% (60%) N/M 3%
Net income (loss) $2,682
Change from prior year 8%
Diluted EPS $1.62
Change from prior year 10%
Diluted shares used 1,654
Estimated Total
Share-Based In-Process Qualcomm
Segments Compensation(2) R&D QSI(3) (GAAP)
Revenues $- $- $7 $7,808
Change from prior year N/M 19%
EBT $(394) $(14) $(200) $2,718
Change from prior year (6%) (40%) (14%) 1%
Net income (loss) $(267) $(13) $(120) $2,282
Change from prior year (9%) (44%) (17%) 5%
Diluted EPS $(0.16) $(0.01) $(0.07) $1.38
Change from prior year (14%) 0% (17%) 8%
Diluted shares used 1,654 1,654 1,654 1,654
Nine Months - Fiscal Year 2007
Qualcomm
Reconciling Pro
Segments QCT QTL QWI Items (1) Forma
Revenues $3,856 $2,125 $583 $1 $6,565
EBT 1,123 1,803 58 250 3,234
Net income (loss) 2,494
Diluted EPS $1.47
Diluted shares used 1,694
Estimated Total
Share-Based In-Process Qualcomm
Segments Compensation(2) Tax Items R&D QSI(3) (GAAP)
Revenues $- $- $- $- $6,565
EBT (370) - (10) (176) 2,678
Net income (loss) (244) 33 (9) (103) 2,171
Diluted EPS $(0.14) $0.02 $(0.01) $(0.06) $1.28
Diluted shares used 1,694 1,694 1,694 1,694 1,694
(1) Reconciling items related to revenues consist primarily of other
nonreportable segment revenues less intersegment eliminations.
Reconciling items related to earnings before taxes consist primarily
of certain investment income, research and development expenses and
marketing expenses that are not allocated to the segments for
management reporting purposes, nonreportable segment results and the
elimination of intersegment profit.
(2) Certain share-based compensation is included in operating expenses as
part of employee-related costs but is not allocated to the Company's
segments as such costs are not considered relevant by management in
evaluating segment performance.
(3) 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 tax provision for Qualcomm pro forma, the tax items
column and the tax provisions related to estimated share-based
compensation and in-process R&D from the tax provision for total
Qualcomm (GAAP).
(4) During the fourth quarter of fiscal 2007, the Company recorded a $331
million tax benefit, or $0.20 diluted earnings per share, related to
tax expense recorded in prior years resulting from the completion of
tax audits during the fourth fiscal quarter. The fiscal 2007 Qualcomm
pro forma results excluded this tax benefit attributable to prior
years.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's third quarter fiscal 2008 earnings conference call will be
broadcast live on July 24, 2008 beginning at 5:00 a.m. Pacific Daylight
Time (PDT) on the Company's web site at: http://www.qualcomm.com. This conference
call 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 at http://www.qualcomm.com immediately prior to commencement of the call.
A taped audio replay will be available via telephone on July 24, 2008,
beginning at approximately 6:00 a.m. PDT through August 23, 2008 at 9:00
p.m. PDT. To listen to the replay, U.S. callers may dial (800) 642-1687 and
international callers may dial (706) 645-9291. U.S. and international
callers should use reservation number 57610454. An audio replay of the
conference call will be available on the Company's web site at
http://www.qualcomm.com for two weeks following the live call.
Editor's Note: To view the web slides that accompany this earnings
release and conference call, please go to the Qualcomm Investor Relations
website at http://investor.qualcomm.com/results.cfm.
Qualcomm Incorporated (http://www.qualcomm.com) 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 500 Index and is a 2008 FORTUNE
500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol
QCOM.
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,
net investment income, income before income taxes, effective tax rate, net
income, diluted earnings 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 the valuation of options and other share-based
compensation as theoretical and unrelated to the Company's operational
performance. Further, share-based compensation 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. Moreover, it is generally not an expense
that requires or will require cash payment by the Company. Certain tax
items related to prior years are excluded in order to provide a clearer
understanding of the Company's ongoing tax rate and after tax earnings.
Acquired in-process R&D is excluded because such expense is viewed by
management as unrelated to the operating activities of the Company's
ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by
operating activities less capital expenditures, to facilitate an
understanding of the amount of cash flow generated that is available to
grow its business and to create long-term shareholder value. The Company
believes that this presentation is useful in evaluating its operating
performance and financial strength. In addition, management uses this
measure to evaluate the Company's performance, to value the Company and to
compare its operating performance with other companies in the industry.
