Qualcomm Announces Fourth Quarter and Fiscal 2013 Results

Fiscal 2013 Revenues $24.9 billion

GAAP EPS $3.91, Non-GAAP EPS $4.51

- Record Fiscal Year Results -

Nov 06, 2013, 16:00 ET from Qualcomm Incorporated

SAN DIEGO, Nov. 6, 2013 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fiscal fourth quarter and year ended September 29, 2013.

"I am very pleased with our record financial performance this year as we delivered revenues of $25 billion, up 30% versus last year. Our technologies underpin the global growth of wireless data, and our semiconductor solutions are used across the industry's flagship smartphones," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Looking forward, we expect continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China with the anticipated launch of LTE. Qualcomm remains well positioned from a growth standpoint, and we expect double-digit compound annual growth rates for both revenues and earnings per share over the next five years."

GAAP Results

Fourth Quarter Fiscal 2013*

  • Revenues: 1 $6.48 billion, up 33 percent year-over-year (y-o-y) and 4 percent sequentially.
  • Operating income: 1 $1.59 billion, up 29 percent y-o-y and down 5 percent sequentially.
  • Net income: 2 $1.50 billion, up 18 percent y-o-y and down 5 percent sequentially.
  • Diluted earnings per share: 2 $0.86, up 18 percent y-o-y and down 4 percent sequentially.
  • Effective tax rate: 1 18 percent.
  • Operating cash flow: $2.52 billion, up 79 percent y-o-y; 39 percent of revenues.
  • Return of capital to stockholders: $3.91 billion, including $3.32 billion through repurchases of 50.7 million shares of common stock and $592 million, or $0.35 per share, of cash dividends paid.

1 Throughout this news release, fiscal 2012 results for FLO TV are presented as discontinued operations. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates are from continuing operations (i.e., before adjustments for noncontrolling interests and, for fiscal 2012, 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.

Fiscal 2013*

  • Revenues: $24.87 billion, up 30 percent y-o-y.
  • Operating income: $7.23 billion, up 27 percent y-o-y.
  • Net income: $6.85 billion, up 12 percent y-o-y.
  • Diluted earnings per share: $3.91, up 11 percent y-o-y.
  • Effective tax rate: 16 percent.
  • Operating cash flow: $8.78 billion, up 46 percent y-o-y; 35 percent of revenues.
  • Return of capital to stockholders: $6.66 billion, including $4.61 billion through repurchases of 71.7 million shares of common stock and $2.05 billion, or $1.20 per share, of cash dividends paid.

Non-GAAP Results

Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.

Fourth Quarter Fiscal 2013*

  • Revenues: $6.48 billion, up 33 percent y-o-y and 4 percent sequentially.
  • Operating income: $1.94 billion, up 20 percent y-o-y and down 5 percent sequentially.
  • Net income: $1.82 billion, up 18 percent y-o-y and even sequentially.
  • Diluted earnings per share: $1.05, up 18 percent y-o-y and 2 percent sequentially.
  • Effective tax rate: 16 percent.
  • Free cash flow (defined as net cash from operating activities less capital expenditures): $2.38 billion, up 92 percent y-o-y; 37 percent of revenues.

Fiscal 2013*

  • Revenues: $24.87 billion, up 30 percent y-o-y.
  • Operating income: $8.66 billion, up 22 percent y-o-y.
  • Net income: $7.91 billion, up 22 percent y-o-y.
  • Diluted earnings per share: $4.51, up 22 percent y-o-y.
  • Effective tax rate: 17 percent.
  • Free cash flow: $8.08 billion, up 55 percent y-o-y; 32 percent of revenues.

Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included within this news release.

* The following should be considered in regards to the year-over-year and sequential comparisons: Fiscal fourth quarter and fiscal 2013 GAAP and Non-GAAP results included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision. Fiscal 2012 GAAP results included $776 million in earnings, net of income taxes, for discontinued operations, primarily a result of a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum.

Key Business Metrics

Fourth Quarter Fiscal 2013

  • MSMchip shipments: 190 million units, up 35 percent y-o-y and 10 percent sequentially.
  • June quarter total reported device sales: approximately $60.2 billion, up 29 percent y-o-y and 7 percent sequentially.
    • June quarter estimated 3G/4G device shipments: approximately 260 to 264 million units, at an estimated average selling price of approximately $227 to $233 per unit.

