John Gilbert
Vice President of Investor and Industry Analyst Relations
1-(858) 658-4813 (ph) 1-(858) 651-9303 (fax)
e-mail:ir@qualcomm.com
Revenues $2.22 Billion, Diluted EPS $0.43
Pro Forma Revenues $2.22 Billion, Diluted EPS $0.50
• | Revenues: $2.22 billion, up 21 percent year-over-year and 10 percent sequentially. | ||
• | Net income: $726 million, up 22 percent year-over-year and 12 percent sequentially. | ||
• | Diluted earnings per share: $0.43, up 26 percent year-over-year and 13 percent sequentially. | ||
• | Effective tax rate: 22 percent for the quarter. Fiscal 2007 estimated tax rate of approximately 21 percent. | ||
• | Estimated share-based compensation: $84 million, net of tax, up 8 percent year-over-year and down 3 percent sequentially. | ||
• | Operating cash flow: $991 million, up 11 percent year-over-year; 45 percent of revenues. | ||
• | Return of capital to stockholders: $438 million, including $398 million, or $0.24 per share, of cash dividends paid (relating to dividends declared in the first and second quarters) and $40 million to repurchase 1.0 million shares of our common stock. |
• | Revenues: $2.22 billion, up 21 percent year-over-year and 10 percent sequentially. | ||
• | Net income: $838 million, up 19 percent year-over-year and 16 percent sequentially. |
Page 2 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
• | Diluted earnings per share: $0.50, up 22 percent year-over-year and 16 percent sequentially; excludes $0.01 loss per share attributable to the QSI segment, $0.05 loss per share attributable to estimated share-based compensation and $0.01 loss per share attributable to acquired in-process R&D. | ||
• | Effective tax rate: 24 percent for the quarter and estimated for fiscal 2007. | ||
• | Free cash flow: $1.09 billion, up 15 percent year-over-year; 49 percent of revenues. (Defined as net cash from operating activities less capital expenditures). |
Page 3 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
($ in millions) | Pro Forma | Compensation | R&D | QSI | (GAAP) | |||||||||||||||
Second quarter fiscal 2007 | $ | 370 | $ | 58 | $ | 10 | $ | 16 | $ | 454 | ||||||||||
As a % of revenue | 17 | % | 20 | % | ||||||||||||||||
Second quarter fiscal 2006 | $ | 302 | $ | 52 | $ | 21 | $ | 15 | $ | 390 | ||||||||||
As a % of revenue | 16 | % | 21 | % | ||||||||||||||||
Year-over-year change ($) | 23 | % | 12 | % | (52 | %) | 7 | % | 16 | % |
Estimated | Total | |||||||||||||||
QUALCOMM | Share-Based | QUALCOMM | ||||||||||||||
($ in millions) | Pro Forma | Compensation | QSI | (GAAP) | ||||||||||||
Second quarter fiscal 2007 | $ | 301 | $ | 59 | $ | 25 | $ | 385 | ||||||||
As a % of revenue | 14 | % | 17 | % | ||||||||||||
Second quarter fiscal 2006 | $ | 188 | $ | 58 | $ | 17 | $ | 263 | ||||||||
As a % of revenue | 10 | % | 14 | % | ||||||||||||
Year-over-year change ($) | 60 | % | 2 | % | 47 | % | 46 | % |
Page 4 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Page 5 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Page 6 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Current Guidance | ||||
Q3’06 | Q3’07 | |||
Results | Estimates | |||
QUALCOMM Pro Forma | ||||
Revenues | $1.95B | $2.2B-$2.3B | ||
Year-over-year change | increase 13% - 18% | |||
Diluted earnings per share (EPS) | $ 0.42 | $0.50-$0.52 | ||
Year-over-year change | increase 19% - 24% | |||
Total QUALCOMM (GAAP) | ||||
Revenues | $1.95B | $2.2B-$2.3B | ||
Year-over-year change | increase 13% - 18% | |||
Diluted earnings per share (EPS) | $ 0.37 | $0.43-$0.45 | ||
Year-over-year change | increase 16% - 22% | |||
Diluted EPS attributable to QSI | $ 0.00 | ($0.02) | ||
Diluted EPS attributable to estimated share-based compensation | ($0.05) | ($0.05) | ||
Metrics | ||||
MSM Shipments | approx. 55M | approx. 62M - 65M | ||
CDMA/WCDMA handset units shipped | approx. 66M* | approx. 81M - 85M* | ||
CDMA/WCDMA handset unit wholesale average selling price | approx. $213* | approx. $213* |
* | Shipments in Mar. quarter, reported in June quarter |
Prior Guidance | Current Guidance | |||||
