Qualcomm Announces Second Quarter Fiscal 2009 Results
Revenues
Pro Forma Loss Per Share
Second Quarter Results (GAAP)
- Revenues:
$2.46 billion , compared to$2.61 billion in the prior year and$2.52 billion in the prior quarter. - Operating loss:
$10 million , which reflects a$748 million charge for litigation settlement related to the settlement and patent agreement with Broadcom, compared to operating income of$813 million in the prior year and$745 million in the prior quarter. - Net loss:
$289 million , compared to net income of$766 million in the prior year and$341 million in the prior quarter. - Diluted loss per share:
$0.18 , compared to diluted earnings per share (EPS) of$0.47 in the prior year and$0.20 in the prior quarter. - Effective tax rate: negative 186 percent for the quarter, primarily due to the impact of the discrete tax benefit related to the litigation settlement charge associated with the settlement and patent agreement with Broadcom at a rate less than
the United States federal rate. Fiscal 2009 estimated tax rate of approximately 35 percent. - Estimated share-based compensation:
$145 million , net of tax, compared to$88 million in the prior year and$99 million in the prior quarter. - Operating cash flow:
$1.26 billion , up 33 percent year-over-year; 51 percent of revenues. - Return of capital to stockholders:
$528 million , or$0.32 per share of cash dividends paid (relating to dividends declared in the first and second quarters).
Pro Forma Second Quarter Results
Pro forma results exclude the Qualcomm Strategic Initiatives (QSI) segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process research and development (R&D) expense.
- Revenues:
$2.45 billion , compared to$2.60 billion in the prior year and$2.51 billion in the prior quarter. - Operating income:
$214 million , which reflects a$748 million charge for litigation settlement related to the settlement and patent agreement with Broadcom, compared to$1.02 billion in the prior year and$986 million in the prior quarter. - Net loss:
$46 million , compared to net income of$894 million in the prior year and$520 million in the prior quarter. - Diluted loss per share:
$0.03 , compared to diluted EPS of$0.54 in the prior year and$0.31 in the prior quarter. The current quarter excludes$0.03 loss per share attributable to the QSI segment,$0.09 loss per share attributable to certain estimated share-based compensation and$0.02 loss per share attributable to the adjustment of our net deferred tax assets to reflect the future impact of the recently enactedCalifornia budget legislation. - Effective tax rate: 131 percent for the quarter, primarily due to the impact of the discrete tax benefit related to the litigation settlement charge associated with the settlement and patent agreement with Broadcom at a rate less than
the United States federal rate. Fiscal 2009 estimated tax rate of approximately 31 percent. - Free cash flow:
$1.15 billion , up 49 percent year-over-year; 47 percent of revenues (defined as net cash from operating activities less capital expenditures).
Detailed reconciliations between results reported in accordance with generally accepted accounting principles (GAAP) and pro forma results are included at the end of this news release. Prior period reconciliations are presented on Qualcomm’s Investor Relations web page at www.qualcomm.com.
“Global demand for 3G-enabled products and services remains strong despite the current economic environment,” said Dr.
“While the business environment remains uncertain and the continued distress in global financial markets resulted in additional impairments to our marketable securities, we believe the CDMA inventory channel has stabilized, and we are seeing some replenishment of products driven primarily by emerging markets. We continue to grow key research and development programs to further our technology leadership and drive future growth, while closely managing SG&A expenses. Demand for CDMA-based products and services remains healthy, and our calendar year 2009 device shipment estimate remains unchanged.”
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled approximately
The distress in global financial markets has continued to affect the value of our marketable securities. As a result, we determined that
Research and Development
($ in millions) Estimated
Share-Based In-Process
Pro Forma Compensation R&D QSI GAAP
Second quarter
fiscal 2009 $506 $68 $6 $24 $604
As a % of
revenues 21% N/M 25%
Second quarter
fiscal 2008 $472 $60 $- $21 $553
As a % of
revenues 18% N/M 21%
Year-over-year
change ($) 7% 13% N/M 14% 9%
Pro forma R&D expenses increased 7 percent year-over-year, primarily due to an increase in costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies, the expansion of our intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services. QSI R&D expenses were related to our FLO TV(TM) subsidiary, formerly MediaFLO USA.
Selling, General and Administrative
($in millions) Estimated
Share-Based
Pro Forma Compensation QSI GAAP
Second quarter fiscal
2009 $289 $62 $24 $375
As a % of
revenues 12% N/M 15%
Second quarter fiscal
2008 $334 $61 $25 $420
As a % of
revenues 13% N/M 16%
Year-over-year change($) (13%) 2% (4%) (11%)
Pro forma selling, general and administrative (SG&A) expenses decreased by 13 percent year-over-year, a majority of which is due to cost reduction activities. QSI SG&A expenses were primarily related to FLO TV.
