Qualcomm Announces Fourth Quarter and Fiscal 2010 Results
By Qualcomm Incorporated, PRNETuesday, November 2, 2010
Fiscal 2010 Revenues $11 Billion, EPS $1.96
SAN DIEGO, November 3, 2010 - 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 26, 2010.
"I am very pleased with our performance this year as we delivered record
earnings per share and record MSM chipset volumes," said Dr. Paul E. Jacobs,
chairman and CEO of Qualcomm. "Our outlook includes strong revenue and
earnings growth in fiscal 2011. In the coming year, we expect continued
strong growth in CDMA-based device shipments, including smartphones and other
data-centric devices, driven by the global adoption of 3G and accelerating
consumer demand for wireless data. With our industry-leading chipset roadmap,
broad licensing program and increasing number of global partners, we are well
positioned to take advantage of these industry trends."
GAAP Results
Qualcomm results are reported in accordance with generally accepted
accounting principles (GAAP).
Fourth Quarter Fiscal 2010
- Revenues: $2.95 billion, up 10 percent year-over-year (y-o-y)
and 9 percent sequentially.
- Operating income: $837 million, up 40 percent y-o-y and 6 percent
sequentially.
- Net income: $865 million, up 8 percent y-o-y and 13 percent
sequentially.
- Diluted earnings per share: $0.53, up 10 percent y-o-y and 13
percent sequentially.
- Effective tax rate: 17 percent.
- Operating cash flow: $1.09 billion, down 17 percent y-o-y; 37
percent of revenues.
- Return of capital to stockholders: $427 million, including $305
million, or $0.19 per share, of cash dividends paid, and $122 million
to repurchase 3.5 million shares of our common stock.
Fiscal 2010
- Revenues: $10.99 billion, up 6 percent y-o-y.
- Operating income: $3.28 billion, up 47 percent y-o-y.
- Net income: $3.25 billion, up 104 percent y-o-y.
- Diluted earnings per share: $1.96, up 106 percent y-o-y.
- Effective tax rate: 20 percent.
- Operating cash flow: $4.08 billion, down 43 percent y-o-y; 37
percent of revenues.
- Return of capital to stockholders: $4.19 billion, including $1.18
billion, or $0.72 per share, of cash dividends paid, and $3.02 billion
to repurchase 79.8 million shares of our common stock.
Non-GAAP Results
Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI)
segment, certain share-based compensation, certain tax items that are not
related to the current year and acquired in-process research and development
(R&D) expense.
Fourth Quarter Fiscal 2010
- Revenues: $2.95 billion, up 10 percent y-o-y and 9 percent
sequentially.
- Operating income: $1.13 billion, up 36 percent y-o-y and 14
percent sequentially.
- Net income: $1.11 billion, up 36 percent y-o-y and 18 percent
sequentially.
- Diluted earnings per share: $0.68, up 42 percent y-o-y and 19
percent sequentially. The current quarter excludes $0.05 loss per share
attributable to the QSI segment, $0.07 loss per share attributable to
certain share-based compensation and $0.02 loss per share attributable
to certain tax items (the sum of Non-GAAP earnings per share and items
excluded do not equal GAAP earnings per share due to rounding).
- Effective tax rate: 19 percent.
- Free cash flow: $1.11 billion, down 14 percent y-o-y; 38 percent
of revenues (defined as net cash from operating activities less capital
expenditures).
Fiscal 2010
- Revenues: $10.98 billion, up 6 percent y-o-y.
- Operating income: $4.32 billion, up 37 percent y-o-y.
- Net income: $4.07 billion, up 86 percent y-o-y.
- Diluted earnings per share: $2.46, up 88 percent y-o-y. The
current fiscal year excludes $0.13 loss per share attributable to the
QSI segment, $0.27 loss per share attributable to certain share-based
compensation and $0.10 loss per share attributable to certain tax
items.
- Effective tax rate: 20 percent.
- Free cash flow: $4.16 billion, down 40 percent y-o-y; 38 percent
of revenues.
Detailed reconciliations between results reported in accordance with GAAP
and Non-GAAP results are included at the end of this news release.
In the year-over-year comparisons summarized above, the following should
be noted: fiscal 2009 results (GAAP and Non-GAAP) included a $783 million
charge related to a litigation settlement and patent agreement with Broadcom
Corporation, including $35 million recorded in the fourth quarter of 2009;
both the fourth quarter and fiscal 2009 results (GAAP and Non-GAAP) also
included a $230 million charge related to the Korea Fair Trade Commission
fine; GAAP results in fiscal 2009 included a $155 million tax benefit related
to prior years as a result of tax audits; net income was favorably impacted
in fiscal 2010 (GAAP and Non-GAAP) due to a significant increase in net
investment income; and fiscal 2009 operating and free cash flow included the
receipt of a $2.5 billion payment related to the license and settlement
agreements with Nokia.
Key Business Metrics
Fourth Quarter Fiscal 2010
- CDMA-based Mobile Station Modem(TM) (MSM(TM)) shipments:
approximately 111 million units, up 22 percent y-o-y and 8 percent
sequentially.
- Total reported device sales*: approximately $28.3 billion, up 14
percent y-o-y and 12 percent sequentially.
- Estimated CDMA-based device shipments*: approximately 153 to
157 million units at an estimated average selling price of
approximately $179 to $185 per unit.
