Qualcomm Announces Fourth Quarter and Fiscal 2011 Results
By Qualcomm Incorporated, PRNETuesday, November 1, 2011
SAN DIEGO, November 2, 2011 -
Fiscal 2011 Revenues $15 Billion
GAAP EPS $2.52, Non-GAAP EPS $3.20
- Record Fiscal 2011 Results -
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 25, 2011.
“I am very pleased with our performance this year as we delivered record revenues, earnings and MSM chipset shipments, driven by the popularity of smartphones, continued adoption of 3G technologies, particularly in emerging regions, and our industry-leading patent portfolio,” said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. “The breadth and depth of our chipset roadmap, extensive licensing program and diverse set of global partnerships position us well for strong revenue and earnings growth in fiscal 2012. We are excited about the upcoming commercial launch of our groundbreaking Snapdragon multimode LTE solution and continue to invest in and execute on our strategic priorities to drive profitable growth.”
GAAP Results
Qualcomm results are reported in accordance with generally accepted accounting principles (GAAP).
Fourth Quarter Fiscal 2011
- Revenues:(1) $4.12 billion, up 39 percent year-over-year (y-o-y) and 14 percent sequentially.
- Operating income:(1) $1.24 billion, up 29 percent y-o-y and 11 percent sequentially.
- Net income:(2) $1.06 billion, up 22 percent y-o-y and 2 percent sequentially.
- Diluted earnings per share:(2) $0.62, up 17 percent y-o-y and 2 percent sequentially.
- Effective tax rate:(1) 20 percent for the quarter.
- Operating cash flow: $1.82 billion, up 67 percent y-o-y; 44 percent of revenues.
- Return of capital to stockholders: $361 million, or $0.215 per share, of cash dividends paid and $142 million to repurchase 2.9 million shares of our common stock.
(1) The results of FLO TV are presented as discontinued operations, and
prior period amounts have been adjusted accordingly. Revenues,
operating expenses, operating income, earnings before tax (EBT) and
effective tax rate throughout this news release are from continuing
operations (i.e., before discontinued operations and the adjustment
for noncontrolling interests), unless otherwise stated.
(2) Net income and diluted earnings per share throughout this news
release are attributable to Qualcomm (i.e., after discontinued
operations and adjustment for noncontrolling interests), unless
otherwise stated.
Fiscal 2011
- Revenues: $14.96 billion, up 36 percent y-o-y.
- Operating income: $5.03 billion, up 35 percent y-o-y.
- Net income: $4.26 billion, up 31 percent y-o-y.
- Diluted earnings per share: $2.52, up 29 percent y-o-y.
- Effective tax rate: 20 percent.
- Operating cash flow: $4.90 billion, up 20 percent y-o-y; 33 percent of revenues.
- Return of capital to stockholders: $1.49 billion, including $1.35 billion, or $0.81 per share, of cash dividends paid, and $142 million to repurchase 2.9 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 certain acquisition-related items. Starting with acquisitions completed in the third quarter of fiscal 2011, we changed our methodology for reporting Non-GAAP results to exclude the recognition of the step-up of inventories to fair value and amortization of certain intangible assets, in addition to our historical practice of excluding acquired in-process research and development (R&D) expense.
Fourth Quarter Fiscal 2011
- Revenues: $4.12 billion, up 39 percent y-o-y and 14 percent sequentially.
- Operating income: $1.62 billion, up 44 percent y-o-y and 17 percent sequentially.
- Net income: $1.37 billion, up 24 percent y-o-y and 11 percent sequentially.
- Diluted earnings per share: $0.80, up 18 percent y-o-y and 10 percent sequentially. The current quarter excludes $0.01 loss per share attributable to the QSI segment, $0.12 loss per share attributable to certain share-based compensation, $0.07 loss per share attributable to certain acquisition-related items and $0.02 earnings per share attributable to certain tax-related items.
- Effective tax rate: 21 percent for the quarter.
- Free cash flow (defined as net cash from operating activities less capital expenditures): $1.69 billion, up 52 percent y-o-y; 41 percent of revenues.
Fiscal 2011
- Revenues: $14.96 billion, up 36 percent y-o-y.
- Operating income: $6.08 billion, up 41 percent y-o-y.
- Net income: $5.41 billion, up 33 percent y-o-y.
- Diluted earnings per share: $3.20, up 30 percent y-o-y. The current fiscal year excludes $0.23 loss per share attributable to the QSI segment, $0.37 loss per share attributable to certain share-based compensation, $0.12 loss per share attributable to certain acquisition-related items and $0.04 earnings per share attributable to certain tax-related items.
- Effective tax rate: 21 percent.
- Free cash flow: $4.83 billion, up 16 percent y-o-y; 32 percent of revenues.
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (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 2011 results included $401 million in revenues related to prior quarters as a result of agreements entered into with two licensees to settle disputes in the second quarter of fiscal 2011 and $120 million in impairment charges related to our Firethorn division, including $114 million in goodwill impairment; and fiscal 2011 operating and free cash flow reflect the impact of a $1.5 billion income tax payment primarily related to the 2008 license and settlement agreements with Nokia. In addition, fiscal 2011 results included the results of Qualcomm Atheros, Inc., which was acquired on May 24, 2011.