Litigation Settlement
The second quarter of fiscal 2009 operating expenses included a
Effective Income Tax Rate
Our fiscal 2009 effective income tax rates are estimated to be 35 percent for GAAP and 31 percent for pro forma. The second quarter effective tax rates of negative 186 percent for GAAP and 131 percent for pro forma differ from the annual rates due to the impact of the discrete tax benefit related to the litigation settlement charge associated with the settlement and patent agreement with Broadcom at a rate less than
Qualcomm Strategic Initiatives
The QSI segment is composed of our strategic investments, including our FLO TV subsidiary. GAAP results for the second quarter of fiscal 2009 included a
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.
We expect the global financial crisis and resulting slowdown in the worldwide economy to continue to cause lower demand for CDMA-based products in various regions. We expect a greater mix of lower-priced CDMA-based products for emerging markets to impact our financial results for the second half of fiscal 2009 as compared to the second half of fiscal 2008. In addition, the financial crisis has had, and may continue to have, an impact on the value of our marketable securities and net investment income (loss). While we do not forecast impairments, we do have unrealized losses on marketable securities that could be recognized in future periods if market conditions do not improve. Given the unprecedented daily market volatility and the significant judgments involved, accurately forecasting other-than-temporary impairments associated with our marketable securities is extremely difficult and actual results could vary materially. As a result, while we are providing revenue, operating income and our other standard guidance, we are not providing earnings per share guidance.
Moreover, our outlook does not include provisions for the consequences of injunctions or significant possible damages related to litigation matters, unless damages or injunctions have been awarded by a court. In addition, due to their nature, certain income and expense items, such as realized investment gains or losses, gains and losses on certain derivative instruments or asset impairments, cannot be accurately forecast. Accordingly, we exclude forecasts of such items from our business outlook, and actual results may vary materially from the business outlook if we incur any such income or expense items.
The following table summarizes GAAP and pro forma guidance based on the current business outlook. The pro forma business outlook provided below is presented consistent with the presentation of pro forma results elsewhere herein.
The following estimates are approximations and are based on the current business outlook:
Qualcomm's Business Outlook Summary
THIRD FISCAL QUARTER
Q3'08 Current Guidance
Results (2) Q3'09 Estimates (3)
Pro Forma
Revenues $2.76B $2.40B - $2.60B
Year-over-year change decrease 6% - 13%
Operating income $1.06B $0.80B - $0.90B
Year-over-year change decrease 15% - 25%
GAAP
Revenues $2.76B $2.40B - $2.60B
Year-over-year change decrease 6% - 13%
Operating income $0.82B $0.55B - $0.65B
Year-over-year change decrease 21% - 33%
Operating income (loss) ($0.08B) ($0.10B)
attributable to QSI
Operating income (loss)
attributable to estimated share-based
compensation ($0.14B) ($0.15B)
Operating income (loss)
attributable to in-process R&D ($0.01B) n/a
Metrics
MSM shipments approx. 86M approx. 87M - 92M
CDMA/WCDMA devices shipped (1) approx. 107M* approx. 107M - 112M*
CDMA/WCDMA device wholesale
average selling price (1) approx. $226* approx. $196*
*Shipments in March quarter, reported in June quarter
FISCAL YEAR
Prior Guidance Current Guidance
FY 2008 FY 2009 FY 2009
Results Estimates (3)(4) Estimates (3)
Pro Forma
Revenues $11.13B $9.3B - $9.8B $9.85B - $10.25B
Year-over-year change decrease 12% - 16% decrease 8% - 12%
Operating income $4.60B $3.2B - $3.5B $2.95B - $3.15B
Year-over-year change decrease 24% - 30% decrease 32% - 36%
GAAP
Revenues $11.14B $9.3B - $9.8B $9.85B - $10.25B
Year-over-year change decrease 12% - 17% decrease 8% - 12%
Operating income $3.73B $2.2B - $2.5B $1.95B - $2.15B
Year-over-year change decrease 33% - 41% decrease 42% - 48%
Operating income (loss)
attributable to QSI ($0.32B) ($0.40B) ($0.39B)
Operating income (loss)
attributable to
estimated share-based
compensation ($0.54B) ($0.60B) ($0.60B)
Operating income (loss)
attributable to
in-process R&D ($0.01B) not provided ($0.01B)
Metrics
Fiscal year*
CDMA/WCDMA
device wholesale
average selling
price (1) approx. $219 approx. $202 approx. $199
*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters
CALENDAR YEAR Device Estimates (1)
CDMA/WCDMA
device shipments
Prior Guidance Current Guidance
Calendar 2008 Calendar 2009 Calendar 2009
Estimates Estimates Estimates
March quarter approx. 107M not provided approx. 107M - 112M
June quarter approx. 119M not provided not provided
September quarter approx. 125M not provided not provided
December quarter approx. 128M not provided not provided
Calendar year range
(approx.) 480M 540M - 590M 540M - 590M
Midpoint Midpoint Midpoint
CDMA/WCDMA units approx. 480M approx. 565M approx. 565M
CDMA units approx. 216M approx. 212M approx. 217M
WCDMA units approx. 264M approx. 353M approx. 348M
(1) CDMA/WCDMA device shipments and average selling prices are for
estimated worldwide device shipments, including shipments not
reported to Qualcomm.
