QUALCOMM, INC. SAN DIEGO, July 23, 2014 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the third quarter of fiscal 2014 ended June 29, 2014.
"We are pleased to report another record quarter with revenues, earnings per share and chip shipments reaching all-time highs, driven by broad-based demand for our industry-leading 3G/4G chipset solutions," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "Looking forward, although we have lowered our near-term financial outlook for the licensing business, we are pleased to be raising our fiscal year earnings per share guidance on better than expected performance in our semiconductor business."
Third Quarter Results (GAAP)*
-- Revenues: (1 )$6.81 billion, up 9 percent year-over-year (y-o-y) and 7
percent sequentially.
-- Operating income: (1) $2.08 billion, up 24 percent y-o-y and 4 percent
sequentially.
-- Net income: (2 )$2.24 billion, up 42 percent y-o-y and 14 percent
sequentially.
-- Diluted earnings per share: (2) $1.31, up 46 percent y-o-y and 15
percent sequentially.
-- Effective tax rate: (1 )10 percent.
-- Operating cash flow: $2.67 billion, up 29 percent y-o-y; 39 percent of
revenues.
-- Return of capital to stockholders: $2.06 billion, including $1.35
billion through repurchases of 17.0 million shares of common stock and
$706 million, or $0.42 per share, of cash dividends paid.
1 Throughout this news release,
revenues, operating expenses,
operating income, earnings before
tax (EBT) and effective tax rates
are from continuing operations
(i.e., before adjustments for
noncontrolling interests and
discontinued operations), unless
otherwise stated.
2 Throughout this news release,
net income and diluted earnings
per share are attributable to
Qualcomm (i.e., after adjustments
for noncontrolling interests and
discontinued operations), unless
otherwise stated.
Non-GAAP Third Quarter Results*
Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.
-- Revenues: $6.81 billion, up 9 percent y-o-y and 7 percent sequentially.
-- Operating income: $2.43 billion, up 19 percent y-o-y and 4 percent
sequentially.
-- Net income: $2.47 billion, up 35 percent y-o-y and 10 percent
sequentially.
-- Diluted earnings per share: $1.44, up 40 percent y-o-y and 10 percent
sequentially.
-- Effective tax rate: 13 percent.
Detailed reconciliations between GAAP and Non-GAAP results are included within this news release.
* The following should be considered in regards to the year-over-year and sequential comparisons:
-- The third quarter of fiscal 2014 results included:
-- $208 million of income, or $0.12 per share, of which $184 million
was recorded in other income, due to the reversal of accruals
related to our litigation with ParkerVision; and
-- $164 million of charges, or $0.08 per share, that resulted from an
impairment on goodwill and long-lived assets related to our QMT
(Qualcomm MEMS Technologies) division.
-- The third quarter of fiscal 2013 results included:
-- $158 million charge, or $0.06 per share, that resulted from an
impairment on long-lived assets related to our QMT division.
Third Quarter Key Business Metrics
-- MSM(TM) chip shipments: 225 million units, up 31 percent y-o-y and 20
percent sequentially.
-- March quarter total reported device sales: approximately $58.1 billion,
up 3 percent y-o-y and down 13 percent sequentially.
-- March quarter estimated 3G/4G device shipments: approximately 250 to
254 million units, at an estimated average selling price of
approximately $228 to $234 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled $32.7 billion at the end of the third quarter of fiscal 2014, compared to $30.4 billion a year ago and $32.1 billion at the end of the second quarter of fiscal 2014. On July 18, 2014, we announced a cash dividend of $0.42 per share payable on September 24, 2014 to stockholders of record as of the close of business on September 3, 2014.