Fiscal 2013

  • MSM chip shipments: 716 million units, up 21 percent y-o-y.
  • Total reported device sales: approximately $231.2 billion, up 23 percent y-o-y.
    • Estimated 3G/4G device shipments: approximately 1,017 to 1,033 million units, at an estimated average selling price of approximately $223 to $229 per unit.

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled $29.4 billion at the end of fiscal 2013, compared to $26.8 billion a year ago and $30.4 billion at the end of the third quarter of fiscal 2013. On October 24, 2013, we announced a cash dividend of $0.35 per share payable on December 19, 2013 to stockholders of record as of December 2, 2013. During the fourth quarter of fiscal 2013, we repurchased and retired 50.7 million shares of common stock for $3.32 billion.

Research and Development

($ in millions)

Non-GAAP

QSI

Share-Based Compensation

Acquisition- Related Items

GAAP

Fourth quarter fiscal 2013

$

1,182

$

1

$

164

$

1

$

1,348

As % of revenues

18%

21%

Fourth quarter fiscal 2012

$

961

$

1

$

152

$

$

1,114

As % of revenues

20%

23%

Year-over-year change ($)

23%

N/M

8%

N/M

21%

N/M - Not Meaningful

Non-GAAP research and development (R&D) expenses increased 23 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 Compensation

Acquisition- Related Items

GAAP

Fourth quarter fiscal 2013

$

547

$

10

$

94

$

6

$

657

As % of revenues

8%

10%

Fourth quarter fiscal 2012

$

491

$

3

$

112

$

21

$

627

As % of revenues

10%

13%

Year-over-year change ($)

11%

N/M

(16%)

N/M

5%

Certain prior period amounts have been reclassified to conform to the current period presentation.

N/M - Not Meaningful

Non-GAAP selling, general and administrative (SG&A) expenses increased 11 percent y-o-y primarily due to increases in selling and marketing, patent-related and employee-related expenses.

Effective Income Tax Rates

Our fiscal 2013 annual effective income tax rates were 16 percent for GAAP and 17 percent for Non-GAAP. The fiscal 2013 GAAP effective tax rate included a tax benefit of $64 million related to the retroactive extension of the United States federal research and development tax credit related to fiscal 2012. This benefit was excluded from our 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 annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.

Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.

Our outlook for fiscal 2014 diluted earnings per share includes an estimate of the benefit related to approximately $4 billion in stock repurchases that we plan to complete over the course of fiscal 2014 under our current stock repurchase program.

On August 21, 2013, we entered into a definitive agreement under which we agreed to sell the North and Latin American operations of our Omnitracs division for $800 million, subject to closing conditions, including receipt of regulatory approvals. We expect the transaction to close in the first quarter of fiscal 2014. Upon close, we expect to record a gain on sale of approximately $0.22 to $0.25 earnings per share, which has been excluded from our fiscal first quarter and fiscal 2014 outlook.

The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook. The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.

Qualcomm's Business Outlook Summary

FIRST FISCAL QUARTER

Q1 FY13

Results

Current Guidance

Q1 FY14 Estimates (2)

Revenues

$6.02B

$6.3B - $6.9B

Year-over-year change

increase 5% - 15%

Non-GAAP diluted earnings per share (EPS)

$1.26

$1.10 - $1.20

Year-over-year change

decrease 5% - 13%

Diluted EPS attributable to QSI

($0.01)

($0.01)

Diluted EPS attributable to share-based compensation

($0.12)

($0.13)

Diluted EPS attributable to acquisition-related items

($0.04)

($0.04)

GAAP diluted EPS

$1.09

$0.92 - $1.02

Year-over-year change

decrease 6% - 16%

Metrics

MSM chip shipments

182M

195M - 210M

Year-over-year change

increase 7% - 15%

Total reported device sales (1)

approx. $53.3B*

approx. $57.5B - $63.5B*

Year-over-year change

increase 8% - 19%

*Est. sales in September quarter, reported in December quarter

FISCAL YEAR

FY 2013

Results

Current Guidance FY 2014 Estimates (2) (3)

Revenues

$24.87B

$26.0B - $27.5B

Year-over-year change

increase 5% - 11%

Non-GAAP diluted EPS

$4.51

$4.95 - $5.15

Year-over-year change

increase 10% - 14%

Diluted EPS attributable to QSI

$0.02

($0.03)

Diluted EPS attributable to share-based compensation

($0.51)

