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Press Release Source: QUALCOMM Incorporated
QUALCOMM Announces Record First Quarter Fiscal 2003 Results
Wednesday January 22, 4:31 pm ET
GAAP Reported Revenues $1.1 Billion and $0.30 EPS
Revenues $1.1 Billion and $0.42 EPS Excluding QSI Segment
QUALCOMM's first quarter fiscal 2003 earnings conference call will be broadcast live on January 22, 2003 beginning at 2:30 p.m. Pacific Standard Time on the Company's web site at: www.qualcomm.com. This conference call may contain forward-looking financial information. The taped audio replay will be available for five business days. To listen to the replay, U.S. callers may dial (800) 633-8284 and international callers may dial (402) 977-9140. Both U.S. and international callers should use reservation number 21095067.
SAN DIEGO, Jan. 22 /PRNewswire-FirstCall/ -- QUALCOMM Incorporated (Nasdaq: QCOM - News) today announced its first quarter fiscal 2003 results ended December 29, 2002. GAAP reported revenues were $1.1 billion in the first fiscal quarter, up 26 percent sequentially and 57 percent year-over-year. Revenues increased primarily due to record demand for CDMA products across global markets. GAAP reported net income was $241 million or $0.30 per share in the first fiscal quarter, up 30 percent sequentially and 76 percent year-over-year.
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Revenues excluding the QUALCOMM Strategic Initiatives (QSI) segment were $1.1 billion in the first fiscal quarter, up 27 percent sequentially and 54 percent year-over-year. Net income excluding the QSI segment was $345 million or $0.42 per share in the first fiscal quarter, up 35 percent sequentially and 83 percent year-over-year.
"QUALCOMM's exceptionally strong performance in the first fiscal quarter was fueled by the successful commercial deployment of third generation CDMA networks, which now total 35 operators in 17 countries around the world," said Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM. "We achieved record revenues and earnings in both our QTL technology licensing business and our QCT semiconductor business, with shipments of approximately 29 million MSM phone chips during the first fiscal quarter. We are continuing to see very strong demand in the Americas and throughout Asia for our industry-leading chipsets and system software. Our end-to-end BREW platform is supporting an ever increasing variety of applications, enhancing data revenues and encouraging an early migration to 3G CDMA. We anticipate significant growth in China and India this year as China Unicom, Reliance InfoComm, Tata Teleservices and other wireless operators introduce commercial CDMA2000 1X service."
Gross margins excluding the QSI segment were 67 percent in the first fiscal quarter, down from 69 percent sequentially and up from 66 percent year-over-year. The sequential decrease in gross margins was primarily due to a lower percentage of total revenues coming from QUALCOMM Technology Licensing (QTL), and the year-over-year increase was primarily due to the shift in product mix toward higher-end 3G CDMA2000 1X products and increased efficiency resulting from economies of scale.
Research and development (R&D) expenses excluding the QSI segment were $110 million in the first fiscal quarter, up 3 percent sequentially and 6 percent year-over-year. The increase in R&D investment was primarily due to product development efforts to support high-speed wireless Internet access and multimode, multiband, multinetwork chips supporting cdmaOne(TM), CDMA2000 1X/1xEV-DO, radioOne(TM), GSM/GPRS and WCDMA technologies. Selling, general and administrative (SG&A) expenses excluding the QSI segment were $107 million in the first fiscal quarter, up 4 percent sequentially and 18 percent year- over-year.
Investment income excluding the QSI segment was $26 million in the first fiscal quarter, up 66 percent sequentially and 5 percent year-over-year. Investment income excluding the QSI segment is primarily comprised of interest income on corporate cash and marketable debt securities and other-than- temporary losses on debt securities. The sequential increase in investment income resulted from lower other-than-temporary losses on debt securities.
QUALCOMM's annual effective income tax rate on earnings excluding the QSI segment for fiscal 2003 is estimated to be 34 percent, compared to 35 percent in the year ago period. Our annual effective income tax rate on GAAP reported earnings for fiscal 2003 is estimated to be 38 percent, compared to 22 percent in the year ago period.