Key Business Metrics
Fourth Quarter Fiscal 2011
- CDMA-based Mobile Station Modem (MSM®) shipments: 127 million units, up 14 percent y-o-y and 6 percent sequentially.
- June quarter total reported device sales: approximately $39.1 billion, up 38 percent y-o-y and 7 percent sequentially.
- June quarter estimated CDMA-based device shipments: approximately 187 to 191 million units, at an estimated average selling price of approximately $204 to $210 per unit.
Fiscal 2011
- CDMA-based MSM shipments: 483 million units, up 21 percent y-o-y.
- Total reported device sales: approximately $149.5 billion, up 41 percent y-o-y.
- Estimated CDMA-based device shipments: approximately 717 to 734 million units, at an estimated average selling price of approximately $203 to $209 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled $20.9 billion at the end of the fourth quarter of fiscal 2011, compared to $20.2 billion at the end of the third quarter of fiscal 2011 and $18.4 billion a year ago. As of September 25, 2011, $1.0 billion remained authorized for repurchases under our stock repurchase program, net of put options outstanding. In addition to the $142 million in stock repurchases we made during the fourth quarter of fiscal 2011, we repurchased and retired 2.0 million shares of our common stock for approximately $99 million since September 25, 2011. In connection with our stock repurchase program, we sold three put options which, if exercised, will require us to repurchase an additional 11.8 million shares for $586 million. On October 11, 2011, we announced a cash dividend of $0.215 per share payable on December 21, 2011 to stockholders of record as of November 23, 2011.
Research and Development
Share-Based
($ in millions) Non-GAAP Compensation QSI GAAP
Fourth quarter fiscal 2011 $ 731 $ 119 $ 1 $ 851
As a % of revenues 18% 21%
Fourth quarter fiscal 2010* $ 547 $ 77 $ 4 $ 628
As a % of revenues 19% 21%
Year-over-year change ($) 34% 55% N/M 36%
*As adjusted for discontinued
operations
N/M - Not Meaningful
Non-GAAP R&D expenses increased 34 percent y-o-y primarily due to an increase in costs related to the development of integrated circuit products, next generation technologies and other initiatives to support the acceleration of advanced wireless products and services.
Selling, General and Administrative
Acquisition-
Share-Based Related
($ in millions) Non-GAAP Compensation Items QSI GAAP
Fourth quarter fiscal
2011 $ 371 $ 110 $ 42 $ 8 $531
As a % of revenues 9% 13%
Fourth quarter fiscal
2010* $ 364 $ 68 $ - $ 8 $440
As a % of revenues 12% 15%
Year-over-year change ($) 2% 62% N/M N/M 21%
*As adjusted for
discontinued operations
N/M - Not Meaningful
Non-GAAP selling, general and administrative (SG&A) expenses increased 2 percent y-o-y primarily due to an increase in employee-related costs.
Effective Income Tax Rate
Our fiscal 2011 effective income tax rates for continuing operations were 20 percent for GAAP and 21 percent for Non-GAAP. The fiscal 2011 GAAP effective tax rate included a tax benefit of $44 million related to an agreement reached on a component of our fiscal 2006 through 2010 state tax returns, as well as a tax benefit of $32 million recorded in fiscal 2011 related to fiscal 2010 due to the retroactive extension of the federal research and development tax credit in fiscal 2011. These tax benefits were excluded from our Non-GAAP results.
Qualcomm Strategic Initiatives
The QSI segment makes strategic investments, many of which are in early-stage companies, and holds wireless spectrum. QSI also includes the discontinued operations of our FLO TV business. GAAP results for the fourth quarter fiscal 2011 included a $0.01 loss per share for the QSI segment. The fourth quarter fiscal 2011 QSI results included $27 million dollars in interest expense, related to the India BWA spectrum won in India in June 2010 and the related bank loans. At the end of the fourth quarter fiscal 2011, the aggregate carrying value of the loans was $994 million.
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 for pending legal matters, other than future legal amounts that are probable and estimable. 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.
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 included elsewhere herein.
