QUALCOMM, INC. 
By SAN DIEGO, April 23, 2014 /PRNewswire/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the second quarter of fiscal 2014 ended March 30, 2014.
"We delivered another solid quarter, driven by demand for our leading multimode 3G/LTE chipset solutions and record licensing revenues," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "Looking forward, we are pleased to be raising our earnings per share guidance for the fiscal year. We continue to see increasing demand for our industry-leading chipsets and strong growth in calendar year 2014 of 3G/4G smartphones around the world."
Second Quarter Results (GAAP)*
-- Revenues: (1) $6.37 billion, up 4 percent year-over-year (y-o-y) and
down 4 percent sequentially.
-- Operating income: (1) $1.99 billion, up 6 percent y-o-y and 33 percent
sequentially.
-- Net income: (2) $1.96 billion, up 5 percent y-o-y and 4 percent
sequentially.
-- Diluted earnings per share: (2) $1.14, up 8 percent y-o-y and 5 percent
sequentially.
-- Effective tax rate: (1) 14 percent.
-- Operating cash flow: $1.81 billion, down 18 percent y-o-y; 28 percent of
revenues.
-- Return of capital to stockholders: $1.59 billion, including $1.00
billion through repurchases of 13.4 million shares of common stock and
$589 million, or $0.35 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 Second Quarter Results*
Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.
-- Revenues: $6.37 billion, up 4 percent y-o-y and down 4 percent
sequentially.
-- Operating income: $2.34 billion, up 5 percent y-o-y and 26 percent
sequentially.
-- Net income: $2.26 billion, up 9 percent y-o-y and 4 percent
sequentially.
-- Diluted earnings per share: $1.31, up 12 percent y-o-y and 4 percent
sequentially.
-- Effective tax rate: 15 percent.
Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included within this news release.
* The following should be considered in regards to the sequential comparisons:
-- The first quarter of fiscal 2014 results included:
-- $665 million gain ($430 million after tax), or $0.25 per share, in
discontinued operations associated with the sale of substantially
all of the operations of our Omnitracs division; and
-- $444 million charge ($346 million after tax), or $0.20 per share,
that resulted from an impairment charge on certain property, plant
and equipment related to our QMT division.
Second Quarter Key Business Metrics
-- MSM(TM) chip shipments: 188 million units, up 9 percent y-o-y and down
12 percent sequentially.
-- December quarter total reported device sales: approximately $66.5
billion, up 9 percent y-o-y and 8 percent sequentially.
-- December quarter estimated 3G/4G device shipments: approximately 295
to 299 million units, at an estimated average selling price of
approximately $221 to $227 per unit.
Cash and Marketable Securities
Our cash, cash equivalents and marketable securities totaled $32.1 billion at the end of the second quarter of fiscal 2014, compared to $30.5 billion a year ago and $31.6 billion at the end of the first quarter of fiscal 2014. On April 8, 2014, we announced a cash dividend of $0.42 per share payable on June 25, 2014 to stockholders of record as of the close of business on June 4, 2014, which represents a 20 percent increase over our prior quarterly dividend.
Research and Development
($ in Non-GAAP QSI Share-Based Acquisition-
millions) Compensation Related
Items GAAP
-------- --- ------------ ------------- ----
Second
quarter
fiscal
2014 $1,170 $1 $163 $22 $1,356
As % of
revenues 18% 21%
Second
quarter
fiscal
2013 $1,056 $1 $156 $1 $1,214
As % of
revenues 17% 20%
Year-over-
year
change ($) 11% N/M 4% N/M 12%
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
($ Non-GAAP QSI Share-Based Acquisition-
in Compensation Related
millions) Items GAAP
-------- --- ------------ ------------ ----
Second
quarter
fiscal
2014 $453 $5 $75 $6 $539
As
%
of
revenues 7% 8%
Second
quarter
fiscal
2013 $556 $4 $95 $6 $661
As
%
of
revenues 9% 11%
Year-
over-
year
change
($) (19%) 25% (21%) N/M (18%)
N/M - Not Meaningful
Non-GAAP selling, general and administrative (SG&A) expenses decreased 19 percent y-o-y primarily due to decreases in costs related to litigation and other legal matters, employee-related expenses and patent-related expenses.