QUALCOMM Strategic Initiatives
The QUALCOMM Strategic Initiatives (QSI) segment includes our strategic investments and related income and expenses, including the Vesper Companies in Brazil. QSI revenues, which are primarily related to the consolidation of the Vesper Companies, were $29 million in the first fiscal quarter, down 15 percent sequentially largely due to changes in foreign exchange rates of the Brazilian real. QSI losses before taxes were $133 million in the first fiscal quarter, up 36 percent sequentially primarily due to a $28 million increase in other-than-temporary losses on investments. Included in the QSI losses was $30 million of losses from Vesper, a 29 percent decrease in losses sequentially.
Business Outlook
The following statements are forward-looking and actual results may differ materially. Please see a description of certain risk factors in this release and QUALCOMM's quarterly reports on file with the Securities and Exchange Commission (SEC) for a more complete description of risks.
Second Quarter Fiscal 2003
-- Based on the current business outlook, we anticipate that revenues
excluding the QSI segment in the second fiscal quarter will increase
by approximately 50 percent year-over-year and decrease sequentially
by approximately 7 percent. We anticipate that earnings per share
excluding the QSI segment will be approximately $0.34-$0.35 in the
second fiscal quarter, a 75 percent increase year-over-year. This
estimate assumes shipments of approximately 27 million MSM phone
chips during the quarter, of which approximately 86 percent is
expected to be 3G CDMA2000 MSM phone chips. This represents 93
percent growth in MSM chip shipments year-over-year. We anticipate
that operating expenses will increase in the second fiscal quarter
compared to the first fiscal quarter due to seasonal factors such as
higher employee payroll taxes and public company expenses.
Fiscal 2003
-- Based on the current business outlook, we anticipate that revenues
excluding the QSI segment will grow by approximately 28-33 percent
year-over-year and earnings per share excluding the QSI segment to
be in the range of $1.34 - $1.39 for fiscal 2003, up 37-42 percent
year-over-year. This estimate is based on the sale of 105-112
million CDMA phones in calendar 2003 with approximately 10 percent
decrease in average selling prices of CDMA phones, upon which
royalties are calculated.
Cash Flow
QUALCOMM's cash, cash equivalents and marketable securities, excluding the QSI segment, totaled approximately $3.7 billion at the end of the first quarter of fiscal 2003. The following table presents selected cash flow information for the first quarter of fiscal 2003, which includes cash equivalents and marketable securities, but excludes the QSI segment, (in millions):
Selected Cash Flow Information
First Quarter
Fiscal 2003
____________
Earnings before taxes, depreciation,
amortization and asset impairments, excluding QSI $555
Working capital changes and tax paid (196)
Net additional share capital 56
Capital expenditures (77)
____________
Net cash provided, excluding QSI 338
Change in fair value of marketable securities 19
Transfers from QSI (1) 390
Transfers to QSI (2) (70)
____________
Net increase in cash, cash equivalents and marketable
securities of QUALCOMM, excluding cash and
marketable securities in QSI (3) $677
============
(1) Cash from loan payments and sale of equity securities.
(2) Funding for strategic debt and equity investments, operations of
Vesper and other QSI operating expenses.
(3) The difference between the $677 million net increase in cash, cash
equivalents and marketable securities of QUALCOMM, excluding QSI,
and the $214 million change in cash and cash equivalents shown in
the Company's Form 10-Q cash flow statement, consists of a $459
million increase in marketable securities held by QUALCOMM, not in
QSI, and a $4 million decrease in cash in QSI.
Results of Business Segments
The following tables present operations segment information, excluding
the QSI segment (in thousands):
First Quarter - Fiscal Year 2003
Other/ QUALCOMM
Reconciling excluding
Segments QCT QTL QWI Items (1) QSI
Revenues 709,681 255,423 108,981 (6,121) 1,067,964
Change from
prior quarter 47% 5% (1%) N/M 27%
Change from
prior year 98% 21% 0% N/M 54%
Earnings before
taxes 288,282 229,409 2,761 1,848 522,300
% of revenues 41% 90% 3% N/M 49%
Change from
prior quarter 82% 4% 331% N/M 36%
Change from
prior year 232% 22% 324% N/M 82%
Fourth Quarter - Fiscal Year 2002
Other/ QUALCOMM
Reconciling excluding
Segments QCT QTL QWI Items (1) QSI
Revenues 483,617 243,481 109,542 3,031 839,671
Earnings
before
taxes 158,334 221,500 (1,196) 5,395 384,033
% of revenues 33% 91% (1%) N/M 46%
First Quarter - Fiscal Year 2002
Other/ QUALCOMM
Reconciling excluding
Segments QCT QTL QWI Items (1) QSI
Revenues 359,144 210,803 109,295 13,446 692,688
Earnings
before
taxes 86,941 188,688 (1,233) 13,053 287,449
% of revenues 24% 90% (1%) N/M 41%
(1) Other/Reconciling Items related to revenues consist primarily of
other non-segment revenues less intersegment eliminations.