Qualcomm's Business Outlook Summary
FIRST FISCAL QUARTER
Current
Guidance
Q1 FY11 Q1 FY12
Results (1) Estimates
Revenues $3.35B $4.35B - $4.75B
Year-over-year change increase 30% - 42%
Non-GAAP Diluted earnings
per share (EPS) $0.82 $0.86 - $0.92
Year-over-year change increase 5% - 12%
Diluted EPS
attributable to QSI ($0.05) ($0.02)
Diluted EPS
attributable to
share-based compensation ($0.07) ($0.11)
Diluted EPS
attributable to
acquisition-related items $0.00 ($0.03)
Diluted EPS
attributable to tax items $0.02 $0.00
GAAP Diluted EPS $0.71 $0.70 - $0.76
Year-over-year change decrease 1% - increase 7%
Metrics
MSM shipments approx. 118M approx. 146M - 154M
Year-over-year change increase 24% - 31%
Total reported
device sales (2) $34.0B* $37.5B - $41.5B*
Year-over-year change increase 10% - 22%
*Est. sales in September quarter,
reported in December quarter
FISCAL YEAR
Current
Guidance
FY 2011 FY 2012
Results Estimates
Revenues $14.96B $18.0B - $19.0B
Year-over-year change increase 20% - 27%
Non-GAAP Diluted EPS $3.20 $3.42 - $3.62
Year-over-year change increase 7% - 13%
Diluted EPS
attributable to QSI ($0.23) ($0.04)
Diluted EPS
attributable to
share-based compensation ($0.37) ($0.46)
Diluted EPS
attributable to
acquisition-related items ($0.12) ($0.12)
Diluted EPS
attributable to tax items $0.04 $0.00
GAAP Diluted EPS $2.52 $2.80 - $3.00
Year-over-year change increase 11% - 19%
Metrics
Est. fiscal year*
CDMA-based device average
selling price range (2) approx $203 - $209 approx $197 - $209
*Shipments in Sept. to June
quarters, reported in Dec.
to Sept. quarters
CALENDAR YEAR Device
Estimates (2)
Current
Current Guidance
Prior Guidance Guidance Calendar
Calendar 2011 Calendar 2011 2012
Estimates Estimates Estimates
Est. CDMA-based device
shipments
approx. 170M - approx. 170M - not provided
March quarter 174M 174M
approx. 187M - not provided
June quarter not provided 191M
September quarter not provided not provided not provided
December quarter not provided not provided not provided
Est. Calendar year range
(approx.) 750M - 800M 755M - 795M 865M - 935M
Midpoint Midpoint Midpoint
Est. total CDMA-based
units approx. 775M approx. 775M approx. 900M
Est. CDMA units approx. 245M approx. 235M not provided
Est. WCDMA units approx. 530M approx. 540M not provided
(1) As adjusted to reflect the reclassification of revenues
related to FLO TV to discontinued operations.
(2) 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 was not reported by the
licensee until such particular period.
Sums may not equal totals due to rounding.
Results of Business Segments
The following tables have been adjusted to reflect discontinued operations (Note 5) (in millions, except per share data):
Non-GAAP
Reconciling
SEGMENTS QCT QTL QWI Items (1) Non-GAAP
Q4 - FISCAL 2011
Revenues $2,587 $1,361 $163 $6 $4,117
Change from prior year 39% 48% (5%) N/M 39%
Change from prior
quarter 18% 8% (1%) N/M 14%
Operating income
(loss) $1,624
Change from prior year 44%
Change from prior
quarter 17%
EBT $569 $1,193 ($5) ($20) $1,737
Change from prior year 10% 58% N/M N/M 28%
Change from prior
quarter 32% 9% 62% N/M 10%
EBT as a % of revenues 22% 88% N/M N/M 42%
Discontinued operations, net of tax (5) $ -
Net income (loss) $1,372
Change from prior year 24%
Change from prior
quarter 11%
Diluted EPS $0.80
Change from prior year 18%
Change from prior
quarter 10%
Diluted shares used 1,716
Q3 - FISCAL 2011
Revenues $2,194 $1,257 $164 $8 $3,623
Operating income
(loss) 1,393
EBT 430 1,092 (13) 65 1,574
Discontinued operations, net of tax (5) -
Net income (loss) 1,240
Diluted EPS $0.73
Diluted shares used 1,709
Q1 - FISCAL 2011
Revenues $2,116 $1,057 $172 $3 $3,348
Operating income
(loss) 1,416
EBT 640 892 - 128 1,660
Discontinued operations, net of tax (5) -
Net income (loss) 1,345
Diluted EPS $0.82
Diluted shares used 1,648
Q4 - FISCAL 2010
Revenues $1,860 $921 $171 $ - $2,952
Operating income
(loss) 1,130
EBT 519 754 (2) 90 1,361
Discontinued operations, net of tax (5) -
Net income (loss) 1,105
Diluted EPS $0.68
Diluted shares used 1,621
12 MONTHS - FISCAL 2011
Revenues $8,859 $5,422 $656 $20 $14,957
Change from prior year 32% 48% 4% N/M 36%
Operating income
(loss) $6,084
Change from prior year 41%
EBT $2,056 $4,753 ($152) $183 $6,840
Change from prior year 21% 57% N/M (49%) 34%
Discontinued operations, net of tax (5) $ -
Net income (loss) $5,407