Fiscal 2010
- CDMA-based MSM shipments: approximately 399 million units, up
26 percent y-o-y.
- Total reported device sales*: approximately $105.7 billion, up 7
percent y-o-y.
- Estimated CDMA-based device shipments*: approximately 561 to
577 million units at an estimated average selling price of
approximately $183 to $189 per unit.
*Royalties are recognized when reported, generally one quarter following
shipment.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled
approximately $18.4 billion at the end of the fourth quarter of fiscal 2010,
compared to $17.6 billion at the end of the third quarter of fiscal 2010 and
$17.7 billion a year ago. On October 13, 2010, we announced a cash dividend
of $0.19 per share payable on December 22, 2010 to stockholders of record as
of November 24, 2010.
Research and Development
Share-Based
($ in millions) Non-GAAP Compensation QSI GAAP
-------- ------------ --- ----
Fourth quarter fiscal 2010 $547 $79 $30 $656
As a % of revenues 19% N/M 22%
Fourth quarter fiscal 2009 $518 $71 $25 $614
As a % of revenues 19% N/M 23%
Year-over-year change ($) 6% 11% 20% 7%
N/M -Not Meaningful
Non-GAAP R&D expenses increased 6 percent y-o-y primarily due to an
increase in costs related to the development of integrated circuit products,
next-generation CDMA and OFDMA technologies and other initiatives to support
the acceleration of advanced wireless products and services. QSI R&D expenses
were primarily related to our FLO TV(TM) subsidiary.
Selling, General and Administrative
Share-Based
($ in millions) Non-GAAP Compensation QSI GAAP
-------- ------------ --- ----
Fourth quarter fiscal 2010 $364 $70 $37 $471
As a % of revenues 12% N/M 16%
Fourth quarter fiscal 2009 $300 $66 $24 $390
As a % of revenues 11% N/M 14%
Year-over-year change ($) 21% 6% 54% 21%
Non-GAAP selling, general and administrative (SG&A) expenses increased 21
percent y-o-y primarily due to an increase in legal and patent-related costs.
QSI SG&A expenses were primarily related to FLO TV.
Effective Income Tax Rate
Our fiscal 2010 effective income tax rates were 20 percent for both GAAP
and Non-GAAP. The fiscal 2010 GAAP effective tax rate included tax expense of
$137 million because deferred revenue related to the 2008 license and
settlement agreements with Nokia was taxable in fiscal 2010, but the
resulting deferred tax asset will reverse in future years when our state tax
rate, based on the legislation in effect during fiscal 2010, will be lower.
The fiscal 2010 GAAP effective tax rate also included $20 million of tax
expense as a result of prior year tax audits completed during the fiscal
year. The tax expense related to these items was excluded from our Non-GAAP
results to provide a clearer understanding of our ongoing tax rate and after
tax earnings.
Qualcomm Strategic Initiatives
The QSI segment manages our strategic investment activities, including
FLO TV, and makes strategic investments in early-stage companies and in
wireless spectrum, such as the Broadband Wireless Access (BWA) spectrum
recently won in the auction in India. GAAP results for the fourth quarter
fiscal 2010 included a $0.05 loss per share for the QSI segment. The fourth
quarter fiscal 2010 QSI results included $132 million in operating expenses
primarily related to FLO TV. In June 2010, in connection with the India BWA
spectrum purchase, we entered into a bank loan agreement that is payable in
full in Indian rupees in December 2010. At the end of the fourth quarter
fiscal 2010, the carrying value of the loan was $1.09 billion.
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.
Our outlook does not include provisions for future asset impairments or
the consequences of injunctions, damages or fines related to any pending
legal matters unless awarded or imposed by a court, governmental entity or
other regulatory body. Further, due to their nature, certain income and
expense items, such as realized investment gains or losses, or gains and
losses on certain derivative instruments, cannot be accurately forecast.
Accordingly, we only include such items in our business outlook to the extent
they are reasonably certain; however, actual results may vary materially from
the business outlook.
We have commenced a restructuring plan under which we expect to exit the
current FLO TV service business. In addition to our ongoing operating costs,
we expect to incur restructuring charges related to this plan in the range of
$125 million to $175 million in fiscal 2011, which are primarily related to
certain contractual obligations and are included in our fiscal 2011 outlook
included herein. Additionally, we continue to evaluate strategic options for
the FLO TV business, which include, but are not limited to, operating the FLO
TV network under a new wholesale service; sale to, or joint venture with, a
third party; and/or the sale of the spectrum licenses and the discontinuance
of the operation of the network. Additional charges, including impairment of
assets, may be incurred as we continue to evaluate or implement these
strategic options or if we are unable to generate adequate future cash flows
associated with this business.
The following table summarizes GAAP and Non-GAAP guidance based on the
current business outlook. The Non-GAAP business outlook presented below is
consistent with the presentation of Non-GAAP results elsewhere herein.