FY 2006 | FY 2007 | FY 2007 | ||||
Results | Estimates (1) | Estimates (2) | ||||
QUALCOMM Pro Forma | ||||||
Revenues | $7.53B | $8.1B-$8.6B | $8.4B-$8.7B | |||
Year-over-year change | increase 8% - 14% | increase 12% - 16% | ||||
Diluted earnings per share (EPS) | $ 1.64 | $1.72-$1.77 | $1.84-$1.88 | |||
Year-over-year change | increase 5% - 8% | increase 12% - 15% | ||||
Total QUALCOMM (GAAP) | ||||||
Revenues | $7.53B | $8.1B-$8.6B | $8.4B-$8.7B | |||
Year-over-year change | increase 8% - 14% | increase 12% - 16% | ||||
Diluted earnings per share (EPS) | $ 1.44 | $1.44-$1.49 | $1.57-$1.61 | |||
Year-over-year change | even - increase 3% | increase 9% - 12% | ||||
Diluted EPS attributable to in-process R&D | ($0.01) | n/a | ($0.01) | |||
Diluted EPS attributable to QSI | ($0.02) | ($0.10) | ($0.09) | |||
Diluted EPS attributable to estimated share-based compensation | ($0.19) | ($0.20) | ($0.20) | |||
Diluted EPS attributable to tax items related to prior years | $ 0.02 | $ 0.02 | $ 0.02 | |||
Metrics | ||||||
Fiscal year* CDMA/WCDMA handset unit wholesale average selling price | approx. $215 | approx. $210 | approx. $208 |
* | Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters |
Prior Guidance | Current Guidance | |||||||||||
Calendar 2007 | Calendar 2007 | |||||||||||
CDMA/WCDMA handset unit shipments | Calendar 2006 | Estimates | Estimates | |||||||||
March quarter | approx. 66M | not provided | approx. 81M - 85M | |||||||||
June quarter | approx. 70M | not provided | not provided | |||||||||
September quarter | approx. 76M | not provided | not provided | |||||||||
December quarter | approx. 91M | not provided | not provided | |||||||||
Calendar year range (approx.) | 301M | 368M - 388M | 373M - 393M | |||||||||
Midpoint | Midpoint | Midpoint | ||||||||||
CDMA/WCDMA units | approx. 301M | approx. 378M | approx. 383M | |||||||||
CDMA units | approx. 200M | approx. 203M | approx. 208M | |||||||||
WCDMA units | approx. 101M | approx. 175M | approx. 175M |
(1) | Prior FY 2007 estimates did not reflect the potential adverse impact on our results of Nokia not paying royalties in the fourth quarter of fiscal 2007 for June quarter shipments. Our prior estimate of such impact was approximately $0.04 to $0.06 diluted earnings per share. | |
(2) | Current FY 2007 estimates do not reflect the potential opportunity of Nokia paying royalties in the fourth quarter of fiscal 2007 for June quarter shipments. Our current estimate of such opportunity is approximately $0.04 to $0.05 diluted earnings per share. |
Page 7 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Estimated | Total | |||||||||||||||||||||||||||||||||||
Reconciling | QUALCOMM Pro | Share-Based | In-process | QUALCOMM | ||||||||||||||||||||||||||||||||
Segments | QCT | QTL | QWI | Items (2) | Forma | Compensation (3) | R&D | QSI (4) | (GAAP) | |||||||||||||||||||||||||||
Revenues | $ | 1,259 | $ | 759 | $ | 198 | $ | 5 | $ | 2,221 | $ | — | $ | — | $ | — | $ | 2,221 | ||||||||||||||||||
Change from prior year | 24 | % | 19 | % | 11 | % | N/M | 21 | % | 21 | % | |||||||||||||||||||||||||
Change from prior quarter | 2 | % | 27 | % | 5 | % | N/M | 10 | % | 10 | % | |||||||||||||||||||||||||
EBT | $ | 368 | $ | 636 | $ | 20 | $ | 82 | $ | 1,106 | $ | (126 | ) | $ | (10 | ) | $ | (42 | ) | $ | 928 | |||||||||||||||
Change from prior year | 26 | % | 8 | % | 25 | % | N/M | 15 | % | 5 | % | (52 | %) | 17 | % | 18 | % | |||||||||||||||||||
Change from prior quarter | 16 | % | 28 | % | 0 | % | N/M | 16 | % | (3 | %) | N/M | (2 | %) | 19 | % | ||||||||||||||||||||
Net income (loss) | $ | 838 | $ | (83 | ) | $ | (9 | ) | $ | (20 | ) | $ | 726 | |||||||||||||||||||||||
Change from prior year | 19 | % | 6 | % | (57 | %) | 43 | % | 22 | % | ||||||||||||||||||||||||||
Change from prior quarter | 16 | % | (3 | %) | N/M | (5 | %) | 12 | % | |||||||||||||||||||||||||||
Diluted EPS | $ | 0.50 | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.43 | |||||||||||||||||||||||