Change from prior year 33%
Diluted EPS $3.20
Change from prior year 30%
Diluted shares used 1,691
12 MONTHS- FISCAL 2010
Revenues $6,695 $3,659 $628 $ - $10,982
Operating income
(loss) 4,316
EBT 1,693 3,020 12 361 5,086
Discontinued operations, net of tax (5) -
Net income (loss) 4,071
Diluted EPS $2.46
Diluted shares used 1,658
Tax Acquisition-
Share-Based Items Related
SEGMENTS Compensation* (2) Items (3) QSI (4)* GAAP*
Q4 - FISCAL
2011
Revenues $ - $ - $ - $ - $4,117
Change from
prior year 39%
Change from
prior
quarter 14%
Operating
income
(loss) ($252) $ - ($125) ($9) $1,238
Change from
prior year (61%) N/A 40% 29%
Change from
prior
quarter (31%) (62%) 10% 11%
EBT ($252) $ - ($125) ($34) $1,326
Change from
prior year (61%) N/A (6%) 13%
Change from
prior
quarter (31%) (62%) (13%) 4%
EBT as a %
of revenues 32%
Discontinued
operations, net of
tax (5) ($1) $ - $ - ($5) ($6)
Net income
(loss) ($214) $ 40 ($120) ($22) $1,056
Change from
prior year (78%) N/M N/A 73% 22%
Change from
prior
quarter (46%) N/M (64%) N/M 2%
Diluted EPS ($0.12) $0.02 ($0.07) ($0.01) $0.62
Change from
prior year (71%) N/M N/A 80% 17%
Change from
prior
quarter (33%) N/M (75%) N/M 2%
Diluted
shares used 1,716 1,716 1,716 1,716 1,716
Q3 - FISCAL
2011
Revenues $ - $ - $ - $ - $3,623
Operating
income
(loss) (193) - (77) (10) 1,113
EBT (193) - (77) (30) 1,274
Discontinued
operations, net of
tax (5) - - - 44 44
Net income
(loss) (147) (4) (73) 19 1,035
Diluted EPS ($0.09) $ - ($0.04) $0.01 $0.61
Diluted
shares used 1,709 1,709 1,709 1,709 1,709
Q1 - FISCAL
2011
Revenues $ - $ - $ - $ - $3,348
Operating
income
(loss) (169) - - - 1,247
EBT (169) - - (21) 1,470
Discontinued
operations, net of
tax (5) (2) - - (80) (82)
Net income
(loss) (116) 28 - (87) 1,170
Diluted EPS ($0.07) $0.02 $ - ($0.05) $0.71
Diluted
shares used 1,648 1,648 1,648 1,648 1,648
Q4 - FISCAL
2010
Revenues $ - $ - $ - $ - $2,952
Operating
income
(loss) (157) - - (15) 958
EBT (157) - - (32) 1,172
Discontinued
operations, net of
tax (5) (3) - - (70) (73)
Net income
(loss) (120) (40) - (80) 865
Diluted EPS ($0.07) ($0.02) $ - ($0.05) $0.53
Diluted
shares used 1,621 1,621 1,621 1,621 1,621
12 MONTHS - FISCAL
2011
Revenues $ - $ - $ - $ - $14,957
Change from
prior year 36%
Operating
income
(loss) ($813) $ - ($208) ($37) $5,026
Change from
prior year (36%) N/M N/M 35%
EBT ($813) $ - ($208) ($132) $5,687
Change from
prior year (36%) N/M N/M 27%
Discontinued
operations, net of
tax (5) ($5) $ - $ - ($308) ($313)
Net income
(loss) ($624) $62 ($200) ($385) $4,260
Change from
prior year (41%) N/M N/M (75%) 31%
Diluted EPS ($0.37) $0.04 ($0.12) ($0.23) $2.52
Change from
prior year (37%) N/M N/M (77%) 29%
Diluted
shares used 1,691 1,691 1,691 1,691 1,691
12 MONTHS-
FISCAL 2010
Revenues $ - $ - $ - $ - $10,982
Operating
income
(loss) (597) - (3) 11 3,727
EBT (597) - (3) 7 4,493
Discontinued
operations, net of
tax (5) (11) - - (262) (273)
Net income
(loss) (442) (159) (3) (220) 3,247
Diluted EPS ($0.27) ($0.10) $ - ($0.13) $1.96
Diluted
shares used 1,658 1,658 1,658 1,658 1,658
(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) During the first quarter of fiscal 2011, we recorded a tax
benefit of $32 million related to fiscal 2010 due to the
retroactive extension of the federal R&D tax credit.
During the fourth quarter of fiscal 2011, we recorded a
tax benefit of $44 million related to an agreement reached
on a component of our fiscal 2006 through 2010 state tax
returns. Also, during the first, second, third and fourth
quarters of fiscal 2011, we recorded $3 million, $3
million, $4 million and $4 million, respectively, in state
tax expense because deferred revenues related to the
license agreement signed in the first quarter of fiscal
2010 with Samsung is taxable in fiscal 2011 but the
resulting deferred tax asset will reverse in future years
when our state tax rate will be lower. Our quarterly and
2011 Non-GAAP results exclude these items.
(3) Beginning in the third quarter of fiscal 2011, Non-GAAP
results exclude certain items related to acquisitions.
During the third and fourth quarters of fiscal 2011,
Non-GAAP results excluded $45 million and $37 million,
respectively, related to the step-up of inventories to
fair value and $32 million and $88 million, respectively,
in amortization of intangible assets that resulted from
acquisitions completed in the third and fourth quarters of
fiscal 2011.