Reconciling Items related to earnings before taxes consist primarily
of charges that are not allocated to the segments for management
reporting purposes, unallocated net investment income, non-
reportable segment results, interest expense and the elimination
of intercompany profit.
N/M - Not Meaningful
Business Segment Highlights
QUALCOMM CDMA Technologies (QCT)
-- Shipped approximately 29 million MSM phone chips to customers
worldwide during the first fiscal quarter, up from approximately 20
million units sequentially and approximately 15 million units in the
year ago quarter.
-- Shipped approximately 23 million 3G CDMA2000 1X/1xEV-DO MSM phone
chips during the first fiscal quarter for a cumulative total of
nearly 70 million 3G CDMA2000 MSM phone chips.
-- Shipped CSM infrastructure chips to support more than 2.2 million
equivalent voice channels, down from 2.5 million sequentially and up
from approximately one million in the year ago quarter.
-- Announced that more than five million gpsOne(TM)-enabled devices are
now in commercial use in Japan, South Korea and the United States,
making gpsOne the most widely deployed commercial position location
technology worldwide.
-- Announced the MSM6250(TM) chipset and system software, a highly
integrated solution that supports GSM/GPRS and WCDMA, also known as
UMTS in Europe. Offering support for numerous multimedia functions
and position location capabilities, the MSM6250 chip is an upgrade
to the MSM6200 that will enable phones to support rich multimedia
data applications and operate on all GSM/GPRS and WCDMA networks
that meet International Telecommunications Union (ITU) standards
worldwide.
-- Announced the MSM6500(TM) chipset and system software, a
high-capacity, high-speed wireless data solution that supports the
industry-wide CDMA2000 standards, as well as roaming on GSM/GPRS
systems.
-- Named "2002 Best Financially Managed Company" by the Fabless
Semiconductor Association for outstanding financial performance.
QUALCOMM Technology Licensing (QTL)
-- Signed a total of eight CDMA license agreements during the first
fiscal quarter, including four new licenses and four extensions to
existing license agreements.
Based on royalty reports for the September quarter of 2002:
-- Twenty-seven subscriber licensees reported sales of CDMA2000 1X
products and seven subscriber licensees reported sales of WCDMA
products.
-- Twelve infrastructure licensees reported sales of CDMA2000 1X
products and seven infrastructure licensees reported sales of
WCDMA products.
QUALCOMM Wireless & Internet Group (QWI)
QUALCOMM Internet Services (QIS)
-- Announced an agreement with China Unicom to create a joint venture
that will foster the growth of the Chinese developer community and
QUALCOMM's BREW platform in China. The joint venture will
capitalize on the technical advantages of BREW technology, the
competitive advantages of CDMA in wireless data and the versatile
operating capabilities of China Unicom.
-- Hosted with China Unicom, the China BREW Application Development
Consortium Meeting, a gathering of Chinese wireless application
developers and wireless device manufacturers. Hundreds of
developers and manufacturers attended, helping build momentum for
China Unicom's launch of BREW-enabled services.
-- Announced that KTF, a leading South Korean wireless operator,
extended its contract to provide a wireless application service
based on QUALCOMM's BREW solution, the complete end-to-end solution
that enables over-the-air downloading of applications virtually
anytime, anywhere.
-- Announced that QUALCOMM's BREW solution can now automatically
provision wireless devices with a Java(TM)-technology based virtual
machine and Java applets over the air using the Insignia Mobile
Foundation Java-enabling software.
QUALCOMM Wireless Business Solutions (QWBS)
-- Shipped approximately 10,600 OmniTRACS(R) units and related products
in the first fiscal quarter, down 28 percent sequentially and up 13
percent year-over-year. This brings the cumulative total to over
460,000 units shipped worldwide.