Effective Income Tax Rates
Our fiscal 2014 annual effective income tax rates are estimated to be 16 percent for GAAP and Non-GAAP, both of which include an estimate of the United States federal R&D tax credit generated through December 31, 2013, the date on which the credit expired. Our estimated annual tax rates decreased from our prior estimate primarily as a result of an increase in our estimate of foreign income taxed at rates lower than rates in the United States, which was partially the result of an agreement recently reached with the Internal Revenue Service related to transfer pricing. Also as a result of this agreement, we expect to record a tax benefit of approximately $65 million during the third quarter of fiscal 2014 related to our fiscal 2013 tax return, which will be excluded from Non-GAAP results and is excluded from our guidance.
Business Outlook
The following statements are forward looking, and actual results may differ materially. The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.
Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our outlook to the extent they are reasonably certain; however, actual results may differ materially from the outlook.
Our outlook for fiscal 2014 diluted earnings per share includes an estimate of the benefit related to approximately $2 billion in stock repurchases that we plan to complete over the remainder of fiscal 2014 under our current stock repurchase program.
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
THIRD FISCAL QUARTER
Q3 FY13 Current Guidance
Results Q3 FY14 Estimates (1)
Revenues $6.24B $6.2B - $6.8B
Year-over-year change decrease 1% -
increase 9%
Non-GAAP diluted
earnings per share (EPS) $1.03 $1.15 - $1.25
Year-over-year change increase 12% - 21%
Diluted EPS attributable
to QSI $0.02 $0.00
Diluted EPS attributable
to share-based
compensation ($0.13) ($0.13)
Diluted EPS attributable
to acquisition-related
items ($0.04) ($0.04)
Diluted EPS attributable
to tax items N/A N/A
GAAP diluted EPS $0.90 $0.98 - $1.08
Year-over-year change increase 9% - 20%
Metrics
MSM chip shipments 172M 198M - 213M
Year-over-year change increase 15% - 24%
Total reported device
sales (2) approx. $56.5B* approx. $56.0B - $62.0B*
Year-over-year change decrease 1% -increase
10%
*Est. sales in March
quarter, reported in
June quarter
---------------------
FISCAL YEAR
-----------
FY 2013 Prior Guidance Current Guidance
Results FY 2014 Estimates (3) FY 2014
Estimates (1) (3)
----------------
Revenues $26.0B - $27.5B $26.0B - $27.5B
$24.87B
Year-over-year change increase 5% - 11% increase 5% - 11%
Non-GAAP diluted EPS $5.00 - $5.20 $5.05 - $5.25
$4.51
Year-over-year change increase 11% - 15% increase 12% - 16%
Diluted EPS attributable to QSI $0.00 ($0.01)
$0.02
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 N/A N/A
$0.04
GAAP diluted EPS $4.33 - $4.53 $4.37 - $4.57
$3.91
Year-over-year change increase 11% - 16% increase 12% - 17%
Metrics
Est. fiscal year* 3G/4G device average approx.
selling price range (2) $223 -
$229 approx. $216 - $230 approx. $218 - $228
*Shipments in Sept. to June quarters,
reported in Dec. to Sept. quarters
--------------------------------------
CALENDAR YEAR Device Estimates (2)
Prior Guidance Calendar 2013 Current Guidance Prior Guidance Current
Guidance
Estimates Calendar 2013 Calendar 2014 Calendar
2014
Estimates Estimates Estimates
---------
Est. 3G/4G
device
shipments
March approx. 244M - 248M approx. 244M - 248M not provided not
quarter provided
June quarter approx. 260M - 264M approx. 260M - 264M not provided not
provided
September approx. 276M - 280M approx. 276M - 280M not provided not
quarter provided
December not provided approx. 295M - 299M not provided not
quarter provided
---------
Est. 1,220M -
calendar 1,300M
year range
(approx.) 1,080M - 1,120M 1,075M - 1,091M 1,220M - 1,300M
----------- --------------- --------------- ---------
Est.
calendar
year
midpoint
(approx.)
(4) 1,100M 1,083M 1,260M 1,260M
--------- ------ ------ ------ ------
(1) Our current outlook for the third
quarter of fiscal 2014 and fiscal
2014 GAAP diluted EPS excludes a tax
benefit of approximately $65 million
that we expect to record in the
third quarter of fiscal 2014 as a
result of an agreement reached with
the Internal Revenue Service, which
will be excluded from our Non-GAAP
results.