(2) Our Q3'08 results do not include royalty revenues attributable to
Nokia's sales.
(3) While we do not forecast impairments, we do have unrealized losses
on marketable securities that could be recognized in future periods
if market conditions do not improve.
(4) Prior FY 2009 guidance did not include the impact of the settlement
and patent agreement with Broadcom.
Sums may not equal totals due to rounding.
Results of Business Segments
(in millions, except
per share data):
Second Quarter - Fiscal Year 2009
Segments QCT QTL QWI Pro Forma
Reconciling Pro
Items (1)(2) Forma (2)
Revenues $1,316 $954 $176 $1 $2,447
Change from prior
year (19%) 20% (9%) N/M (6%)
Change from prior
quarter (1%) (5%) 4% N/M (3%)
Operating income
(loss) $214
Change from prior
year (79%)
Change from prior
quarter (78%)
EBT $217 $839 $25 $(934) $147
Change from prior
year (49%) 23% N/M N/M (87%)
Change from prior
quarter 29% (4%) N/M N/M (79%)
EBT as a % of
revenues 16% 88% 14% N/M 6%
Net (loss) income $(46)
Change from prior
year (105%)
Change from prior
quarter (109%)
Diluted EPS $(0.03)
Change from prior
year (106%)
Change from prior
quarter (110%)
Diluted shares used 1,651
Second Quarter - Fiscal Year 2009
Segments
Estimated
Share-Based Tax In-Process
Compensation Items (4) R&D QSI (5) GAAP (2)
Revenues $- $- $- $8 $2,455
Change from prior
year 300% (6%)
Change from prior
quarter 33% (2%)
Operating income
(loss) $(140) $- $(6) $(78) $(10)
Change from prior
year (8%) N/A (5%) (101%)
Change from prior
quarter 3% N/A 19% (101%)
EBT $(140) $- $(6) $(102) $(101)
Change from prior
year (8%) N/A (62%) (111%)
Change from prior
quarter 3% N/A (4%) (122%)
EBT as a % of
revenues N/M N/M N/M (4%)
Net (loss) income $(145) $(36) $(6) $(56) $(289)
Change from prior
year (65%) N/A N/A (40%) (138%)
Change from prior
quarter (46%) N/A N/A 30% (185%)
Diluted EPS $(0.09) $(0.02) $- $(0.03) $(0.18)
Change from prior
year (80%) N/A N/A (50%) (138%)
Change from prior
quarter (50%) N/A N/A 40% (190%)
Diluted shares used 1,651 1,651 1,651 1,651 1,651
First Quarter - Fiscal Year 2009
Segments
Pro Forma Estimated
Reconciling Pro Share-Based
QCT QTL QWI Items (1) Forma Compensation(3) QSI (5) GAAP
Revenues $1,334 $1,006 $170 $1 $2,511 $- $6 $2,517
Operating
income
(loss) 986 (145) (96) 745
EBT 168 874 3 (351) 694 (145) (98) 451
Net
income
(loss) 520 (99) (80) 341
Diluted
EPS $0.31 $(0.06) $(0.05) $0.20
Diluted
shares
used 1,667 1,667 1,667 1,667
Second Quarter - Fiscal Year 2008
Segments
Pro Forma Estimated
Reconciling Pro Share-Based
QCT QTL QWI Items (1) Forma Compensation(3) QSI (5) GAAP
Revenues $1,620 $795 $194 $(5) $2,604 $- $2 $2,606
Operating
income
(loss) 1,017 (130) (74) 813
EBT 427 684 - (12) 1,099 (130) (63) 906
Net income
(loss) 894 (88) (40) 766
Diluted
EPS $0.54 $(0.05) $(0.02) $0.47
Diluted
shares
used 1,643 1,643 1,643 1,643
Third Quarter - Fiscal Year 2008
Segments
Pro Forma
Reconciling Pro
QCT QTL QWI Items (1) Forma
Revenues $1,762 $803 $190 $3 $2,758
Operating
Income (loss) 1,060
EBT 487 670 (1) (40) 1,116
Net income (loss) 915
Diluted EPS $0.55
Diluted
shares used 1,654
Third Quarter - Fiscal Year 2008