Research and Development
($ in
millions) Non-GAAP QSI Share-Based Acquisition- GAAP
Compensation Related
Items
Third
quarter
fiscal
2014 $1,251 $1 $174 $3 $1,429
As % of
revenues 18% 21%
Third
quarter
fiscal
2013 $1,130 $1 $166 $1 $1,298
As % of
revenues 18% 21%
Year-over-
year
change ($) 11% N/M 5% N/M 10%
N/M - Not Meaningful
Non-GAAP research and development (R&D) expenses increased 11 percent y-o-y primarily due to an increase in costs to develop 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- GAAP
Compensation Related
Items
Third
quarter
fiscal
2014 $484 $4 $88 $6 $582
As % of
revenues 7% 9%
Third
quarter
fiscal
2013 $505 $6 $96 $6 $613
As % of
revenues 8% 10%
Year-over-
year
change ($) (4%) (33%) (8%) N/M (5%)
N/M - Not Meaningful
Non-GAAP selling, general and administrative (SG&A) expenses decreased 4 percent y-o-y primarily due to a decrease in selling and marketing expenses.
Effective Income Tax Rates
Our fiscal 2014 annual effective income tax rates are estimated to be 14 percent for GAAP and 15 percent for Non-GAAP, both of which include the United States federal R&D tax credit generated through December 31, 2013, the date on which the credit expired. During the third quarter of fiscal 2014, we recorded a $66 million tax benefit as a result of an agreement reached with the Internal Revenue Service related to transfer pricing on our fiscal 2013 tax return, which was excluded from Non-GAAP results.
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 most recent quarterly report 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 financial outlook to the extent they are reasonably certain; however, actual results may differ materially from the outlook.
During the fourth quarter of fiscal 2014, we expect to complete a minimum of $1 billion in stock repurchases under our current stock repurchase program. Our outlook for fiscal 2014 diluted earnings per share includes an estimate of the benefit related to stock repurchases.
China continues to present significant opportunities for us, particularly with the rollout of 4G LTE, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the China National Development and Reform Commission (NDRC). Please refer to our Quarterly Report on Form 10-Q for the third quarter ended June 29, 2014 filed with the SEC for our most recent disclosures regarding the NDRC investigation.
We also believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee) and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing. We expect calendar year 2014 3G/4G device shipments to be approximately 1.3 billion globally. However, our estimate of calendar year 2014 3G/4G device shipments that we currently expect to be reported to us is approximately 1.04 billion to 1.13 billion, which is adjusted for units that we believe may not be reported to us, are in dispute or are currently unlicensed. We are taking steps to address these issues, although the timing of any resolution is uncertain.
The following table summarizes GAAP and Non-GAAP guidance based on the current outlook. The Non-GAAP outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.
Qualcomm's Business Outlook Summary
FOURTH FISCAL QUARTER
Q4 FY13 Current Guidance
Results Q4 FY14 Estimates
Revenues $6.48B $6.5B - $7.4B
Year-over-year change even - increase 14%
Non-GAAP diluted earnings per share
(EPS) $1.05 $1.20 - $1.35
Year-over-year change increase 14% - 29%
Diluted EPS attributable to QSI ($0.01) $0.00
Diluted EPS attributable to share-
based compensation ($0.13) ($0.13)
Diluted EPS attributable to
acquisition-related items ($0.04) ($0.04)
GAAP diluted EPS $0.86 $1.03 - $1.18
Year-over-year change increase 20% - 37%
Metrics
MSM chip shipments 190M 230M - 245M
Year-over-year change increase 21% - 29%
Total reported device sales (1) approx. approx. $53.0B -
$60.2B* $59.0B*
Year-over-year change decrease 2% - 12%
*Est. sales in June quarter,
reported in September quarter
-----------------------------
FISCAL YEAR
-----------
FY 2013 Prior Guidance Current Guidance
FY 2014 Estimates
Results FY 2014 Estimates (2)
Revenues $24.87B $26.0B - $27.5B $26.3B - $27.2B
Year-over-year change increase 5% - 11% increase 6% - 9%
Non-GAAP diluted EPS $4.51 $5.05 - $5.25 $5.21 - $5.36
Year-over-year change increase 12% - 16% increase 16% - 19%
Diluted EPS attributable to QSI $0.02 ($0.01) ($0.01)
Diluted EPS attributable to share-based
compensation ($0.51) ($0.51) ($0.51)
Diluted EPS attributable to acquisition-
related items ($0.16) ($0.16) ($0.16)
Diluted EPS attributable to tax items $0.04 N/A $0.04
GAAP diluted EPS $3.91 $4.37 - $4.57 $4.57 - $4.72
Year-over-year change increase 12% - 17% increase 17% - 21%
Metrics
Est. fiscal year* 3G/4G device average
selling price range (1) approx. $223 - $229 approx. $218 - $228 approx. $222 - $228
*Shipments in Sept. to June quarters,
reported in Dec. to Sept. quarters
--------------------------------------
CALENDAR YEAR Device Estimates (1)
Calendar 2013 Prior Guidance Current Guidance
Estimates Calendar 2014 Calendar 2014
Estimates Estimates
Est. 3G/4G
device
shipments
March
quarter approx. 244M - 248M not provided approx. 250M - 254M
June quarter approx. 260M - 264M not provided not provided
September
quarter approx. 276M - 280M not provided not provided
December
quarter approx. 295M - 299M not provided not provided
------------
Est.
