|
|
QUALCOMM Announces Fourth Quarter and Fiscal 2005 Results
SAN DIEGO, Nov. 2 /PRNewswire-FirstCall/ -- QUALCOMM Incorporated today announced results for its fourth quarter and fiscal 2005 year ended September 25, 2005.
Total QUALCOMM Results(1):
Fourth Quarter
* Revenues: $1.56 billion, up 40 percent year-over-year and 15 percent
sequentially.
* Net income: $538 million, up 37 percent year-over-year and down
4 percent sequentially.
* Diluted earnings per share: $0.32, up 39 percent year-over-year and
down 3 percent sequentially.
* Effective tax rate: 32 percent.
* Operating cash flow: $945 million, up 23 percent year-over year;
61 percent of revenue. (Defined as net cash provided by operating
activities.)
* Return of capital to stockholders: paid $147 million, or $0.09 per
share, in cash dividends, up 29 percent year-over-year.
Fiscal 2005
* Revenues: $5.67 billion, up 16 percent year-over-year.
* Net income: $2.14 billion, up 25 percent year-over-year.
* Diluted earnings per share: $1.26, up 22 percent year-over-year.
* Effective tax rate: 24 percent.
* Operating cash flow: $2.69 billion, up 8 percent year-over-year;
47 percent of revenue.
* Return of capital to stockholders: $1.48 billion; this includes
$524 million of cash dividends, or $0.32 per share, and $953 million
to repurchase 27.1 million shares of our common stock.
Pro Forma Defined
Pro forma results exclude the QUALCOMM Strategic Initiatives (QSI) segment for all periods presented, and one-time tax benefits related to fiscal 2004 that were recorded in the second and third quarters of fiscal 2005. Pro forma results for fiscal 2004 are presented as if the "New Method"(1) of recording royalties had been in use throughout that year.
QUALCOMM Pro Forma Results:
Fourth Quarter
* Revenues: $1.56 billion, up 14 percent year-over-year and 15 percent
sequentially.
* Net income: $543 million, up 9 percent year-over-year and 17 percent
sequentially.
* Diluted earnings per share: $0.32, up 7 percent year-over-year and
14 percent sequentially.
* Effective tax rate: 33 percent.
* Free cash flow: $838 million, up 31 percent year-over-year; 54 percent
of revenue. (Defined as net cash provided by operating activities
less capital expenditures.)
Fiscal 2005
* Revenues: $5.67 billion, up 13 percent year-over-year.
* Net income: $1.97 billion, up 9 percent year-over-year.
* Diluted earnings per share: $1.16, up 8 percent year-over-year,
excludes $0.06 per share attributable to the QSI segment and $0.04 per
share attributable to the one-time tax benefits recorded in the second
and third quarters of fiscal 2005.
* Effective tax rate: 30 percent.
* Free cash flow: $2.24 billion, up 4 percent year-over-year;
39 percent of revenue.
Detailed reconciliations between total QUALCOMM results and QUALCOMM pro forma results and cash flows are included at the end of this news release. Prior period reconciliations are presented on our Investor Relations web page at http://www.qualcomm.com/.
"Our record financial results reflect the accelerating migration to CDMA throughout the world," said Dr. Paul E. Jacobs, chief executive officer of QUALCOMM. "As of September 2005, there were approximately 159 operators offering third generation services in 71 countries with over 200 million subscribers."
"We aggressively increased our R&D investment in fiscal 2005. QUALCOMM consistently leads the market with innovative wireless solutions benefiting suppliers, operators and consumers. A significant result is that QUALCOMM's WCDMA/HSDPA solutions have been selected by more than 30 handset manufacturers around the world and a number of very exciting wireless devices based on our chipsets will be introduced by the end of this year. In addition, our CDMA2000 1xEV-DO solutions power more than 120 commercially available devices around the world, as existing networks are expanded and new networks are launched. Our pioneering work in DO has been adapted to create HSDPA, and QUALCOMM is recognized as a leading innovator in both of these technologies. The multimedia capabilities of our Launchpad suite of software and our BREW applications platform have seen tremendous uptake over the past year as operators have increasingly focused on data as a source for new revenue streams. We recently demonstrated MediaFLO working over-the-air and we remain optimistic about a significant commercial launch next year. The technical superiority of our MediaFLO technology will enable the delivery of high quality video to the mass market."
"Looking forward, we anticipate 2006 to be yet another strong growth year with new CDMA handset shipments growing approximately 30% year-over-year. The wireless market continues to evolve at a rapid pace and QUALCOMM will continue increasing R&D investments in fiscal 2006 to capture the many opportunities ahead and maintain or extend our leadership position in the market."
Cash and Marketable Securities
QUALCOMM's cash, cash equivalents and marketable securities totaled approximately $8.7 billion at the end of fiscal 2005, compared to $7.9 billion on June 26, 2005 and $7.6 billion on September 26, 2004. In the fourth quarter of fiscal 2005, the Company recognized approximately $43 million of investment income related to put options sold in connection with our stock repurchase program which, if exercised, will require us to repurchase an additional 11.5 million shares for $411 million. During the fourth quarter of fiscal 2005, we made the decision to repatriate approximately $0.5 billion of qualifying foreign earnings under the American Jobs Creation Act of 2004.
