Qualcomm Announces Fourth Quarter and Fiscal 2012 Results
SAN DIEGO, Nov. 7, 2012 /PRNewswire-FirstCall/ — 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 30, 2012.
“I am very pleased with our performance this year. We delivered record revenues, earnings and MSM chipset shipments driven by increasing global consumption of wireless data across a diverse range of devices, particularly smartphones,” said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. “As we continue to invest in and execute on our strategic priorities, our broad licensing program and industry-leading Snapdragon and 3G/LTE chipset roadmap position us for double-digit revenue growth again in fiscal 2013.”
GAAP Results
Qualcomm’s results are reported in accordance with generally accepted accounting principles (GAAP).
Fourth Quarter Fiscal 2012
- Revenues: (1) $4.87 billion, up 18 percent year-over-year (y-o-y) and 5 percent sequentially.
- Operating income: (1 )$1.24 billion, even y-o-y and down 11 percent sequentially.
- Net income: (2) $1.27 billion, up 20 percent y-o-y and 5 percent sequentially.
- Diluted earnings per share: (2) $0.73, up 18 percent y-o-y and 6 percent sequentially.
- Effective tax rate: (1) 19 percent for the quarter.
- Operating cash flow: $1.41 billion, down 23 percent y-o-y; 29 percent of revenues.
- Return of capital to stockholders: $1.27 billion, including $426 million, or $0.25 per share, of cash dividends paid, and $841 million through repurchases of 15.3 million shares of common stock.
(1) Throughout this news release, the results of FLO TV are presented as discontinued operations. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates are from continuing operations (i.e., before discontinued operations and adjustments for noncontrolling interests), unless otherwise stated.
(2) Throughout this news release, net income and diluted earnings per share are attributable to Qualcomm (i.e., after discontinued operations and adjustments for noncontrolling interests), unless otherwise stated.
Fiscal 2012*
- Revenues: $19.12 billion, up 28 percent y-o-y.
- Operating income: ( )$5.68 billion, up 13 percent y-o-y.
- Net income: $6.11 billion, up 43 percent y-o-y.
- Diluted earnings per share: $3.51, up 39 percent y-o-y.
- Effective tax rate: 19 percent.
- Operating cash flow: $6.00 billion, up 22 percent y-o-y; 31 percent of revenues.
- Return of capital to stockholders: $2.90 billion, including $1.58 billion, or $0.93 per share, of cash dividends paid, and $1.31 billion through repurchases of 23.9 million shares of common stock.
Non-GAAP Results
Non-GAAP results exclude the QSI segment, certain share-based compensation, certain acquisition-related items and certain tax items.
Fourth Quarter Fiscal 2012
- Revenues: $4.87 billion, up 18 percent y-o-y and 5 percent sequentially.
- Operating income: $1.61 billion, down 1 percent y-o-y and 6 percent sequentially.
- Net income: $1.55 billion, up 13 percent y-o-y and 4 percent sequentially.
- Diluted earnings per share: $0.89, up 11 percent y-o-y and 5 percent sequentially. Excludes $0.01 earnings per share attributable to QSI, $0.13 loss per share attributable to certain share-based compensation, $0.04 loss per share attributable to certain acquisition-related items and $0.01 earnings per share attributable to certain tax-related items. The sum of Non-GAAP earnings per share and items excluded do not equal GAAP earnings per share due to rounding.
- Effective tax rate: 19 percent for the quarter.
- Free cash flow (defined as net cash from operating activities less capital expenditures): $1.24 billion, down 27 percent y-o-y; 25 percent of revenues.
Fiscal 2012*
- Revenues: $19.12 billion, up 28 percent y-o-y.
- Operating income: $7.10 billion, up 17 percent y-o-y.
- Net income: $6.46 billion, up 20 percent y-o-y.
- Diluted earnings per share: $3.71, up 16 percent y-o-y. Excludes $0.40 earnings per share attributable to QSI, $0.47 loss per share attributable to certain share-based compensation, $0.14 loss per share attributable to certain acquisition-related items and $0.01 earnings per share attributable to certain tax-related items.
- Effective tax rate: 20 percent.
- Free cash flow: $5.20 billion, up 8 percent y-o-y; 27 percent of revenues.
Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included within this news release.
* The following should be considered in regards to the year-over-year comparisons: Fiscal 2012 GAAP results included $776 million in earnings, net of income taxes, for discontinued operations (primarily a result of a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum), as compared to a $313 million loss, net of income taxes, for discontinued operations in fiscal 2011. Additionally, fiscal 2012 GAAP and Non-GAAP results included Qualcomm Atheros, Inc., which was acquired on May 24, 2011, as compared to fiscal 2011 GAAP and Non-GAAP results, which only included Qualcomm Atheros, Inc. from the date of the acquisition. Fiscal 2011 operating and free cash flows reflected the impact of a $1.5 billion income tax payment primarily related to license and settlement agreements entered into in fiscal 2008.
Key Business Metrics
Fourth Quarter Fiscal 2012
- MSM(TM) chip shipments: 141 million units, up 11 percent y-o-y and even sequentially.