($0.51)

Diluted EPS attributable to acquisition-related items

($0.16)

($0.16)

Diluted EPS attributable to tax items

$0.04

N/A

GAAP diluted EPS

$3.91

$4.25 - $4.45

Year-over-year change

increase 9% - 14%

Metrics

Est. fiscal year* 3G/4G device average selling price range (1)

approx. $223 - $229

approx. $216 - $230

*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters

CALENDAR YEAR Device Estimates (1)

Prior Guidance

Calendar 2013

Estimates

Current Guidance

Calendar 2013

Estimates

Current Guidance

Calendar 2014

Estimates

Est. 3G/4G device shipments

March quarter

approx. 244M - 248M

approx. 244M - 248M

not provided

June quarter

not provided

approx. 260M - 264M

not provided

September quarter

not provided

not provided

not provided

December quarter

not provided

not provided

not provided

Est. calendar year range (approx.)

1,015M - 1,085M

1,075M - 1,125M

1,220M - 1,300M

Est. calendar year midpoint (approx.) (4)

1,050M

1,100M

1,260M

(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 selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until such particular period.

(2)

Q1 and FY 2014 guidance excludes the expected gain on sale of the North and Latin American operations of our Omnitracs division. We expect the transaction to close in the first quarter of fiscal 2014. Upon close, we expect to record a gain on sale of approx. $0.22 to $0.25 EPS.

(3)

FY 2014 guidance includes an estimate of the benefit related to approx. $4 billion in stock repurchases that we plan to complete over the course of fiscal 2014 under our current stock repurchase program. FY 2014 guidance also reflects an annual effective tax rate that includes an estimate of the United States federal R&D tax credit expected to be generated through December 31, 2013, the date on which the credit will expire.

(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

QWI

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)

Share-Based Compensation (2)

Acquisition-Related Items (2)

Tax Items

GAAP

Q4 - FISCAL 2013

Revenues

$4,457

$1,874

$154

($5)

$6,480

$—

$—

$—

$—

$6,480

Change from prior year

42%

19%

(4%)

N/M

33%

33%

Change from prior quarter

6%

 

—%

(3%)

N/M

4%

4%

Operating income (loss)

$1,940

($11)

($274)

($67)

$—

$1,588

Change from prior year

20%

N/M

4%

25%

29%

Change from prior quarter

(5%)

(57%)

2%

6%

(5%)

EBT

$702

$1,622

$12

($163)

$2,173

($11)

($274)

($67)

$—

$1,821

Change from prior year

44%

18%

N/M

N/M

13%

48%

4%

25%

19%

Change from prior quarter

(5%)

(1%)

N/M

N/M

(2%)

N/M

2%

6%

(5%)

EBT as % of revenues

16%

87%

8%

N/M

34%

28%

Net income (loss)

$1,818

($24)

($226)

($67)

$—

$1,501

Change from prior year

18%

N/M

(2%)

14%

N/M

18%

Change from prior quarter

 

—%

N/M

(2%)

(5%)

N/A

(5%)

Diluted EPS

$1.05

($0.01)

($0.13)

($0.04)

$—

$0.86

Change from prior year

18%

N/M

 

—%

 

—%

N/M

18%

Change from prior quarter

2%

N/M

 

—%

 

—%

N/A

(4%)

Diluted shares used

1,738

1,738

1,738

1,738

1,738

1,738

Q3 - FISCAL 2013

Revenues

$4,222

$1,867

$158

($4)

$6,243

$—

$—

$—

$—

$6,243

Operating income (loss)

2,035

(7)

(280)

(71)

1,677

EBT

$738

$1,633

($16)

($145)

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 2012

Revenues

$3,129

$1,572

$161

$9

$4,871

$—

$—

$—

$—

$4,871

Operating income (loss)

1,612

(4)

(284)

(89)

1,235

EBT

$486

$1,370

($1)

$65

1,920

(21)

(284)

(89)

1,526

Discontinued operations, net of tax

23

23

Net income (loss)

1,547

14

(222)

(78)

10

1,271

Diluted EPS

$0.89

$0.01

($0.13)

($0.04)

$0.01

$0.73

Diluted shares used

1,745

1,745

1,745

1,745

1,745

1,745

Q1 - FISCAL 2013

Revenues

$4,120

$1,757

$146

($5)

$6,018

$—

$—

$—

$—

$6,018

Operating income (loss)

2,447

(8)