calendar
year range
(approx.) 1,075M - 1,091M 1,220M - 1,300M 1,040M - 1,130M (3)
----------- --------------- --------------- ------------------
(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 CDMA/
OFDMA multimode 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 sales
net of permitted deductions,
including transportation,
insurance, packing costs and other
items, while other licensees
report sales 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. In addition, certain
licensees may not report (in the
quarter in which they are
contractually obligated to report)
their sales of certain types of
subscriber units, which (as a
result of audits, legal actions or
for other reasons) may be reported
in a subsequent quarter.
Accordingly, 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) Our prior guidance for fiscal 2014
GAAP diluted EPS excluded a $66
million tax benefit that we
recorded in the third quarter of
fiscal 2014 as a result of an
agreement reached with the
Internal Revenue Service, which
was excluded from our Non-GAAP
results.
(3) We expect calendar year 2014 3G/4G
device shipments to be
approximately 1.3 billion
globally. However, our estimate of
calendar year 2014 3G/4G device
shipments that we currently expect
to be reported to us is
approximately 1.04 billion to 1.13
billion, which is adjusted for
units that we believe may not be
reported to us, are in dispute or
are currently unlicensed. We are
taking steps to address these
issues, although the timing of any
resolution is uncertain.
N/A - Not Applicable
Sums may not equal totals due to rounding.
Results of Business Segments
The following table reconciles our Non-GAAP results to our GAAP results ($ in millions, except per share data):
SEGMENTS QCT QTL Non-GAAP Non-GAAP QSI (3) Share-Based
Reconciling (3) Compensation (3) Acquisition- Tax GAAP
Items (1) (2) Related Items
Items (3)
Q3 - FISCAL 2014
----------------
Revenues $4,957 $1,803 $46 $6,806 $- $- $- $- $6,806
Change from prior year 17% (3%) (70%) 9% 9%
Change from prior quarter 17% (13%) (13%) 7% 7%
Operating income (loss) $2,425 ($5) ($274) ($71) $- $2,075
Change from prior year 19% 29% 2% -% 24%
Change from prior quarter 4% 17% (9%) 21% 4%
EBT $1,116 $1,550 $177 $2,843 ($1) ($274) ($71) $- $2,497
Change from prior year 51% (5%) N/M 29% N/M 2% -% 31%
Change from prior quarter 51% (15%) N/M 7% 97% (9%) 21% 10%
EBT as % of revenues 23% 86% N/M 42% 37%
Net income (loss) $2,470 $- ($232) ($66) $66 $2,238
Change from prior year 35% N/M (5%) (3%) N/M 42%
Change from prior quarter 10% N/M (17%) 19% N/M 14%
Diluted EPS $1.44 $0.00 ($0.14) ($0.04) $0.04 $1.31
Change from prior year 40% N/M (8%) -% N/M 46%
Change from prior quarter 10% N/M (27%) 20% N/M 15%
Diluted shares used 1,714 1,714 1,714 1,714 1,714 1,714
Q2 - FISCAL 2014
----------------
Revenues $4,243 $2,071 $53 $6,367 $- $- $- $- $6,367