Research and Development
Research and development (R&D) expenses were $271 million in the fourth fiscal quarter and $1.0 billion in fiscal 2005, up 30 and 40 percent year- over-year, respectively. Increases in R&D are primarily due to additional engineering resources for the development of integrated circuit products and other initiatives to support lower-cost phones, multimedia applications, high- speed wireless Internet access and multimode, multiband, multinetwork products and technologies, including CDMA2000 1xEV-DO, WCDMA, HSDPA, GSM/GPRS/EDGE and OFDMA, and the development of our FLO (Forward Link Only) technology, MediaFLO Media Distribution System (MDS) and iMoD display products. R&D expenses included $16 million in the fourth quarter and $49 million in fiscal 2005 attributable to the QUALCOMM Strategic Initiatives (QSI) segment for MediaFLO USA, as compared to $8 million in the prior year quarter and $25 million in fiscal 2004.
Selling, General and Administrative
Selling, general and administrative (SG&A) expenses were $178 million in the fourth fiscal quarter and $631 million in fiscal 2005, up 29 and 15 percent year-over-year, respectively. Increases in fourth quarter and fiscal 2005 SG&A expenses compared to the fourth quarter of fiscal 2004 are largely attributable to increases in legal and patent related expenses, headcount growth and the offsetting effect of other income in the prior year periods that reduced SG&A expenses. SG&A expenses included $10 million of expenses in the fourth quarter and $20 million of expenses in fiscal 2005 attributable to the QSI segment, as compared to $3 million of income in the prior year quarter and $4 million of income in fiscal 2004.
Effective Income Tax Rate
Our fiscal 2005 effective income tax rate for total QUALCOMM is 24 percent, compared to our previous estimate of approximately 22 percent. Our fiscal 2005 pro forma effective tax rate is 30 percent, compared to our previous estimate of 28 percent. The increase in our annual effective tax rates as compared to our previous estimates for total QUALCOMM and QUALCOMM pro forma is primarily the result of $35 million additional tax expense related to our decision to repatriate on a one-time basis approximately $0.5 billion of qualifying foreign earnings in the fourth quarter of fiscal 2005. With this additional tax expense, the rates for the fourth quarter of fiscal 2005 are 32% for total QUALCOMM and 33% for QUALCOMM pro forma.
QUALCOMM Strategic Initiatives
The QSI segment includes our strategic investments and related income and expenses. The fourth quarter of fiscal 2005 results consisted of $26 million of operating expenses primarily related to MediaFLO USA and $4 million in equity in losses of investees, partially offset by $3 million in realized gains on investments. Total QUALCOMM results for the fourth quarter and fiscal 2005 include break-even and $0.06 diluted earnings per share for the QSI segment, respectively, compared to $0.03 and $0.01 earnings per share in the year-ago comparable periods.
Business Outlook
The following statements are forward-looking and actual results may differ materially. Please see Note Regarding Forward-Looking Statements at the end of this news release for a description of certain risk factors and QUALCOMM's annual and quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks. Due to their nature, certain income and expense items such as realized investment gains or losses in QSI and asset impairments cannot be accurately forecast. Accordingly, the Company excludes forecasts of such items from its business outlook, and actual results may vary materially from the business outlook if the Company incurs any such income or expense items.
The following business outlook for total QUALCOMM includes the effects of the Company's adoption of SFAS No.123R, Share-Based Payment (FAS 123R) in the first quarter of fiscal 2006, which requires the expensing of share-based payment programs. A pro forma outlook is provided consistent with the presentation of pro forma results provided elsewhere herein and excludes share-based compensation. The total QUALCOMM and QUALCOMM pro forma outlook summary is detailed herein.
Fiscal 2006 earnings per share include a decrease of approximately $0.18 per share for total QUALCOMM related to a preliminary estimate of share-based compensation expense, and a decrease of approximately $0.03 per share due to the ELATA acquisition which closed in August and the anticipated Flarion acquisition which is expected to close in the first half of fiscal 2006. The expiration of royalty-sharing obligations under two agreements, one in fiscal 2005 and the other in fiscal 2006, will contribute to an increase in our royalty revenues in fiscal 2006 and beyond. In fiscal 2006, we expect the termination of these royalty sharing obligations to contribute approximately $290 to $310 million to our fiscal 2006 revenue and pretax earnings. We also expect a tax rate for fiscal 2006 of approximately 24 percent for total QUALCOMM and approximately 27 percent for QUALCOMM pro forma.
Our handset shipment forecast will be discussed in more detail during our fourth quarter conference call. This call is scheduled for 2:30pm (PST) on Wednesday November 2, 2005. Refer to conference call dial-in information included at the end of this press release.