- June quarter total reported device sales: approximately $46.5 billion, up 19 percent y-o-y and down 3 percent sequentially.
- June quarter estimated 3G/4G device shipments: approximately 210 to 214 million units, at an estimated average selling price of approximately $216 to $222 per unit.
Fiscal 2012
- MSM chip shipments: 590 million units, up 22 percent y-o-y.
- Total reported device sales: approximately $187.3 billion, up 25 percent y-o-y.
- Estimated 3G/4G device shipments: approximately 846 to 863 million units, at an estimated average selling price of approximately $216 to $222 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled $26.8 billion at the end of the fourth quarter of fiscal 2012, compared to $20.9 billion a year ago and $26.5 billion at the end of the third quarter of fiscal 2012. On October 17, 2012, we announced a cash dividend of $0.25 per share payable on December 21, 2012 to stockholders of record as of December 7, 2012. Since September 30, 2012, we repurchased and retired 4.1 million shares of common stock for $240 million.
Research and Development
($ in millions) Non-GAAP QSI Share-Based GAAP
Compensation
---
Fourth quarter
fiscal 2012 $961 $1 $152 $1,114
As % of revenues 20% 23%
Fourth quarter
fiscal 2011 $731 $1 $119 $851
As % of revenues 18% 21%
Year-over-year
change ($) 31% N/M 28% 31%
N/M - Not Meaningful
Non-GAAP research and development (R&D) expenses increased 31 percent y-o-y primarily due to an increase in costs related to the development of CDMA-based 3G, OFDMA-based 4G LTE and other technologies for integrated circuit and related software products and to expand our intellectual property portfolio.
Selling, General and Administrative
($ in
millions) Non-GAAP QSI Share-Based Acquisition-Related GAAP
Compensation Items
---
Fourth
quarter
fiscal
2012 $545 $3 $112 $21 $681
As %
of
revenues 11% 14%
Fourth
quarter
fiscal
2011 $371 $8 $110 $42 $531
As %
of
revenues 9% 13%
Year-
over-
year
change
($) 47% N/M 2% N/M 28%
N/M - Not Meaningful
Non-GAAP selling, general and administrative (SG&A) expenses increased 47 percent y-o-y primarily due to a long-lived asset impairment charge related to our QMT division and increases in employee-related expenses, costs relating to legal matters, selling and marketing expenses and patent-related expenses.
Effective Income Tax Rates
Our fiscal 2012 effective income tax rates were 19 percent for GAAP and 20 percent for Non-GAAP. The fiscal 2012 GAAP and Non-GAAP effective tax rates only reflect the United States federal R&D credit generated through December 31, 2011, the date on which the credit expired. The fiscal 2012 GAAP effective tax rate included a tax benefit of $10 million related to the completion of the audit of our fiscal 2005 through fiscal 2008 state tax returns. This tax benefit was excluded from our Non-GAAP results.
QSI Segment
QSI 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 of fiscal 2012 included $0.01 earnings per share for QSI.
Business Outlook
The following statements are forward looking, and actual results may differ materially. The “Note Regarding Forward-Looking Statements” in 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 and certain derivative gains or losses, 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
--------------------
Q1 FY12 Current Guidance
Results Q1 FY13 Estimates
------- -----------------
Revenues $4.68B $5.6B - $6.1B
Year-over-
year change increase 20% - 30%
Non-GAAP
Diluted
earnings per
share (EPS) $0.97 $1.08 - $1.16
Year-over-
year change increase 11% - 20%
Diluted EPS
attributable
to QSI ($0.01) ($0.01)
Diluted EPS
attributable
to share-
based
compensation ($0.11) ($0.13)
Diluted EPS
attributable
to
acquisition-
related items ($0.03) ($0.04)
Diluted EPS
attributable
to tax items N/A N/A
GAAP Diluted
EPS $0.81 $0.90 - $0.98
Year-over-
year change increase 11% - 21%
------------
Metrics
MSM chip
shipments 156M 168M - 178M
Year-over-
year change increase 8% - 14%
Total reported
device sales
(1) approx. $41.4B* approx. $46.0B - $51.0B*
Year-over-
year change increase 11% - 23%
*Est. sales in
September
quarter,
reported in
December
quarter
FISCAL YEAR
-----------
FY 2012 Current Guidance
-------
Results (2) FY 2013 Estimates
---------- -----------------
Revenues $19.12B $23.0B - $24.0B
-------
Year-over-
year change increase 20% - 26%
Non-GAAP
Operating
Income $7.10B $8.1B - $8.6B
------
Year-over-
year change increase 14% - 21%
Operating loss
attributable
to QSI ($0.12B) ($0.05B)
Operating loss
attributable
to share-
based
compensation ($1.04B) ($1.15B)
Operating loss
attributable
to
acquisition-
related items ($0.27B) ($0.30B)
GAAP Operating
Income $5.68B $6.6B - $7.1B
Year-over-
year change increase 16% - 25%
Non-GAAP
Diluted EPS $3.71 $4.12 - $4.32
-----
Year-over-
year change increase 11% - 16%
Diluted EPS
attributable
to QSI $0.40 ($0.04)
-----
Diluted EPS
attributable
to share-
based
compensation ($0.47) ($0.53)
Diluted EPS
attributable
to
acquisition-
related items ($0.14) ($0.15)
Diluted EPS
attributable
to tax items $0.01 N/A
GAAP Diluted
EPS $3.51 $3.40 - $3.60
Year-over-
year change decrease 3% - increase 3%
Metrics
Est. fiscal
year* 3G/4G
device
average
selling price
range (1) approx. $216 - $222 approx. $214 - $226
*Shipments in
Sept. to June
quarters,
reported in
Dec. to Sept.