The following estimates are approximations and are based on the current
business outlook:
Qualcomm's Business Outlook Summary
-------------------------------------------------------------------------
FIRST FISCAL QUARTER
-------------------------------------------------------------------------
Q1 FY10 Current Guidance
Results Q1 FY11 Estimates
-------------------------------------------------------------------------
Non-GAAP
Revenues $2.67B $3.05B - $3.35B
Year-over-year change increase 14% - 26%
Diluted earnings per share (EPS) $0.62 $0.70 - $0.74
Year-over-year change increase 13% - 19%
-------------------------------------------------------------------------
GAAP
Revenues $2.67B $3.05B - $3.35B
Year-over-year change increase 14% - 25%
Diluted EPS $0.50 $0.58 - $0.62
Year-over-year change increase 16% - 24%
Diluted EPS attributable
to QSI ($0.03) ($0.05)
Diluted EPS attributable
to share-based
compensation ($0.07) ($0.07)
Diluted EPS attributable
to certain tax items ($0.02) $0.00
-------------------------------------------------------------------------
Metrics
MSM shipments approx. 92M approx. 115M - 119M
Year-over-year change increase 25% - 29%
Total reported device
sales (1) $24.5B* $31.5B - $33.5B*
Year-over-year change increase 29% - 37%
Est. CDMA-based devices
shipped (1) approx. 126M - 130M* not provided
Est. CDMA-based device
average selling price (1) approx. $189-$195* not provided
*Est. sales in September
quarter, reported in
December quarter
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FISCAL YEAR
-------------------------------------------------------------------------
FY 2010 Current Guidance
Results FY 2011 Estimates
-------------------------------------------------------------------------
Non-GAAP
Revenues $10.98B $12.4B - $13.0B
Year-over-year change increase 13% - 18%
Operating Income $4.32B $4.8B - $5.3B
Year-over-year change increase 11% - 23%
Diluted EPS $2.46 $2.63 - $2.77
Year-over-year change increase 7% - 13%
-------------------------------------------------------------------------
GAAP
Revenues $10.99B $12.4B - $13.0B
Year-over-year change increase 13% - 18%
Operating Income $3.28B $3.6B - $4.1B
Year-over-year change increase 10% - 25%
Diluted EPS $1.96 $2.08 - $2.22
Year-over-year change increase 6% - 13%
Diluted EPS attributable
to QSI ($0.13) ($0.22)
Diluted EPS attributable
to share-based
compensation ($0.27) ($0.32)
Diluted EPS attributable
to certain tax items ($0.10) ($0.01)
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CALENDAR YEAR Device Estimates (1)
-------------------------------------------------------------------------
Prior Guidance Current Guidance Current Guidance
Calendar 2010 Calendar 2010 Calendar 2011
Estimates Estimates Estimates
-------------------------------------------------------------------------
Est. CDMA-based
device
shipments
March quarter approx. 134M-138M approx. 134M-138M not provided
June quarter not provided approx. 153M-157M not provided
September quarter not provided not provided not provided
December quarter not provided not provided not provided
-------------------------------------------------------------------------
Est. Calendar Year
range (approx.) 600M - 650M 625M - 650M 740M - 790M
-------------------------------------------------------------------------
Midpoint Midpoint Midpoint
Est. total
CDMA-based units approx. 625M approx. 638M approx. 765M
Est. CDMA units approx. 236M approx. 241M approx. 250M
Est. WCDMA units approx. 389M approx. 397M approx. 515M
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(1) Total reported device sales is the sum of all reported sales in
U.S. dollars (as reported to us by our licensees) of all licensed
CDMA-based subscriber devices (including handsets, modules, modem
cards and other subscriber devices) by our licensees during a
particular period. The reported quarterly estimated ranges of ASPs
and unit shipments are determined based on the information as
reported to us by our licensees during the relevant period and our
own estimates of the selling prices and unit shipments for licensees
that do not provide such information. Not all licensees report
sales, selling prices and/or unit shipments the same way (e.g.,
some licensees report selling prices net of permitted deductions,
such as transportation, insurance and packing costs, while other
licensees report selling prices and then identify the amount of
permitted deductions in their reports), and the way in which
licensees report such information may change from time to time.
Total reported device sales, estimated unit shipments and estimated
ASPs for a particular period may include prior period activity that
is reported with the activity for the particular period. For
results using assumptions in effect for quarters prior to the second
quarter of fiscal 2010, please refer to the "Changes to QTL Metrics"
table of our April 21, 2010 earnings release that was furnished to
the Securities and Exchange Commission on Form 8-K.
