Tuesday April 18, 4:31 pm Eastern Time
Company Press Release
SOURCE: QUALCOMM Incorporated
QUALCOMM Announces Second Quarter Results Pro Forma Earnings Per Share $0.26
- Pro Forma Net Income Increased 74% From Second Quarter of Fiscal 1999 -
SAN DIEGO, April 18 /PRNewswire/ -- QUALCOMM Incorporated (Nasdaq: QCOM - news) today reported pro forma revenues (see note below) of $649 million for the second quarter of fiscal 2000, an increase of 16 percent compared to $558 million in the year ago period. Pro forma earnings per share were $.26 in the second quarter of fiscal 2000 compared to $.18 per share in the year ago period, an increase of 44 percent. Pro forma earnings before taxes were $334 million in the second quarter of fiscal 2000 compared to $184 million in the year ago period, an increase of 82 percent. Pro forma net income was $207 million in the second quarter of fiscal 2000 compared to $119 million in the year ago period, an increase of 74 percent.
``During the quarter, we successfully completed the sale of our phone business to Kyocera. We also favorably settled a lengthy patent lawsuit with Motorola, resulting in the extension of its CDMA license to include QUALCOMM patents issued since 1995,' said Dr. Irwin M. Jacobs, chairman and CEO of QUALCOMM Incorporated. ``As expected, second quarter revenues reflected lower shipments in our chip business. However, we believe industry inventories have returned to normal levels and we expect a strong second half with record MSM chip shipments.'
Note: Pro forma results for the current period exclude acquisition-related costs, including a $60 million one-time write-off of purchased in-process technology and $21 million in ongoing amortization of goodwill and other intangible assets, $50 million in losses incurred by the exited consumer phone business and $56 million in charges related to the sale, $12 million in employer payroll taxes on employee non-qualified stock option exercises, $267 million in realized gains from sale of marketable securities and $3 million in other non-operating charges. Pro forma results for the prior period exclude the results of exited businesses and related charges. Pro forma earnings differ from reported earnings presented in accordance with generally accepted accounting principles because they exclude these cost and income items.
``We are pleased with the rapidly increasing worldwide acceptance of CDMA and the exciting potential for wireless Internet access. Our 1xHDR technology to deliver data rates up to 2.4 Mbps in a spectrally-efficient, cost-effective manner using existing CDMA radio bandwidth continues on a rapid path through tests, trials, and chip development to commercialization,' Dr. Jacobs said. ``We continue to strengthen our market position in our satellite and digital media businesses, with OmniTRACS growing well, Globalstar entering commercial expansion, our latest version of Eudora with advertiser support being well accepted, and digital cinema gathering increasing interest.'
Pro forma operating expenses (research and development and selling, general and administrative) for the second quarter of fiscal 2000 increased to 23 percent of revenues due to increased chipset and system software product initiatives and High Data Rate (HDR) development efforts compared to 20 percent of revenues during the year ago period.
Pro forma operating income as a percent of revenues increased to 42 percent for the second quarter of fiscal 2000 from 34 percent in the year ago period.
The Company currently estimates its pro forma annual effective income tax rate to be approximately 38 percent for fiscal 2000, compared to 35 percent for fiscal 1999.
Reported revenues for the second quarter of fiscal 2000 were $728 million, compared to $932 million in the year ago period. Reported earnings per share were $.25 in the second quarter of fiscal 2000, compared to a loss of $.07 per share in the year ago period. Reported earnings before taxes were $399 million and reported net income was $200 million in the second quarter of fiscal 2000 compared to a loss before taxes of $66 million and a net loss of $43 million, respectively, in the year ago period.
Outlook
Based on current indications and strong acceptance of newer MSM chip models, the Company expects third fiscal quarter MSM chip shipments to exceed first fiscal quarter shipments of 14.5 million. The Company expects its pro forma earnings per share to meet the current analysts' consensus estimates of $.27 for the third quarter of fiscal 2000 due principally to expected growth in chipset and system software revenues and profits.