(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) During fiscal 2011, we shut down the FLO TV business and
network. The results of FLO TV are presented as
discontinued operations, and prior period amounts have
been adjusted accordingly.
* As adjusted for discontinued operations
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm’s fourth quarter fiscal 2011 earnings conference call will be broadcast live on November 2, 2011, 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 2, 2011, beginning at approximately 5:30 p.m. PT through December 2, 2011 at 9:00 p.m. PT. To listen to the replay, U.S. callers may dial (855) 859-2056 and international callers may dial +1-404-537-3406. U.S. and international callers should use reservation number 14571452. 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 3G and next-generation mobile technologies. For more than 25 years, Qualcomm ideas and inventions have driven the evolution of digital communications, linking people everywhere more closely to information, entertainment and each other. For more information, visit www.qualcomm.com
Note Regarding Use of Non-GAAP Financial Measures
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.
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 certain acquisition-related items. 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 and realized gains or losses 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. In fiscal 2011, the Company began excluding the benefit of retroactive extensions of the federal R&D tax credit from Non-GAAP results because the Company does not include the potential extension of the credit in its business outlook due to uncertainty as to whether and when the federal R&D tax credit will be retroactively extended. In addition to its historical practice of excluding acquired in-process research and development expenses from Non-GAAP results, the Company began excluding recognition of the step-up of inventories to fair value and amortization of certain intangible assets starting with acquisitions completed in the third quarter of fiscal 2011. These certain acquisition-related items are excluded and no longer allocated to the Company’s segments because management has concluded that such expenses should not be considered when assessing segment performance as they are unrelated to the operating activities of the Company’s ongoing core businesses. In addition, these charges are significantly impacted by the size and timing of acquisitions, potentially obscuring period to period comparisons of the Company’s operating 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 stockholder 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.
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 commercial deployment of, and demand for, our technologies in communications products and services; the uncertainty of global economic conditions and their potential impacts on demand for our products, services or applications and on 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 suppliers; foreign currency fluctuations; strategic investments and transactions we have or may pursue, including our investment in the BWA Spectrum in India which is currently subject to legal proceedings; failures, defects or errors in our products and services or in the products of our customers; the commercial success of our QMT division’s IMOD 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 25, 2011. We undertake 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. MSM is a registered trademark of Qualcomm Incorporated. CDMA2000 is a registered trademark of the Telecommunications Industry Association (TIA USA). All other trademarks are the property of their respective owners.
Qualcomm Contact:
Warren Kneeshaw
Phone: +1-858-658-4813
e-mail: ir@qualcomm.com
Qualcomm Incorporated
Supplemental Information for the Three Months Ended
September 25, 2011
(Unaudited)
Non-GAAP Share-Based Tax
Results Compensation Items
($ in millions
except per share
data)
Cost of
equipment and
services
revenues $ 1,391 $ 23 $ -
R&D 731 119 -
SG&A 371 110 -
Operating
income (loss) 1,624 (252) -
Investment
income
(loss), net 113 (b) - -
Tax rate 21% 15% N/A
Net income
(loss) $ 1,372 $ (214) $ 40 (d)
Diluted
earnings
(loss) per
share (EPS) $ 0.80 $ (0.12) $ 0.02
Operating
cash flow $ 1,886 $ (16) $ -
Operating
cash flow as
% of revenues 46% N/A N/A
Free cash
flow (e) $ 1,692 $ (16) $ -
Free cash
flow as a %
of revenues 41% N/A N/A
Acquisition-
Related GAAP
Items (a) QSI Results
($ in millions
except per share
data)
Cost of
equipment and
services
revenues $ 83 $ - $ 1,497
R&D - 1 851
SG&A 42 8 531
Operating
income (loss) (125) (9) 1,238
Investment
income
(loss), net - (25) (c) 88
Tax rate N/M N/M 20%
Net income
(loss) $ (120) $ (22) $ 1,056
Diluted
earnings
(loss) per
share (EPS) $ (0.07) $(0.01) $ 0.62
Operating
cash flow $ - $ (50) $ 1,820
Operating
cash flow as
% of revenues N/A N/A 44%
Free cash
flow (e) $ - $ (50) $ 1,626
Free cash
flow as a %
of revenues N/A N/A 39%
(a) Included $37 million related to the step-up of inventories to
fair value and $88 million in amortization of intangible assets
that resulted from acquisitions completed in the third and
fourth quarters of fiscal 2011.
(b) Included $112 million in interest and dividend income related
to cash, cash equivalents and marketable securities, which were
not part of our strategic investments, and $33 million in net
realized gains on investments, partially offset by $23 million
in other-than-temporary losses on investments, $5 million in
losses on derivatives and $4 million in interest expense.
(c) Included $27 million in interest expense and $4 million in
other-than-temporary losses on investments, partially offset by
$6 million in interest and dividend income related to cash,
cash equivalents and marketable securities.