QUALCOMM Strategic Initiatives (QSI)
-- Won bids to acquire mobile licenses for the Vesper Companies in the
state of Sao Paulo (excluding Sao Paulo metro), the state of Minas
Gerais and in the Northeast region of Brazil. The new mobile
licenses cover areas with a combined population in excess of 64
million, according to Morgan Stanley.
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. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and traded on The Nasdaq Stock Market® 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: changing global economic conditions, particularly in the telecommunications and Internet-related industries and the resulting uncertainty in forecasting future results; timing and receipt of license fees and royalties; integrated circuit inventory and order levels; the Company's ability to execute additional 3G licenses; the scale-up, acceptance and operations of CDMA systems, including CDMA2000 1xEV-DO and systems in new markets such as China and India; the ability to sustain or improve operational efficiency and profitability; decreases in the rate of growth in CDMA-based wireless data and Internet access or the CDMA subscriber population; strategic investments, loans, acquisitions or divestitures the Company has or may pursue; the performance of the Vesper Companies business in Brazil; changes in the fair values of marketable securities and derivative instruments held; the development, deployment and commercial acceptance of evolving CDMA technology standards; developments in current or future litigation; customer receivables and performance guarantees; component shortages; and international business activities, as well as the other risks detailed from time-to-time in the Company's SEC reports.
QUALCOMM®, QCT®, QUALCOMM Wireless Business Solutions®, OmniTRACS®, MSM(TM), MSM6250(TM), MSM6500(TM), gpsOne(TM), radioOne(TM), Vesper(TM) and BREW(TM) are trademarks and/or service marks of QUALCOMM Incorporated. All other trademarks are the property of their respective owners.
For further information, please contact: Julie Cunningham, Sr. Vice President, Investor Relations of QUALCOMM Incorporated, +1-858-658-4224, or fax, +1-858-651-9303, juliec@qualcomm.com.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THIS SCHEDULE IS TO ASSIST THE READER IN RECONCILING FROM
RESULTS EXCLUDING QSI TO THE GAAP REPORTED RESULTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
__________________________________________________________
December 30, December 29, December 29,
2001 2002 2002
Excluding Excluding % GAAP
QSI QSI Change QSI Reported
_____ _____ _____ _____ _____
Revenues:
Equipment
and services $483,566 $828,258 71% $29,205 $857,463
Licensing
and royalty
fees 209,122 239,706 15% -- 239,706
_______ _______ _______ _______
692,688 1,067,964 54% 29,205 1,097,169
_______ _______ _______ _______
Operating
expenses:
Cost of
equipment
and services
revenues 234,316 351,404 50% 36,597 388,001
Research
and
development 104,369 110,247 6% 2,232 112,479
Selling,
general and
administrative 90,891 106,802 18% 41,197 147,999
Amortization
of other
acquisition-related
intangible
assets --(e) 1,972 -- 1,972
_______ _______ _______ _______
Total
operating
expenses 429,576 570,425 33% 80,026 650,451
_______ _______ _______ _______
Operating
income (loss) 263,112 497,539 89% (50,821) 446,718
Interest expense (493) (1,339) 172% (5,542) (6,881)
Investment income
(expense), net 24,830 26,100(a) 5% (76,688)(d) (50,588)
_______ _______ _______ _______
Income (loss)
before income
taxes 287,449 522,300 82% (133,051)(b) 389,249
Income tax
(expense)
benefit (97,733) (177,582)(c) 82% 29,667 (147,915)(c)
_______ _______ _______ _______
Net income
(loss) $189,716 $344,718 82% $(103,384) $241,334
======= ======= ======= =======
Net earnings
per common
share:
Diluted $0.23 $0.42 $0.30
======= ======= =======
Shares used
in per
share
calculations:
Diluted 809,574 815,745 815,745
======= ======= =======
(a) Includes $27 million in interest income related to cash, cash
equivalents and marketable debt securities, which are not part of
the Company's strategic investment portfolio.
(b) Includes $30 million loss, net of minority interest, of Vesper
Holdings from September 1, 2002 through November 30, 2002 due to the
Company's practice of consolidating foreign subsidiaries one month
in arrears.
(c) The estimated fiscal year 2003 effective tax rate for operations
excluding QSI and GAAP reported results are 34% and 38%,
respectively.
(d) Includes $66 million other-than-temporary losses on investments, $33
million equity losses in investees, $14 million minority interest in
loss of consolidated subsidiaries and $7 million interest income.