The following estimates are approximations and are based on the current business outlook:
Business Outlook Summary
FIRST QUARTER
Current Guidance
Q1'05 Q1'06
Results Estimates
QUALCOMM Pro Forma
Revenues $1.39B $1.67B - $1.77B
Year-over-year change increase 20% - 27%
Diluted earnings per share (EPS) $0.28 $0.36- $0.38
Year-over-year change increase 29% - 36%
Total QUALCOMM
Revenues $1.39B $1.67B - $1.77B
Year-over-year change increase 20% - 27%
Diluted earnings per share (EPS) $0.30 $0.30 - $0.32
Year-over-year change increase 0% - 7%
EPS attributable to QSI $0.02 ($0.02)
EPS attributable to
share-based
compensation n/a ($0.04)
Metrics
MSM Shipments approx. 39M 46M - 48M
CDMA/WCDMA handset
units shipped approx. 40M* 51M - 53M*
CDMA/WCDMA handset
unit wholesale
average
selling price approx. $212* $206*
*Shipments in Sept. quarter, reported in Dec. quarter
FISCAL YEAR
Current Guidance
FY 2005 FY 2006
Results Estimates
QUALCOMM Pro Forma
Revenues $5.67B $6.7B - $7.1B
Year-over-year change increase 18% - 25%
Diluted earnings per share (EPS) $1.16 $1.43 - $1.47
Year-over-year change increase 23% - 27%
Total QUALCOMM
Revenues $5.67B $6.7B - $7.1B
Year-over-year change increase 18% - 25%
Diluted earnings per share (EPS) $1.26 $1.19 - $1.23
Year-over-year change decrease 2% - 6%
EPS attributable to QSI $0.06 ($0.06)
EPS attributable to share-based
compensation n/a ($0.18)
EPS attributable to tax benefit
related to prior year $0.04 n/a
Metrics
Fiscal year* CDMA/WCDMA handset
unit wholesale average selling
price approx. $215 $210
*Shipments in Sep. to June quarters, reported in Dec. to Sep. quarters
CALENDAR YEAR handset estimates
CDMA/WCDMA handset
unit shipments Prior Guidance Current Guidance Current Guidance
Calendar 2005 Calendar 2005 Calendar 2006
Estimates Estimates Estimates
March quarter actuals approx. 43M approx. 43M not provided
June quarter actuals approx. 48M approx. 48M not provided
September quarter not provided 51M - 53M not provided
December quarter not provided not provided not provided
Calendar year range 198M - 208M 200M - 205M 255M - 270M
Midpoint Midpoint Midpoint
CDMA/WCDMA units 203M 202M 262M
CDMA units 158M 158M 176M
WCDMA units 45M 44M 86M
Sums may not equal totals due to rounding
Results of Business Segments The following tables, which present segment information, have been adjusted to reflect the 2005 segment presentation (Note 1), as well as to present QTL results for fiscal year 2004 as if the New Method of recognizing QTL revenues had been in effect for the entire year (Note 3.) GAAP equivalents and reconciliations for fiscal 2004 periods are included at the end of this news release (dollars in millions, except per share data):
Fourth Quarter - Fiscal Year 2005
Reconciling QUALCOMM
Items Pro Total
Segments QCT QTL QWI (2) Forma QSI QUALCOMM
Revenues $912 $497 $170 $(19) $1,560 $-- $1,560
Change from
prior year
(New Method
for QTL (3)) 7% 23% 10% N/M 14% 14%
Change from
prior
quarter 19% 11% 4% N/M 15% 15%
Earnings (loss)
from
continuing
operations
before taxes $266 $451 $21 $75 $813 $(27) $786
Change from
prior year
(New Method
for QTL (3)) (3%) 24% 75% N/M 21% N/M 15%
Change from
prior
quarter 43% 11% 75% N/M 24% N/M 15%
Net income (loss) $543 $(5) $538
Change from
prior year
(New Method
for QTL (3)) 9% N/M (2%)
Change from prior
quarter 17% N/M (4%)
Diluted earnings per
common share $0.32 $-- $0.32
Change from prior year
(New Method for QTL
(3)) 7% N/M 0%
Change from prior
quarter 14% N/M (3%)
Third Quarter - Fiscal Year 2005
Reconciling
Segments QCT QTL QWI Items (2)
Revenues $766 $448 $164 $(20)
Earnings from continuing
operations before taxes 186 407 12 51
Net income
Diluted earnings per common share
Third Quarter - Fiscal Year 2005
Tax
QUALCOMM Adjustment Total
Segments Pro Forma (4) QSI QUALCOMM
Revenues $1,358 $-- $-- $1,358
Earnings from continuing
operations before taxes 656 -- 30 686
Net income 465 16 79 560
Diluted earnings per common share $0.28 $0.01 $0.05 $0.33
First Quarter - Fiscal Year 2005
Reconciling QUALCOMM
Items Pro Total
Segments QCT QTL QWI (2) Forma QSI QUALCOMM
Revenues $865 $400 $159 $(34) $1,390 $-- $1,390
Earnings
from
continuing
operations
before
taxes 242 358 16 48 664 40 704
Net income 474 39 513
Diluted
earnings
per common
share $0.28 $0.02 $0.30
Fourth Quarter - Fiscal Year 2004
New Reconciling QUALCOMM
Method* Items Pro Forma
Segments QCT(1)* QTL(3) QWI(1)* (1)(2)* (1)(3)*
Revenues $850 $404 $155 $(38) $1,371
Earnings from
continuing
operations before
taxes 273 364 12 24 673
Net income 499
Diluted earnings per
common share $0.30
Twelve Months - Fiscal Year 2005
Reconciling
Items
Segments QCT QTL QWI (2)
Revenues $3,290 $1,839 $644 $(100)
Change from prior year
(New Method for QTL (3)) 6% 24% 13% N/M
Earnings from continuing
operations before taxes $852 $1,663 $57 $227
Change from prior year
(New Method for QTL (3)) (19%) 24% 200% 177%
Net income
Change from prior year
(New Method for QTL (3))
Diluted earnings per common share
Change from prior year (New Method
for QTL (3))
Twelve Months - Fiscal Year 2005
Tax
QUALCOMM Adjustments Total