Results of Business Segments (in millions, except per share data):
Non-GAAP
Reconciling Non-
SEGMENTS QCT QTL QWI Items (1)(5) GAAP (5)
-----------------------------------------------------------------------
Q4 - FISCAL 2010
----------------
Revenues $1,860 $921 $171 $- $2,952
Change from prior
year 9% 10% 17% N/M 10%
Change from prior
quarter 10% 9% 6% N/M 9%
Operating income (loss) $1,130
Change from prior year 36%
Change from prior
quarter 14%
EBT $519 $754 ($2) $90 $1,361
Change from prior
year 2% 9% N/M N/M 38%
Change from prior
quarter 28% 12% N/M N/M 17%
EBT as a % of revenues 28% 82% (1%) N/M 46%
Net income (loss) $1,105
Change from prior year 36%
Change from prior quarter 18%
Diluted EPS $0.68
Change from prior year 42%
Change from prior quarter 19%
Diluted shares used 1,621
Q3 - FISCAL 2010
----------------
Revenues $1,691 $847 $162 $- $2,700
Operating income (loss) 991
EBT 404 673 6 78 1,161
Net income (loss) 936
Diluted EPS $0.57
Diluted shares used 1,642
Q1 - FISCAL 2010
----------------
Revenues $1,608 $917 $142 $1 $2,668
Operating income (loss) 1,134
EBT 425 772 9 104 1,310
Net income (loss) 1,041
Diluted EPS $0.62
Diluted shares used 1,691
Q4 - FISCAL 2009
----------------
Revenues $1,699 $837 $146 $1 $2,683
Operating income (loss) 831
EBT 508 693 (5) (211) 985
Net income (loss) 811
Diluted EPS $0.48
Diluted shares used 1,688
12 MONTHS -FISCAL 2010
----------------------
Revenues $6,695 $3,659 $628 $- $10,982
Change from prior
year 9% 1% (2%) N/M 6%
Operating income (loss) $4,316
Change from prior year 37%
EBT $1,693 $3,020 $12 $361 $5,086
Change from prior
year 17% (2%) (40%) N/M 68%
Net income (loss) $4,071
Change from prior year 86%
Diluted EPS $2.46
Change from prior year 88%
Diluted shares used 1,658
12 MONTHS -FISCAL 2009
----------------------
Revenues $6,135 $3,605 $641 $6 $10,387
Operating income (loss) 3,153
EBT 1,441 3,068 20 (1,502) 3,027
Net income (loss) 2,187
Diluted EPS $1.31
Diluted shares used 1,673
------------------- -----
In-
Share-Based Tax Process
SEGMENTS Compensation(2) Items(3) R&D QSI(4) GAAP(5)
-------------------------------------------------------------------------
Q4 - FISCAL 2010
----------------
Revenues $- $- $- $- $2,952
Change from prior
year (100%) 10%
Change from prior
quarter (100%) 9%
Operating income
(loss) ($161) $- $- ($132) $837
Change from prior
year (9%) N/A (53%) 40%
Change from prior
quarter (8%) N/A N/M 6%
EBT ($161) $- $- ($153) $1,047
Change from prior
year (9%) N/A (61%) 41%
Change from prior
quarter (8%) N/A N/M 8%
EBT as a % of revenues N/M N/A N/M 35%
Net income (loss) ($120) ($40) $- ($80) $865
Change from prior year (41%) N/M N/A (3%) 8%
Change from prior
quarter (8%) N/M N/A N/M 13%
Diluted EPS ($0.07) ($0.02) $- $(0.05) $0.53
Change from prior year (40%) N/M N/A 0% 10%
Change from prior
quarter 0% N/M N/A N/M 13%
Diluted shares used 1,621 1,621 1,621 1,621 1,621
Q3 - FISCAL 2010
----------------
Revenues $- $- $- $6 $2,706
Operating income (loss) (149) - - (50) 792
EBT (149) - - (41) 971
Net income (loss) (111) (54) - (4) 767
Diluted EPS ($0.07) ($0.03) $- $- $0.47
Diluted shares used 1,642 1,642 1,642 1,642 1,642
Q1 - FISCAL 2010
----------------
Revenues $- $- $- $2 $2,670
Operating income (loss) (151) - - (104) 879
EBT (151) - - (107) 1,052
Net income (loss) (114) (32) - (54) 841
Diluted EPS ($0.07) $(0.02) $- ($0.03) $0.50
Diluted shares used 1,691 1,691 1,691 1,691 1,691
Q4 - FISCAL 2009
----------------
Revenues $- $- $- $7 $2,690
Operating income (loss) (148) - - (86) 597
EBT (148) - - (95) 742
Net income (loss) (85) 155 - (78) 803
Diluted EPS ($0.05) $0.09 $- ($0.05) $0.48
Diluted shares used 1,688 1,688 1,688 1,688 1,688
12 MONTHS -FISCAL 2010
----------------------
Revenues $- $- $- $9 $10,991
Change from prior year (69%) 6%
Operating income (loss) ($614) $- ($3) ($416) $3,283
Change from prior year (5%) N/M (23%) 47%
EBT ($614) $- ($3) ($435) $4,034
Change from prior year (5%) N/M (20%) 94%
Net income (loss) ($442) ($159) ($3) ($220) $3,247
Change from prior year 3% N/M N/M 13% 104%
Diluted EPS ($0.27) ($0.10) $- ($0.13) $1.96
Change from prior year 0% N/M N/M 13% 106%
Diluted shares used 1,658 1,658 1,658 1,658 1,658
12 MONTHS -FISCAL 2009
----------------------
Revenues $- $- $- $29 $10,416
Operating income (loss) (584) - (6) (337) 2,226
EBT (584) - (6) (361) 2,076
Net income (loss) (455) 118 (6) (252) 1,592
Diluted EPS ($0.27) $0.07 $- ($0.15) $0.95
Diluted shares used 1,673 1,673 1,673 1,673 1,673
------------------- ----- ----- ----- ----- -----
(1) Non-GAAP reconciling items related to revenues consist
primarily of other nonreportable segment revenues less intersegment
eliminations. Non-GAAP reconciling items related to earnings
before taxes consist primarily of certain investment income or
losses, interest expense, research and development expenses, sales
and marketing expenses and other operating expenses that are not
allocated to the segments for management reporting purposes,
nonreportable segment results and the elimination of intersegment
profit.
