Uncle Frank, I find the Qualcomm reports are unfriendly to forensic analysis. Lots of mud in the water.
But we can work through an example.
Operating Cash Flow (OCF) is just as you mentioned it. 1296 - 484 = 812 OCF
Neither the 1296 or 484 or 812 is fully representative of value though. Sadly. Which is where the concept of Free Cash Flow comes in.
The 1296 is what the business brought in, which consists of earnings as reported, minus all the costs imbedded in earnings that didn't actually have a cash impact. Like "depreciation and Amortization" and so on. But not all cash from operations are equal. Embedded in there somewhere is 217,846 of tax benefit from stock options, which we have to think about from a "valuation" perspective since that comes, indirectly, from shareholders. I strongly suspect something fishy in a large positive contribution to cash flows from taxes (481,621)... but I haven't got the foggiest clue how to treat it, so I'll err on the side of benefit to QCOM and leave it in.
The 484 is what got tossed into the machine (which includes changes in Accounts Receivable, Finance Receivables, ... and Unearned Revenue) = all of those things towards the end of the Cash Flows from Operations part of the CF statement. These are not sustainable (for example, they can't keep reducing AR by 200 M$ per year for much longer) and often go back and forth and aren't "free" cash flow because they represent movement of cash into and out of working capital buckets. This sum is not included in a Free Cash Flow analysis.
Then we need to look at only one other thing, which is usage of cash to grow the business. Cash spent acquiring capital assets (property, plant and equipment). This is (163,182) and Qualcomm reports it under investing activities.
So our '00 FCF is: 1,296 - 218 - 163 = 915
Up from '99 FCF of 555 - 290 - 180 = 85
We don't have the details for '01 and won't until the 10-K comes out, but the max it will be is 1,186 if capex was zero and no tax benefit from stock options.
10-Q's aren't detailed enough to compute the stock option contribution to cash flows so you get a distorted view from the quarterlies.
That's a detailed example of FCF calculation for QCOM.
John. |