The non-GAAP pro forma financial information presented herein should be
considered in addition to, not as a substitute for, or superior to,
financial measures calculated in accordance with GAAP. In addition, "pro
forma" is not a term defined by GAAP, and, as a result, the Company's
measure of pro forma results might be different than similarly titled
measures used by other companies. Reconciliations between total Qualcomm
(GAAP) results and Qualcomm pro forma results and between total Qualcomm
(GAAP) cash flow and Qualcomm pro forma cash flow 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 of our technologies in wireless
networks and of 3G wireless communications, equipment and services,
including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and
internationally; 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; fluctuations in the demand for products, services or
applications based on our technologies; 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 MediaFLO USA network and FLO(TM) technology;
as well as the other risks detailed from time-to-time in our SEC reports.
(C) 2008 Qualcomm Incorporated. All rights reserved. Qualcomm is a
registered trademark of Qualcomm Incorporated. MediaFLO and FLO are
trademarks of Qualcomm Incorporated. CDMA2000 is a registered trademark of
the Telecommunications Industry Association. 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 Qualcomm
Pro Forma results to Total Qualcomm (GAAP) results
(In millions, except per share data)
(Unaudited)
Three Months Ended June 29, 2008
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
Forma Compensation R&D QSI (GAAP)
Revenues:
Equipment and
services $1,863 $- $- $4 $1,867
Licensing and
royalty fees 895 - - - 895
Total
revenues 2,758 - - 4 2,762
Operating expenses:
Cost of
equipment and
services
revenues 846 10 - 33 889
Research and
development 495 64 13 24 596
Selling, general
and
administrative 357 65 - 31 453
Total
operating
expenses 1,698 139 13 88 1,938
Operating income
(loss) 1,060 (139) (13) (84) 824
Investment
income, net 56(a) - - 2(b) 58
Income (loss)
before income
taxes 1,116 (139) (13) (82) 882
Income tax
(expense)
benefit (201)(c) 45 - 22(d) (134)(c)
Net income (loss) $915 $(94) $(13) $(60) $748
Earnings (loss)
per common
share:
Diluted $0.55 $(0.06) $(0.01) $(0.04) $0.45
Shares used in
per share
calculations:
Diluted 1,654 1,654 1,654 1,654 1,654
Supplemental
Financial Data:
Operating Cash
Flow $1,020 $(209)(f) $(13) $(59) $739
Operating Cash
Flow as a %
of Revenues 37% N/M 27%
Free Cash Flow(e) $844 $(209)(f) $(13) $(438) $184
Free Cash Flow as
a % of Revenues 31% N/M 7%
(a) Included $105 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 $24 million in
net realized gains on investments, partially offset by $71 million in
other-than-temporary losses on investments and $2 million in interest
expense.
(b) Included $15 million in net realized gains on investments and $3
million interest and dividend income, partially offset by $12 million
in other-than-temporary losses on investments, $2 million in equity
in losses of investees and $2 million in interest expense.
(c) The third quarter of fiscal 2008 effective tax rates were
approximately 15% for total Qualcomm (GAAP) and approximately 18% for
Qualcomm pro forma.
(d) At fiscal year-end, the sum of the quarterly tax provisions for each
column, including QSI, equals the annual tax provisions for each
column computed in accordance with GAAP. In interim quarters, the
tax provision for the QSI operating segment is computed by
subtracting the tax provision for Qualcomm pro forma, the tax items
column and the tax provisions related to estimated share-based
compensation and in-process R&D from the tax provision for total
Qualcomm (GAAP).