quarters
-------------
CALENDAR YEAR Device Estimates (1)
---------------------------------
Prior Guidance Current Guidance Current Guidance
Calendar 2012 Calendar 2012 Calendar 2013
Estimates Estimates Estimates
--------- --------- ---------
Est. 3G/4G
device
shipments
March
quarter approx. 206M - 211M approx. 206M - 211M not provided
-------------------
June quarter not provided approx. 210M - 214M not provided
------------
September
quarter not provided not provided not provided
------------
December
quarter not provided not provided not provided
--------- ------------
Est.
calendar
year range
(approx.) 875M - 935M 880M - 930M 1,000M - 1,070M
----------- ----------- ----------- ---------------
Est.
calendar
year
midpoint
(approx.)
(3) 905M 905M 1,035M
--------- ---- ---- ------
(1) Total reported device sales is the
sum of all reported sales in U.S.
dollars (as reported to us by our
licensees) of all licensed CDMA-
based, OFDMA-based and multimode
CDMA/OFDMA subscriber devices
(including handsets, modules, modem
cards and other subscriber devices)
by our licensees during a
particular period (collectively,
3G/4G devices). The reported
quarterly estimated ranges of
average selling prices (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.
(2) Fiscal 2012 results for QSI and GAAP
included $0.44 EPS related to a
$1.2 billion gain associated with
the sale of substantially all of
our 700 MHz spectrum, which was
recognized in discontinued
operations and was excluded from
Non-GAAP results.
(3) The midpoints of the estimated
calendar year ranges are identified
for comparison purposes only and do
not indicate a higher degree of
confidence in the midpoints.
Sums may not equal totals due to
rounding.
Results of Business Segments
The following table reconciles our Non-GAAP results to our GAAP results (in millions, except per share data):
SEGMENTS QCT QTL QWI Non-GAAP Reconciling Items (1) Non-GAAP (2) QSI (2) Acquisition- Related Items (2)
(3) Tax Items (4) GAAP
Share-Based
Compensation (2)
--- --- ---
Q4 - FISCAL 2012
----------------
Revenues $3,129 $1,572 $161 $9 $4,871 $ - $ - $ - $ - $4,871
Change from prior year 21% 16% (1%) 50% 18% 18%
Change from prior quarter 9% (1%) 1% N/M 5% 5%
Operating income (loss) $1,612 ($4) ($284) ($89) $ - $1,235
Change from prior year (1%) 56% (13%) 29% 0%
Change from prior quarter (6%) 64% (8%) (46%) (11%)
EBT $486 $1,370 ($1) $65 $1,920 ($21) ($284) ($89) $ - $1,526
Change from prior year (15%) 15% 80% N/M 11% 38% (13%) 29% 15%
Change from prior quarter 3% (3%) 83% 33% 0% (31%) (8%) (46%) (3%)
EBT as % of revenues 16% 87% N/M N/M 39% 31%
Discontinued operations, net of tax (5) $ - $23 $ - $ - $ - $23
Net income (loss) $1,547 $14 ($222) ($78) $10 $1,271
Change from prior year 13% N/M (4%) 35% (75%) 20%
Change from prior quarter 4% N/M (6%) (34%) N/A 5%
Diluted EPS $0.89 $0.01 ($0.13) ($0.04) $0.01 $0.73
Change from prior year 11% N/M (8%) 43% (50%) 18%
Change from prior quarter 5% N/M (8%) (33%) N/A 6%
Diluted shares used 1,745 1,745 1,745 1,745 1,745 1,745
Q3 - FISCAL 2012
----------------
Revenues $2,869 $1,593 $160 $4 $4,626 $ - $ - $ - $ - $4,626
Operating income (loss) 1,718 (11) (264) (61) - 1,382
EBT $472 $1,407 ($6) $49 1,922 (16) (264) (61) - 1,581
Discontinued operations, net of tax (5) - (3) - - - (3)
Net income (loss) 1,486 (11) (210) (58) - 1,207
Diluted EPS $0.85 ($0.01) ($0.12) ($0.03) $ - $0.69
Diluted shares used 1,758 1,758 1,758 1,758 1,758 1,758
Q1 - FISCAL 2012
----------------
Revenues $3,085 $1,440 $152 $4 $4,681 $ - $ - $ - $ - $4,681
Operating income (loss) 1,871 (13) (247) (60) - 1,551
EBT $739 $1,267 $1 $55 2,062 (34) (247) (60) - 1,721
Discontinued operations, net of tax (5) - (5) - - - (5)
Net income (loss) 1,672 (22) (194) (55) - 1,401
Diluted EPS $0.97 ($0.01) ($0.11) ($0.03) $ - $0.81
Diluted shares used 1,721 1,721 1,721 1,721 1,721 1,721
Q4 - FISCAL 2011
----------------
Revenues $2,587 $1,361 $163 $6 $4,117 $ - $ - $ - $ - $4,117
Operating income (loss) 1,624 (9) (252) (125) - 1,238
EBT $569 $1,193 ($5) ($20) 1,737 (34) (252) (125) - 1,326
Discontinued operations, net of tax (5) - (5) (1) - - (6)
Net income (loss) 1,372 (22) (214) (120) 40 1,056