Segments Pro Forma (4)(5) QSI QUALCOMM
Revenues $5,673 $-- $-- $5,673
Change from prior year
(New Method for QTL (3)) 13% 13%
Earnings from continuing
operations before taxes $2,799 $-- $10 $2,809
Change from prior year
(New Method for QTL (3)) 12% N/M 14%
Net income $1,970 $71 $102 $2,143
Change from prior year
(New Method for QTL (3)) 9% N/M N/M 18%
Diluted earnings per common
share $1.16 $0.04 $0.06 $1.26
Change from prior year
(New Method for QTL (3)) 8% N/M N/M 17%
Twelve Months - Fiscal Year 2004
New Reconciling QUALCOMM
Method* Items Pro Forma
Segments QCT(1)* QTL (3) QWI(1)* (1)(2)* (1)(3)*
Revenues $3,111 $1,483 $571 $(133) $5,031
Earnings from
continuing
operations
before taxes 1,048 1,346 19 82 2,495
Net income 1,800
Diluted earnings
per common share $1.07
(1) During the first quarter of fiscal 2005, the Company reorganized its
MediaFLO USA business into the QSI segment. The operating expenses
related to the MediaFLO USA business were included in reconciling
items through the end of fiscal 2004. Also during the first quarter
of fiscal 2005, the Company reorganized a division in the QWI segment
that develops and sells test tools into the QCT segment. Prior period
segment information has been adjusted to conform to the new segment
presentation.
(2) Reconciling items related to revenues consist primarily of other
non-reportable segment revenues less intersegment eliminations.
Reconciling items related to earnings before taxes consist primarily
of corporate expenses not allocated to the segments for management
reporting purposes, unallocated net investment income, non-reportable
segment results and the elimination of intercompany profit.
(3) QTL's results in the fourth quarter of fiscal 2004 reflect the
Company's decision to make the prospective change to the New Method of
recording royalties based solely on reports received from licensees
for royalty bearing sales of equipment in the prior quarter. This
change had the one-time effect of reducing royalty revenues in the
fourth quarter of fiscal 2004. Results using the New Method of
recording royalties are presented for prior periods to illustrate the
differences between the Prior Method of recording royalties and the
New Method implemented during the fourth quarter of fiscal 2004. The
QTL percentage increases over the prior year quarter on a GAAP basis
are as follows: Q4 Revenues, 229% increase; Q4 EBT, 306% increase;
year to date revenues, 38% increase; year to date EBT, 39% increase.
(4) During the second quarter of fiscal 2005, the Company decreased its
estimate of R&D costs allocable to the Company's foreign operations
under an intercompany cost sharing agreement. Due to this change in
estimate, the effective tax rate in the second quarter for total
QUALCOMM includes a $55 million benefit, or $0.03 diluted earnings
per share, related to fiscal 2004 and a $17 million benefit, or $0.01
diluted earnings per share, related to the first quarter of fiscal
2005. For fiscal 2005 pro forma presentation, results have been
adjusted to exclude the tax benefit attributable to fiscal 2004.
(5) During the third quarter of fiscal 2005, the Company made an election
to compute its California tax on the basis of its U.S. operations
only, which resulted in a $38 million tax benefit. Our effective tax
rate in the third quarter of fiscal 2005 for total QUALCOMM excluding
QSI includes a $16 million tax benefit, or $0.01 diluted earnings per
share, for this California tax election related to fiscal 2004. For
fiscal 2005 pro forma presentation, results have been adjusted to
exclude the tax benefit attributable to fiscal 2004.
* As adjusted as described in the notes above.
N/M - Not Meaningful
Sums may not equal totals due to rounding.
Business Segment Information
QUALCOMM CDMA Technologies (QCT)
* QCT shipped approximately 40 million MSM chips to customers worldwide
during the fourth quarter of fiscal 2005, compared to approximately
39 million units in the same quarter of fiscal 2004 and approximately
36 million units in the third quarter of fiscal 2005. A record
quantity for any single quarter, the year's cumulative total is also a
record with 151 million MSM chips shipped.
* QCT announced its second billion chips shipped since the Company's
first CDMA solution shipped in 1996. The second billion follow only
two years after the first billion were shipped over a period of 8 years
from 1996 to 2003.
* QCT's CDMA2000 and WCDMA products continue to gain traction worldwide.
The highly-integrated, multimedia-rich MSM6500 and MSM6550 solutions
for 1xEV-DO networks power more than 120 handset models around the
world, and more than 30 wireless device manufacturers have selected
QCT's WCDMA/HSDPA chipsets for more than 110 models that are either in
design or commercially available.
* QCT's power management portfolio expands to strengthen offerings for
all market segments. The PM6620 provides a cost-effective power
management option for chipsets from the Value Platform, while the
PM6630 and PM6640 reinforce the Multimedia Platform of integrated
solutions.