Segments
Estimated
Share-Based In-Process
Compensation(3) R&D QSI (5) GAAP
Revenues $- $- $4 $2,762
Operating income
(loss) (139) (13) (84) 824
EBT (139) (13) (82) 882
Net income (loss) (94) (13) (60) 748
Diluted EPS $(0.06) $(0.01) $(0.04) $0.45
Diluted shares used 1,654 1,654 1,654 1,654
Twelve Months - Fiscal Year 2008
Segments
Pro Forma
Reconciling Pro
QCT QTL QWI Items (1) Forma
Revenues $6,717 $3,622 $785 $6 $11,130
Operating
income
(loss) 4,604
EBT 1,833 3,142 (1) (290) 4,684
Net income
(loss) 3,740
Diluted EPS $2.25
Diluted shares
used 1,660
Twelve Months - Fiscal Year 2008
Segments
Estimated
Share-Based In-Process
Compensation (3) R&D QSI GAAP
Revenues $- $- $12 $11,142
Operating income
(loss) (540) (14) (320) 3,730
EBT (540) (14) (304) 3,826
Net income (loss) (365) (13) (202) 3,160
Diluted EPS $(0.22) $(0.01) $(0.12) $1.90
Diluted shares used 1,660 1,660 1,660 1,660
Six Months - Fiscal Year 2009
Segments Pro Forma
Reconciling Pro
QCT QTL QWI Items (1)(2) Forma (2)
Revenues $2,650 $1,961 $346 $2 $4,959
Change from prior
year (17%) 36% (15%) N/M (2%)
Operating income
(loss) 1,200
Change from prior
year (39%)
EBT $385 $1,713 $28 $(1,285) $841
Change from prior
year (57%) 40% 17% N/M (62%)
Net income (loss) 472
Change from prior
year (73%)
Diluted EPS $0.28
Change from prior
year (74%)
Diluted shares used 1,665
Six Months - Fiscal Year 2009
Segments
Estimated
Share-Based In-Process
Compensation (3) Tax Items (4) R&D QSI (5) GAAP (2)
Revenues $- $- $- $13 $4,972
Change from
prior year 225% (1%)
Operating income
(loss) $(285) $- $(6) $(174) $735
Change from
prior year (12%) (26%) (53%)
EBT $(285) $- $(6) $(200) $350
Change from
prior year (12%) N/M (71%) (81%)
Net income
(loss) $(243) $(36) $(6) $(135) $52
Change from
prior year (40%) N/A N/M (125%) (97%)
Diluted EPS $(0.15) $(0.02) $- $(0.08) $0.03
Change from
prior year (50%) N/A N/M (100%) (97%)
Diluted shares
used 1,665 1,665 1,665 1,665 1,665
Six Months - Fiscal Year 2008
Segments Pro Forma
Reconciling
QCT QTL QWI Items (1) Pro Forma
Revenues $3,194 $1,445 $405 $(1) $5,043
Operating income
(loss) 1,966
EBT 897 1,224 24 65 2,210
Net income (loss) 1,767
Diluted EPS $1.07
Diluted shares used 1,653
Six Months - Fiscal Year 2008
Segments Estimated
Share-Based In-Process
Compensation (3) R&D QSI (5) GAAP
Revenues $- $- $4 $5,047
Operating income
(loss) (255) (2) (138) 1,571
EBT (255) (2) (117) 1,836
Net income (loss) (173) (1) (60) $1,533
Diluted EPS $(0.10) $- $(0.04) $0.93
Diluted shares used 1,653 1,653 1,653 1,653
(1) Pro forma reconciling items related to revenues consist primarily of
other nonreportable segment revenues less intersegment eliminations.
Pro forma reconciling items related to earnings before taxes consist
primarily of certain investment income or losses, research and
development expenses and marketing expenses that are not allocated to
the segments for management reporting purposes, nonreportable segment
results and the elimination of intersegment profit.
(2) The second quarter of fiscal 2009 included a $748 million litigation
settlement charge related to a settlement and patent agreement
with Broadcom.