Diluted EPS $0.80 ($0.01) ($0.12) ($0.07) $0.02 $0.62
Diluted shares used 1,716 1,716 1,716 1,716 1,716 1,716
12 MONTHS - FISCAL 2012
-----------------------
Revenues $12,141 $6,327 $633 $20 $19,121 $ - $ - $ - $ - $19,121
Change from prior year 37% 17% (4%) 0% 28% 28%
Operating income (loss) $7,100 ($116) ($1,035) ($267) $ - $5,682
Change from prior year 17% N/M (27%) (28%) 13%
EBT $2,296 $5,585 ($15) $168 $8,034 ($170) ($1,035) ($267) $ - $6,562
Change from prior year 12% 18% 90% (8%) 17% (29%) (27%) (28%) 15%
EBT as a % of revenues 19% 88% N/M N/M 42% 34%
Discontinued operations, net of tax (5) $ - $777 ($1) $ - $ - $776
Net income (loss) $6,463 $690 ($811) ($243) $10 $6,109
Change from prior year 20% N/M (30%) (22%) (84%) 43%
Diluted EPS $3.71 $0.40 ($0.47) ($0.14) $0.01 $3.51
Change from prior year 16% N/M (27%) (17%) (75%) 39%
Diluted shares used 1,741 1,741 1,741 1,741 1,741 1,741
12 MONTHS - FISCAL 2011
-----------------------
Revenues $8,859 $5,422 $656 $20 $14,957 $ - $ - $ - $ - $14,957
Operating income (loss) 6,084 (37) (813) (208) - 5,026
EBT $2,056 $4,753 ($152) $183 6,840 (132) (813) (208) - 5,687
Discontinued operations, net of tax (5) - (308) (5) - - (313)
Net income (loss) 5,407 (385) (624) (200) 62 4,260
Diluted EPS $3.20 ($0.23) ($0.37) ($0.12) $0.04 $2.52
Diluted shares used 1,691 1,691 1,691 1,691 1,691 1,691
------------------- ----- ----- ----- ----- ----- -----
(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 costs of
equipment and services revenues,
research and development expenses,
sales and marketing expenses,
other operating expenses and
certain investment income or
losses and interest expense that
are not allocated to the segments
for management reporting purposes;
nonreportable segment results; and
the elimination of intersegment
profit.
(2) At fiscal year end, the sum of the
quarterly tax provision (benefit)
for each column equals the annual
tax provision (benefit) for each
column computed in accordance with
GAAP. In interim quarters, the
sum of these provisions (benefits)
may not equal the total GAAP tax
provision, and starting in fiscal
2012, this difference is allocated
to tax provisions (benefits) among
the columns. In interim quarters
of prior years, it was included in
QSI because variability in QSI
results was considered the primary
driver of the difference.
(3) In addition to our historical
practice of excluding acquired in-
process research and development
expenses, starting with
acquisitions completed in the
third quarter of fiscal 2011, Non-
GAAP results also exclude other
items related to acquisitions.
During fiscal 2012, acquisition-
related items consisted of
amortization of certain intangible
assets, expense associated with
the termination of a contract of
an acquiree and the recognition of
the step-up of inventories to
fair value.
(4) During the fourth quarter of fiscal
2012, we recorded a tax benefit of
$10 million related to the
completion of the audit of our
fiscal 2005 through fiscal 2008
state tax returns. Our quarterly
and fiscal 2012 Non-GAAP results
exclude this item.
(5) During fiscal 2011, we shut down
the FLO TV business and network.
The results of FLO TV are
presented as discontinued
operations.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm’s fourth quarter and fiscal 2012 earnings conference call will be broadcast live on November 7, 2012, beginning at 1:45 p.m. Pacific Time (PT) at www.qualcomm.com/investor. This conference call will include a discussion of “Non-GAAP financial measures” as defined in Regulation G. The most directly comparable GAAP financial measures and GAAP reconciliation information, as well as the other material financial and statistical information to be discussed on the conference call, will be posted at www.qualcomm.com/investor immediately prior to commencement of the call. An audio replay will be available at www.qualcomm.com/investor and via telephone for 30 days shortly following the live call. To listen to the replay via telephone, U.S. callers may dial (855) 859-2056, and international callers may dial (404) 537-3406. Callers should use reservation number 37726774.
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 and Non-GAAP results are presented herein.