* QCT further expanded its wireless reach by providing chipsets to data
card providers for embedded modules in portable computing devices, with
three embedded models currently available. The initial chipset
utilized in the embedded modules was the MSM6500, allowing devices to
utilize 1xEV-DO wireless broadband capabilities on laptops. Other
customers have announced plans for both 1xEV-DO and HSDPA-enabled
devices.
QUALCOMM Technology Licensing (QTL)
* More than 130 major wireless equipment manufacturers are now licensed
by QUALCOMM for CDMA2000 products.
* More than 60 major wireless equipment manufacturers are now licensed by
QUALCOMM for WCDMA and/or TD-SCDMA products.
* Licensee information for the third quarter of fiscal 2005 as reported
by licensees in the fourth quarter of fiscal 2005:
-- We estimate WCDMA royalties contributed approximately 41 percent of
total royalties reported compared to approximately 26 percent in the
year ago quarter and approximately 36 percent reported in the prior
quarter.
-- Worldwide shipments of approximately 48 million CDMA2000 and WCDMA
subscriber units at an average selling price of approximately $213
were reported.
-- Forty-six subscriber licensees reported sales of CDMA2000 1X
products and 17 reported sales of WCDMA products.
-- Twelve infrastructure licensees reported sales of CDMA2000 1X
products and 12 reported sales of WCDMA products.
QUALCOMM Wireless & Internet Group (QWI)
QUALCOMM Internet Services (QIS)
* As of September 2005, 56 wireless operators were offering BREW services
in 29 countries, including customers acquired related to the ELATA
acquisition. As of June 2005, BREW publishers and developers have
earned more than $350 million to date from the sale of wireless
applications and services developed for the BREW solution, compared to
the more than $200 million announced in October 2004.
* Through September 2005, three operators, including ALLTEL, have entered
into agreements to license the BREW uiOne user interface offering.
* In August 2005, QUALCOMM completed the acquisition of ELATA, Ltd.
(ELATA), a developer of mobile content delivery and device management
software systems, for a total of approximately $57 million in cash. The
acquisition of ELATA will enable QUALCOMM to offer a unified mobile
content delivery system to operators who desire an enhanced framework
for managing, delivering and marketing rich wireless content. The ELATA
single service delivery framework has become part of QUALCOMM's family
of BREW product offerings and is being marketed under the brand name
deliveryOne.
QUALCOMM Wireless Business Solutions (QWBS)
* QWBS shipped nearly 11,000 satellite-based systems (OmniTRACS,
EutelTRACS and TruckMAIL) in the fourth quarter of fiscal 2005 compared
to nearly 13,900 in the fourth quarter of fiscal 2004 and approximately
13,800 in the third quarter of fiscal 2005. This brings the cumulative
total satellite-based systems shipped worldwide to more than 566,000.
* QWBS shipped nearly 17,500 terrestrial-based systems (OmniExpress,
GlobalTRACS and T2 Untethered TrailerTRACS) in the fourth quarter of
fiscal 2005 compared to nearly 4,900 terrestrial-based systems in the
fourth quarter of fiscal 2004 and more than 19,600 terrestrial-based
systems in the third quarter of fiscal 2005. This brings the
cumulative total terrestrial-based systems shipped worldwide to more
than 85,000.
Other
* On August 11, 2005, QUALCOMM announced its intention to acquire Flarion
Technologies, Inc. (Flarion), a developer of OFDMA technology. The
acquisition of Flarion is intended to broaden QUALCOMM's ability to
effectively support operators who may prefer an OFDMA or hybrid
OFDM/CDMA/WCDMA network alternative for differentiating their services.
QUALCOMM Strategic Initiatives (QSI)
MediaFLO USA
* QUALCOMM and its partners announced the FLO Forum, a non-profit
industry association that will work together to promote the development
of FLO technology products and services. The FLO Forum, currently
comprised of 24 members, will work with regional and global industry
consortia, regulatory bodies and designated standards organizations in
support of the open standardization of FLO technologies, and develop
equipment compliance and certification processes for FLO products. A
listing of current members can be found on the FLO Forum web site at
http://www.floforum.org/.
* MediaFLO conducted the first live, over-the-air demonstration of FLO
technology delivering content to a mobile handset. FLO technology, a
multicast innovation and key component of the MediaFLO Media
Distribution System (MDS), is an air-interface technology designed to
increase capacity and coverage and reduce cost for multimedia content
delivery to mobile handsets. The demonstration featured over-the-air
delivery and viewing of multiple channels of high quality (QVGA)
wireless multimedia content, both streaming video and multicast packet
data to a mobile handset.
Conference Call
QUALCOMM's fourth quarter fiscal 2005 earnings conference call will be broadcast live on November 2, 2005 beginning at 2:30 p.m. (PST) on the Company's web site at: http://www.qualcomm.com/. This conference call may contain forward-looking financial information. The conference call will include a discussion of "non-GAAP financial measures" as that term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as the other material financial and statistical information to be discussed in the conference call, will be posted on the Company's Investor Relations web site at http://www.qualcomm.com/ immediately prior to commencement of the call. A taped audio replay will be available via telephone on November 2, 2005 beginning at approximately 4:30 p.m. (PST) through November 17, 2005 at 4:30 p.m. (PST). To listen to the replay, U.S. callers may dial (800) 633-8284 and international callers may dial (402) 977-9140. U.S. and international callers should use reservation number 21245580. An audio replay of the conference call will be available on the Company's web site at http://www.qualcomm.com/ for two weeks following the live call.