Change from prior year | 22 | % | 0 | % | 0 | % | 0 | % | 26 | % | ||||||||||||||||||||||||||
Change from prior quarter | 16 | % | 0 | % | N/M | 0 | % | 13 | % | |||||||||||||||||||||||||||
Diluted shares used | 1,693 | 1,693 | 1,693 | 1,693 | 1,693 |
Estimated | Total | |||||||||||||||||||||||||||||||||||
�� | Reconciling | QUALCOMM Pro | Share-Based | QUALCOMM | ||||||||||||||||||||||||||||||||
Segments | QCT | QTL | QWI | Items (2) | Forma | Compensation (3) | Tax Items (5) | QSI (4) | (GAAP) | |||||||||||||||||||||||||||
Revenues | $ | 1,230 | $ | 600 | $ | 188 | $ | 1 | $ | 2,019 | $ | — | $ | — | $ | — | $ | 2,019 | ||||||||||||||||||
EBT | 316 | 498 | 20 | 118 | 952 | (130 | ) | — | (43 | ) | 779 | |||||||||||||||||||||||||
Net income (loss) | 722 | (86 | ) | 33 | (21 | ) | 648 | |||||||||||||||||||||||||||||
Diluted EPS | $ | 0.43 | $ | (0.05 | ) | $ | 0.02 | $ | (0.01 | ) | $ | 0.38 | ||||||||||||||||||||||||
Diluted shares used | 1,685 | 1,685 | 1,685 | 1,685 | 1,685 |
Estimated | Total | |||||||||||||||||||||||||||||||||||
Reconciling | QUALCOMM Pro | Share-Based | In-Process | QUALCOMM | ||||||||||||||||||||||||||||||||
Segments | QCT(1)* | QTL(1)* | QWI (1)* | Items (1)(2)* | Forma | Compensation (3) | R&D | QSI (4) | (GAAP) | |||||||||||||||||||||||||||
Revenues | $ | 1,018 | $ | 640 | $ | 178 | $ | (2 | ) | $ | 1,834 | $ | — | $ | — | $ | — | $ | 1,834 | |||||||||||||||||
EBT | 291 | 587 | 16 | 68 | 962 | (120 | ) | (21 | ) | (36 | ) | 785 | ||||||||||||||||||||||||
Net income (loss) | 706 | (78 | ) | (21 | ) | (14 | ) | 593 | ||||||||||||||||||||||||||||
Diluted EPS | $ | 0.41 | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.34 | |||||||||||||||||||||||
Diluted shares used | 1,721 | 1,721 | 1,721 | 1,721 | 1,721 |
Estimated | Total | |||||||||||||||||||||||||||||||
Reconciling | QUALCOMM Pro | Share-Based | QUALCOMM | |||||||||||||||||||||||||||||
Segments | QCT(1)* | QTL(1)* | QWI (1)* | Items (1)(2)* | Forma | Compensation (3) | QSI (4) | (GAAP) | ||||||||||||||||||||||||
Revenues | $ | 1,133 | $ | 640 | $ | 178 | $ | — | $ | 1,951 | $ | — | $ | — | $ | 1,951 | ||||||||||||||||
EBT | 346 | 576 | 18 | 36 | 976 | (126 | ) | (26 | ) | 824 | ||||||||||||||||||||||
Net income (loss) | 726 | (83 | ) | — | 643 | |||||||||||||||||||||||||||
Diluted EPS | $ | 0.42 | $ | (0.05 | ) | $ | — | $ | 0.37 | |||||||||||||||||||||||
Diluted shares used | 1,728 | 1,728 | 1,728 | 1,728 |
Estimated | Total | |||||||||||||||||||||||||||||||||||||||
Reconciling | QUALCOMM Pro | Share-Based | QUALCOMM | |||||||||||||||||||||||||||||||||||||
Segments | QCT(1)* | QTL(1)* | QWI (1)* | Items (1)(2)* | Forma | Compensation (3) | Tax Items | In-Process R&D | QSI (4) | (GAAP) | ||||||||||||||||||||||||||||||
Revenues | $ | 4,332 | $ | 2,467 | $ | 731 | $ | (4 | ) | $ | 7,526 | $ | — | $ | — | $ | — | $ | — | $ | 7,526 | |||||||||||||||||||
EBT | 1,298 | 2,233 | 78 | 197 | 3,806 | (495 | ) | — | (22 | ) | (133 | ) | 3,156 | |||||||||||||||||||||||||||
Net income (loss) | 2,804 | (320 | ) | 40 | (22 | ) | (32 | ) | 2,470 | |||||||||||||||||||||||||||||||
Diluted EPS | $ | 1.64 | $ | (0.19 | ) | $ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 1.44 | |||||||||||||||||||||||||
Diluted shares used | 1,711 | 1,711 | 1,711 | 1,711 | 1,711 | 1,711 |
Estimated | Total | |||||||||||||||||||||||||||||||||||||||
Reconciling | QUALCOMM Pro | Share-Based | QUALCOMM | |||||||||||||||||||||||||||||||||||||
Segments | QCT | QTL | QWI | Items (2) | Forma | Compensation (3) | Tax Items (5) | In-Process R&D | QSI (4) | (GAAP) | ||||||||||||||||||||||||||||||
Revenues | $ | 2,490 | $ | 1,359 | $ | 387 | $ | 4 | $ | 4,240 | $ | — | $ | — | $ | — | $ | — | $ | 4,240 | ||||||||||||||||||||
Change from prior year | 21 | % | 17 | % | 8 | % | N/M | 19 | % | 19 | % | |||||||||||||||||||||||||||||
EBT | $ | 684 | $ | 1,134 | $ | 40 | $ | 200 | $ | 2,058 | $ | (257 | ) | $ | — | $ | (10 | ) | $ | (85 | ) | $ | 1,706 | |||||||||||||||||
Change from prior year | 9 | % | 6 | % | 21 | % | N/M | 10 | % | 6 | % | (52 | %) | 1 | % | 12 | % | |||||||||||||||||||||||