The Company uses Non-GAAP financial information (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 QCT, QTL and QWI 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: revenues, cost of revenues, R&D expenses, SG&A expenses, other 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. The Company 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. The Company presents Non-GAAP financial information to provide greater transparency to investors with respect to its use of such information in financial and operational decision-making.
Non-GAAP information used by management excludes QSI, certain share-based compensation, certain acquisition-related items and certain tax items.
- QSI 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 expense relates primarily to restricted stock units and stock options. Certain share-based compensation is excluded because management views such expenses as unrelated to the operating activities of the Company’s ongoing core business. Further, the fair values of share-based awards are affected by factors that are variable on each grant date, which may include the Company’s stock price, stock market volatility, expected award life, risk-free interest rates and expected dividend payouts in future years.
- In addition to its historical practice of excluding acquired in-process R&D expenses from Non-GAAP results, the Company began excluding amortization of certain intangible assets, recognition of the step-up of inventories to fair value and the related tax effects of these items starting with acquisitions completed in the third quarter of fiscal 2011, as well as any tax effects from restructuring the ownership of such acquired assets. Additionally, starting with acquisitions completed in the fourth quarter of fiscal 2012, the Company began excluding expenses related to the termination of contract(s) that limit the use of the acquired intellectual property. These certain acquisition-related items are excluded and no longer allocated to the Company’s segments because management views such expenses as unrelated to the operating activities of the Company’s ongoing core business. In addition, these charges are impacted by the size and timing of acquisitions, potentially obscuring period to period comparisons of the Company’s operating businesses.
- Certain tax items that were recorded in each fiscal year presented, but that 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. The Company also excludes any benefit resulting from the 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.
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 and to compare its operating performance with other companies in the industry.
About Qualcomm
Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G, 4G and next-generation wireless 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 Forward-Looking Statements
In addition to the historical information contained herein, this news release contains forward-looking statements that are inherently subject to risks and uncertainties, including but not limited to statements regarding our broad licensing program and industry-leading Snapdragon and 3G/LTE chipset roadmap positioning us for double-digit revenue growth in fiscal 2013; the Company’s business outlook; and estimates and guidance related to revenues, GAAP and Non-GAAP diluted earnings per share, effective income tax rates, MSM chip shipments, total reported device sales, 3G/4G device average selling price ranges and 3G/4G device shipment ranges and midpoints. Forward-looking statements are generally identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “guidance” and similar expressions. Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to risks associated with the commercial deployment of our technologies and our customers’ and licensees’ sales of equipment, products and services based on these technologies; competition; our dependence on a small number of customers and licensees; attacks on our licensing business model, including current and future legal proceedings and actions of governmental or quasi-governmental bodies; our dependence on third-party suppliers, including the potential impact of supply constraints; the enforcement and protection of our intellectual property rights; claims by third parties that we infringe their intellectual property; global economic conditions that impact the communications industry and the potential impact on demand for our products and our customers’ and licensees’ products; our stock price and earnings volatility; strategic transactions and investments; the commercial success of our QMT division’s display technology; foreign currency fluctuations; and failures, defects or errors in our products and services or in the products of our customers and licensees. These and other risks are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012 filed with the SEC. Our reports filed with the SEC are available on our website at www.qualcomm.com. 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, Snapdragon and MSM are trademarks of Qualcomm Incorporated, registered in the United States and other countries. All other trademarks are the property of their respective owners.
Qualcomm Incorporated
Supplemental Information for the Three Months Ended September 30, 2012
(Unaudited)
Acquisition- Tax-
Non-GAAP Share-Based Related Related GAAP
Results QSI Compensation Items (a) Items Results
------- --- ------------ -------- ----- -------
($ in millions, except
per share data)
Cost of equipment and
services revenues $1,753 $ - $20 $68 $ - $1,841
R&D 961 1 152 - - 1,114
SG&A 545 3 112 21 - 681
Operating income (loss) 1,612 (4) (284) (89) - 1,235
Investment income (loss), net $308 (b) $(17) (c) $ - $ - $ - $291
Tax rate 19% 19% 22% 12% N/M 19%
Net income (loss) $1,547 $14 $(222) $(78) $10 (d) $1,271
Diluted earnings (loss) per
share (EPS) $0.89 $0.01 $(0.13) $(0.04) $0.01 $0.73
Operating cash flow $1,476 $(26) $(41) $ - $ - $1,409
Operating cash flow as % of
revenues 30% N/A N/A N/A N/A 29%
Free cash flow(e) $1,242 $(42) $(41) $ - $ - $1,159
Free cash flow as % of
revenues 25% N/A N/A N/A N/A 24%
(a) Consisted of amortization of certain
intangible assets, expense
associated with the termination of a
contract of an acquiree and the
recognition of the step-up of
inventories to fair value.
(b) Included $177 million in interest and
dividend income related to cash,
cash equivalents and marketable
securities, which were not part of
our strategic investments and $143
million in net realized gains on
investments, partially offset by $5
million in other-than-temporary
losses on investments, $4 million in
losses on derivatives and $3 million
in interest expense.
(c) Included $14 million in other-than-
temporary losses on investments, $13
million in interest expense and $3
million in equity in losses of
investees, partially offset by $12
million in net realized gains on
investments and $1 million in
interest and dividend income related
to cash, cash equivalents and
marketable securities.