Operating income (loss) 2,337 (6) (251) (90) - 1,990
EBT $740 $1,834 $78 2,652 (39) (251) (90) - 2,272
Net income (loss) 2,255 (17) (198) (81) - 1,959
Diluted EPS $1.31 ($0.01) ($0.11) ($0.05) $- $1.14
Diluted shares used 1,719 1,719 1,719 1,719 1,719 1,719
Q3 - FISCAL 2013
----------------
Revenues $4,222 $1,867 $154 $6,243 $- $- $- $- $6,243
Operating income (loss) 2,035 (7) (280) (71) - 1,677
EBT $738 $1,633 ($161) 2,210 51 (280) (71) - 1,910
Net income (loss) 1,823 43 (222) (64) - 1,580
Diluted EPS $1.03 $0.02 ($0.13) ($0.04) $- $0.90
Diluted shares used 1,765 1,765 1,765 1,765 1,765 1,765
Q4 - FISCAL 2013
----------------
Revenues $4,457 $1,874 $149 $6,480 $- $- $- $- $6,480
Operating income (loss) 1,940 (11) (274) (67) - 1,588
EBT $702 $1,622 ($151) 2,173 (11) (274) (67) - 1,821
Net income (loss) 1,818 (24) (226) (67) - 1,501
Diluted EPS $1.05 ($0.01) ($0.13) ($0.04) $- $0.86
Diluted shares used 1,738 1,738 1,738 1,738 1,738 1,738
------------------- ----- ----- ----- ----- ----- -----
SEGMENTS QCT QTL Non-GAAP Non-GAAP QSI (3) Share-Based
Reconciling (3) Compensation (3) Acquisition- Tax GAAP
Items (1) (2) Related Items
Items (3)
--- --- ---
9 MONTHS - FISCAL 2014
----------------------
Revenues $13,816 $5,774 $205 $19,795 $- $- $- $- $19,795
Change from prior year 13% 2% (54%) 8% 8%
Operating income (loss) $6,611 ($16) ($806) ($231) $- $5,558
Change from prior year (2%) 20% 3% (3%) (1%)
EBT $2,762 $5,054 ($217) $7,599 ($36) ($806) ($231) $- $6,526
Change from prior year 11% 2% N/M 3% N/M 3% (3%) 2%
EBT as % of revenues 20% 88% N/M 38% 33%
Discontinued operations, net of tax (4) $430 $- $- $- $- $430
Net income (loss) $6,888 ($13) ($655) ($213) $66 $6,073
Change from prior year 13% N/M 1% -% 3% 13%
Diluted EPS $4.01 ($0.01) ($0.38) ($0.12) $0.04 $3.53
Change from prior year 16% N/M -% -% -% 16%
Diluted shares used 1,718 1,718 1,718 1,718 1,718 1,718
9 MONTHS - FISCAL 2013
----------------------
Revenues $12,258 $5,680 $447 $18,385 $- $- $- $- $18,385
Operating income (loss) 6,716 (20) (829) (225) - 5,642
EBT $2,487 $4,968 ($95) 7,360 66 (829) (225) - 6,372
Net income (loss) 6,094 67 (661) (212) 64 5,352
Diluted EPS $3.46 $0.04 ($0.38) ($0.12) $0.04 $3.04
Diluted shares used 1,760 1,760 1,760 1,760 1,760 1,760
12 MONTHS - FISCAL 2013
-----------------------
Revenues $16,715 $7,554 $597 $24,866 $- $- $- $- $24,866
Operating income (loss) 8,657 (31) (1,103) (293) - 7,230
EBT $3,189 $6,590 ($245) 9,534 56 (1,103) (293) - 8,194
Net income (loss) 7,911 43 (886) (279) 64 6,853
Diluted EPS $4.51 $0.02 ($0.51) ($0.16) $0.04 $3.91
Diluted shares used 1,754 1,754 1,754 1,754 1,754 1,754
------------------- ----- ----- ----- ----- ----- -----
(1) Non-GAAP reconciling items related
to revenues consisted primarily of
nonreportable segment revenues
less intersegment eliminations.