(2) Certain share-based compensation is included in operating
expenses as part of employee-related costs but is not allocated to
the Company's segments as such costs are not considered relevant by
management in evaluating segment performance.
(3) During the first, second, third and fourth quarters of fiscal
2010, the Company recorded $32 million, $33 million, $32 million and
$40 million in state tax expense, respectively, or $0.02 diluted
loss per share for each quarter, because deferred revenue related to
the license and settlement agreements with Nokia was taxable in
fiscal 2010 but the resulting deferred tax asset will reverse in
future years when the Company's state tax rate, based on the
legislation in effect during fiscal 2010, will be lower. During the
third quarter of fiscal 2010, the Company recorded $22 million of
tax expense, or $0.01 diluted loss per share, as a result of prior
year tax audits completed during the third quarter.
(4) At fiscal year-end, the sum of the quarterly tax provisions for
each column, including QSI, equals the annual tax provisions for
each column computed in accordance with GAAP. In interim quarters,
the tax provision for the QSI operating segment is computed by
subtracting the Non-GAAP tax provision, the tax items column and
the tax provision related to share-based compensation from the GAAP
tax provision.
(5) Fiscal 2009 results included a $783 million charge related to a
litigation settlement and patent agreement with Broadcom
Corporation, including $748 million recorded in the second quarter
of fiscal 2009 and $35 million recorded in the fourth quarter of
2009. The fourth quarter of fiscal 2009 results also included a
$230 million charge related to the Korea Fair Trade Commission fine.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's fourth quarter fiscal 2010 earnings conference call will be
broadcast live on November 3, 2010 beginning at 1:45 p.m. Pacific Time (PT)
on the Company's web site at: www.qualcomm.com. This conference call may
contain forward-looking financial information and will include a discussion
of "Non-GAAP financial measures" as that term is defined in Regulation G. The
most directly comparable GAAP financial measures and information reconciling
these Non-GAAP financial measures to the Company's financial results prepared
in accordance with GAAP, as well as the other material financial and
statistical information to be discussed in the conference call, will be
posted on the Company's Investor Relations web site at www.qualcomm.com
immediately prior to commencement of the call. A taped audio replay will be
available via telephone on November 3, 2010, beginning at approximately 5:30
p.m. PT through December 3, 2010 at 9:00 p.m. PT. To listen to the replay,
U.S. callers may dial (800) 642-1687 and international callers may dial
+1-706-645-9291. U.S. and international callers should use reservation number
17283098. An audio replay of the conference call will be available on the
Company's web site at www.qualcomm.com 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: investor.qualcomm.com/results.cfm
Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in next-generation
mobile technologies. For 25 years, Qualcomm ideas and inventions have driven
the evolution of wireless communications, connecting people more closely to
information, entertainment and each other. Today, Qualcomm technologies are
powering the convergence of mobile communications and consumer electronics,
making wireless devices and services more personal, affordable and accessible
to people everywhere. For more information, please visit
www.qualcomm.com
Note Regarding Use of Non-GAAP Financial Measures
The Company presents Non-GAAP 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. Non-GAAP 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 Non-GAAP information. As a result, management
compensation decisions and the review of executive compensation by the
Compensation Committee of the Board of Directors focus primarily on Non-GAAP
financial measures applicable to the Company and its business segments.
Non-GAAP information used by management excludes the QSI segment, certain
share-based compensation, certain tax items and acquired in-process R&D. The
QSI segment is excluded because the Company expects to exit its strategic
investments at various times, and the effects of fluctuations in the value of
such investments are viewed by management as unrelated to the Company's
operational performance. Share-based compensation, other than amounts related
to share-based awards granted under a bonus program that may result in the
issuance of unrestricted shares of the Company's common stock, is excluded
because management views such share-based compensation as unrelated to the
Company's operational performance. Further, share-based compensation related
to stock options is affected by factors that are subject to change, including
the Company's stock price, stock market volatility, expected option life,
risk-free interest rates and expected dividend payouts in future years.
Certain tax items that were recorded in reported earnings in each fiscal year
presented, but were unrelated to the fiscal year in which they were recorded,
are excluded in order to provide a clearer understanding of the Company's
ongoing Non-GAAP 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 financial information presented herein should be considered
in addition to, not as a substitute for, or superior to, financial measures
calculated in accordance with GAAP. In addition, "Non-GAAP" is not a term
defined by GAAP, and, as a result, the Company's measure of Non-GAAP results
might be different than similarly titled measures used by other companies.
Reconciliations between GAAP results and Non-GAAP 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, and demand for, our
technologies in wireless networks and of wireless communications, equipment
and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA, TD-SCDMA and
OFDMA, both domestically and internationally; the uncertainty of global
economic conditions and its potential impact on demand for our products,
services or applications and the value of our marketable securities;
competition; our dependence on major customers and licensees; attacks on our
licensing business model, including results of current and future litigation
and arbitration proceedings, as well as actions of governmental or
quasi-governmental bodies, and the costs we incur in connection therewith,
including potentially damaged relationships with customers and operators who
may be impacted by the results of these proceedings; our dependence on
third-party manufacturers and suppliers; foreign currency fluctuations;
strategic investments and transactions we have or may pursue; defects or
errors in our products and services; the success of the FLO TV service
business and MediaFLO(TM) technology; the development and commercial success
of the mirasol(R) display technology; as well as the other risks detailed
from time-to-time in our SEC reports, including the report on Form 10-K for
the year ended September 26, 2010. The Company undertakes no obligation to
update, or continue to provide information with respect to, any
forward-looking statement or risk factor, whether as a result of new
information, future events or otherwise.