(281)

(70)

 

2,088

EBT

$1,068

$1,532

($3)

$98

2,695

(17)

(281)

(70)

2,327

Net income (loss)

2,204

(12)

(219)

(67)

1,906

Diluted EPS

$1.26

($0.01)

($0.12)

($0.04)

$—

$1.09

Diluted shares used

1,751

1,751

1,751

1,751

1,751

1,751

SEGMENTS

QCT

QTL

QWI

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)

Share-Based Compensation (2)

Acquisition-Related Items (2)

Tax Items

GAAP

12 MONTHS - FISCAL 2013

Revenues

$16,715

$7,554

$613

($16)

$24,866

$—

$—

$—

$—

$24,866

Change from prior year

38%

19%

(3%)

N/M

30%

30%

Operating income (loss)

$8,657

($31)

($1,103)

($293)

$—

$7,230

Change from prior year

22%

73%

(7%)

(10%)

27%

EBT

$3,189

$6,590

($8)

($237)

$9,534

$56

($1,103)

($293)

$—

$8,194

Change from prior year

39%

18%

47%

N/M

19%

N/M

(7%)

(10%)

25%

EBT as % of revenues

19%

87%

(1%)

N/M

38%

33%

Net income (loss)

$7,911

$43

($886)

($279)

$64

$6,853

Change from prior year

22%

(94%)

(9%)

(15%)

N/M

12%

Diluted EPS

$4.51

$0.02

($0.51)

($0.16)

$0.04

$3.91

Change from prior year

22%

(95%)

(9%)

(14%)

N/M

11%

Diluted shares used

1,754

1,754

1,754

1,754

1,754

1,754

12 MONTHS - FISCAL 2012

Revenues

$12,141

$6,327

$633

$20

$19,121

$—

$—

$—

$—

$19,121

Operating income (loss)

7,100

(116)

(1,035)

(267)

5,682

EBT

$2,296

$5,585

($15)

$168

8,034

(170)

(1,035)

(267)

6,562

Discontinued operations, net of tax

777

(1)

776

Net income (loss)

6,463

690

(811)

(243)

10

6,109

Diluted EPS

$3.71

$0.40

($0.47)

($0.14)

$0.01

$3.51

Diluted shares used

1,741

1,741

1,741

1,741

1,741

1,741

(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 consist primarily of certain costs of equipment and services revenues, research and development expenses, sales and marketing expenses, other operating expenses and certain investment income or losses and interest expense that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit.

(2)

At fiscal year end, the sum of the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is allocated to tax provisions (benefits) among the columns.

N/M - Not Meaningful

N/A - Not Applicable

Sums may not equal totals due to rounding.

Conference Call

Qualcomm's fiscal fourth quarter and fiscal 2013 earnings conference call will be broadcast live on November 6, 2013, 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 87075999.

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), QTL (Qualcomm Technology Licensing) and QWI (Qualcomm Wireless & Internet) 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 and stock options. Certain share-based compensation is excluded because management views such expenses as unrelated to the operating activities of the Company's ongoing core businesses. Further, the fair values of share-based awards are affected by factors that are variable on each grant date, which may include the Company's stock price, stock market volatility, expected award life, risk-free interest rates and expected dividend payouts in future years.
  • Acquisition-related items relate to 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, starting with acquisitions completed in the fourth quarter of fiscal 2012, the Company began excluding 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.

The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term stockholder value. In addition, management uses this measure to evaluate the Company's performance and to compare its operating performance with other companies in the industry.

About Qualcomm

Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. 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 the expected continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China; our being well positioned from a growth standpoint; expectations for double-digit compound annual growth rates for both revenues and earnings per share over the next five years; 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 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; 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 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 Phone: 1-858-658-4813 e-mail: ir@qualcomm.com

Supplemental Information

(Unaudited)

Three Months Ended September 29, 2013

Non-GAAP Results

QSI

Share-Based Compensation

Acquisition- Related Items (a)

GAAP

Results

($ in millions, except per share data)

Cost of equipment and services revenues

$

2,638

$

$

16

$

60

$

2,714

R&D

1,182

1

164

1

1,348

SG&A

547

10

94

6

657

Other expenses

173

(b)

173

Operating income (loss)

1,940

(11)

(274)

(67)

1,588

Investment income, net

$

233

(c)

$

(d)

$

$

$

233

Tax rate

16%

N/M

18%

—%

18%

Net income (loss)

$

1,818

$

(24)

$

(226)

$

(67)

$

1,501

Diluted EPS

$

1.05

$

(0.01)

$

(0.13)

$

(0.04)

$

0.86

(a)

Included amortization and impairment of certain intangible assets and the recognition of the step-up of inventories to fair value.