(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 Total Qualcomm (GAAP) net cash provided by operating
activities and other supplemental disclosures for the three months
ended June 29, 2008, 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 Qualcomm
Pro Forma results to Total Qualcomm (GAAP) results
(In millions, except per share data)
(Unaudited)
Nine Months Ended June 29, 2008
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
Forma Compensation(a) R&D QSI (GAAP)
Revenues:
Equipment and
services $5,288 $- $- $7 $5,295
Licensing and
royalty fees 2,513 - - - 2,513
Total
revenues 7,801 - - 7 7,808
Operating expenses:
Cost of
equipment
and services
revenues 2,379 29 - 85 2,493
Research and
development 1,397 182 14 67 1,660
Selling,
general and
administrative 1,000 183 - 78 1,261
Total
operating
expenses 4,776 394 14 230 5,414
Operating
income (loss) 3,025 (394) (14) (223) 2,394
Investment
income, net 301(b) - - 23(c) 324
Income (loss)
before income
taxes 3,326 (394) (14) (200) 2,718
Income tax
(expense)
benefit (644)(d) 127 1 80(e) (436)(d)
Net income (loss)$2,682 $(267) $(13) $(120) $2,282
Earnings (loss)
per common share:
Diluted $1.62 $(0.16) $(0.01) $(0.07) $1.38
Shares used in
per share
calculations:
Diluted 1,654 1,654 1,654 1,654 1,654
Supplemental
Financial Data:
Operating Cash
Flow $3,090 $(310)(g) $(14) $(199) $2,567
Operating Cash
Flow as a %
of Revenue 40% N/M 33%
Free Cash
Flow(f) $2,722 $(310)(g) $(14) $(814) $1,584
Free Cash Flow
as a % of Revenue 35% N/M 20%
(a) Estimated share-based compensation presented above and excluded from
pro forma results did not include $1 million, net of tax, related to
share-based awards granted under a bonus program.
(b) Included $374 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, $108 million in net
realized gains on investments and $6 million in gains on derivative
instruments from put options related to our share repurchase program,
partially offset by $175 million in other-than-temporary losses on
investments and $12 million in interest expense.
(c) Included $50 million in net realized gains on investments, $4 million
in interest and dividend income and $1 million in equity in earnings
of investees, partially offset by $27 million in other-than-temporary
losses on investments and $5 million in interest expense.
(d) The effective tax rates for the nine months ended June 29, 2008 were
approximately 16% for total Qualcomm (GAAP) and approximately 19% for
Qualcomm pro forma.
(e) 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 tax provision for Qualcomm pro forma, the tax items
column and the tax provisions related to estimated share-based
compensation and in-process R&D from the tax provision for total
Qualcomm (GAAP).
(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 Total Qualcomm (GAAP) net cash provided by operating
activities and other supplemental disclosures for the nine months
ended June 29, 2008, included herein.
(g) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
Reconciliation of Pro Forma Free Cash Flows to
Total Qualcomm (GAAP) net cash provided by operating activities
and other supplemental disclosures
(In millions)
(Unaudited)
Three Months Ended June 29, 2008
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
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
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $30 $- $- $(30) $-
Cash transfers
to QSI (2) (446) - - 446 -
Net cash
transfers $(416) $- $- $416 $-
Nine Months Ended June 29, 2008
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
Forma Compensation R&D QSI (GAAP)
Net cash
provided (used)
by operating
activities $3,090 $(310)(a) $(14) $(199) $2,567
Less:capital
expenditures(3) (368) - - (615) (983)
Free cash flow $2,722 $(310) $(14) $(814) $1,584
Other supplemental
cash disclosures:
Cash transfers
from QSI (1) $59 $- $- $(59) $-
Cash transfers
to QSI (2) (842) - - 842 -
Net cash
transfers $(783) $- $- $783 $-
(1) Cash from sale of equity securities.
(2) Funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
(3) Upon receipt of licenses from the FCC for additional 700 MHz spectrum
for use in our MediaFLO USA business, the deposit made in the second
quarter of fiscal 2008 of $195 million was reclassified from Qualcomm
pro forma capital expenditures to QSI capital expenditures. The total
license fee included in QSI capital expenditures for fiscal 2008 was
$555 million.