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO TV and
MediaFLO are trademarks of Qualcomm Incorporated. mirasol is a registered
trademark of Qualcomm MEMS Technologies, Inc. CDMA2000 is a registered
trademark of the Telecommunications Industry Association (TIA USA). All other
trademarks are the property of their respective owners.
Qualcomm Contact:
Warren Kneeshaw
Phone: +1-858-658-4813
e-mail: ir@qualcomm.com
Qualcomm Incorporated
Supplemental Information for the Three Months Ended September 26, 2010
(Unaudited)
-------------------------------------------------------------------------
Non-GAAP Share-Based Tax GAAP
Results Compensation Items QSI Results
------- ------------ ----- --- -------
($ in
millions
except per
share data)
R&D $547 $79 $- $30 $656
SG&A 364 70 - 37 471
Operating income
(loss) 1,130 (161) - (132) 837
Investment income
(loss), net 231 - - (21)(a) 210
Tax rate 19% N/M N/M N/M 17%
Net income (loss) $1,105 ($120) ($40)(b) ($80) $865
Diluted earnings
(loss) per share
(EPS) $0.68 ($0.07) ($0.02) ($0.05) $0.53
Operating
Cash Flow $1,214 ($11)(c) $- ($110) $1,093
Operating
Cash Flow as
% of Revenues 41% N/A N/A N/M 37%
Free Cash Flow(d) $1,113 ($11)(c) $- ($122) $980
Free Cash
Flow as a %
of Revenues 38% N/A N/A N/M 33%
(a) The Company's strategic investment activities included $25
million in interest expense and $7 million in other-than-temporary
losses on investments, partially offset by $7 million in gains on
derivative instruments, $3 million in interest and dividend income
related to cash, cash equivalents and marketable securities and $1
million in net realized gains on investments.
(b) During the fourth quarter of fiscal 2010, the Company recorded a
$40 million state tax expense, or $0.02 diluted loss per share,
because deferred revenue related to the license and settlement
agreements with Nokia was taxable in fiscal 2010 but the resulting
deferred tax asset will reverse in future years when the Company's
state tax rate, based on the legislation in effect during fiscal
2010, will be lower.
(c) Incremental tax benefits from stock options exercised during the
period.
(d) Free Cash Flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these
amounts is included in the "Reconciliation of Non-GAAP Free Cash
Flows to Net Cash Provided by Operating Activities (GAAP) and Other
Supplemental Disclosures" for the three months ended September 26,
2010, included herein.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Qualcomm Incorporated
Supplemental Information for the Twelve Months Ended September 26,
2010
(Unaudited)
-------------------------------------------------------------------------
Share- In-
Non-GAAP Based Tax Process GAAP
Results Compensation Items R&D QSI Results
($ in millions
except per share
data)
R&D $2,142 $300 $- $3 $104 $2,549
SG&A 1,268 272 - - 102 1,642
Operating income
(loss) 4,316 (614) - (3) (416) 3,283
Investment income
(loss), net 770 - - - (19)(a) 751
Tax rate 20% 28% N/M N/A 45% 20%
Net income (loss) $4,071 ($442) ($159)(b) ($3) ($220) $3,247
Diluted earnings
(loss) per share
(EPS) $2.46 ($0.27) ($0.10) $- ($0.13) $1.96
Operating Cash Flow $4,511 ($45)(c) $- $- ($390) $4,076
Operating Cash Flow
as % of Revenues 41% N/A N/A N/A N/M 37%
Free Cash Flow(d) $4,161 ($45)(c) $- $- ($466) $3,650
Free Cash Flow as a
% of Revenues 38% N/A N/A N/A N/M 33%
(a) The Company's strategic investment activities included $42
million in interest expense, $15 million in other-than-temporary
losses on investments and $3 million in equity in losses of
investees, partially offset by $26 million in net realized gains on
investments, $8 million in interest and dividend income related to
cash, cash equivalents and marketable securities and $7 million in
gains on derivative instruments.
(b) During fiscal 2010, the Company recorded (i) a $137 million
state tax expense, or $0.08 diluted loss per share, because deferred
revenue related to the license and settlement agreements with Nokia
was taxable in fiscal 2010 but the resulting deferred tax asset will
reverse in future years when the Company's state tax rate, based on
the legislation in effect during fiscal 2010, will be lower, and
(ii) a $22 million tax expense, or $0.01 diluted loss per share, as
a result of prior year tax audits completed during fiscal 2010.
(c) Incremental tax benefits from stock options exercised during the
period.
(d) Free Cash Flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these
amounts is included in the "Reconciliation of Non-GAAP Free Cash
Flows to Net Cash Provided by Operating Activities (GAAP) and Other
Supplemental Disclosures" for the twelve months ended September 26,
2010, included herein.