(e) Starting in fiscal 2003, the Company no longer records goodwill
amortization in accordance with Statement of Financial Accounting
Standards No. 142. Goodwill amortization has been excluded from
first quarter fiscal 2002 results to provide a consistent basis for
financial comparison.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
ASSETS
QUALCOMM
Excluding
QSI QSI (a) QUALCOMM QUALCOMM
December 29, December 29, December 29, September 29,
2002 2002 2002 2002
___________ __________ __________ ____________
Current assets:
Cash and cash
equivalents $1,600,796 $19,497 $1,620,293 $1,406,704
Marketable
securities 1,707,302 127,938 1,835,240 1,411,178
Accounts receivable,
net 640,308 21,445 661,753 536,950
Finance receivables,
net 3,358 966 4,324 388,396
Inventories, net 100,645 6,960 107,605 88,094
Other current
assets 114,356 24,971 139,327 109,444
____________ __________ __________ ____________
Total current
assets 4,166,765 201,777 4,368,542 3,940,766
Marketable
securities 391,098 57,248 448,346 381,630
Finance receivables,
net 3,936 440,774 444,710 442,934
Other investments 4,721 250,939 255,660 276,414
Property, plant and
equipment, net 493,770 194,042 687,812 686,283
Goodwill, net 345,055 1,865 346,920 344,803
Other assets 234,632 241,427 476,059 436,691
____________ __________ __________ ____________
Total assets $5,639,977 $1,388,072 $7,028,049 $6,509,521
============ ========== ========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts
payable $150,966 $43,771 $194,737 $209,418
Payroll and other
benefits related
liabilities 99,094 9,609 108,703 126,005
Unearned revenue 172,616 5,267 177,883 183,482
Other current
liabilities 152,356 21,215 173,571 156,081
____________ __________ __________ ____________
Total current
liabilities 575,032 79,862 654,894 674,986
Unearned revenue 250,693 626 251,319 259,995
Long-term debt -- 156,889 156,889 94,288
Other liabilities 39,617 2,503 42,120 43,756
____________ __________ __________ ____________
Total
liabilities 865,342 239,880 1,105,222 1,073,025
____________ __________ __________ ____________
Minority interest in
consolidated
subsidiaries 50 21,768 21,818 44,540
____________ __________ __________ ____________
Stockholders' equity:
Preferred stock,
$0.0001 par value -- -- -- --
Common stock, $0.0001
par value 80 -- 80 79
Paid-in capital 5,123,139 -- 5,123,139 4,918,202
Retained earnings 845,958 -- 845,958 604,624
Accumulated other
comprehensive
loss (40,958) (27,210) (68,168) (130,949)
____________ __________ __________ ____________
Total
stockholders'
equity 5,928,219 (27,210) 5,901,009 5,391,956
____________ __________ __________ ____________
Total liabilities
and stockholders'
equity $6,793,611 $234,438 $7,028,049 $6,509,521
============ ========== ========== ============
(a) Includes the consolidated Vesper Holdings balance sheet at November
30, 2002. The Company consolidates foreign subsidiaries one month
in arrears.
QUALCOMM Incorporated
GAAP REPORTED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
_____________________________
December 29, December 30,
2002 2001
__________ __________
Revenues:
Equipment and services $857,463 $489,092
Licensing and royalty fees 239,706 209,550
__________ __________
1,097,169 698,642
__________ __________
Operating expenses:
Cost of equipment and services revenues 388,001 245,197
Research and development 112,479 106,868
Selling, general and administrative 147,999 100,765
Amortization of goodwill and other
acquisition-related intangible assets 1,972 63,731
__________ __________
Total operating expenses 650,451 516,561
__________ __________
Operating income 446,718 182,081
Interest expense (6,881) (2,562)
Investment (expense) income, net (50,588) 38,032
__________ __________
Income before income taxes 389,249 217,551
Income tax expense (147,915) (78,318)
__________ __________
Net income $241,334 $139,233
========== ==========
Net earnings per common share:
Basic $0.31 $0.18
========== ==========
Diluted $0.30 $0.17
========== ==========
Shares used in per share calculations:
Basic 783,280 764,959
========== ==========
Diluted 815,745 809,574
========== ==========
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Source: QUALCOMM Incorporated |