QUALCOMM Incorporated (http://www.qualcomm.com/) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2005 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
Note Regarding Use of Non-GAAP Financial Measures
Pro forma financial measurements are used by management to evaluate, assess and benchmark the Company's operating results, and the Company believes that pro forma reporting represents relevant and useful information that is widely used by analysts, investors and other interested parties in its industry. The Company presents pro forma financial information excluding the QUALCOMM Strategic Initiatives (QSI) segment to facilitate evaluation of the Company's ongoing core operating businesses, including QUALCOMM CDMA Technologies (QCT), QUALCOMM Technology Licensing (QTL) and QUALCOMM Wireless & Internet (QWI). QSI results relate to strategic investments for which the Company has exit strategies of varying durations. Management believes that the information excluding QSI presents a more representative view of the operating and liquidity performance of the Company because it excludes the effect of fluctuations in the values of investments that are unrelated to the Company's operational performance.
The Company presents pro forma financial results for fiscal 2004 as though the New Method of recording royalties had been in effect throughout fiscal 2004 to facilitate evaluation by management, investors and analysts of the results for fiscal 2004 on a comparable basis to the Company's current results, current guidance and future periods. The Company believes that this presentation is useful in evaluating its performance on a consistent and comparable basis.
The Company presents pro forma results for fiscal 2005 excluding one-time tax benefits related to fiscal 2004 to facilitate an understanding of its ongoing tax rate and after tax earnings. The Company believes that this presentation is useful in evaluating performance on a consistent and comparable basis.
The Company presents pro forma financial results for fiscal 2006 excluding share-based compensation under FAS 123R to facilitate evaluation by management, investors and other interested parties in its industry of core business operating results. The Company's management uses this pro forma presentation to evaluate, assess and benchmark the Company's operating results because share-based compensation is not an expense that requires or will require cash payment by the Company. This Company believes that this presentation is also useful to evaluate performance on a basis that is consistent and comparable with periods prior to the adoption of FAS 123R in the first quarter of fiscal 2006.
The Company's management uses pro forma cash flow information including marketable securities to analyze increases and decreases in certain of its liquid assets, comprised of cash, cash equivalents and marketable securities. Management views certain marketable securities as liquid assets available to fund operations, which result from cash management strategies designed to increase yields. However, these marketable securities do not meet the definition of cash equivalents in accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows" and must be excluded from the GAAP statements of cash flows. Since the GAAP statements of cash flows reconcile the Company's beginning and ending cash and cash equivalents balances, the purchases and sales of marketable securities are presented as inflows and outflows. For internal analysis of the Company's cash position, management does not view these transactions as inflows and outflows from the business, but as cash management transactions. If required, most of such investments could be settled relatively quickly as additional cash resources are needed. The Company believes that this non-GAAP presentation is a helpful measure of the Company's liquidity.
The non-GAAP pro forma financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, pro forma is not a term defined by GAAP, and, as a result, the Company's measure of pro forma results might be different than similarly titled measures used by other companies. Reconciliations between total QUALCOMM results and QUALCOMM pro forma results and total QUALCOMM cash flow and QUALCOMM pro forma changes in cash, cash equivalents and marketable securities 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 development, deployment and commercial acceptance of CDMA-based networks and CDMA-based technology, including CDMA2000 1X, 1xEV-DO and WCDMA, both domestically and internationally; our dependence on major customers and licensees; fluctuations in the demand for CDMA-based products, services or applications; foreign currency fluctuations; strategic loans, investments and transactions the Company has or may pursue; our dependence on third party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the Flarion acquisition; developments in current and future litigation, as well as the other risks detailed from time-to-time in the Company's SEC reports.
QUALCOMM(R), QUALCOMM Wireless Business Solutions(R), Mobile Station Modem(TM), MSM(TM), FLO(TM), Clipcasting(TM), MediaFLO(TM), MSM6500(TM), MSM6550(TM), PM6620(TM), PM6630(TM), PM6640(TM), BREW(R), uiOne(TM), iMoD(TM), TruckMAIL(TM), OmniTRACS(R), OmniExpress(R), GlobalTRACS(R), T2(TM), LINQ(TM) and Untethered TrailerTRACS(R) are trademarks and/or service marks of QUALCOMM Incorporated. CDMA2000(R) is a registered trademark of the Telecommunications Industry Association. All other trademarks are the property of their respective owners.
(1) The New Method of recording royalties is based solely on reports
received from licensees for royalty bearing sales of equipment in the
prior quarter. The Company adopted this New Method during the fourth
quarter of fiscal 2004 on a prospective basis. Under the Prior Method
of recording royalties, the Company recorded an estimate of earned
royalties in the quarter preceding its receipt of licensee reports.
As a result of the change, GAAP results for the fourth quarter of
fiscal 2004 reflect only partial economic performance of the Company's
licensing business as royalty revenue that would have been recognized
in the fourth quarter of fiscal 2004 was recognized in the first
quarter of fiscal 2005. Results under the New Method are presented
herein under pro forma results to assist investors with evaluating
financial performance on a comparable basis.