Three Months Ended July 1, 2007
Estimated Total
Qualcomm Pro Share-Based Qualcomm
Forma Compensation QSI (GAAP)
Net cash
provided (used)
by operating
activities $1,122 $(80)(a) $(54) $988
Less: capital
expenditures (145) - (12) (157)
Free cash flow $977 $(80) $(66) $831
Nine Months Ended July 1, 2007
Estimated Total
Qualcomm Pro Share-Based In-Process Qualcomm
Forma Compensation R&D QSI (GAAP)
Net cash
provided (used)
by operating
activities $3,116 $(199)(a) $(10) $(139) $2,768
Less: capital
expenditures (506) - - (65) (571)
Free cash flow $2,610 $(199) $(10) $(204) $2,197
(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 29, September 30,
2008 2007
Current assets:
Cash and cash equivalents $2,970 $2,411
Marketable securities 3,644 4,170
Accounts receivable, net 917 715
Inventories 618 469
Deferred tax assets 358 435
Collateral held under securities lending 326 421
Other current assets 228 200
Total current assets 9,061 8,821
Marketable securities 4,567 5,234
Property, plant and equipment, net 1,912 1,788
Goodwill 1,520 1,325
Deferred tax assets 870 318
Other assets 1,667 1,009
Total assets $19,597 $18,495
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $653 $635
Payroll and other benefits related liabilities 356 311
Unearned revenues 186 218
Income taxes payable 15 119
Obligations under securities lending 326 421
Other current liabilities 575 554
Total current liabilities 2,111 2,258
Unearned revenues 124 142
Income taxes payable 222 -
Other liabilities 314 260
Total liabilities 2,771 2,660
Stockholders' equity:
Preferred stock, $0.0001 par value; issuable
in series; 8 shares authorized; none
outstanding at June 29, 2008 and
September 30, 2007 - -
Common stock, $0.0001 par value; 6,000 shares
authorized; 1,640 and 1,646 shares issued and
outstanding at June 29, 2008 and
September 30, 2007, respectively - -
Paid-in capital 6,783 7,057
Retained earnings 10,104 8,541
Accumulated other comprehensive (loss) income (61) 237
Total stockholders' equity 16,826 15,835
Total liabilities and stockholders' equity $19,597 $18,495
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
Revenues:
Equipment and services $1,867 $1,484 $5,295 $4,196
Licensing and royalty fees 895 841 2,513 2,369
Total revenues 2,762 2,325 7,808 6,565
Operating expenses:
Cost of equipment and
services revenues 889 688 2,493 1,956
Research and development 596 454 1,660 1,348
Selling, general and
administrative 453 401 1,261 1,155
Total operating expenses 1,938 1,543 5,414 4,459
Operating income 824 782 2,394 2,106
Investment income, net 58 190 324 572
Income before income taxes 882 972 2,718 2,678
Income tax expense (134) (174) (436) (507)
Net income $748 $798 $2,282 $2,171
Basic earnings per common share $0.46 $0.48 $1.40 $1.31
Diluted earnings per common share $0.45 $0.47 $1.38 $1.28
Shares used in per share calculations:
Basic 1,626 1,670 1,626 1,661
Diluted 1,654 1,704 1,654 1,694
Dividends per share paid $0.16 $0.14 $0.44 $0.38
Dividends per share announced $0.16 $0.14 $0.44 $0.38
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
Operating Activities:
Net income $748 $798 $2,282 $2,171
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 117 99 336 283
Non-cash income tax expense 66 136 148 365
Non-cash portion of share-based
compensation expense 138 114 393 371
Incremental tax benefits from
stock options exercised (209) (80) (310) (199)
Net realized gains on marketable
securities and other investments (39) (53) (158) (173)
Other-than-temporary losses on
marketable securities
and other investments 83 8 202 11
Other items, net 11 7 1 5
Changes in assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (186) (45) (178) (62)
Inventories (7) (49) (142) (147)
Other assets (7) 10 35 (137)
Trade accounts payable (24) (7) (4) 127
Payroll, benefits and other
liabilities 78 68 12 69
Unearned revenues (30) (18) (50) 84
Net cash provided by operating
activities 739 988 2,567 2,768
Investing Activities:
Capital expenditures (555) (157) (983) (571)
Purchases of available-for-sale
securities (1,984) (2,340) (4,944) (5,921)
Proceeds from sale of available-
for-sale securities 1,559 1,909 5,548 6,254
Other investments and acquisitions,
net of cash acquired (8) (3) (283) (230)
Change in collateral held under
securities lending 8 (153) 95 (153)
Other items, net 4 12 30 13
Net cash used by investing
activities (976) (732) (537) (608)
Financing Activities:
Proceeds from issuance of common
stock 464 220 700 474
Incremental tax benefits from stock
options exercised 209 80 310 199
Dividends paid (261) (234) (716) (632)
Repurchase and retirement of common
stock - (129) (1,670) (264)
Proceeds from put options - 17 - 17
Change in obligations under
securities lending (8) 153 (95) 153
Net cash provided (used) by
financing activities 404 107 (1,471) (53)
Effect of exchange rate changes on
cash - - - 2
Net increase in cash and
cash equivalents 167 363 559 2,109
Cash and cash equivalents at
beginning of period 2,803 3,353 2,411 1,607
Cash and cash equivalents at end of
period $2,970 $3,716 $2,970 $3,716
Qualcomm Contact:
John Gilbert
Vice President of Investor and Industry Analyst Relations
1-858-658-4813 (ph) 1-858-651-9303 (fax)
e-mail: [email protected]
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