(d) Included a $44 million tax benefit related toanagreement
reached on a component of our fiscal 2006 through 2010 state
tax returns, partially offset by $4 million in state tax
expense because deferred revenue related to the license
agreement signed in the first quarter of fiscal 2010 with
Samsung is taxable in fiscal 2011 but the resulting deferred
tax asset will reverse in future years when our state tax rate
will be lower.
(e) Free cash flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these
amounts is included in the "Reconciliation of Non-GAAP Free
Cash Flows to Net Cash Provided by Operating Activities (GAAP)
and Other Supplemental Disclosures" for the three months ended
September 25, 2011, included herein.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Qualcomm Incorporated
Supplemental Information for the Twelve Months Ended
September 25, 2011
(Unaudited)
Non-GAAP Share-Based Tax
Results Compensation (a) Items
($ in millions except
per share data)
Cost of
equipment and
services
revenues $ 4,662 $ 67 $ -
R&D 2,585 397 -
SG&A 1,512 349 -
Operating income
(loss) 6,084 (c) (813) -
Investment
income (loss),
net 756 (d) - -
Tax rate 21% 24% N/A
Net income
(loss) $ 5,407 $ (624) $ 62 (f)
Diluted earnings
(loss) per share
(EPS) $ 3.20 $ (0.37) $ 0.04
Operating cash
flow $ 5,418 $ (183) $ -
Operating cash
flow as % of
revenues 36% N/A N/A
Free cash flow
(g) $ 4,830 $ (183) $ -
Free cash flow
as a % of
revenues 32% N/A N/A
Acquisition-
Related GAAP
Items (b) QSI (a) Results
($ in millions except
per share data)
Cost of equipment and
services revenues $ 143 $ 5 $ 4,877
R&D 6 7 2,995
SG&A 59 25 1,945
Operating income (loss) (208) (37) 5,026
Investment income (loss),
net - (95) (e) 661
Tax rate N/M N/M 20%
Net income (loss) $ (200) $ (385) $ 4,260
Diluted earnings (loss) per
share (EPS) $ (0.12) $ (0.23) $ 2.52
Operating cash flow $ - $ (335) $ 4,900
Operating cash flow as % of
revenues N/A N/A 33%
Free cash flow (g) $ - $ (340) $ 4,307
Free cash flow as a % of
revenues N/A N/A 29%
(a) During fiscal 2011, the Company shut down the FLO TV business
and network. The results of FLO TV are presented as
discontinued operations, and prior period amounts have been
adjusted accordingly.
(b) Beginning in the third quarter of fiscal 2011, Non-GAAP results
exclude certain items related to acquisitions. During fiscal
2011, Non-GAAP results excluded $82 million related to the
step-up of inventories to fair value and $120 million in
amortization of intangible assets that resulted from
acquisitions completed in the third and fourth quarters of
fiscal 2011. In addition, fiscal 2011 Non-GAAP results excluded
$6 million in acquired in-process research and development
expense.
(c) Operating income during fiscal 2011 included impairment charges
of $120 million related to our Firethorn division, including
$114 million in goodwill impairment.
(d) Included $480 million in interest and dividend income related
to cash, cash equivalents and marketable securities, which were
not part of our strategic investments, $335 million in net
realized gains on investments and $1 million in equity in
earnings of investees, partially offset by $39 million in
other-than-temporary losses on investments, $15 million in
interest expense and $6 million in losses on derivatives.
(e) Included $99 million in interest expense, $13 million in
other-than-temporary losses on investments and $8 million in
equity in losses of investees, partially offset by $20 million
in interest and dividend income related to cash, cash
equivalents and marketable securities, $3 million in gains on
derivatives and $2 million in net realized gains on
investments.
(f) Included a tax benefit of $44 million related toanagreement
reached on a component of our fiscal 2006 through 2010 state
tax returns and a $32 million tax benefit related to fiscal
2010 due to the retroactive extension of the federal R&D tax
credit, partially offset by $14 million in state tax expense
because deferred revenues related to the license agreement
signed in the first quarter of fiscal 2010 with Samsung is
taxable in fiscal 2011 but the resulting deferred tax asset
will reverse in future years when our state tax rate will be
lower.
(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 Non-GAAP Free
Cash Flows to Net Cash Provided by Operating Activities (GAAP)
and Other Supplemental Disclosures" for the twelve months ended
September 25, 2011, included herein.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
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 25, 2011
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used)
by operating activities $ 1,886 $ (16) (a) $ (50) $ 1,820
Less: capital
expenditures (194) - - (194)
Free cash flow $ 1,692 $ (16) $ (50) $ 1,626
Revenues $ 4,117 $ - $ - $ 4,117
Free cash flow as a % of
revenues 41% N/A N/A 39%
Other supplemental cash
disclosures:
Cash transfers from QSI $ 2 $ - $ (2) $ -
Cash transfers to QSI
(b) (62) - 62 -
Net cash transfers $ (60) $ - $ 60 $ -
Twelve Months Ended September 25, 2011
Share-Based
Non-GAAP Compensation QSI GAAP
Net cash provided (used)
by operating activities $ 5,418 $ (183) (a) $ (335) $ 4,900
Less: capital
expenditures (588) - (5) (593)
Free cash flow $ 4,830 $ (183) $ (340) $ 4,307
Revenues $ 14,957 $ - $ - $ 14,957
Free cash flow as a % of
revenues 32% N/A N/A 29%
Other supplemental cash
disclosures:
Cash transfers from QSI
(c) $ 69 $ - $ (69) $ -
Cash transfers to QSI
(b) (392) - 392 -
Net cash transfers $ (323) $ - $ 323 $ -
Three Months Ended September 26, 2010
Share-Based
Non-GAAP Compensation 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
Twelve Months Ended September 26, 2010
Share-Based
Non-GAAP Compensation 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
(a) Incremental tax benefits from stock options exercised during the
period.