Net income (loss) | $ | 1,560 | $ | (169 | ) | $ | 33 | $ | (9 | ) | $ | (42 | ) | $ | 1,373 | |||||||||||||||||||||||||
Change from prior year | 14 | % | 6 | % | (41 | %) | (57 | %) | 20 | % | 13 | % | ||||||||||||||||||||||||||||
Diluted EPS | $ | 0.92 | $ | (0.10 | ) | $ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.81 | |||||||||||||||||||||||||
Change from prior year | 15 | % | 11 | % | (33 | %) | 0 | % | 0 | % | 14 | % | ||||||||||||||||||||||||||||
Diluted shares used | 1,689 | 1,689 | 1,689 | 1,689 | 1,689 | 1,689 |
Estimated | Total | |||||||||||||||||||||||||||||||||||||||
Reconciling | QUALCOMM | Share-Based | In-Process | QUALCOMM | ||||||||||||||||||||||||||||||||||||
Segments | QCT(1)* | QTL(1)* | QWI(1)* | Items (1)(2)* | Pro Forma | Compensation (3) | Tax Items | R&D | QSI (4) | (GAAP) | ||||||||||||||||||||||||||||||
Revenues | $ | 2,051 | $ | 1,165 | $ | 357 | $ | 2 | $ | 3,575 | $ | — | $ | — | $ | — | $ | — | $ | 3,575 | ||||||||||||||||||||
EBT | 629 | 1,066 | 33 | 140 | 1,868 | (242 | ) | — | (21 | ) | (84 | ) | 1,521 | |||||||||||||||||||||||||||
Net income | 1,373 | (160 | ) | 56 | (21 | ) | (35 | ) | 1,213 | |||||||||||||||||||||||||||||||
Diluted EPS | $ | 0.80 | $ | (0.09 | ) | $ | 0.03 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.71 | |||||||||||||||||||||||||
Diluted shares used | 1,711 | 1,711 | 1,711 | 1,711 | 1,711 | 1,711 |
Page 8 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
(1) | During the first quarter of fiscal 2007, the Company reassessed the intersegment royalty charged to QCT by QTL and determined that the royalty should be eliminated starting in fiscal 2007 for management reporting purposes. As a result, QCT did not record a royalty to QTL in the first six months of fiscal 2007. The Company also reorganized the QUALCOMM Wireless Systems (QWS) division into the QWBS division within the QWI segment. Revenues and operating results relating to QWS were included in reconciling items through the end of fiscal 2006. Prior period segment information has been adjusted to conform to the new segment presentation. | |
(2) | Reconciling items related to revenues consist primarily of other nonreportable segment revenues less intersegment eliminations. Reconciling items related to earnings before taxes consist primarily of certain investment income, 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 intercompany profit. | |
(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) | 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 tax provision for QUALCOMM pro forma, the tax adjustment column and the tax provisions related to estimated share-based compensation and in-process R&D from the tax provision for total QUALCOMM (GAAP). | |
(5) | During the first quarter of fiscal 2007, the federal R&D tax credit that expired on December 31, 2005 was extended by Congress for a period of two years beyond the prior expiration date. The Company recorded a tax benefit of $33 million, or $0.02 diluted earnings per share, related to fiscal 2006 in the first quarter of fiscal 2007 due to this retroactive extension. The effective tax rate for the first quarter of fiscal 2007 for total QUALCOMM (GAAP) was 17% primarily as a result of this benefit. The first quarter fiscal 2007 QUALCOMM pro forma results exclude this tax benefit attributable to 2006. | |
N/M – Not Meaningful | ||
Sums may not equal totals due to rounding. | ||
*As adjusted to conform to 2007 segment presentation |
Page 9 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Page 10 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Page 11 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
Page 12 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
PRO FORMA RESULTS TO TOTAL QUALCOMM (GAAP) RESULTS
(In millions, except per share data)
(Unaudited)
Three Months Ended April 1, 2007 | ||||||||||||||||||||
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
Pro Forma | Compensation (a) | R&D | QSI | (GAAP) | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Equipment and services | $ | 1,370 | $ | — | $ | — | $ | — | $ | 1,370 | ||||||||||