(2) 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. 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.
(3) Our prior and current outlook for
fiscal 2014 diluted EPS includes an
estimate of the benefit related to
stock repurchases that we plan to
complete during the fiscal year and
reflects an annual effective tax
rate that includes an estimate of
the United States federal R&D tax
credit generated through December
31, 2013, the date on which the
credit expired.
(4) The midpoints of the estimated
calendar year ranges are identified
for comparison purposes only and do
not indicate a higher degree of
confidence in the midpoints.
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 Share-Based Acquisition- Tax
Reconciling (3) Compensation Related Items
Items (1) (3) Items (3)
(2) QSI (3) GAAP
-------- --- --- ------------ -------- ------ ------------ ------------ ----- ----
Q2 - FISCAL 2014
----------------
Revenues $4,243 $2,071 $53 $6,367 $6,367
$- $- $- $-
Change from prior year 8% 1% (65%) 4% 4%
Change from prior quarter (8%) 9% (50%) (4%) (4%)
Operating income (loss) $2,337 ($6) ($251) ($90) $1,990
$-
Change from prior year 5% (20%) 6% (8%) 6%
Change from prior quarter 26% (20%) 11% (30%) 33%
EBT $740 $1,834 $78 $2,652 ($39) ($251) ($90) $2,272
$-
Change from prior year 9% 2% N/M 8% N/M 6% (8%) 6%
Change from prior quarter (18%) 10% N/M 26% N/M 11% (30%) 29%
EBT as % of revenues 17% 89% N/M 42% 36%
Net income (loss) $2,255 ($17) ($198) ($81) $1,959
$-
Change from prior year 9% N/M 10% (1%) N/M 5%
Change from prior quarter 4% N/M 12% (23%) N/A 4%
Diluted EPS $1.31 ($0.01) ($0.11) ($0.05) $1.14
$-
Change from prior year 12% N/M 8% -% N/M 8%
Change from prior quarter 4% N/M 15% (25%) N/A 5%
Diluted shares used 1,719 1,719 1,719 1,719 1,719 1,719
Q1 - FISCAL 2014
----------------
Revenues $4,616 $1,900 $106 $6,622 $6,622
$- $- $- $-
Operating income (loss) 1,848 (5) (281) (69) - 1,493
EBT $906 $1,670 ($473) 2,103 4 (281) (69) - 1,757
Discontinued operations, net of tax (4) 430 - - - - 430
Net income (loss) 2,163 4 (226) (66) - 1,875
Diluted EPS $1.26 $0.00 ($0.13) ($0.04) $1.09
$-
Diluted shares used 1,722 1,722 1,722 1,722 1,722 1,722
Q2 - FISCAL 2013
----------------
Revenues $3,916 $2,057 $151 $6,124 $6,124
$- $- $- $-
Operating income (loss) 2,233 (5) (268) (83) - 1,877
EBT $681 $1,803 ($30) 2,454 33 (268) (83) - 2,136
Net income (loss) 2,066 36 (220) (80) 64 1,866
Diluted EPS $1.17 $0.02 ($0.12) ($0.05) $0.04 $1.06
Diluted shares used 1,763 1,763 1,763 1,763 1,763 1,763
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
------------------- ----- ----- ----- ----- ----- -----
SEGMENTS QCT QTL Non-GAAP Non-GAAP Share-Based Acquisition-
Reconciling (3) Compensation Related
Items (1) (3) Items (3)
(2) QSI (3) Tax Items GAAP
-------- --- --- ------------ -------- ------ ------------ ------------ --------- ----
6 MONTHS - FISCAL 2014
----------------------
Revenues $8,859 $3,971 $159 $12,989 $12,989
$- $- $- $-
Change from prior year 10% 4% (46%) 7% 7%
Operating income (loss) $4,185 ($10) ($532) ($160) $3,483
$-
Change from prior year (11%) 17% 3% (4%) (12%)
EBT $1,646 $3,504 ($394) $4,756 ($35) ($532) ($160) $4,029
$-
Change from prior year (6%) 5% N/M (8%) N/M 3% (4%) (10%)
EBT as % of revenues 19% 88% N/M 37% 31%
Discontinued operations, net of tax (4) $430 $430
$- $- $- $-
Net income (loss) $4,418 ($13) ($423) ($147) $3,835
$-
Change from prior year 3% N/M 4% -% N/M 2%
Diluted EPS $2.57 ($0.01) ($0.25) ($0.09) $2.23
$-
Change from prior year 6% N/M -% (13%) N/M 4%
Diluted shares used 1,721 1,721 1,721 1,721 1,721 1,721
6 MONTHS - FISCAL 2013
----------------------
Revenues $8,036 $3,813 $294 $12,143 $12,143
$- $- $- $-
Operating income (loss) 4,681 (12) (549) (154) - 3,966
EBT $1,749 $3,335 $66 5,150 16 (549) (154) - 4,463
Net income (loss) 4,270 24 (439) (147) 64 3,772
Diluted EPS $2.43 $0.01 ($0.25) ($0.08) $0.04 $2.15
Diluted shares used 1,757 1,757 1,757 1,757 1,757 1,757
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
costs of equipment and services
revenues, research and development
expenses, sales and marketing
expenses, other operating expenses
and certain investment income or
losses and interest expense that
are not allocated to the segments
for management reporting purposes;
nonreportable segment results; and
the elimination of intersegment
profit.