Non-GAAP reconciling items
related to earnings before taxes
consisted primarily of certain
research and development expenses,
selling, general and
administrative expenses, other
expenses or income and certain
investment income that are not
allocated to the segments for
management reporting purposes;
nonreportable segment results; and
the elimination of intersegment
profit.
(2) During the first quarter of fiscal
2014, as a result of the
reassessment of management
reporting, the former Qualcomm
Wireless & Internet (QWI) segment
was eliminated. Revenues and
operating results for the
divisions that comprised the QWI
segment are included in Non-GAAP
reconciling items. Prior period
information has been adjusted to
conform to the current
presentation.
(3) 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.
(4) During the first quarter of fiscal
2014, a gain of $665 million was
recorded associated with the sale
of substantially all of the
operations of our Omnitracs
division.
N/M - Not Meaningful
N/A - Not Applicable
Sums may not equal totals due to rounding.
Conference Call
Qualcomm's third quarter fiscal 2014 earnings conference call will be broadcast live on July 23, 2014, beginning at 2:45 p.m. Pacific Time (PT) at http://investor.qualcomm.com/events.cfm. 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 information reconciling these Non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as other 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 http://investor.qualcomm.com/events.cfm and via telephone following the live call for 30 days thereafter. 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 63935250.
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 (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing) segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors. Non-GAAP measurements used by the Company include revenues, cost of equipment and services revenues, R&D expenses, SG&A expenses, operating income, net investment income, income or earnings before income taxes, effective tax rate, net income and diluted earnings per share. 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 and certain share-based compensation, acquisition-related items and 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 primarily relates to restricted stock
units. Non-cash share-based compensation is excluded because management
views such expenses as unrelated to the operating activities of the
Company's ongoing core businesses.
-- Acquisition-related items include amortization and impairment 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, the Company excludes expenses related to the
termination of contracts that limit the use of the acquired intellectual
property. These acquisition-related items are excluded and are not
allocated to the Company's segments because management views such
expenses as unrelated to the operating activities of the Company's
ongoing core businesses. 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 are unrelated to the fiscal year in which they
are recorded are excluded in order to provide a clearer understanding of
the Company's ongoing Non-GAAP tax rate and after tax earnings.
About Qualcomm
Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. Qualcomm Incorporated includes Qualcomm's licensing business, QTL, and the vast majority of its patent portfolio. Qualcomm Technologies, Inc., a wholly-owned subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm's engineering, research and development functions, and substantially all of its products and services businesses, including its semiconductor business, QCT. 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 near-term financial outlook for the licensing business; better than expected performance in our semiconductor business; stock repurchases that we plan to complete during the fourth quarter of fiscal 2014 under our current stock repurchase program; challenges to our business in China; our business outlook; and our estimates and guidance related to revenues, our fiscal 2014 annual effective tax rates, GAAP and Non-GAAP diluted earnings per share, MSM chip shipments, total reported device sales, 3G/4G device average selling price ranges and 3G/4G device shipments and ranges. Forward-looking statements are generally identified by words such as "estimates," "guidance," "expects," "anticipates," "intends," "plans," "believes," "seeks" 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 CDMA, OFDMA and other communications technologies; continuing growth in our customers' and licensees' sales of products and services based on these technologies and our ability to continue to drive customer demand for our products and services based on these technologies; competition; our dependence on a small number of customers and licensees; the continued and future success of our licensing programs; attacks on our licensing business model, including current and future legal proceedings or actions of governmental or quasi-governmental bodies or standards or industry organizations; the enforcement and protection of our intellectual property rights; the commercial success of our new technologies, products and services; claims by third parties that we infringe their intellectual property; our dependence on a limited number of third-party suppliers; our stock price and earnings volatility; government regulations and policies; acquisitions, strategic transactions and investments; global economic conditions that impact the mobile communications industry; foreign currency fluctuations; and failures in our products or services or in the products of our customers, including those resulting from security vulnerabilities, defects or errors. These and other risks are set forth in the Company's Quarterly Report on Form 10-Q for the third quarter ended June 29, 2014 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 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 Contact:
Warren Kneeshaw
Vice President, Investor Relations
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com
Supplemental Information
(Unaudited)
Three Months Ended June 29, 2014
--------------------------------
Non-GAAP
Results
QSI Share-Based Acquisition- Tax Items (a) GAAP
Compensation Related Items
Results
-------
($ in millions, except per share data)
Cost of equipment and services
revenues $2,666 $ - $12 $62 $ - $2,740
R&D expenses 1,251 1 174 3 - 1,429
SG&A expenses 484 4 88 6 - 582
Other income, net 20 (b) - - - - 20
Operating income (loss) 2,425 (5) (274) (71) - 2,075
Investment income, net $418 (c) $4 (d) $ - $ - $ - $422
Tax rate 13% -% 15% 7% N/A 10%
Net income (loss) $2,470 $ - $(232) $(66) $66 $2,238
Diluted EPS $1.44 $0.00 $(0.14) $(0.04) $0.04 $1.31
----------- ----- ----- ------ ------ ----- -----
(a) Included a $66 million tax benefit
related to an agreement reached with
the Internal Revenue Service related
to transfer pricing on our fiscal
2013 tax return.