Licensing and royalty fees | 851 | — | — | — | 851 | |||||||||||||||
Total revenues | 2,221 | — | — | — | 2,221 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of equipment and services revenues | 616 | 9 | — | 9 | 634 | |||||||||||||||
Research and development | 370 | 58 | 10 | 16 | 454 | |||||||||||||||
Selling, general and administrative | 301 | 59 | — | 25 | 385 | |||||||||||||||
Total operating expenses | 1,287 | 126 | 10 | 50 | 1,473 | |||||||||||||||
Operating income (loss) | 934 | (126 | ) | (10 | ) | (50 | ) | 748 | ||||||||||||
Investment income, net | 172 | (b) | — | — | 8 | (c) | 180 | |||||||||||||
Income (loss) before income taxes | 1,106 | (126 | ) | (10 | ) | (42 | ) | 928 | ||||||||||||
Income tax (expense) benefit | (268 | )(d) | 43 | 1 | 22 | (e) | (202 | )(d) | ||||||||||||
Net income (loss) | $ | 838 | $ | (83 | ) | $ | (9 | ) | $ | (20 | ) | $ | 726 | |||||||
Earnings (loss) per common share: | ||||||||||||||||||||
Diluted | $ | 0.50 | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | 0.43 | |||||||
Shares used in per share calculations: | ||||||||||||||||||||
Diluted | 1,693 | 1,693 | 1,693 | 1,693 | 1,693 | |||||||||||||||
Supplemental Financial Data: | ||||||||||||||||||||
Operating Cash Flow | $ | 1,159 | $ | (87) | (g) | $ | (10 | ) | $ | (71 | ) | $ | 991 | |||||||
Operating Cash Flow as a % of Revenues | 52 | % | 45 | % | ||||||||||||||||
Free Cash Flow (f) | $ | 1,087 | $ | (87) | (g) | $ | (10 | ) | $ | (91 | ) | $ | 899 | |||||||
Free Cash Flow as a % of Revenues | 49 | % | 40 | % |
(a) | Estimated share-based compensation presented above and excluded from pro forma results does not include $1 million, net of tax, related to share-based awards granted under the executive bonus program. | |
(b) | Includes $125 million in interest and dividend income related to cash, cash equivalents and marketable securities, which are not part of the Company’s strategic investment portfolio, and $49 million in net realized gains on investments, partially offset by $1 million in other-than-temporary losses on investments and $1 million in interest expense. | |
(c) | Includes $6 million in net realized gains on investments and $3 million in interest and dividend income, partially offset by $1 million in interest expense. | |
(d) | The second quarter of fiscal 2007 tax rates are approximately 22% for total QUALCOMM (GAAP) and approximately 24% for QUALCOMM pro forma. | |
(e) | At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, will equal 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 tax provision for QUALCOMM pro forma and the tax provisions related to estimated share-based compensation andin-process R&D from the tax provision for total QUALCOMM (GAAP). | |
(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 Pro Forma Free Cash Flows to Total QUALCOMM Net Cash Provided by Operating Activities for the three months ended April 1, 2007, included herein. | |
(g) | Incremental tax benefits from stock options exercised during the period. |
Page 13 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
PRO FORMA RESULTS TO TOTAL QUALCOMM (GAAP) RESULTS
(In millions, except per share data)
(Unaudited)
Six Months Ended April 1, 2007 | ||||||||||||||||||||||||
Estimated | Total | |||||||||||||||||||||||
QUALCOMM | Share-Based | Tax | In-Process | QUALCOMM | ||||||||||||||||||||
Pro Forma | Compensation (a) | Adjustment | R&D | QSI | (GAAP) | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Equipment and services | $ | 2,712 | $ | — | $ | — | $ | — | $ | — | $ | 2,712 | ||||||||||||
Licensing and royalty fees | 1,528 | — | — | — | — | 1,528 | ||||||||||||||||||
4,240 | — | — | — | — | 4,240 | |||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Cost of equipment and services revenues | 1,239 | 20 | — | — | 9 | 1,268 | ||||||||||||||||||
Research and development | 737 | 115 | — | 10 | 33 | 895 | ||||||||||||||||||
Selling, general and administrative | 582 | 122 | — | — | 50 | 754 | ||||||||||||||||||