(b) Primarily funding for strategic debt and equity investments
and QSI operating expenses.
(c) Primarily from the issuance of subsidiary shares to noncontrolling
interests.
N/A - Not Applicable
Qualcomm Incorporated
Reconciliation of Non-GAAP Tax Rate to GAAP Tax Rate
(in millions)
(Unaudited)
Three Months Ended September 25, 2011
Non-GAAP Share-Based Tax
Results Compensation Items (a)
Income (loss)
from continuing
operations before
income taxes $ 1,737 $ (252) $ -
Income tax
(expense) benefit (365) 39 40
Income (loss)
from continuing
operations $ 1,372 $ (213) $ 40
Tax rate 21% 15% N/A
Three Months Ended September 25, 2011
Acquisition-
Related QSI GAAP
Items (b) Results
Income
(loss) from
continuing
operations
before
income taxes $ (125) $ (34) $ 1,326
Income tax
(expense)
benefit 5 10 (271)
Income
(loss) from
continuing
operations $ (120) $ (24) $ 1,055
Tax rate N/M N/M 20%
Twelve Months Ended September 25, 2011
Non-GAAP Share-Based Tax
Results Compensation Items (a)
Income (loss)
from continuing
operations before
income taxes $ 6,840 $ (813) $ -
Income tax
(expense) benefit (1,433) 194 62
Income (loss)
from continuing
operations $ 5,407 $ (619) $ 62
Tax rate 21% 24% N/A
Twelve Months Ended September 25, 2011
Acquisition-
Related QSI GAAP
Items (b) Results
Income
(loss) from
continuing
operations
before
income taxes $ (208) $ (132) $ 5,687
Income tax
(expense)
benefit 8 37 (1,132)
Income
(loss) from
continuing
operations $ (200) $ (95) $ 4,555
Tax rate N/M 28% 20%
(a) During the first quarter of fiscal 2011, we recorded a tax
benefit of $32 million related to fiscal 2010 due to the
retroactive reenactment of the federal R&D tax credit.
During the fourth quarter of fiscal 2011, we recorded a tax
benefit of $44 million related to an agreement reached on a
component of our fiscal 2006 through 2010 state tax returns.
We also recorded $4 million and $14 million in state tax
expense during the fourth quarter and fiscal 2011,
respectively, because deferred revenue related to the
license agreement signed in the first quarter of fiscal 2010
with Samsung is taxable in fiscal 2011 but the resulting
deferred tax asset will reverse in future years when our
state tax rate will be lower.
(b) 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
Sums may not equal totals due to rounding
Qualcomm Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
September 25, September 26,
2011 2010
Current assets:
Cash and cash equivalents $ 5,462 $ 3,547
Marketable securities 6,190 6,732
Accounts receivable, net 993 730
Inventories 765 528
Deferred tax assets 537 321
Other current assets 346 275
Total current assets 14,293 12,133
Marketable securities 9,261 8,123
Deferred tax assets 1,703 1,922
Assets held for sale 746 -
Property, plant and equipment, net 2,414 2,373
Goodwill 3,432 1,488
Other intangible assets, net 3,099 3,022
Other assets 1,474 1,511
Total assets $ 36,422 $ 30,572
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 969 $ 764
Payroll and other benefits related
liabilities 644 467
Unearned revenues 610 623
Loans payable 994 1,086
Income taxes payable 18 1,443
Other current liabilities 2,054 1,085
Total current liabilities 5,289 5,468
Unearned revenues 3,541 3,485
Other liabilities 620 761
Total liabilities 9,450 9,714
Stockholders' equity:
Qualcomm stockholders' equity:
Preferred stock, $0.0001 par value;
issuable in series;
8 shares authorized; none outstanding at
September 25, 2011 and September 26, 2010 - -
Common stock, $0.0001 par value; 6,000
shares authorized;
1,681 and 1,612 shares issued and
outstanding at
September 25, 2011 and September 26, 2010,
respectively - -
Paid-in capital 10,394 6,856
Retained earnings 16,204 13,305
Accumulated other comprehensive income 353 697
Total Qualcomm stockholders' equity 26,951 20,858
Noncontrolling interests 21 -
Total stockholders' equity 26,972 20,858
Total liabilities and stockholders' equity $ 36,422 $ 30,572
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
September 25, September 26, September 25, September 26,
2011 2010* 2011 2010*
Revenues:
Equipment and
services $ 2,673 $ 1,950 $ 9,223 $ 6,971
Licensing 1,444 1,002 5,734 4,011
Total revenues 4,117 2,952 14,957 10,982