Acquisitions and Investments
During the quarter QUALCOMM acquired: 1) SnapTrack, a leader in wireless position location technology; 2) the technology development group of Tellit, a U.K.-based company with industry-leading expertise in European Radio Frequency (RF) handset design; and 3) Within Technology, a technology and systems consulting firm with expertise in collaborative workgroup software, interface design and document annotation techniques. These acquisitions were valued at over $1 billion and are expected to significantly enhance QUALCOMM's future product offerings.
The Company has also increased its investment activities in other companies to further its strategic interests. These include start-up companies that have developed or are developing innovative wireless data applications, venture firms that invest in and incubate wireless Internet start-up companies and wireless carriers that promote the worldwide deployment of CDMA and HDR systems.
During the quarter, the Company recognized gains of $267 million before taxes on sales of one investment in the portfolio. The Company will seek to leverage its strong position in the wireless voice and Internet markets to build the value of its strategic investment portfolio. These investments are intended to strengthen the market for CDMA and HDR products and enhance the Company's future product offerings.
Cash Flow
QUALCOMM's cash, cash equivalents and investments totaled approximately $2 billion at the end of the second quarter of fiscal 2000, an increase of $470 million from the first quarter of fiscal 2000. The following table presents selected cash flow information for the second quarter of fiscal 2000 (in millions):
Selected Cash Flow Information Amount
Earnings before taxes, depreciation
and amortization $250
QCP sale to Kyocera and related items 360
Investment sale/Loan repayments/Other 294
Net cash inflows 904
Investments and capital expenditures (284)
Bank loan paydown (124)
Working capital changes (26)
Net cash outflows (434)
Net cash generated $470
``Our improved operating margins and focus on working capital management have generated and are expected to continue to generate significant cash flow to fund attractive new business opportunities in the growing CDMA and wireless data markets,' said Tony Thornley, executive vice president and chief financial officer for QUALCOMM.
Pro Forma Results of Business Segments
The following tables present pro forma segment information for the second quarter of fiscal 2000 (in thousands):
Second Quarter - Fiscal Year 2000
Reconciling Total
Segments QCT QTL QWS Items (1) QUALCOMM
Revenues 279,187 167,652 188,300 13,615 648,754
Change from
prior year 6% 57% 5% N/M 16%
Earnings
before taxes 89,976 150,422 83,041 10,136 333,575
% of revenues 32% 90% 44% N/M 51%
Change from
prior year -17% 60% 226% N/M 82%
Second Quarter - Fiscal Year 1999
Reconciling Total
Segments QCT QTL QWS (2) Items (1) QUALCOMM
Revenues 263,411 106,476 178,490 9,321 557,698
Earnings
before taxes 109,006 93,771 25,499 (44,522) 183,754
% of revenues 41% 88% 14% N/M 33%
Historical pro forma trend information is available on QUALCOMM's web site at qualcomm.com on the Investor Relations page.
(1) Reconciling Items related to revenues consist primarily of other
non-reportable segment revenue less inter-segment eliminations.
Reconciling Items related to earnings before taxes consist primarily
of non-reportable segment results, unallocated net investment income,
distributions on Trust Convertible Preferred Securities, and the
elimination of inter-company profit.
(2) QWS revenues and earnings before taxes for the second quarter of
fiscal 1999 exclude $24 million and $50 million in revenues and
losses before taxes, respectively, related to the Company's
terrestrial CDMA wireless infrastructure business sold to Ericsson in
May 1999.
N/M - Not Meaningful
Highlights of Business Segments - Second Quarter Fiscal 2000
QUALCOMM CDMA Technologies (QCT)
-- Recorded a book-to-bill ratio of greater than one at the end of the
second quarter of fiscal 2000.
-- Shipped over 11 million Mobile Station Modem (MSM) phone chips to
customers worldwide during the second quarter of fiscal 2000, compared
to 9 million units shipped during the same period last year. Shipments
for the third quarter of fiscal 2000 are expected to exceed the first
quarter level of 14.5 million units.
-- Announced partnerships with Ericsson, Symbian, Microsoft and RF Micro
Devices to drive development of next-generation CDMA products and
services.