(2) During the first quarter of fiscal
2014, as a result of the
reassessment of management
reporting, the 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 second quarter fiscal 2014 earnings conference call will be broadcast live on April 23, 2014, beginning at 1:45 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 25607511.
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 of the following financial data are used by the Company: 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, diluted earnings per share, operating cash flow and free cash flow. The Company is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments. The Company presents Non-GAAP financial information to provide greater transparency to investors with respect to its use of such information in financial and operational decision-making.
Non-GAAP information used by management excludes QSI 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
were 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 increasing demand for our industry-leading chipsets and strong growth in calendar year 2014 of 3G/4G smartphones around the world; stock repurchases that we plan to complete over the remainder of fiscal 2014 under our current stock repurchase program; the tax benefit of approximately $65 million that we expect to record in the third quarter of fiscal 2014 as a result of an agreement we reached with the Internal Revenue Service; our business outlook; and our estimates and guidance related to revenues, 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, ranges and midpoints. 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 Annual Report on Form 10-K for the fiscal year ended September 29, 2013 and Quarterly Report on Form 10-Q for the second quarter ended March 30, 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.
Supplemental Information
(Unaudited)
Three Months Ended March 30, 2014
Non-GAAP Results QSI Share-Based Acquisition-Related
Compensation Items GAAP
Results
-------
($ in millions, except
per share data)
Cost of equipment and
services revenues $2,407 $ - $13 $62 $2,482
R&D 1,170 1 163 22 1,356
SG&A 453 5 75 6 539
Operating income (loss) 2,337 (6) (251) (90) 1,990
Investment income, net $315 (a) $(33) (b) $ - $ - $282
Tax rate 15% 54% 21% 10% 14%
Net income (loss) $2,255 $(17) $(198) $(81) $1,959
Diluted EPS $1.31 $(0.01) $(0.11) $(0.05) $1.14
----------- ----- ------ ------ ------ -----
(a) Included $237 million in net realized
gains on investments, $167 million in
interest and dividend income and $2
million in gains on deconsolidation of
subsidiaries, partially offset by $88
million in other-than-temporary
losses on investments and $3 million
in interest expense.
(b) Included $35 million in other-than-
temporary losses on investments and $4
million in equity in losses of
investees, partially offset by $6
million in net realized gains on
investments.
Six Months Ended March 30, 2014
Non-GAAP Results QSI Share-Based Acquisition-Related
Compensation Items GAAP
Results
-------
($ in millions, except
per share data)
Cost of equipment and
services revenues $5,040 $ - $25 $124 $5,189
R&D 2,321 3 336 23 2,683
SG&A 971 7 171 13 1,162
Other expenses 472 (c) - - - 472
Operating income (loss) 4,185 (10) (532) (160) 3,483
Investment income, net $571 (d) $(25) (e) $ - $ - $546
Tax rate 16% 57% 20% 8% 16%
Net income (loss) $4,418 $(13) $(423) $(147) $3,835
Diluted EPS $2.57 $(0.01) $(0.25) $(0.09) $2.23
----------- ----- ------ ------ ------ -----
(c) Included a $444 million loss that
resulted from an impairment charge on
certain property, plant and equipment
related to our QMT division, a $16
million goodwill impairment charge
related to our QRS division and a $12
million charge related to the
ParkerVision verdict.