(3) Certain share-based compensation is included in operating expenses as
part of employee-related costs but is not allocated to the Company's
segments as such costs are not considered relevant by management in
evaluating segment performance.
(4) During the second quarter of fiscal 2009, the Company recorded a tax
expense related to the adjustment of net deferred tax assets that
were recorded in prior years to reflect the future impact of
California budget legislation enacted on February 20, 2009.
(5) 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 pro forma tax provision, the tax items column and the
tax provisions related to estimated share-based compensation and in-
process R&D from the GAAP tax provision.
N/M - Not Meaningful
Sums may not equal totals due to rounding.
Conference Call
Qualcomm’s second quarter fiscal 2009 earnings conference call will be broadcast live on
Editor’s Note: To view the web slides that accompany this earnings release and conference call, please go to the Qualcomm Investor Relations web site at http://investor.qualcomm.com/results.cfm
Qualcomm Incorporated (Nasdaq: QCOM) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in
Note Regarding Use of Non-GAAP Financial Measures
The Company presents pro forma financial information that is used by management (i) to evaluate, assess and benchmark the Company’s operating results on a consistent and comparable basis, (ii) to measure the performance and efficiency of the Company’s ongoing core operating businesses, including the Qualcomm CDMA Technologies, Qualcomm Technology Licensing and Qualcomm Wireless & Internet segments and (iii) to compare the performance and efficiency of these segments against each other and against competitors outside the Company. Pro forma measurements of the following financial data are used by the Company’s management: revenues, R&D expenses, SG&A expenses, total operating expenses, operating income, net investment income (loss), income 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 pro forma information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on pro forma financial measures applicable to the Company and its business segments.
Pro forma information used by management excludes the QSI segment, certain estimated share-based compensation, certain tax items related to prior years and acquired in-process R&D. The QSI segment is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments are viewed by management as unrelated to the Company’s operational performance. Estimated share-based compensation, other than amounts related to share-based awards granted under a bonus program that may result in the issuance of unrestricted shares of the Company’s common stock, is excluded because management views such share-based compensation as unrelated to the Company’s operational performance. Moreover, it is generally not an expense that requires or will require cash payment by the Company. Further, share-based compensation related to 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 related to prior years are excluded in order to provide a clearer understanding of the Company’s ongoing pro forma tax rate and after tax earnings. The Company decided to include the benefit of the retroactive extension of the federal research and development tax credit in pro forma results starting in fiscal 2009 because it recurs with relative frequency and would have been included in the Company’s pro forma results for the prior year if it had been reenacted in the prior fiscal year. Acquired in-process R&D is excluded because such expense is viewed by management as unrelated to the operating activities of the Company’s ongoing core businesses.
The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term shareholder value. The Company believes that this presentation is useful in evaluating its operating performance and financial strength. In addition, management uses this measure to evaluate the Company’s performance, to value the Company and to compare its operating performance with other companies in the industry.
The non-GAAP pro forma financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, “pro forma” is not a term defined by GAAP, and, as a result, the Company’s measure of pro forma results might be different than similarly titled measures used by other companies. Reconciliations between GAAP results and pro forma results are presented herein.
Note Regarding Forward-Looking Statements
In addition to the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with: the rate of deployment of our technologies in wireless networks and of 3G wireless communications, equipment and services, including CDMA2000 1X, 1xEV-DO, WCDMA, HSPA and OFDMA both domestically and internationally; the current uncertainty of global economic conditions and its potential impact on demand for our products, services or applications and the value of our marketable securities; attacks on our business model, including results of current and future litigation and arbitration proceedings, as well as actions of governmental or quasi-governmental bodies, and the costs we incur in connection therewith, including potentially damaged relationships with customers and operators who may be impacted by the results of these proceedings; our dependence on major customers and licensees; foreign currency fluctuations; strategic loans, investments and transactions we have or may pursue; our dependence on third-party manufacturers and suppliers; our ability to maintain and improve operational efficiencies and profitability; the development, deployment and commercial acceptance of the FLO TV network and FLO(TM) technology; as well as the other risks detailed from time-to-time in our SEC reports.