QUALCOMM Contact:
Bill Davidson
Vice President, Investor Relations
1-(858) 658-4813 (ph) 1-(858) 651-9303 (fax)
e-mail: ir@qualcomm.com
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
PRO FORMA RESULTS TO TOTAL QUALCOMM RESULTS
(In millions, except per share data)
(Unaudited)
Three Months Ended September 25, 2005
Pro Forma QSI Total QUALCOMM
Revenues:
Equipment and services $1,035 $-- $1,035
Licensing and royalty fees 525 -- 525
1,560 -- 1,560
Operating expenses:
Cost of equipment and services
revenues 441 -- 441
Research and development 255 16 271
Selling, general and administrative 168 10 178
Total operating expenses 864 26 890
Operating income (loss) 696 (26) 670
Investment income (expense), net 117 (a) (1) (b) 116
Income (loss) before income taxes 813 (27) 786
Income tax (expense) benefit (270)(c) 22 (248)(c)
Net income (loss) $543 $(5) $538
Earnings per common share:
Diluted $0.32 $-- $0.32
Shares used in per share
calculations:
Diluted 1,686 1,686 1,686
Supplemental Financial Data:
Operating Cash Flow $964 $(19) $945
Operating Cash Flow as a % of Revenue 62% 61%
Free Cash Flow (d) $838 $(31) $807
Free Cash Flow as a % of Revenue 54% 52%
(a) Includes $71 million in interest income related to cash, cash
equivalents and marketable securities, which are not part of the
Company's strategic investment portfolio, $9 million in net realized
gains on investments and $43 million in gains on derivatives related
to put options sold in connection with our stock repurchase program,
partially offset by $6 million in other-than-temporary losses on
marketable securities.
(b) Includes $3 million in net realized gains on investments more than
offset by $4 million in equity in losses of investees.
(c) The fourth quarter of fiscal 2005 tax rates of 32% for total QUALCOMM
and 33% for QUALCOMM pro forma are higher than the annual effective
tax rate primarily as a result of $35 million expense related to the
Company's decision during the fourth quarter to repatriate on a one-
time basis approximately $0.5 billion of qualifying foreign earnings
as provided for under the American Jobs Creation Act of 2004.
(d) Free Cash Flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these amounts
is presented in the Condensed Consolidated Statements of Cash Flows
and Marketable Securities for the three months ended
September 25, 2005, included herein.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
PRO FORMA RESULTS TO TOTAL QUALCOMM RESULTS
(In millions, except per share data)
(Unaudited)
Twelve Months Ended September 25, 2005
Tax Total
Pro Forma Adjustments QSI QUALCOMM
Revenues:
Equipment and services $3,744 $-- $-- $3,744
Licensing and royalty fees 1,929 -- -- 1,929
5,673 -- -- 5,673
Operating expenses:
Cost of equipment and
services revenues 1,645 -- -- 1,645
Research and development 962 -- 49 1,011
Selling, general and
administrative 611 -- 20 631
Total operating
expenses 3,218 -- 69 3,287
Operating income (loss) 2,455 -- (69) 2,386
Investment income, net 344(a) -- 79(b) 423
Income before income taxes 2,799 -- 10 2,809
Income tax (expense) benefit (829)(c) 71 92 (666)(c)
Net income $1,970 $71 $102 $2,143
Earnings per common share:
Diluted $1.16 $0.04 $0.06 $1.26
Shares used in per share
calculations:
Diluted 1,694 1,694 1,694 1,694
Supplemental Financial Data:
Operating Cash Flow $2,722 -- $(36) $2,686
Operating Cash Flow as a % of
Revenue 48% 47%
Free Cash Flow (d) $2,240 $-- $(130) $2,110
Free Cash Flow as a % of
Revenue 39% 37%
(a) Includes $252 million in interest income related to cash, cash
equivalents and marketable securities, which are not part of the
Company's strategic investment portfolio, $78 million in net realized
gains on investments and $30 million in gains on derivatives primarily
related to put options sold in connection with our stock repurchase
program, partially offset by $13 million of other-than-temporary
losses on marketable securities and $3 million in interest expense.
(b) Includes $101 million in net realized gains on investments, $3 million
in gains on derivative instruments and $3 million in interest income,
partially offset by $28 million in equity in losses of investees.
(c) The annual effective tax rate for fiscal 2005 for total QUALCOMM is
approximately 24% and QUALCOMM pro forma is approximately 30%.