(b) Included $184 million of other income
from the reversal of accruals
related to our litigation with
ParkerVision, partially offset by
$164 million of impairment charges
on goodwill and long-lived assets
related to our QMT division.
(c) Included $288 million in net realized
gains on investments, $139 million
in interest and dividend income and
$4 million in gains on
deconsolidation of subsidiaries,
partially offset by $8 million in
other-than-temporary losses on
investments and $5 million in net
losses on derivatives.
(d) Included $10 million in net realized
gains on investments, partially
offset by $3 million in other-than-
temporary losses on investments, $2
million in equity in losses of
investees and $1 million in net
losses on derivatives.
Nine Months Ended June 29, 2014
-------------------------------
Non-GAAP
Results
QSI Share-Based Acquisition- Tax Items (a) GAAP
Compensation Related Items
Results
-------
($ in millions, except per share
data)
Cost of equipment and
services revenues $7,706 $ - $37 $186 $ - $7,929
R&D expenses 3,573 4 510 26 - 4,113
SG&A expenses 1,455 12 259 19 - 1,745
Other expenses, net 450 (e) - - - - 450
Operating income (loss) 6,611 (16) (806) (231) - 5,558
Investment income, net $988 (f) $(20) (g) $ - $ - $ - $968
Tax rate 15% 56% 19% 8% N/A 14%
Net income (loss) $6,888 $(13) $(655) $(213) $66 $6,073
Diluted EPS $4.01 $(0.01) $(0.38) $(0.12) $0.04 $3.53
----------- ----- ------ ------ ------ ----- -----
(e) Included $607 million of impairment
charges on long-lived assets and
goodwill related to our QMT division
and a $16 million goodwill
impairment charge related to our
former QRS (Qualcomm Retail
Solutions) division, partially
offset by the reversal of the $173
million accrual recorded in fiscal
2013 related to our litigation with
ParkerVision.
(f) Included $650 million in net realized
gains on investments, $459 million
in interest and dividend income, $5
million in gains on deconsolidation
of subsidiaries and $1 million in
net gains on derivatives, partially
offset by $124 million in other-
than-temporary losses on
investments and $3 million in
interest expense.
(g) Included $46 million in other-than-
temporary losses on investments, $7
million in equity in losses of
investees, $2 million in net losses
on derivatives and $1 million in
interest expense, partially offset
by $35 million in net realized gains
on investments and $1 million in
interest and dividend income.
N/A - Not Applicable
Sums may not equal totals due to rounding.
Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)
(Unaudited)
Three Months Ended June 29, 2014
--------------------------------
($ in millions) QSI Share-Based Compensation Acquisition- Tax Items (b) GAAP Results
Related Items
Non-GAAP
Results
--- -------
Income (loss) from
continuing operations
before income taxes $2,843 $(1) $(274) $(71) $ - $2,497
Income tax (expense) benefit (373) - 42 5 66 (260)
---- --- --- --- --- ----
Income (loss) from
continuing operations $2,470 $(1) $(232) $(66) $66 $2,237
Tax rate 13% -% 15% 7% N/A 10%
-------- --- --- --- --- --- ---
Nine Months Ended June 29, 2014
-------------------------------
($ in millions) Non-GAAP Results QSI Share-Based Compensation Acquisition- Tax Items (b) GAAP Results
Related Items
--- -------------
Income (loss)
from
continuing
operations
before income
taxes $7,599 $(36) $(806) $(231) $ - $6,526
Income tax
(expense)
benefit (1,141) 20 151 18 66 (886)
------ --- --- --- --- ----
Income (loss)
from
continuing
operations $6,458 $(16) $(655) $(213) $66 $5,640
Tax rate 15% 56% 19% 8% N/A 14%
-------- --- --- --- --- --- ---
(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.
(b) During the third quarter of
fiscal 2014, we recorded a
$66 million tax benefit as a
result of an agreement
reached with the Internal
Revenue Service related to
transfer pricing on our
fiscal 2013 tax return.
N/A - Not Applicable
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
June 29, September 29,
2014 2013
---- ----
ASSETS
Current assets:
Cash and cash equivalents $7,944 $6,142
Marketable securities 10,209 8,824
Accounts receivable, net 2,084 2,142
Inventories 1,185 1,302
Deferred tax assets 451 573
Other current assets 535 572
--- ---
Total current assets 22,408 19,555
Marketable securities 14,563 14,440
Deferred tax assets 1,195 1,059
Property, plant and equipment,
net 2,555 2,995
Goodwill 4,183 3,976
Other intangible assets, net 2,608 2,553
Other assets 843 938
--- ---
Total assets $48,355 $45,516
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,900 $1,554
Payroll and other benefits
related liabilities 740 839
Unearned revenues 705 501
Other current liabilities 2,676 2,319
----- -----
Total current liabilities 6,021 5,213
Unearned revenues 3,168 3,666
Other liabilities 379 550
--- ---
Total liabilities 9,568 9,429
----- -----
Stockholders' equity:
Qualcomm stockholders' equity:
Preferred stock, $0.0001 par
value; 8 shares authorized; none
outstanding - -
Common stock and paid-in
capital, $0.0001 par value;
6,000 shares authorized; 1,678
and 1,685 shares issued and
outstanding, respectively 8,346 9,874
Retained earnings 29,618 25,461
Accumulated other comprehensive
income 825 753
--- ---
Total Qualcomm stockholders'
equity 38,789 36,088
Noncontrolling interests (2) (1)
--- ---
Total stockholders' equity 38,787 36,087
------ ------
Total liabilities and
stockholders' equity $48,355 $45,516
======= =======
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
June 29, June 30, June 29, June 30,
2014 2013 2014 2013
---- ---- ---- ----
Revenues:
Equipment and services $4,922 $4,286 $13,803 $12,474
Licensing 1,884 1,957 5,992 5,911
----- ----- ----- -----
Total revenues 6,806 6,243 19,795 18,385
----- ----- ------ ------
Costs and expenses:
Cost of equipment and
services revenues 2,740 2,497 7,929 7,106
Research and
development 1,429 1,298 4,113 3,618
Selling, general and
administrative 582 613 1,745 1,861
Other (20) 158 450 158
--- --- --- ---
Total costs and
expenses 4,731 4,566 14,237 12,743
----- ----- ------ ------
Operating income 2,075 1,677 5,558 5,642
Investment income, net 422 233 968 730
--- --- --- ---
Income from continuing
operations before
income taxes 2,497 1,910 6,526 6,372
Income tax expense (260) (332) (886) (1,028)
---- ---- ---- ------
Income from continuing
operations 2,237 1,578 5,640 5,344
Discontinued
operations, net of