Total operating expenses | 2,558 | 257 | — | 10 | 92 | 2,917 | ||||||||||||||||||
Operating income (loss) | 1,682 | (257 | ) | — | (10 | ) | (92 | ) | 1,323 | |||||||||||||||
Investment income (expense), net | 376 | (b) | — | — | — | 7 | (c) | 383 | ||||||||||||||||
Income (loss) before income taxes | 2,058 | (257 | ) | — | (10 | ) | (85 | ) | 1,706 | |||||||||||||||
Income tax (expense) benefit | (498 | ) | 88 | 33 | 1 | 43 | (e) | (333) | (d) | |||||||||||||||
Net income (loss) | $ | 1,560 | $ | (169 | ) | $ | 33 | $ | (9 | ) | $ | (42 | ) | $ | 1,373 | |||||||||
Earnings (loss) per common share: | ||||||||||||||||||||||||
Diluted | $ | 0.92 | $ | (0.10 | ) | $ | 0.02 | $ | (0.01 | ) | $ | (0.02 | ) | $ | 0.81 | |||||||||
Shares used in per share calculations: | ||||||||||||||||||||||||
Diluted | 1,689 | 1,689 | 1,689 | 1,689 | 1,689 | 1,689 | ||||||||||||||||||
Supplemental Financial Data: | ||||||||||||||||||||||||
Operating Cash Flow | $ | 1,994 | $ | (119) | (g) | $ | — | $ | (10 | ) | $ | (85 | ) | $ | 1,780 | |||||||||
Operating Cash Flow as a % of Revenue | 47 | % | 42 | % | ||||||||||||||||||||
Free Cash Flow (f) | $ | 1,633 | $ | (119) | (g) | $ | — | $ | (10 | ) | $ | (138 | ) | $ | 1,366 | |||||||||
Free Cash Flow as a % of Revenue | 39 | % | 32 | % |
(a) | Estimated share-based compensation presented above and excluded from pro forma results does not include $1 million, net of tax, related to share-based awards granted under the executive bonus program. | |
(b) | Includes $266 million in interest and dividend income related to cash, cash equivalents and marketable securities, which are not part of the Company’s strategic investment portfolio, $112 million in net realized gains on investments, partially offset by $1 million in other-than-temporary losses on investments and $1 million in interest expense. | |
(c) | Includes $7 million in net realized gains on investments and $4 million in interest and dividend income, partially offset by $2 million in interest expense, $1 million in other-than-temporary losses on investments and $1 million in losses on derivatives. | |
(d) | The tax rate of 20% for the first six months of fiscal 2007 for total QUALCOMM (GAAP) is lower than the estimated annual effective tax rate of 22% due primarily to $33 million of tax benefits recorded in the first quarter related to the retroactive extension of the federal research and development tax credit. | |
(e) | At fiscal year-end, the sum of the quarterly tax provisions for each column, including QSI, will equal 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 tax provision for QUALCOMM pro forma, the tax adjustment column and the tax provisions related to estimated share-based compensation and in-process R&D from the tax provision for total QUALCOMM (GAAP). | |
(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 Pro Forma Free Cash Flows to Total QUALCOMM Net Cash Provided by Operating Activities for the six months ended April 1, 2007, included herein. | |
(g) | Incremental tax benefits from stock options exercised during the period. |
Page 14 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
RECONCILIATION OF PRO FORMA FREE CASH FLOWS TO
TOTAL QUALCOMM (GAAP) NET CASH PROVIDED BY OPERATING ACTIVITIES
AND OTHER SUPPLEMENTAL DISCLOSURES
(In millions)
(Unaudited)
Three Months Ended April 1, 2007 | ||||||||||||||||||||
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
Pro Forma | Compensation | R&D | QSI | (GAAP) | ||||||||||||||||
Net cash provided (used) by operating activities | $ | 1,159 | $ | (87 | )(a) | $ | (10 | ) | $ | (71 | ) | $ | 991 | |||||||
Less: capital expenditures | (72 | ) | — | — | (20 | ) | (92 | ) | ||||||||||||
Free cash flow | $ | 1,087 | $ | (87 | ) | $ | (10 | ) | $ | (91 | ) | $ | 899 | |||||||
Other supplemental cash disclosures: | ||||||||||||||||||||
Cash transfers from QSI (1) | $ | 7 | $ | — | $ | — | $ | (7 | ) | $ | — | |||||||||
Cash transfers to QSI (2) | (99 | ) | — | — | 99 | — | ||||||||||||||