(d) Free Cash Flow is calculated as net cash provided by operating
activities less capital expenditures. Reconciliation of these amounts
is presented in the Condensed Consolidated Statements of Cash Flows
and Marketable Securities for the twelve months ended
September 25, 2005, included herein.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND MARKETABLE SECURITIES THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING PRO FORMA CASH FLOWS FROM CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES TO TOTAL QUALCOMM CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended September 25, 2005
Total
Pro Forma QSI QUALCOMM
Earnings (losses) before taxes,
depreciation, amortization and
other adjustments (1) $819 $(23) $796
Working capital changes and taxes
paid (2) 145 4 149
Net cash provided by operating
activities 964 (19) 945
Capital expenditures (126) (12) (138)
Free cash flow (Net cash provided
by operating activities less
capital expenditures) 838 (31) 807
Net additional share capital 150 -- 150
Proceeds from put options 8 -- 8
Dividends paid (147) -- (147)
Other investments and acquisitions,
net of cash acquired (59) (1) (60)
Other items, net -- 6 6
Changes in fair value and other
changes to marketable securities 14 -- 14
Marketable securities pending
settlement 39 -- 39
Transfer from QSI (3) 8 (8) --
Transfer to QSI (4) (35) 35 --
Net increase in cash, cash
equivalents and marketable
securities (5) $816 $1 $817
(1) Reconciliation to GAAP:
Net income $543 $(5) $538
Non-cash adjustments (a) 216 (15) 201
Net realized gains on
marketable securities
and other investments (10) (3) (13)
Net taxes paid 70 -- 70
Earnings (losses) before
taxes, depreciation,
amortization and other
adjustments $819 $(23) $796
(2) Reconciliation to GAAP:
Increase in cash resulting
from changes in working
capital $215 $4 $219
Net taxes paid (70) -- (70)
Working capital changes and
taxes paid $145 $4 $149
(3) Cash from loan payments
and sale of equity securities
(4) Funding for strategic debt and
equity investments and other QSI
operating expenses
(5) Reconciliation to GAAP cash flow
statement:
Net increase in cash and cash
equivalents (GAAP) $710 $-- $710
Plus: Net proceeds of
marketable securities 53 1 54
Plus: Net increase in fair
value and other changes to
marketable securities 14 -- 14
Plus: Net increase in
marketable securities pending
settlement 39 -- 39
Net increase in cash, cash
equivalents and marketable
securities $816 $1 $817
(a) See detail on the following pages.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS AND MARKETABLE SECURITIES
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING PRO FORMA CASH FLOWS
FROM CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES TO TOTAL
QUALCOMM CASH FLOWS
(In millions)
(Unaudited)
Twelve Months Ended September 25, 2005
Tax Total
Pro Forma Adjustments QSI QUALCOMM
Earnings (losses)
before taxes,
depreciation,
amortization and
other adjustments (1) $2,899 $-- $(60) $2,839
Working capital changes
and taxes paid (2) (177) -- 24 (153)
Net cash provided by
operating activities 2,722 -- (36) 2,686
Capital expenditures (482) -- (94) (576)
Free cash flow (Net cash
provided by operating
activities less
capital expenditures) 2,240 -- (130) 2,110
Net additional share
capital 386 -- -- 386
Repurchase and
retirement of common
stock (953) -- -- (953)
Proceeds from put options 37 -- -- 37
Dividends paid (524) -- -- (524)
Other investments and
acquisitions, net of
cash acquired (236) -- (13) (249)
Other items, net 2 -- 20 22
Changes in fair value
and other changes to
marketable securities 69 -- 126 195
Marketable securities
pending settlement 22 -- -- 22
Transfer from QSI (3) 165 -- (165) --
Transfer to QSI (4) (177) -- 177 --
Net increase in cash,
cash equivalents
and marketable
securities (5) $1,031 $-- $15 $1,046
(1) Reconciliation to
GAAP:
Net income $1,970 $71 $102 $2,143
Non-cash
adjustments (b) 839 (71) (61) 707
Net realized gains
on marketable
securities and
other investments (78) -- (101) (179)
Net taxes paid 168 -- -- 168
Earnings (losses)
before taxes,
depreciation,
amortization and
other adjustments $2,899 $-- $(60) $2,839
(2) Reconciliation to
GAAP:
(Decrease) increase
in cash resulting
from changes in
working capital $(9) $-- $24 $15
Net taxes paid (168) -- -- (168)
Working capital
changes and taxes
paid $(177) $-- $24 $(153)
(3) Cash from loan
payments and sale
of equity securities
(4) Funding for strategic
debt and equity
investments and other
QSI operating expenses
(5) Reconciliation to GAAP
cash flow statement:
Net increase in
cash and cash
equivalents (GAAP) $856 $-- $-- $856
Plus: Net purchase
(proceeds) of
marketable
securities 84 -- (111) (27)
Plus: Net increase
in fair value and
other changes
to marketable
securities 69 -- 126 195
Plus: Net increase
in marketable
securities pending
settlement 22 -- -- 22
Net increase in cash,
cash equivalents and
marketable
securities $1,031 $-- $15 $1,046
(b) See detail on the following page.
QUALCOMM Incorporated
SUPPLEMENTAL DETAIL TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
AND MARKETABLE SECURITIES
(In millions)
(Unaudited)
Three Months Ended September 25, 2005
Total
Pro Forma QSI QUALCOMM
(a) Non-cash adjustments are
comprised of:
Depreciation and amortization $55 $1 $56
Gains on derivative instruments (42) -- (42)
Other-than-temporary losses on
marketable securities and
other investments 6 1 7
Equity in losses of investees -- 4 4
Non-cash income tax expense
(benefit) 201 (22) 179
Other non-cash charges and
(credits) (4) 1 (3)
Total non-cash adjustments $216 $(15) $201
Twelve Months Ended September 25, 2005
Tax Total
Pro Forma Adjustments QSI QUALCOMM
(b) Non-cash adjustments are
compris | | |
Find Solutions for Enterprises, SMBs & Service Providers at the INTERNET TELEPHONY Conference and EXPO West, September 16-18, 2008. Los Angeles, California.