Qualcomm is a registered trademark of Qualcomm Incorporated. FLO and FLO TV are trademarks 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 Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Three Months Ended March 29, 2009
Estimated
Pro Share-Based Tax In-Process
Forma Compensation Items R&D QSI GAAP
Revenues:
Equipment
and
services $1,404 $- $- $- $8 $1,412
Licensing and
royalty fees 1,043 - - - - 1,043
Total
revenues 2,447 - - - 8 2,455
Operating
expenses:
Cost of
equipment
and services
revenues 690 10 - - 38 738
Research and
development 506 68 - 6 24 604
Selling,
general and
administrative 289 62 - - 24 375
Litigation
settlement 748(a) - - - - 748(a)
Total
operating
expenses 2,233 140 - 6 86 2,465
Operating income
(loss) 214 (140) - (6) (78) (10)
Investment
loss, net (67)(b) - - - (24)(c) (91)
(Loss) income
before income
taxes 147 (140) - (6) (102) (101)
Income tax
(expense)
benefit (193)(d) (5)(e) (36)(e) - 46(f) (188)(d)
Net loss $(46) $(145) $(36) $(6) $(56) $(289)
Loss per
common share:
Diluted $(0.03) $(0.09) $(0.02) $(0.00) $(0.03) $(0.18)
Shares used
in per share
calculations:
Diluted 1,651 1,651 1,651 1,651 1,651 1,651
Supplemental
Financial Data:
Operating cash
flow $1,359 $(16)(h) $- $- $(80) $1,263
Operating cash
flow as a % of
revenues 56% N/M 51%
Free cash flow
(g) $1,153 $(16)(h) $- $- $(108) $1,029
Free cash flow
as a % of
revenues 47% N/M 42%
(a) The second quarter of fiscal 2009 included a $748 million
litigation settlement charge related to a settlement and patent
agreement with Broadcom.
(b) Included $199 million in other-than-temporary losses on investments,
which were not part of the Company's strategic investment portfolio,
$2 million in interest expense, partially offset by $121 million in
interest and dividend income related to cash, cash equivalents and
marketable securities and $13 million gain on derivatives.
(c) Included $12 million in equity in losses of investees, $10 million
in other-than-temporary losses on investments and $2 million in
interest expense.
(d) The second quarter effective tax rates of negative 186% for GAAP
and 131% for pro forma differ from the annual rates due to the
impact of the discrete tax benefit related to the expense associated
with the settlement and patent agreement with Broadcom at a rate
less than the United States federal rate.
(e) During the second quarter of fiscal 2009, the Company recorded a tax
expense related the adjustment of net deferred tax assets that were
recorded in prior years to reflect the future impact of California
budget legislation enacted on February 20, 2009.
(f) 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 pro forma tax provision, the tax items column
and the tax provisions related to estimated share-based compensation
and in-process R&D from the GAAP tax provision.
(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 Pro Forma Free Cash
Flows to Net Cash Provided by Operating Activities (GAAP) and other
supplemental disclosures for the three months ended March 29, 2009,
included herein.
(h) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
This schedule is to assist the reader in reconciling from
Pro Forma results to GAAP results
(In millions, except per share data)
(Unaudited)
Six Months Ended March 29, 2009
Estimated
Pro Share-Based Tax In-Process
Forma Compensation Items R&D QSI GAAP
Revenues:
Equipment
and
services $2,822 $- $- $- $13 $2,835
Licensing
and
royalty
fees 2,137 - - - - 2,137
Total
revenues 4,959 - - - 13 4,972
Operating
expenses:
Cost of
equipment
and services
revenues 1,399 20 - - 74 1,493
Research
and
development 1,017 137 - 6 47 1,207
Selling,
general and
administrative 595 128 - - 66 789
Litigation
settlement 748(a) - - - - 748(a)
Total
operating
expenses 3,759 285 - 6 187 4,237
Operating
income
(loss) 1,200 (285) - (6) (174) 735
Investment
loss, net (359)(b) - - - (26)(c) (385)
Income (loss)
before
income
taxes 841 (285) - (6) (200) 350
Income tax
(expense)
benefit (369)(d) 42(e) (36)(e) - 65(f) (298)(d)
Net income
(loss) $472 $(243) $(36) $(6) $(135) $52
Earnings
(loss) per
common share:
Diluted $0.28 $(0.15) $(0.02) $(0.00) $(0.08) $0.03
Shares used
in per share
calculations:
Diluted 1,665 1,665 1,665 1,665 1,665 1,665
Supplemental
Financial Data:
Operating cash
flow $4,988 $(32)(h) $- $- $(192) $4,764
Operating cash
flow as a % of
revenues 101% N/M 96%
Free cash
flow (g) $4,573 $(32)(h) $- $- $(245) $4,296
Free cash flow
as a % of
revenues 92% N/M 86%
(a) The second quarter of fiscal 2009 included a $748 million litigation
settlement charge related to a settlement and patent agreement with
Broadcom.