Net cash transfers | $ | (92 | ) | $ | — | $ | — | $ | 92 | $ | — | |||||||||
Six Months Ended April 1, 2007 | ||||||||||||||||||||
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
Pro Forma | Compensation | R&D | QSI | (GAAP) | ||||||||||||||||
Net cash provided (used) by operating activities | $ | 1,994 | $ | (119 | )(a) | $ | (10 | ) | $ | (85 | ) | $ | 1,780 | |||||||
Less: capital expenditures | (361 | ) | — | — | (53 | ) | (414 | ) | ||||||||||||
Free cash flow | $ | 1,633 | $ | (119 | ) | $ | (10 | ) | $ | (138 | ) | $ | 1,366 | |||||||
Other supplemental cash disclosures: | ||||||||||||||||||||
Cash transfers from QSI (1) | $ | 13 | $ | — | $ | — | $ | (13 | ) | $ | — | |||||||||
Cash transfers to QSI (2) | (194 | ) | — | — | 194 | — | ||||||||||||||
Net cash transfers | $ | (181 | ) | $ | — | $ | — | $ | 181 | $ | — | |||||||||
(1) | Cash from loan payments and sale of equity securities. | |
(2) | Funding for strategic debt and equity investments and other QSI operating expenses. |
Three Months Ended March 26, 2006 | ||||||||||||||||||||
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
Pro Forma | Compensation | R&D | QSI | (GAAP) | ||||||||||||||||
Net cash provided (used) by operating activities | $ | 1,072 | $ | (172 | )(a) | $ | — | $ | (11 | ) | $ | 889 | ||||||||
Less: capital expenditures | (125 | ) | — | — | (36 | ) | (161 | ) | ||||||||||||
Free cash flow | $ | 947 | $ | (172 | ) | $ | — | $ | (47 | ) | $ | 728 | ||||||||
Six Months Ended March 26, 2006 | ||||||||||||||||||||
Estimated | Total | |||||||||||||||||||
QUALCOMM | Share-Based | In-Process | QUALCOMM | |||||||||||||||||
Pro Forma | Compensation | R&D | QSI | (GAAP) | ||||||||||||||||
Net cash provided (used) by operating activities | $ | 1,785 | $ | (273 | )(a) | $ | — | $ | (27 | ) | $ | 1,485 | ||||||||
Less: capital expenditures | (307 | ) | — | — | (67 | ) | (374 | ) | ||||||||||||
Free cash flow | $ | 1,478 | $ | (273 | ) | $ | — | $ | (94 | ) | $ | 1,111 | ||||||||
(a) | Incremental tax benefits from stock options exercised during the period. |
Page 15 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
April 1, | September 24, | |||||||
2007 | 2006 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,353 | $ | 1,607 | ||||
Marketable securities | 3,198 | 4,114 | ||||||
Accounts receivable, net | 714 | 700 | ||||||
Inventories | 347 | 250 | ||||||
Deferred tax assets | 232 | 235 | ||||||
Other current assets | 234 | 143 | ||||||
Total current assets | 8,078 | 7,049 | ||||||
Marketable securities | 4,751 | 4,228 | ||||||
Property, plant and equipment, net | 1,582 | 1,482 | ||||||
Goodwill | 1,320 | 1,230 | ||||||
Deferred tax assets | 486 | 512 | ||||||
Other assets | 1,037 | 707 | ||||||
Total assets | $ | 17,254 | $ | 15,208 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 566 | $ | 420 | ||||
Payroll and other benefits related liabilities | 240 | 273 | ||||||
Unearned revenue | 289 | 197 | ||||||
Income taxes payable | 298 | 137 | ||||||
Other current liabilities | 433 | 395 | ||||||
Total current liabilities | 1,826 | 1,422 | ||||||
Unearned revenue | 151 | 141 | ||||||
Other liabilities | 247 | 239 | ||||||
Total liabilities | 2,224 | 1,802 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding at April 1, 2007 and September 24, 2006 | — | — | ||||||
Common stock, $0.0001 par value; 6,000 shares authorized; 1,665 and 1,652 shares issued and outstanding at April 1, 2007 and September 24, 2006, respectively | — | — | ||||||
Paid-in capital | 7,758 | 7,242 | ||||||
Retained earnings | 7,075 | 6,100 | ||||||
Accumulated other comprehensive income | 197 | 64 | ||||||
Total stockholders’ equity | 15,030 | 13,406 | ||||||
Total liabilities and stockholders’ equity | $ | 17,254 | $ | 15,208 | ||||
Page 16 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
April 1, | March 26, | April 1, | March 26, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Revenues: | ||||||||||||||||
Equipment and services | $ | 1,370 | $ | 1,122 | $ | 2,712 | $ | 2,271 | ||||||||