N/M - Not Meaningful
N/A - Not Applicable
Qualcomm Incorporated
Reconciliation of Non-GAAP Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and Other Supplemental Disclosures
(In millions)
(Unaudited)
Three Months Ended September 26, 2010
-------------------------------------------------------
In-
Share-Based Tax Process
Non-GAAP Compensation Items R&D QSI GAAP
--------------------------------------------------------
Net cash provided
(used) by
operating
activities $1,214 $(11)(a) $- $- $(110) $1,093
Less: capital
expenditures (101) - - - (12) (113)
---- --- --- --- --- ----
Free cash flow $1,113 $(11) $- $- $(122) $980
====== ==== === === ===== ====
Revenues 2,952 - - - - 2,952
Free Cash Flow as
a % of Revenues 38% N/A N/A N/A N/M 33%
Other supplemental
cash disclosures:
Cash transfers
from QSI(1) $2 $- $- $- $(2) $-
Cash transfers
to QSI(2) (144) - - - 144 -
---- --- --- --- --- ---
Net cash
transfers $(142) $- $- $- $142 $-
===== === === === ==== ===
Twelve Months Ended September 26, 2010
--------------------------------------------------------
In-
Share-Based Tax Process
Non-GAAP Compensation Items R&D QSI GAAP
--------------------------------------------------------
Net cash provided
(used) by
operating
activities $4,511 $(45)(a) $- $- $(390) $4,076
Less: capital
expenditures (350) - - - (76) (426)
---- --- --- --- --- ----
Free cash flow $4,161 $(45) $- $- $(466) $3,650
====== ==== === === ===== ======
Revenues 10,982 - - - 9 10,991
Free Cash Flow as
a % of Revenues 38% N/A N/A N/A N/M 33%
Other supplemental
cash disclosures:
Cash transfers
from QSI(3) $119 $- $- $- $(119) $-
Cash transfers
to QSI(2) (520) - - - 520 -
---- --- --- --- --- ---
Net cash
transfers $(401) $- $- $- $401 $-
===== === === === ==== ===
Three Months Ended September 27, 2009
--------------------------------------------------------
In-
Share-Based Tax Process
Non-GAAP Compensation Items R&D 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
====== ==== === === ==== ======
Twelve Months Ended September 27, 2009
--------------------------------------------------------
In-
Share-Based Tax Process
Non-GAAP Compensation Items R&D 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
====== ==== === === ===== ======
(a) Incremental tax benefits from stock options exercised during the
period.
(1) Cash from sale of equity investments.
(2) Primarily funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
(3) Cash from sale of equity investments and Australia spectrum license.
N/M - Not Meaningful
N/A - Not Applicable
Qualcomm Incorporated
Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate
(in millions)
(Unaudited)
Three Months Ended September 26, 2010
-------------------------------------------------------------------------
Non- Share- In-
GAAP Based Tax Process GAAP
Results Compensation Items R&D QSI(a) Results
-------- ----------- ----- ------ ------- --------
Income (loss)
before income
taxes $1,361 ($161) $- $- ($153) $1,047
Income tax
(expense) benefit (256) 41 (40) - 73 (182)
---- --- --- --- --- ----
Net income (loss) $1,105 ($120) ($40) $- ($80) $865
====== ===== ==== === ==== ====
Tax rate 19% 25% N/M N/M N/M 17%
Twelve Months Ended September 26, 2010
-------------------------------------------------------------------------
Non- Share- In-
GAAP Based Tax Process GAAP
Results Compensation Items R&D QSI Results
-------- ----------- ----- ------ ------- --------
Income (loss)
before income
taxes $5,086 ($614) $- ($3) ($435) $4,034
Income tax
(expense) benefit (1,015) 172 (159) - 215 (787)
------ --- ---- --- --- ----
Net income (loss) $4,071 ($442) ($159) ($3) ($220) $3,247
====== ===== ===== === ===== ======
Tax rate 20% 28% N/M N/M 49% 20%
(a) 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 Non-GAAP tax provision, the tax items column and
the tax provision related to share-based compensation from the GAAP
tax provision.