(d) Included $364 million in net realized
gains on investments, $322 million in
interest and dividend income, $5
million in net gains on derivatives
and $1 million in gains on
deconsolidation of subsidiaries,
partially offset by $116 million in
other-than-temporary losses on
investments and $5 million in interest
expense.
(e) Included $43 million in other-than-
temporary losses on investments, $5
million in equity in losses of
investees and $1 million in net losses
on derivatives, partially offset by
$24 million in net realized gains on
investments.
Sums may not equal totals due to rounding.
Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)
(Unaudited)
Three Months Ended March 30, 2014
---------------------------------
($ in millions) Non-GAAP QSI Share-Based Acquisition-
Results Compensation Related
Items GAAP Results
-------------- --------- --- ------------ ------------- ------------
Income (loss) from
continuing operations
before income taxes $2,652 $(39) $(251) $(90) $2,272
Income tax (expense)
benefit (397) 21 53 9 (314)
---- --- --- --- ----
Income (loss) from
continuing operations $2,255 $(18) $(198) $(81) $1,958
Tax rate 15% 54% 21% 10% 14%
-------- --- --- --- --- ---
Six Months Ended March 30, 2014
-------------------------------
($ in millions) Non-GAAP QSI Share-Based Acquisition-
Results Compensation Related
Items GAAP Results
-------------- --------- --- ------------ ------------- ------------
Income (loss) from
continuing operations
before income taxes $4,756 $(35) $(532) $(160) $4,029
Income tax (expense)
benefit (768) 20 109 13 (626)
---- --- --- --- ----
Income (loss) from
continuing operations $3,988 $(15) $(423) $(147) $3,403
Tax rate 16% 57% 20% 8% 16%
-------- --- --- --- --- ---
(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.
Qualcomm Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
March 30, September 29,
2014 2013
---------- --------------
ASSETS
Current assets:
Cash and cash
equivalents $6,337 $6,142
Marketable securities 10,291 8,824
Accounts receivable,
net 2,217 2,142
Inventories 1,147 1,302
Deferred tax assets 495 573
Other current assets 521 572
--- ---
Total current assets 21,008 19,555
Marketable securities 15,425 14,440
Deferred tax assets 1,161 1,059
Property, plant and
equipment, net 2,573 2,995
Goodwill 4,226 3,976
Other intangible
assets, net 2,699 2,553
Other assets 783 938
--- ---
Total assets $47,875 $45,516
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,551 $1,554
Payroll and other
benefits related
liabilities 739 839
Unearned revenues 625 501
Other current
liabilities 2,986 2,319
----- -----
Total current
liabilities 5,901 5,213
Unearned revenues 3,367 3,666
Other liabilities 354 550
--- ---
Total liabilities 9,622 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;
1,686 and 1,685
shares issued and
outstanding,
respectively 9,347 9,874
Retained earnings 28,097 25,461
Accumulated other
comprehensive income 810 753
--- ---
Total Qualcomm
stockholders' equity 38,254 36,088
Noncontrolling
interests (1) (1)
--- ---
Total stockholders'
equity 38,253 36,087
------ ------
Total liabilities and
stockholders' equity $47,875 $45,516
======= =======
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
March 30, March 31, March 30, March 31,
2014 2013 2014 2013
---------- ---------- ---------- ----------
Revenues:
Equipment and services $4,229 $3,990 $8,881 $8,189
Licensing 2,138 2,134 4,108 3,954
----- ----- ----- -----
Total revenues 6,367 6,124 12,989 12,143
----- ----- ------ ------
Costs and expenses:
Cost of equipment and
services revenues 2,482 2,372 5,189 4,609
Research and
development 1,356 1,214 2,683 2,320
Selling, general and
administrative 539 661 1,162 1,248
Other - - 472 -
--- --- --- ---
Total costs and
expenses 4,377 4,247 9,506 8,177
----- ----- ----- -----
Operating income 1,990 1,877 3,483 3,966
Investment income, net 282 259 546 497
--- --- --- ---
Income from continuing