(d) Included a tax benefit of $10 million
related to the completion of the
audit of our fiscal 2005 through
fiscal 2008 state tax returns.
(e) Free cash flow is calculated as net
cash provided by operating
activities less capital
expenditures. Reconciliation of
these amounts is included in the
"Reconciliation of Non-GAAP Free
Cash Flows to Net Cash Provided by
Operating Activities (GAAP) and
Other Supplemental Disclosures" for
the three months ended September 30,
2012 included herein.
N/A - Not Applicable
Sums may not equal totals due to rounding.
Qualcomm Incorporated
Supplemental Information for the Twelve Months Ended September 30, 2012
(Unaudited)
Acquisition- Tax-
Non-GAAP Share-Based Related Related GAAP
Results QSI Compensation Items (a) Items Results
------- --- ------------ -------- ----- -------
($ in millions, except
per share data)
Cost of equipment and
services revenues $6,796 $ - $75 $225 $ - $7,096
R&D 3,363 6 546 - - 3,915
SG&A 1,839 29 414 42 - 2,324
Other operating expenses 23 81 (b) - - - 104
Operating income (loss) 7,100 (116) (1,035) (267) - 5,682
Investment income (loss), net $934 (c) $(54) (d) $ - $ - $ - $880
Tax rate 20% 19% 22% 9% N/M 19%
Net income (loss) $6,463 $690 $(811) $(243) $10 (e) $6,109
Diluted earnings (loss) per
share (EPS) $3.71 $0.40 $(0.47) $(0.14) $0.01 $3.51
Operating cash flow $6,382 $(216) $(168) $ - $ - $5,998
Operating cash flow as % of
revenues 33% N/A N/A N/A N/A 31%
Free cash flow(f) $5,199 $(317) $(168) $ - $ - $4,714
Free cash flow as % of
revenues 27% N/A N/A N/A N/A 25%
(a) Consisted of amortization of certain
intangible assets, expense
associated with the termination of a
contract of an acquiree and the
recognition of the step-up of
inventories to fair value.
(b) QSI results for fiscal 2012 included
$81 million in other operating
expenses associated with a payment
made to the Indian government in
connection with the issuance of the
BWA spectrum license.
(c) Included $590 million in interest and
dividend income related to cash,
cash equivalents and marketable
securities, which were not part of
our strategic investments, $327
million in net realized gains on
investments, $76 million in gains on
derivatives (primarily due to gains
from put options sold as part of our
stock repurchase program) and $1
million in equity earnings of
investees, partially offset by $49
million in other-than-temporary
losses on investments and $11
million in interest expense.
(d) Included $79 million in interest
expense, $34 million in other-than-
temporary losses on investments and
$10 million of equity in losses of
investees, partially offset by $42
million in net realized gains on
investments, $19 million in interest
and dividend income related to cash,
cash equivalents and marketable
securities and $8 million in gains
on derivatives.
(e) Included a tax benefit of $10 million
related to the completion of the
audit of our fiscal 2005 through
fiscal 2008 state tax returns.
(f) Free cash flow is calculated as net
cash provided by operating
activities less capital
expenditures. Reconciliation of
these amounts is included in the
"Reconciliation of Non-GAAP Free
Cash Flows to Net Cash Provided by
Operating Activities (GAAP) and
Other Supplemental Disclosures" for
the twelve months ended September
30, 2012, included herein.
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 30, 2012
-------------------------------------
Share-Based
Non-GAAP QSI Compensation GAAP
-------- --- ------------ ----
Net cash provided (used) by
operating activities $1,476 $(26) $(41) (a) $1,409
Less: capital expenditures (234) (16) - (250)
---- --- --- ----
Free cash flow $1,242 $(42) $(41) $1,159
====== ==== ==== ======
Revenues $4,871 $ - $ - $4,871
Free cash flow as % of
revenues 25% N/A N/A 24%
Other supplemental cash
disclosures:
Cash transfers from QSI (b) $183 $(183) $ - $ -
Cash transfers to QSI (c) (123) 123 - -
---- --- --- ---
Net cash transfers $60 $(60) $ - $ -
=== ==== === ===
Twelve Months Ended September 30, 2012
--------------------------------------
QSI Share-Based GAAP
Non-GAAP Compensation
-------- ------------
Net cash provided (used) by
operating activities $6,382 $(216) $(168) (a) $5,998
Less: capital expenditures (1,183) (101) - (1,284)
------ ---- --- ------
Free cash flow $5,199 $(317) $(168) $4,714
====== ===== ===== ======
Revenues $19,121 $ - $ - $19,121
Free cash flow as % of
revenues 27% N/A N/A 25%
Other supplemental cash
disclosures:
Cash transfers from QSI (d) $2,281 $(2,281) $ - $ -
Cash transfers to QSI (c) (478) 478 - -
---- --- --- ---
Net cash transfers $1,803 $(1,803) $ - $ -
====== ======= === ===
Three Months Ended September 25, 2011
-------------------------------------
QSI Share-Based GAAP
Non-GAAP Compensation
-------- ------------
Net cash provided (used) by
operating activities $1,886 $(50) $(16) (a) $1,820
Less: capital expenditures (194) - - (194)
---- --- --- ----
Free cash flow $1,692 $(50) $(16) $1,626
====== ==== ==== ======
Twelve Months Ended September 25, 2011
--------------------------------------
QSI Share-Based GAAP
Non-GAAP Compensation
-------- ------------
Net cash provided (used) by
operating activities $5,418 $(335) $(183) (a) $4,900
Less: capital expenditures (588) (5) - (593)
---- --- --- ----
Free cash flow $4,830 $(340) $(183) $4,307
====== ===== ===== ======
(a) Incremental tax benefits from stock
options exercised during the
period.