income taxes - - 430 -
--- --- --- ---
Net income 2,237 1,578 6,070 5,344
Net loss attributable
to noncontrolling
interests 1 2 3 8
--- --- --- ---
Net income
attributable to
Qualcomm $2,238 $1,580 $6,073 $5,352
====== ====== ====== ======
Basic earnings per share attributable
to Qualcomm:
Continuing operations $1.33 $0.91 $3.35 $3.11
Discontinued
operations - - 0.25 -
--- --- ---- ---
Net income $1.33 $0.91 $3.60 $3.11
===== ===== ===== =====
Diluted earnings per share
attributable to Qualcomm:
Continuing operations $1.31 $0.90 $3.28 $3.04
Discontinued
operations - - 0.25 -
--- --- ---- ---
Net income $1.31 $0.90 $3.53 $3.04
===== ===== ===== =====
Shares used in per share
calculations:
Basic 1,683 1,727 1,686 1,720
===== ===== ===== =====
Diluted 1,714 1,765 1,718 1,760
===== ===== ===== =====
Dividends per share
announced $0.42 $0.35 $1.12 $0.85
===== ===== ===== =====
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
June 29, June 30, June 29, June 30,
2014 2013 2014 2013
---- ---- ---- ----
Operating Activities:
Net income $2,237 $1,578 $6,070 $5,344
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and
amortization expense 292 255 853 744
Gain on sale of discontinued
operations - - (665) -
Revenues related to non-
monetary exchanges (31) (31) (93) (93)
Long-lived asset and
goodwill impairment charges 164 163 642 191
Income tax provision (less
than) in excess of income
tax payments (24) 59 244 220
Non-cash portion of share-
based compensation expense 274 281 806 831
Incremental tax benefits
from share-based
compensation (70) (75) (239) (178)
Net realized gains on
marketable securities and
other investments (298) (60) (685) (239)
Impairment losses on
marketable securities and
other investments 11 27 170 49
Other items, net 46 5 88 34
Changes in assets and liabilities:
Accounts receivable, net 139 (21) 43 (445)
Inventories (37) (245) 116 (699)
Other assets 9 90 136 (111)
Trade accounts payable 286 221 321 598
Payroll, benefits and other
liabilities (235) (151) (337) 52
Unearned revenues (90) (19) (202) (30)
--- --- ---- ---
Net cash provided by
operating activities 2,673 2,077 7,268 6,268
----- ----- ----- -----
Investing Activities:
Capital expenditures (158) (314) (955) (808)
Purchases of available-for-
sale securities (2,488) (4,663) (10,315) (12,112)
Proceeds from sales and
maturities of available-
for-sale securities 4,060 2,805 9,744 7,337
Purchases of trading
securities (1,054) (862) (2,868) (2,658)
Proceeds from sales and
maturities of trading
securities 826 767 2,619 2,365
Purchases of other
marketable securities (220) - (220) -
Proceeds from sale of
discontinued operations,
net of cash sold - - 788 -
Acquisitions and other
investments, net of cash
acquired (100) (47) (447) (179)
Other items, net 40 (2) 102 68
--- --- --- ---
Net cash provided (used) by
investing activities 906 (2,316) (1,552) (5,987)
--- ------ ------ ------
Financing Activities:
Borrowing under loans and
debentures - 534 - 534
Repayment of loans and
debentures - (492) - (492)
Proceeds from issuance of
common stock 194 217 1,147 964
Incremental tax benefits
from share-based
compensation 70 75 239 178
Repurchases and retirements
of common stock (1,350) (1,039) (3,354) (1,289)
Dividends paid (706) (604) (1,884) (1,463)
Other items, net (184) 37 (65) 35
Net cash used by financing
activities (1,976) (1,272) (3,917) (1,533)
------ ------ ------
Changes in cash and cash
equivalents held for sale - (46) - (15)
--- --- --- ---
Effect of exchange rate
changes on cash and cash
equivalents 4 (3) 3 (7)
--- --- --- ---
Net increase (decrease) in
cash and cash equivalents 1,607 (1,560) 1,802 (1,274)
Cash and cash equivalents at
beginning of period 6,337 4,093 6,142 3,807
----- ----- ----- -----
Cash and cash equivalents at
end of period $7,944 $2,533 $7,944 $2,533
====== ====== ====== ======
SOURCE Qualcomm Incorporated