operations before
income taxes 2,272 2,136 4,029 4,463
Income tax expense (314) (273) (626) (697)
---- ---- ---- ----
Income from continuing
operations 1,958 1,863 3,403 3,766
Discontinued
operations, net of
income taxes - - 430 -
--- --- --- ---
Net income 1,958 1,863 3,833 3,766
Net loss attributable
to noncontrolling
interests 1 3 2 6
--- --- --- ---
Net income attributable
to Qualcomm $1,959 $1,866 $3,835 $3,772
====== ====== ====== ======
Basic earnings per share
attributable to Qualcomm:
Continuing operations $1.16 $1.08 $2.02 $2.20
Discontinued operations - - 0.25 -
--- --- ---- ---
Net income $1.16 $1.08 $2.27 $2.20
===== ===== ===== =====
Diluted earnings per share
attributable to Qualcomm:
Continuing operations $1.14 $1.06 $1.98 $2.15
Discontinued operations - - 0.25 -
--- --- ---- ---
Net income $1.14 $1.06 $2.23 $2.15
===== ===== ===== =====
Shares used in per share
calculations:
Basic 1,688 1,722 1,688 1,716
===== ===== ===== =====
Diluted 1,719 1,763 1,721 1,757
===== ===== ===== =====
Dividends per share
announced $0.35 $0.25 $0.70 $0.50
===== ===== ===== =====
Qualcomm Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
March 30, March 31, March 30, March 31,
2014 2013 2014 2013
---- ---- ---- ----
Operating Activities:
Net income $1,958 $1,863 $3,833 $3,766
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and
amortization expense 289 248 561 489
Gain on sale of
discontinued operations - - (665) -
Goodwill and long-lived
asset impairment charges 19 23 479 28
Income tax provision in
excess of (less than)
income tax payments 10 (34) 268 161
Non-cash portion of
share-based
compensation expense 251 267 532 550
Incremental tax benefits
from share-based
compensation (70) (42) (169) (103)
Net realized gains on
marketable securities
and other investments (243) (84) (388) (179)
Net impairment losses on
marketable securities
and other investments 123 12 159 22
Other items, net (23) (25) (20) (33)
Changes in assets and liabilities:
Accounts receivable, net (884) (239) (96) (424)
Inventories (84) (207) 153 (454)
Other assets 58 (150) 127 (201)
Trade accounts payable 183 1 35 377
Payroll, benefits and
other liabilities 240 590 (102) 203
Unearned revenues (13) (7) (112) (11)
--- --- ---- ---
Net cash provided by
operating activities 1,814 2,216 4,595 4,191
----- ----- ----- -----
Investing Activities:
Capital expenditures (587) (289) (797) (494)
Purchases of available-
for-sale securities (5,772) (4,160) (7,827) (7,449)
Proceeds from sales and
maturities of available-
for-sale securities 3,516 2,306 5,684 4,532
Purchases of trading
securities (1,029) (826) (1,814) (1,796)
Proceeds from sales and
maturities of trading
securities 1,020 574 1,793 1,598
Proceeds from sale of
discontinued operations,
net of cash sold - - 788 -
Acquisitions and other
investments, net of cash
acquired (32) (93) (347) (132)
Other items, net (19) 44 62 70
--- --- --- ---
Net cash used by
investing activities (2,903) (2,444) (2,458) (3,671)
------ ------ ------ ------
Financing Activities:
Proceeds from issuance of
common stock 512 407 953 747
Incremental tax benefits
from share-based
compensation 70 42 169 103
Repurchases and
retirements of common
stock (1,002) - (2,004) (250)
Dividends paid (589) (431) (1,179) (859)
Change in obligations
under securities lending 142 (3) 123 -
Other items, net (1) (1) (3) (2)
Net cash (used) provided
by financing activities (868) 14 (1,941) (261)
---- --- ------
Changes in cash and cash
equivalents held for
sale 4 18 - 31
--- --- --- ---
Effect of exchange rate
changes on cash and cash
equivalents (2) (4) (1) (4)
--- --- --- ---
Net (decrease) increase
in cash and cash
equivalents (1,955) (200) 195 286
Cash and cash equivalents
at beginning of period 8,292 4,293 6,142 3,807
----- ----- ----- -----
Cash and cash equivalents
at end of period $6,337 $4,093 $6,337 $4,093
====== ====== ====== ======
SOURCE Qualcomm Incorporated