(b) Primarily due to release of
restricted cash and cash from sale
of equity securities and other
investments.
(c) Primarily funding for strategic debt
and equity investments, other
investing activities and QSI
operating and capital expenditures.
(d) Primarily cash from sale of wireless
spectrum, issuance of subsidiary
shares to noncontrolling interest,
borrowings under loans and
debentures and sale of equity
securities and other investments.
N/A - Not Applicable
Qualcomm Incorporated
Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)
(in millions)
(Unaudited)
Three Months Ended September 30, 2012
-------------------------------------
Acquisition- Tax-
Non-GAAP QSI Share-Based Related Related GAAP
Results Compensation Items Items Results
------- ------------ ----- ----- -------
Income (loss)
from
continuing
operations
before income
taxes $1,920 $(21) $(284) $(89) $ - $1,526
Income tax
(expense)
benefit (373) 4 62 11 10 (286)
---- --- --- --- --- ----
Income (loss)
from
continuing
operations $1,547 $(17) $(222) $(78) $10 $1,240
====== ==== ===== ==== === ======
Tax rate 19% 19% 22% 12% N/M 19%
Twelve Months Ended September 30, 2012
--------------------------------------
Acquisition- Tax-
Non-GAAP QSI Share-Based Related Related GAAP
Results Compensation Items Items Results
------- ------------ ----- ----- -------
Income (loss)
from
continuing
operations
before income
taxes $8,034 $(170) $(1,035) $(267) $ - $6,562
Income tax
(expense)
benefit (1,571) 33 225 24 10 (1,279)
------ --- --- --- --- ------
Income (loss)
from
continuing
operations $6,463 $(137) $(810) $(243) $10 $5,283
====== ===== ===== ===== === ======
Tax rate 20% 19% 22% 9% N/M 19%
(a) At fiscal year end, the sum of
the quarterly tax provision
(benefit) for each column
equals the annual tax
provision (benefit) for each
column computed in accordance
with GAAP. In interim
quarters, the sum of these
provisions (benefits) may not
equal the total GAAP tax
provision, and this difference
is allocated to tax provisions
(benefits) among the columns.
Sums may not equal totals due to rounding.
Qualcomm Incorporated
CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
September 30, September 25,
2012 2011
---- ----
Current assets:
Cash and cash equivalents $3,807 $5,462
Marketable securities 8,567 6,190
Accounts receivable, net 1,459 993
Inventories 1,030 765
Deferred tax assets 309 537
Other current assets 473 346
--- ---
Total current assets 15,645 14,293
Marketable securities 14,463 9,261
Deferred tax assets 1,412 1,703
Assets held for sale 1,109 746
Property, plant and equipment,
net 2,851 2,414
Goodwill 3,917 3,432
Other intangible assets, net 2,938 3,099
Other assets 677 1,474
--- -----
Total assets $43,012 $36,422
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,298 $969
Payroll and other benefits
related liabilities 664 644
Unearned revenues 545 610
Loans and debentures - 994
Liabilities held for sale 1,072 -
Other current liabilities 1,723 2,072
----- -----
Total current liabilities 5,302 5,289
Unearned revenues 3,739 3,541
Other liabilities 426 620
--- ---
Total liabilities 9,467 9,450
----- -----
Stockholders' equity:
Qualcomm stockholders' equity:
Preferred stock, $0.0001 par
value; 8 shares authorized;
none outstanding - -
Common stock, $0.0001 par
value; 6,000 shares
authorized; 1,706
and 1,681 shares issued and
outstanding, respectively - -
Paid-in capital 11,956 10,394
Retained earnings 20,701 16,204
Accumulated other
comprehensive income 866 353
--- ---
Total Qualcomm stockholders'
equity 33,523 26,951
Noncontrolling interests 22 21
--- ---
Total stockholders' equity 33,545 26,972
------ ------
Total liabilities and
stockholders' equity $43,012 $36,422
======= =======
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------ -------------------
September 30, September 25, September 30, September 25,
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
Equipment and
services $3,213 $2,673 $12,465 $9,223
Licensing 1,658 1,444 6,656 5,734
----- ----- ----- -----
Total revenues 4,871 4,117 19,121 14,957
----- ----- ------ ------
Operating expenses:
Cost of equipment and
services revenues 1,841 1,497 7,096 4,877
Research and
development 1,114 851 3,915 2,995
Selling, general and
administrative 681 531 2,324 1,945
Other - - 104 114
Total operating
expenses 3,636 2,879 13,439 9,931
----- ----- ------ -----