Licensing and royalty fees | 851 | 712 | 1,528 | 1,304 | ||||||||||||
Total revenues | 2,221 | 1,834 | 4,240 | 3,575 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of equipment and services revenues | 634 | 521 | 1,268 | 1,037 | ||||||||||||
Research and development | 454 | 390 | 895 | 731 | ||||||||||||
Selling, general and administrative | 385 | 263 | 754 | 502 | ||||||||||||
Total operating expenses | 1,473 | 1,174 | 2,917 | 2,270 | ||||||||||||
Operating income | 748 | 660 | 1,323 | 1,305 | ||||||||||||
Investment income, net | 180 | 125 | 383 | 216 | ||||||||||||
Income before income taxes | 928 | 785 | 1,706 | 1,521 | ||||||||||||
Income tax expense | (202 | ) | (192 | ) | (333 | ) | (308 | ) | ||||||||
Net income | $ | 726 | $ | 593 | $ | 1,373 | $ | 1,213 | ||||||||
Basic earnings per common share | $ | 0.44 | $ | 0.36 | $ | 0.83 | $ | 0.73 | ||||||||
Diluted earnings per common share | $ | 0.43 | $ | 0.34 | $ | 0.81 | $ | 0.71 | ||||||||
Shares used in per share calculations: | ||||||||||||||||
Basic | 1,659 | 1,664 | 1,656 | 1,655 | ||||||||||||
Diluted | 1,693 | 1,721 | 1,689 | 1,711 | ||||||||||||
Dividends per share paid | $ | 0.24 | $ | 0.18 | $ | 0.24 | $ | 0.18 | ||||||||
Dividends per share announced | $ | 0.12 | $ | 0.09 | $ | 0.24 | $ | 0.18 | ||||||||
Page 17 of 17
QUALCOMM Announces Second Quarter Fiscal 2007 Results
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
April 1, | March 26, | April 1, | March 26, | |||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Operating Activities: | ||||||||||||||||
Net income | $ | 726 | $ | 593 | $ | 1,373 | $ | 1,213 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 93 | 63 | 184 | 121 | ||||||||||||
Non-cash portion of share-based compensation expense | 127 | 120 | 257 | 242 | ||||||||||||
Incremental tax benefits from stock options exercised | (87 | ) | (172 | ) | (119 | ) | (273 | ) | ||||||||
Net realized gains on marketable securities and other investments | (55 | ) | (40 | ) | (119 | ) | (60 | ) | ||||||||
Non-cash income tax expense | 131 | 116 | 229 | 220 | ||||||||||||
Other items, net | 2 | 22 | 8 | 26 | ||||||||||||
Changes in assets and liabilities, net of effects of acquisitions: | ||||||||||||||||
Accounts receivable, net | (8 | ) | 157 | (17 | ) | (14 | ) | |||||||||
Inventories | (17 | ) | (21 | ) | (98 | ) | (39 | ) | ||||||||
Other assets | (57 | ) | 5 | (155 | ) | 21 | ||||||||||
Trade accounts payable | 87 | 19 | 134 | 106 | ||||||||||||
Payroll, benefits and other liabilities | 7 | 21 | 1 | (65 | ) | |||||||||||
Unearned revenue | 42 | 6 | 102 | (13 | ) | |||||||||||
Net cash provided by operating activities | 991 | 889 | 1,780 | 1,485 | ||||||||||||
Investing Activities: | ||||||||||||||||
Capital expenditures | (92 | ) | (161 | ) | (414 | ) | (374 | ) | ||||||||
Purchases of available-for-sale securities | (1,908 | ) | (2,744 | ) | (3,581 | ) | (6,062 | ) | ||||||||
Proceeds from sale of available-for-sale securities | 1,909 | 2,283 | 4,345 | 4,443 | ||||||||||||
Other investments and acquisitions, net of cash acquired | (7 | ) | (264 | ) | (227 | ) | (270 | ) | ||||||||
Other items, net | 3 | 41 | 1 | 45 | ||||||||||||
Net cash (used) provided by investing activities | (95 | ) | (845 | ) | 124 | (2,218 | ) | |||||||||
Financing Activities: | ||||||||||||||||
Proceeds from issuance of common stock | 158 | 287 | 255 | 468 | ||||||||||||
Incremental tax benefits from stock options exercised | 87 | 172 | 119 | 273 | ||||||||||||
Dividends paid | (398 | ) | (298 | ) | (398 | ) | (298 | ) | ||||||||
Repurchase and retirement of common stock | (40 | ) | — | (136 | ) | — | ||||||||||
Net cash (used) provided by financing activities | (193 | ) | 161 | (160 | ) | 443 | ||||||||||
Effect of exchange rate changes on cash | 1 | (3 | ) | 2 | (1 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 704 | 202 | 1,746 | (291 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 2,649 | 1,577 | 1,607 | 2,070 | ||||||||||||
Cash and cash equivalents at end of period | $ | 3,353 | $ | 1,779 | $ | 3,353 | $ | 1,779 | ||||||||