Operating
expenses:
Cost of
equipment and
services
revenues 1,497 926 4,877 3,301
Research and
development 851 628 2,995 2,451
Selling, general
and
administrative 531 440 1,945 1,503
Other - - 114 -
Total operating
expenses 2,879 1,994 9,931 7,255
Operating income 1,238 958 5,026 3,727
Investment
income, net 88 214 661 766
Income from
continuing
operations
before income
taxes 1,326 1,172 5,687 4,493
Income tax
expense (271) (234) (1,132) (973)
Income from
continuing
operations 1,055 938 4,555 3,520
Discontinued
operations, net
of income taxes (6) (73) (313) (273)
Net Income 1,049 865 4,242 3,247
Net loss
attributable to
noncontrolling
interests 7 - 18 -
Net income
attributable to
Qualcomm $ 1,056 $ 865 $ 4,260 $ 3,247
Basic earnings
(loss) per share
attributable to
Qualcomm:
Continuing
operations $ 0.63 $ 0.59 $ 2.76 $ 2.15
Discontinued
operations - (0.05) (0.19) (0.17)
Net income $ 0.63 $ 0.54 $ 2.57 $ 1.98
Diluted earnings
(loss) per share
attributable to
Qualcomm:
Continuing
operations $ 0.62 $ 0.58 $ 2.70 $ 2.12
Discontinued
operations - (0.05) (0.18) (0.16)
Net income $ 0.62 $ 0.53 $ 2.52 $ 1.96
Shares used in
per share
calculations:
Basic 1,681 1,608 1,658 1,643
Diluted 1,716 1,621 1,691 1,658
Dividends per
share announced $ 0.215 $ 0.19 $ 0.81 $ 0.72
*As adjusted for discontinued operations
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Twelve Months Ended
September September September September
25, 26, 25, 26,
2011 2010 2011 2010
Operating
Activities:
Net income $ 1,049 $ 865 $ 4,242 $ 3,247
Adjustments to
reconcile net income
to net cash provided
by
operating
activities:
Depreciation and
amortization 241 171 1,061 666
Goodwill impairment - - 114 -
Revenues related to
non-monetary
exchanges (30) (31) (123) (130)
Income tax provision
in excess of (less
than) income tax
payments 14 36 (1,204) 116
Non-cash portion of
share-based
compensation expense 256 159 824 612
Incremental tax
benefit from stock
options exercised (16) (11) (183) (45)
Net realized gains
on marketable
securities and other
investments (33) (131) (337) (405)
Net impairment
losses on marketable
securities and other
investments 26 23 52 125
Other items, net (12) 6 12 (64)
Changes in assets
and liabilities, net
of effects of
acquisitions:
Accounts receivable,
net (161) 73 (140) (18)
Inventories (19) (87) (62) (80)
Other assets (34) 11 (70) (60)
Trade accounts
payable 165 125 (26) 148
Payroll, benefits
and other
liabilities 362 (68) 572 (229)
Unearned revenues 12 (48) 168 193
Net cash provided by
operating activities 1,820 1,093 4,900 4,076
Investing
Activities:
Capital expenditures (194) (113) (593) (426)
Advanced payment on
spectrum - - - (1,064)
Purchases of
available-for-sale
securities (2,677) (1,924) (10,948) (8,973)
Proceeds from sale
of
available-for-sale
securities 1,306 3,086 10,661 10,440
Purchases of other
marketable
securities - (850) - (850)
Cash received for
partial settlement
of investing
receivables - 1 18 34
Atheros acquisition,
net of cash acquired - - (3,130) -
Other investments
and acquisitions,
net of cash acquired (362) (49) (494) (94)
Other items, net 1 6 (3) 94
Net cash (used)
provided by
investing activities (1,926) 157 (4,489) (839)
Financing
Activities:
Borrowing under
loans payable 295 - 1,555 1,064
Repayment of loans
payable (295) - (1,555) -
Proceeds from
issuance of common
stock 255 170 2,647 689
Proceeds from put
option premiums 75 - 75 -
Proceeds from
issuance of
subsidiary shares to
noncontrolling
interests - - 62 -
Incremental tax
benefit from stock
options exercised 16 11 183 45
Repurchase and
retirement of common
stock (142) (122) (142) (3,016)
Dividends paid (361) (305) (1,346) (1,177)
Change in obligation
under securities
lending 4 46 -
Other items, net (1) (9) (7) (10)
Net cash (used)
provided by
financing activities (154) (255) 1,518 (2,405)
Effect of exchange
rate changes on cash (24) 11 (14) (2)
Net (decrease)
increase in cash and
cash equivalents (284) 1,006 1,915 830
Cash and cash
equivalents at
beginning of period 5,746 2,541 3,547 2,717
Cash and cash
equivalents at end
of period $ 5,462 $ 3,547 $ 5,462 $ 3,547
.
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