Operating income 1,235 1,238 5,682 5,026
Investment income,
net 291 88 880 661
--- --- --- ---
Income from
continuing
operations before
income taxes 1,526 1,326 6,562 5,687
Income tax expense (286) (271) (1,279) (1,132)
---- ---- ------ ------
Income from
continuing
operations 1,240 1,055 5,283 4,555
Discontinued
operations, net of
income taxes 23 (6) 776 (313)
--- --- --- ----
Net income 1,263 1,049 6,059 4,242
Net loss attributable
to noncontrolling
interests 8 7 50 18
--- --- --- ---
Net income
attributable to
Qualcomm $1,271 $1,056 $6,109 $4,260
====== ====== ====== ======
Basic earnings (loss)
per share
attributable to
Qualcomm:
Continuing operations $0.73 $0.63 $3.14 $2.76
Discontinued
operations 0.02 - 0.45 (0.19)
---- --- ---- -----
Net income $0.75 $0.63 $3.59 $2.57
===== ===== ===== =====
Diluted earnings
(loss) per share
attributable to
Qualcomm:
Continuing operations $0.72 $0.62 $3.06 $2.70
Discontinued
operations 0.01 - 0.45 (0.18)
---- --- ---- -----
Net income $0.73 $0.62 $3.51 $2.52
===== ===== ===== =====
Shares used in per
share calculations:
Basic 1,704 1,681 1,700 1,658
===== ===== ===== =====
Diluted 1,745 1,716 1,741 1,691
===== ===== ===== =====
Dividends per share
announced $0.250 $0.215 $0.930 $0.810
====== ====== ====== ======
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Twelve Months Ended
------------------ -------------------
September 30, 2012 September 25, 2011 September 30, 2012 September 25, 2011
------------------ ------------------ ------------------ ------------------
Operating Activities:
Net income $1,263 $1,049 $6,059 $4,242
Adjustments to
reconcile net income
to net cash provided
by
operating activities:
Depreciation and
amortization 257 241 897 1,061
Gain on sale of
wireless spectrum - - (1,179) -
Goodwill impairment - - 23 114
Revenues related to
non-monetary
exchanges (30) (30) (122) (123)
Income tax provision
in excess of (less
than) income tax
payments 156 14 395 (1,204)
Non-cash portion of
share-based
compensation expense 283 256 1,035 824
Incremental tax
benefit from stock
options exercised (41) (16) (168) (183)
Net realized gains on
marketable securities
and other investments (155) (33) (369) (337)
Net impairment losses
on marketable
securities and other
investments 19 26 83 52
Losses (gains) on
derivative
instruments 4 4 (84) 3
Other items, net 65 (16) 93 9
Changes in assets and
liabilities, net of
effects of
acquisitions:
Accounts receivable,
net (207) (161) (456) (140)
Inventories (199) (19) (252) (62)
Other assets (209) (34) (240) (70)
Trade accounts payable 174 165 371 (26)
Payroll, benefits and
other liabilities 71 362 (341) 572
Unearned revenues (42) 12 253 168
--- --- --- ---
Net cash provided by
operating activities 1,409 1,820 5,998 4,900
----- ----- ----- -----
Investing Activities:
Capital expenditures (250) (194) (1,284) (593)
Purchases of
available-for-sale
securities (3,707) (2,677) (15,511) (10,948)
Proceeds from sale of
available-for-sale
securities 4,084 1,306 9,858 10,661
Purchase of trading
securities (1,729) - (4,009) -
Proceeds from sale of
trading securities 1,763 - 3,060 -
Proceeds from sale of
wireless spectrum - - 1,925 -
Acquisitions and other
investments, net of
cash acquired (156) (362) (833) (3,624)
Other items, net (7) 1 (83) 15
--- --- --- ---
Net cash used by
investing activities (2) (1,926) (6,877) (4,489)
--- ------ ------ ------
Financing Activities:
Borrowing under loans
and debentures - 295 710 1,555
Repayment of loans
payable - (295) (591) (1,555)
Proceeds from issuance
of common stock 355 255 1,714 2,647
Incremental tax
benefit from stock
options exercised 41 16 168 183
Proceeds from issuance
of subsidiary shares
to noncontrolling
interests 1 - 86 62
Repurchase and
retirement of common
stock (841) (142) (1,313) (142)
Dividends paid (426) (361) (1,583) (1,346)
Other items, net (147) 78 52 114
---- --- --- ---
Net cash (used)
provided by financing
activities (1,017) (154) (757) 1,518
------ ---- ---- -----
Effect of exchange
rate changes on cash 5 (24) (19) (14)
--- --- --- ---
Net increase
(decrease) in cash
and cash equivalents 395 (284) (1,655) 1,915
Cash and cash
equivalents at
beginning of period 3,412 5,746 5,462 3,547
----- ----- ----- -----
Cash and cash
equivalents at end of
period $3,807 $5,462 $3,807 $5,462
====== ====== ====== ======
SOURCE Qualcomm Incorporated