(b)

Included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision.

(c)

Included $168 million in interest and dividend income, $112 million in net realized gains on investments and $7 million in gains on deconsolidation of subsidiaries, partially offset by $35 million in other-than-temporary losses on investments, $18 million in net losses on derivatives and $1 million in interest expense.

(d)

Included $17 million in net realized gains on investments and $1 million in interest and dividend income, offset by $16 million in losses on deconsolidation of subsidiaries, $1 million in other-than-temporary losses on investments and $1 million in equity in net losses of investees.

Twelve Months Ended September 29, 2013

Non-GAAP Results

QSI

Share-Based Compensation

Acquisition- Related Items (e)

Tax Items (f)

GAAP

Results

($ in millions, except per share data)

Cost of equipment and services revenues

$

9,485

$

$

71

$

264

$

$

9,820

R&D

4,318

4

642

3

4,967

SG&A

2,075

27

390

26

2,518

Other expenses

331

(g)

331

Operating income (loss)

8,657

(31)

(1,103)

(293)

7,230

Investment income, net

$

877

(h)

$

87

(i)

$

$

$

$

964

Tax rate

17%

38%

20%

5%

N/A

16%

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

(e)

Included amortization and impairment of certain intangible assets, expense associated with the termination of a contract and the recognition of the step-up of inventories to fair value.

(f)

Included a $64 million tax benefit as a result of the retroactive reinstatement of the federal R&D tax credit related to fiscal 2012.

(g)

Included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision and a $158 million loss, or $0.06 per share, that resulted from an impairment charge on certain long-lived assets related to our QMT division.

(h)

Included $689 million in interest and dividend income, $259 million in net realized gains on investments and $6 million in gains on deconsolidation of subsidiaries, partially offset by $71 million in other-than-temporary losses on investments, $5 million in interest expense and $1 million in net losses on derivatives.

(i)

Included $110 million in net realized gains on investments, $8 million in interest and dividend income, $6 million in gains on deconsolidation of subsidiaries and $1 million in net gains on derivatives, partially offset by $18 million in interest expense, $14 million in other-than-temporary losses on investments and $6 million in equity in net losses of investees.

N/M - Not Meaningful

N/A - Not Applicable

Sums may not equal totals due to rounding.

Reconciliation of Non-GAAP Free Cash Flows to

Net Cash Provided by Operating Activities (GAAP)

and Other Supplemental Disclosures

(In millions)

(Unaudited)

Three Months Ended September 29, 2013

Non-GAAP

QSI

Share-Based Compensation

GAAP

Net cash provided (used) by operating activities

$

2,583

$

(7)

$

(53)

(a)

$

2,523

Less: capital expenditures

(200)

(200)

Free cash flow

$

2,383

$

(7)

$

(53)

$

2,323

Revenues

$

6,480

$

$

$

6,480

Operating cash flow as % of revenues

40%

N/A

N/A

39%

Free cash flow as % of revenues

37%

N/A

N/A

36%

Twelve Months Ended September 29, 2013

Non-GAAP

QSI

Share-Based Compensation

GAAP

Net cash provided (used) by operating activities

$

9,052

$

(43)

$

(231)

(a)

$

8,778

Less: capital expenditures

(973)

(75)

(1,048)

Free cash flow

$

8,079

$

(118)

$

(231)

$

7,730

Revenues

$

24,866

$

$

$

24,866

Operating cash flow as % of revenues

36%

N/A

N/A

35%

Free cash flow as % of revenues

32%

N/A

N/A

31%

Three Months Ended September 30, 2012

Non-GAAP

QSI

Share-Based Compensation

GAAP

Net cash provided (used) by operating activities

$

1,476

$

(26)

$

(41)

(a)

$

1,409

Less: capital expenditures

(234)

(16)

(250)

Free cash flow

$

1,242

$

(42)

$

(41)

$

1,159

Revenues

$

4,871

$

$

$

4,871

Operating cash flow as % of revenues

30%

N/A

N/A

29%

Free cash flow as % of revenues

25%

N/A

N/A

24%

Twelve Months Ended September 30, 2012

Non-GAAP

QSI

Share-Based Compensation

GAAP

Net cash provided (used) by operating activities

$

6,382

$

(216)

$

(168)

(a)

$

5,998

Less: capital expenditures

(1,183)

(101)

(1,284)

Free cash flow

$

5,199

$

(317)

$

(168)

$

4,714

Revenues

$

19,121

$

$

$

19,121

Operating cash flow as % of revenues

33%

N/A

N/A

31%

Free cash flow as % of revenues

27%

N/A

N/A

25%

(a)

Incremental tax benefits from share-based compensation during the period.