N/M - Not Meaningful
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
September September
26, 27,
2010 2009
---- ----
Current assets:
Cash and cash equivalents $3,547 $2,717
Marketable securities 6,732 8,352
Accounts receivable, net 730 700
Inventories 528 453
Deferred tax assets 321 149
Other current assets 275 199
--- ---
Total current assets 12,133 12,570
Marketable securities 8,123 6,673
Deferred tax assets 1,922 843
Property, plant and equipment, net 2,373 2,387
Goodwill 1,488 1,492
Other intangible assets, net 3,022 3,065
Other assets 1,511 415
----- ---
Total assets $30,572 $27,445
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $764 $636
Payroll and other benefits related
liabilities 467 480
Unearned revenues 623 441
Loan payable to banks 1,086 -
Income taxes payable 1,443 29
Other current liabilities 1,085 1,227
----- -----
Total current liabilities 5,468 2,813
Unearned revenues 3,485 3,464
Other liabilities 761 852
--- ---
Total liabilities 9,714 7,129
----- -----
Stockholders' equity:
Preferred stock, $0.0001 par value; issuable in series;
8 shares authorized; none outstanding at
September 26, 2010 and September 27,
2009 - -
Common stock, $0.0001 par value; 6,000 shares authorized;
1,612 and 1,669 shares issued and outstanding at
September 26, 2010 and September 27,
2009, respectively - -
Paid-in capital 6,856 8,493
Retained earnings 13,305 11,235
Accumulated other comprehensive income 697 588
--- ---
Total stockholders' equity 20,858 20,316
------ ------
Total liabilities and stockholders'
equity $30,572 $27,445
======= =======
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
---------------------- --------------------
September September September September
26, 2010 27, 2009 26, 2010 27, 2009
--------- --------- --------- ---------
Revenues:
Equipment and services $1,950 $1,769 $6,980 $6,466
Licensing and
royalty fees 1,002 921 4,011 3,950
----- --- ----- -----
Total revenues 2,952 2,690 10,991 10,416
----- ----- ------ ------
Operating expenses:
Cost of equipment and
services revenues 988 824 3,517 3,181
Research and
development 656 614 2,549 2,440
Selling, general and
administrative 471 390 1,642 1,556
Litigation settlement,
patent license and other
related items - 35 - 783
KFTC fine - 230 - 230
--- --- --- ---
Total operating
expenses 2,115 2,093 7,708 8,190
----- ----- ----- -----
Operating income 837 597 3,283 2,226
Investment income (loss),
net 210 145 751 (150)
--- --- --- ----
Income before
income taxes 1,047 742 4,034 2,076
Income tax (expense)
benefit (182) 61 (787) (484)
---- --- ---- ----
Net income $865 $803 $3,247 $1,592
==== ==== ====== ======
Basic earnings per common
share $0.54 $0.48 $1.98 $0.96
===== ===== ===== =====
Diluted earnings per
common share $0.53 $0.48 $1.96 $0.95
===== ===== ===== =====
Shares used in per share
calculations:
Basic 1,608 1,666 1,643 1,656
===== ===== ===== =====
Diluted 1,621 1,688 1,658 1,673
===== ===== ===== =====
Dividends per share paid $0.19 $0.17 $0.72 $0.66
===== ===== ===== =====
Dividends per share
announced $0.19 $0.17 $0.72 $0.66
===== ===== ===== =====
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Twelve Months Ended
-------------------- --------------------
September September September September
26, 2010 27, 2009 26, 2010 27, 2009
--------- --------- --------- ---------
Operating Activities:
Net income $865 $803 $3,247 $1,592
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 171 175 666 635
Revenues related to
non-monetary exchanges (31) (29) (130) (114)
Income tax provision
in excess of income
tax payments 36 (255) 116 (33)
Non-cash portion of
share-based compensation
expense 159 148 612 584
Non-cash portion of
interest and
dividend income (7) (24) (24) (68)
Incremental tax
benefit from stock
options exercised (11) (25) (45) (79)
Net realized gains
on marketable securities
and other investments (131) (80) (405) (137)
Impairment losses on
marketable securities and
other investments 23 46 125 763
Other items, net 13 14 (40) 36
Changes in assets and
liabilities, net of effects
of acquisitions:
Accounts receivable, net 73 366 (18) 3,083
Inventories (87) (74) (80) 69
Other assets 11 (41) (60) (58)
Trade accounts payable 125 65 148 57
Payroll, benefits and
other liabilities (68) 273 (229) 984
Unearned revenues (48) (41) 193 (142)
--- --- --- ----
Net cash provided by
operating activities 1,093 1,321 4,076 7,172
----- ----- ----- -----
Investing Activities:
Capital expenditures (113) (144) (426) (761)
Advance payment on
spectrum - - (1,064) -
Purchases of
available-for-
sale securities (1,924) (3,946) (8,973) (10,443)
Proceeds from sale
of available-for-
sale securities 3,086 1,668 10,440 5,274
Purchases of other
marketable securities (850) - (850) -
Cash received for
partial settlement
of investment
receivables 1 - 34 349
Other investments
and acquisitions,
net of cash acquired (49) (7) (94) (54)
Change in collateral
held under securities
lending - - - 173
Other items, net 6 (1) 94 5
--- --- --- ---
Net cash provided
(used) by investing
activities 157 (2,430) (839) (5,457)
--- ------ ---- ------
Financing Activities:
Borrowing under loan
payable to banks - - 1,064 -
Proceeds from issuance
of common stock 170 366 689 642
Incremental tax
benefit from stock
options exercised 11 25 45 79
Repurchase and retirement
of common stock (122) - (3,016) (285)
Dividends paid (305) (283) (1,177) (1,093)
Change in obligations
under securities lending - - - (173)
Other items, net (9) (3) (10) (3)
--- --- --- ---
Net cash (used) provided
by financing activities (255) 105 (2,405) (833)
---- --- ------ ----
Effect of exchange
rate changes on cash 11 - (2) (5)
--- --- --- ---
Net increase (decrease)
in cash and cash
equivalents 1,006 (1,004) 830 877
Cash and cash
equivalents at
beginning of period 2,541 3,721 2,717 1,840
----- ----- ----- -----
Cash and cash
equivalents at end
of period $3,547 $2,717 $3,547 $2,717
====== ====== ====== ======
Warren Kneeshaw of Qualcomm Incorporated, +1-858-658-4813, ir at qualcomm.com
Tags: california, November 3, Qualcomm Incorporated, San diego, United Kingdom