-- Announced the development of the Wireless Internet Launchpad suite of
applications and Internet services, including advanced multi-media,
connectivity, position location, user interface and removable storage
functionality.
-- Introduced two new chipsets and system software, the first to support
multimedia applications: the MSM3300 solution for IS-95A/B and the
MSM5100 solution for 3G CDMA 1xMC.
-- Shipped samples of the MSM5000 chipset and system software for handsets
and the CSM5000 solution for infrastructure equipment on time. These
chips are the first in the world to support the 3G CDMA 1xMC standard.
QUALCOMM Technology Licensing (QTL)
-- License, development and royalty fees totaled $168 million, a
58 percent increase in the second quarter of 2000, compared to
$106 million for the same period a year ago. Royalty fees declined
from the first quarter of fiscal 2000 as a result of seasonal and
other factors that also impacted the chip business in the quarter.
Royalties are expected to increase in the third fiscal quarter.
License, development and royalty fees from third parties were
$149 million in the second quarter of fiscal 2000.
-- Extended Motorola's CDMA license to include certain patents filed after
July 3, 1995 for standards including IS-95A/B, 1X MC, 1X Plus and
1Xtreme. Motorola agreed to pay royalties to QUALCOMM at rates
consistent with those generally paid by the industry for using newly
licensed patents.
-- Extended Hitachi's CDMA license agreement, including a multi-million
dollar up-front license fee and ongoing royalties as Hitachi begins
selling third-generation CDMA equipment.
QUALCOMM Wireless Systems (QWS)
-- Shipped a record 16,460 OmniTRACS units and related products, a
54 percent increase in the second quarter of fiscal 2000 compared to
the year ago quarter, for a cumulative total of over 335,000 units.
International unit shipments increased to 5,400 or 124 percent,
compared to 2,415 in the year ago quarter. QUALCOMM Wireless Business
Solutions (QWBS) customers now include 37 of the top 40 domestic
truckload carriers.
-- Formed a strategic alliance with Wabtec Railway Electronics, a division
of Wabtec Corporation, to market the OmniTRACS Mobile Information
Management System for the rail industry.
-- Formed a strategic relationship with Ryder System, Inc., a leader in
logistics and transportation solutions worldwide, to purchase up to
10,000 OmniTRACS units.
-- Announced the formation of eQ-COM to provide wireless
communications-based fleet management solutions to the European freight
transport industry and other transportation-based industries. Also
signed an agreement with Vodafone Airtouch to provide Pan-European data
services for eQ-COM.
-- Shipped a cumulative total of approximately 40,000 Globalstar phones.
-- Demonstrated Internet access and packet data capability on the
Globalstar system to allow users to communicate with their corporate
data networks, access the Internet, and send and receive email
messages. Commercial field trials are slated for summer 2000 followed
by a phased integration, which will be made available to all Globalstar
Service Providers.
Other
-- QUALCOMM Digital Media (QDM) announced an agreement with Eastman Kodak
Company to collaborate on testing core technologies for the creation of
a high-quality digital cinema system. QUALCOMM's compression,
encryption and watermarking techniques will be key technologies
incorporated into Kodak's prototype digital projection system.
-- Eudora announced the release of the new Eudora 4.3 email software
providing email for free, sponsored by advertising.
-- Downloaded more than 500,000 copies of Eudora 4.3 in the first two
months after commercial release.
-- Surpassed 100 million ad impressions delivered to users.
QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. The Company's major businesses include integrated CDMA chipsets and system software; technology licensing; and satellite-based systems including OmniTRACS© and portions of the Globalstar(TM) system. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 1999 FORTUNE 500© company traded on the NASDAQ under the ticker symbol QCOM.