N/A - Not Applicable

Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)

(In millions)

(Unaudited)

Three Months Ended September 29, 2013

Non-GAAP Results

QSI

Share-Based Compensation

Acquisition- Related Items

Tax Items

GAAP Results

Income (loss) from continuing operations before income taxes

$

2,173

$

(11)

$

(274)

$

(67)

$

$

1,821

Income tax (expense) benefit

(354)

(14)

48

(320)

Income (loss) from continuing operations

$

1,819

$

(25)

$

(226)

$

(67)

$

$

1,501

Tax rate

16%

N/M

18%

—%

N/A

18%

Twelve Months Ended September 29, 2013

Non-GAAP Results

QSI

Share-Based Compensation

Acquisition- Related Items

Tax Items (b)

GAAP Results

Income (loss) from continuing operations before income taxes

$

9,534

$

56

$

(1,103)

$

(293)

$

$

8,194

Income tax (expense) benefit

(1,623)

(21)

217

14

64

(1,349)

Income (loss) from continuing operations

$

7,911

$

35

$

(886)

$

(279)

$

64

$

6,845

Tax rate

17%

38%

20%

5%

N/A

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.

(b)

During fiscal 2013, we recorded a tax benefit of $64 million related to fiscal 2012 due to the retroactive reinstatement of the United States federal R&D tax credit.

N/M - Not Meaningful

N/A - Not Applicable

Qualcomm Incorporated

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)

September 29, 2013

September 30, 2012

ASSETS

Current assets:

Cash and cash equivalents

$

6,142

$

3,807

Marketable securities

8,824

8,567

Accounts receivable, net

2,142

1,459

Inventories

1,302

1,030

Deferred tax assets

573

309

Other current assets

572

473

   Total current assets

19,555

15,645

Marketable securities

14,440

14,463

Deferred tax assets

1,059

1,412

Assets held for sale

72

1,109

Property, plant and equipment, net

2,995

2,851

Goodwill

3,976

3,917

Other intangible assets, net

2,553

2,938

Other assets

866

677

   Total assets

$

45,516

$

43,012

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Trade accounts payable

$

1,554

$

1,298

Payroll and other benefits related liabilities

839

664

Unearned revenues

501

545

Liabilities held for sale

43

1,072

Other current liabilities

2,276

1,723

   Total current liabilities

5,213

5,302

Unearned revenues

3,666

3,739

Other liabilities

550

426

   Total liabilities

9,429

9,467

Stockholders' equity:

Qualcomm stockholders' equity:

Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding

Common stock, $0.0001 par value; 6,000 shares authorized; 1,685 and 1,706 shares issued and outstanding, respectively

Paid-in capital

9,874

11,956

Retained earnings

25,461

20,701

Accumulated other comprehensive income

753

866

   Total Qualcomm stockholders' equity

36,088

33,523

Noncontrolling interests

(1)

22

   Total stockholders' equity

36,087

33,545

      Total liabilities and stockholders' equity

$

45,516

$

43,012

Qualcomm Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

September 29, 2013

September 30, 2012

September 29, 2013

September 30, 2012

Revenues:

   Equipment and services

$

4,513

$

3,213

$

16,988

$

12,465

   Licensing

1,967

1,658

7,878

6,656

      Total revenues

6,480

4,871

24,866

19,121

Costs and expenses:

   Cost of equipment and services revenues

2,714

1,841

9,820

7,096

   Research and development

1,348

1,114

4,967

3,915

   Selling, general and administrative

657

627

2,518

2,270

   Other

173

54

331

158

      Total costs and expenses

4,892

3,636

17,636

13,439

Operating income

1,588

1,235

7,230

5,682

Investment income, net

233

291

964

880

      Income from continuing operations before income taxes

1,821

1,526

8,194

6,562

Income tax expense

(320)