(b) Included $586 million in other-than-temporary losses on investments,
which were not part of the Company's strategic investment portfolio,
$38 million in net realized losses on investments and $3 million in
interest expense, partially offset by $255 million in interest and
dividend income related to cash, cash equivalents and marketable
securities and $13 million gain on derivatives.
(c) Included $15 million in other-than-temporary losses on investments,
$13 million in equity in losses of investees and $4 million in
interest expense, partially offset by $5 million in net realized
gains on investments and $1 million in interest and dividend income
related to cash, cash equivalents and marketable securities.
(d) The first six months of fiscal 2009 GAAP and pro forma effective tax
rates were approximately 85% and 44%, respectively, are higher than
the estimated annual rates of 35% and 31%, respectively, primarily
due to the impact of the discrete tax benefit related to the expense
associated with the settlement and patent agreement with Broadcom at
a rate less than the United States federal rate.
(e) During the second quarter of fiscal 2009, the Company recorded a tax
expense related to the adjustment of net deferred tax assets that
were recorded in prior years to reflect the future impact of
California budget legislation enacted on February 20, 2009.
(f) 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 pro forma tax provision, the tax items column
and the tax provisions related to estimated share-based compensation
and in-process R&D from the GAAP tax provision.
(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 Pro Forma Free Cash
Flows to Net Cash Provided by Operating Activities (GAAP) and other
supplemental disclosures for the six months ended March 29, 2009,
included herein.
(h) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
Reconciliation of Pro Forma Free Cash Flows to
Net Cash Provided by Operating Activities (GAAP)
and other supplemental disclosures
(In millions)
(Unaudited)
Three Months Ended March 29, 2009
Estimated In-
Share-Based Tax Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided
(used) by
operating
activities $1,359 $(16)(a) $- $- $(80) $1,263
Less: capital
expenditures (206) - - - (28) (234)
Free cash
flow $1,153 $(16) $- $- $(108) $1,029
Other
supplemental
cash
disclosures:
Cash transfers
from QSI (1) $12 $- $- $- $(12) $-
Cash transfers
to QSI (2) (121) - - - 121 $-
Net cash
transfers $(109) $- $- $- $109 $-
Six Months Ended March 29, 2009
Estimated In-
Share-Based Tax Process
Pro Forma Compensation Items R&D QSI GAAP
Net cash
provided
(used) by
operating
activities $4,988 $(32)(a) $- $- $(192) $4,764
Less: capital
expenditures (415) - - - (53) (468)
Free cash
flow $4,573 $(32) $- $- $(245) $4,296
Other
supplemental
cash
disclosures:
Cash transfers
from QSI (1) $23 $- $- $- $(23) $-
Cash transfers
to QSI (2) (273) - - - 273 -
Net cash
transfers $(250) $- $- $- $250 $-
(1) Cash from sale of strategic debt and equity investments and partial
settlement of investment receivables.
(2) Funding for strategic debt and equity investments, capital
expenditures and other QSI operating expenses.
Three Months Ended March 30, 2008
Estimated
Share-Based
Pro Forma Compensation QSI GAAP
Net cash
provided
(used) by
operating
activities $1,056 $(53)(a) $(56) $947
Less: capital
expenditures (281) - (20) (301)
Free cash
flow $775 $(53) $(76) $646
Six Months Ended March 30, 2008
Estimated
Share-Based In-Process
Pro Forma Compensation R&D QSI GAAP
Net cash
provided
(used) by
operating
activities $2,070 $(101)(a) $(2) $(140) $1,827
Less: capital
expenditures (387) - - (41) (428)
Free cash
flow $1,683 $(101) $(2) $(181) $1,399
(a) Incremental tax benefits from stock options exercised during the
period.