Except for the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks associated with component shortages; risks associated with chip inventory levels and the ability to increase shipments; risks associated with the ability to meet analyst consensus estimates in future periods; risks associated with the ability to sustain or improve operational efficiency and profitability; risks that the rate of growth in the CDMA subscriber population will decrease; risks associated with strategic investments, acquisitions or divestitures the Company may pursue; risks associated with the scale-up and operations of CDMA systems; risks associated with the development, deployment, and commercial acceptance of evolving CDMA technology standards; risks associated with developments in current or future litigation; risks associated with customer receivables and performance guarantees; risks associated with timing and receipt of license fees and royalties; and risks associated with international business activities, as well as the other risks detailed from time to time in the Company's SEC reports.
QUALCOMM, OmniTRACS and Eudora are registered trademarks of QUALCOMM Incorporated. MSM, CSM, iMSM and TruckMAIL are trademarks of QUALCOMM Incorporated. Globalstar is a trademark of Loral QUALCOMM Satellite Services, Incorporated. All other trademarks are the property of their respective manufacturers.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
ASSETS
March 26, September 26,
2000 1999
Current Assets:
Cash and cash equivalents $772,548 $660,016
Investments 935,778 954,415
Accounts receivable, net 659,297 883,640
Finance receivables 23,597 26,377
Inventories, net 77,902 257,941
Other current assets 332,297 195,849
Total current assets 2,801,419 2,978,238
Property, plant and
equipment, net 440,195 555,991
Investments 318,566 70,495
Finance receivables, net 784,297 548,482
Goodwill, net 942,293 1,833
Deferred income taxes 443,194 123,788
Other assets 413,760 256,123
Total assets $6,143,724 $4,534,950
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued liabilities $507,532 $705,208
Unearned revenue 81,617 56,070
Bank lines of credit -- 112,000
Current portion of long-term debt 200 3,099
Total current liabilities 589,349 876,377
Long-term debt 343 795
Other liabilities 49,085 74,872
Total liabilities 638,777 952,044
Minority interest in
consolidated subsidiaries 45,695 51,596
Company-obligated mandatorily
redeemable Trust
Convertible Preferred Securities
of a subsidiary trust holding
solely debt securities
of the Company -- 659,555
Stockholders' Equity:
Preferred stock, $0.0001 par value -- --
Common stock, $0.0001 par value 74 65
Paid-in capital 4,897,967 2,587,899
Retained earnings 577,714 200,879
Accumulated other
comprehensive income (loss) (16,503) 82,912
Total stockholders' equity 5,459,252 2,871,755
Total liabilities and
stockholders' equity $6,143,724 $4,534,950
RestatedSeptember 26, 1999 Stockholders' Equity for stock split on
December 30, 1999.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
March 26, March 28, March 26, March 28,
2000 1999 2000 1999
Revenues $727,741 $932,395 $1,847,814 $1,873,618
Operating expenses:
Cost of revenues 350,396 623,775 999,144 1,266,165
Research and
development 90,153 102,713 173,557 203,075
Selling, general
and administrative 97,398 104,592 199,174 224,813
Amortization of
goodwill and other
acquisition-related
intangible assets 20,536 302 20,608 604
Purchased in-process
technology 60,030 -- 60,030 --
Other 37,437 95,824 63,589 95,824
Total operating
expenses 655,950 927,206 1,516,102 1,790,481
Operating income 71,791 5,189 331,712 83,137
Interest expense (1,213) (5,459) (3,886) (8,774)
Investment income
(expense), net 333,749 (2,863) 369,996 3,887
Distributions on
Trust Convertible
Preferred Securities
of subsidiary
trust (1,994) (9,904) (13,039) (19,703)
Other (3,265) (52,531) (3,265) (52,531)
Income (loss)
before income
taxes 399,068 (65,568) 681,518 6,016
Income tax
(expense) benefit (199,352) 22,948 (304,683) (106)
Net income (loss) $199,716 $(42,620) $376,835 $5,910
Net earnings (loss)
per common share:
Basic $0.28 $(0.07) $0.55 $0.01
Diluted $0.25 $(0.07) $0.48 $0.01
Shares used in per
share calculations:
Basic 716,818 578,457 690,702 572,118
Diluted 801,388 578,457 796,107 586,103
SOURCE: QUALCOMM Incorporated
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