(286)

(1,349)

(1,279)

      Income from continuing operations

1,501

1,240

6,845

5,283

Discontinued operations, net of income taxes

23

776

      Net income

1,501

1,263

6,845

6,059

Net loss attributable to noncontrolling interests

8

8

50

      Net income attributable to Qualcomm

$

1,501

$

1,271

$

6,853

$

6,109

Basic earnings per share attributable to Qualcomm:

   Continuing operations

$

0.88

$

0.73

$

3.99

$

3.14

   Discontinued operations

0.02

0.45

   Net income

$

0.88

$

0.75

$

3.99

$

3.59

Diluted earnings per share attributable to Qualcomm:

   Continuing operations

$

0.86

$

0.72

$

3.91

$

3.06

   Discontinued operations

0.01

0.45

   Net income

$

0.86

$

0.73

$

3.91

$

3.51

Shares used in per share calculations:

   Basic

1,703

1,704

1,715

1,700

   Diluted

1,738

1,745

1,754

1,741

Dividends per share announced

$

0.35

$

0.25

$

1.20

$

0.93

Certain prior period amounts have been reclassified to conform to the current period presentation.

Qualcomm Incorporated

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Three Months Ended

Twelve Months Ended

September 29, 2013

September 30, 2012

September 29, 2013

September 30, 2012

Operating Activities:

Net income

$

1,501

$

1,263

$

6,845

$

6,059

Adjustments to reconcile net income to net cash provided by operating activities:

   Depreciation and amortization expense

273

257

1,017

897

   Gain on sale of wireless spectrum

(1,179)

   Goodwill and long-lived asset impairment charges

1

59

192

84

   Revenues related to non-monetary exchanges

(30)

(30)

(123)

(122)

   Income tax provision in excess of income tax payments

48

156

268

395

   Non-cash portion of share-based compensation expense

274

283

1,105

1,035

   Incremental tax benefit from share-based compensation

(53)

(41)

(231)

(168)

   Net realized gains on marketable securities and other investments

(129)

(155)

(369)

(369)

   Net impairment losses on marketable securities and other investments

36

19

85

83

Other items, net

82

10

104

(52)

Changes in assets and liabilities, net of effects of acquisitions:

   Accounts receivable, net

(235)

(207)

(680)

(456)

   Inventories

399

(199)

(300)

(252)

   Other assets

(98)

(209)

(209)

(240)

   Trade accounts payable

(291)

174

307

371

   Payroll, benefits and other liabilities

700

71

752

(341)

   Unearned revenues

45

(42)

15

253

   Net cash provided by operating activities

2,523

1,409

8,778

5,998

Investing Activities:

Capital expenditures

(200)

(250)

(1,048)

(1,284)

Purchases of available-for-sale securities

(1,839)

(3,707)

(13,951)

(15,511)

Proceeds from sales and maturities of available-for-sale securities

6,157

4,084

13,494

9,858

Purchases of trading securities

(654)

(1,729)

(3,312)

(4,009)

Proceeds from sales and maturities of trading securities

1,002

1,763

3,367

3,060

Proceeds from sale of wireless spectrum

1,925

Acquisitions and other investments, net of cash acquired

(13)

(156)

(192)

(833)

Other items, net

(4)

(7)

64

(83)

   Net cash provided (used) by investing activities

4,449

(2)

(1,578)

(6,877)

Financing Activities:

Borrowing under loans and debentures

534

710

Repayment of loans and debentures

(439)

(591)

Proceeds from issuance of common stock

561

355

1,525

1,714

Incremental tax benefit from share-based compensation

53

41

231

168

Repurchases and retirements of common stock

(3,321)

(841)

(4,610)

(1,313)

Dividends paid

(592)

(426)

(2,055)

(1,583)

Other items, net

(66)

(146)

(31)

138

   Net cash used by financing activities

(3,365)

(1,017)

(4,845)

(757)

Changes in cash and cash equivalents held for sale

(15)

Effect of exchange rate changes on cash

2

5

(5)

(19)

   Net increase (decrease) in cash and cash equivalents

3,609

395

2,335

(1,655)

Cash and cash equivalents at beginning of year

2,533

3,412

3,807

5,462

   Cash and cash equivalents at end of year

$

6,142

$

3,807

$

6,142

$

3,807

Certain prior period amounts have been reclassified to conform to the current period presentation.

SOURCE Qualcomm Incorporated



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