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
ASSETS
March 29, September 28,
2009 2008
Current assets:
Cash and cash equivalents $3,892 $1,840
Marketable securities 5,523 4,571
Accounts receivable, net 804 4,038
Inventories 409 521
Deferred tax assets 280 289
Collateral held under securities
lending - 173
Other current assets 324 291
Total current assets 11,232 11,723
Marketable securities 4,560 4,858
Deferred tax assets 941 830
Property, plant and equipment, net 2,282 2,162
Goodwill 1,502 1,517
Other intangible assets, net 3,123 3,104
Other assets 444 369
Total assets $24,084 $24,563
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $444 $570
Payroll and other benefits related
liabilities 313 406
Income taxes payable 109 20
Unearned revenues 421 394
Obligations under securities lending - 173
Other current liabilities 970 728
Total current liabilities 2,257 2,291
Unearned revenues 3,599 3,768
Income taxes payable 276 227
Other liabilities 839 333
Total liabilities 6,971 6,619
Stockholders' equity:
Preferred stock, $0.0001 par value; issuable in
series; 8 shares authorized; none outstanding
at March 29, 2009 and September 28, 2008 - -
Common stock, $0.0001 par value; 6,000 shares
authorized; 1,653 and 1,656 shares issued and
outstanding at March 29, 2009 and September 28,
2008, respectively - -
Paid-in capital 7,648 7,511
Retained earnings 10,241 10,717
Accumulated other comprehensive loss (776) (284)
Total stockholders' equity 17,113 17,944
Total liabilities and stockholders'
equity $24,084 $24,563
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
March 29, March 30, March 29, March 30,
2009 2008 2009 2008
Revenues:
Equipment and services $1,412 $1,725 $2,835 $3,429
Licensing and royalty fees 1,043 881 2,137 1,618
Total revenues 2,455 2,606 4,972 5,047
Operating expenses:
Cost of equipment and
Services revenues 738 820 1,493 1,604
Research and development 604 553 1,207 1,064
Selling, general and
administrative 375 420 789 808
Litigation settlement 748 - 748 -
Total operating expenses 2,465 1,793 4,237 3,476
Operating (loss) income (10) 813 735 1,571
Investment (loss) income, net (91) 93 (385) 265
(Loss) income before income
taxes (101) 906 350 1,836
Income tax expense (188) (140) (298) (303)
Net (loss) income $(289) $766 $52 $1,533
Basic (loss) earnings per
common share $(0.18) $0.47 $0.03 $0.94
Diluted (loss) earnings per
common share $(0.18) $0.47 $0.03 $0.93
Shares used in per share
calculations:
Basic 1,651 1,617 1,652 1,626
Diluted 1,651 1,643 1,665 1,653
Dividends per share paid $0.32 $0.28 $0.32 $0.28
Dividends per share announced $0.16 $0.14 $0.32 $0.28
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
March 29, March 30, March 29, March 30,
2009 2008 2009 2008
Operating Activities:
Net (loss) income $(289) $766 $52 $1,533
Adjustments to reconcile net
(loss) income to net cash
provided by operating
activities:
Depreciation and
amortization 154 111 306 219
Revenues related to
non-monetary
exchanges (29) - (57) -
Non-cash portion of
income tax expense 121 10 166 82
Non-cash portion of
share-based
compensation expense 140 130 285 255
Incremental tax benefit
from stock
options exercised (16) (53) (32) (101)
Net realized (gains)
losses on
marketable securities
and other investments - (37) 33 (118)
Other-than-temporary
losses on marketable
securities and other
investments 209 62 601 119
Other items, net (5) (14) (20) (11)
Changes in assets and
liabilities, net of effects
of acquisitions:
Accounts receivable, net 108 (35) 2,824 8
Inventories 48 (88) 113 (135)
Other assets (11) 31 (30) 42
Trade accounts payable 89 97 (103) 20
Payroll, benefits and other
liabilities 764 (31) 710 (66)
Unearned revenues (20) (2) (84) (20)
Net cash provided by
operating activities 1,263 947 4,764 1,827
Investing Activities:
Capital expenditures (234) (301) (468) (428)
Purchases of available-
for-sale securities (1,710) (1,276) (4,296) (2,960)
Proceeds from sale of
available-for-sale
securities 1,088 1,497 2,461 3,989
Cash received for partial
settlement of investment
receivables 115 - 317 -
Other investments and
acquisitions,
net of cash acquired (26) (46) (40) (275)
Change in collateral held
Under securities lending 11 (51) 173 87
Other items, net 10 26 6 26
Net cash (used) provided by
investing activities (746) (151) (1,847) 439
Financing Activities:
Proceeds from issuance of
common stock 75 159 101 236
Incremental tax benefit
from stock options
exercised 16 53 32 101
Dividends paid (528) (455) (528) (455)
Repurchase and retirement
of common stock - (769) (285) (1,670)
Change in obligations under
securities lending (11) 51 (173) (87)
Other items, net (2) - (3) -
Net cash used by
financing activities (450) (961) (856) (1,875)
Effect of exchange rate
changes on cash (1) - (9) 1
Net increase (decrease)
in cash and
cash equivalents 66 (165) 2,052 392
Cash and cash equivalents at
beginning of period 3,826 2,968 1,840 2,411
Cash and cash
equivalents at
end of period $3,892 $2,803 $3,892 $2,803
Qualcomm Contact:
John Gilbert
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
SOURCE Qualcomm Incorporated