QUALCOMM Reports Third Fiscal Quarter Revenues of $1 Billion; Operating Earnings Per Share of 75, Excluding Non-Recurring Charges
All of the Share and Per-Share Amounts in this Release Have Been Adjusted
To Reflect the 2:1 Stock Distribution that was Paid May 10, 1999
To QUALCOMM Stockholders of Record on April 21, 1999
SAN DIEGO, July 19 /PRNewswire/ -- QUALCOMM Incorporated (Nasdaq: QCOM)
today reported revenues of $1 billion and net income of $59 million, or
$.35 per share (diluted), for the third quarter of fiscal 1999 (see Financial
Data comparisons, pg. 6). Excluding non-recurring charges of $117 million
associated primarily with the sale of the Company's terrestrial Code Division
Multiple Access (CDMA) wireless infrastructure business, the Company reported
record net income in the third quarter of $135 million, or $.75 earnings per
share (diluted). This represents an increase in net income, excluding
non-recurring items, of 445 percent over the third quarter of fiscal 1998.
Revenues in the third quarter of fiscal 1999 increased 15 percent over
revenues of $875 million for the year ago quarter. This revenue growth was
due to increased communications systems revenues consisting of sales of
Application Specific Integrated Circuits (ASICs), OmniTRACS units and CDMA
phones, as well as a significant increase in royalties.
"We are pleased to report very strong third fiscal quarter results.
Revenues reached the billion dollar mark and we had record net income," said
Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM Incorporated. "We
achieved several important milestones this quarter, including closing the sale
of the terrestrial CDMA wireless infrastructure business, attaining the number
two position in digital phone market share in the U.S. (according to
Dataquest), and shipping over 11 million MSM chips to CDMA phone manufacturers
worldwide. We are also pleased to have been selected for inclusion in the S&P
500 index."
Pro Forma Results
(Excluding Infrastructure Business and Non-Recurring Charges)
Pro forma financial information is provided for the purpose of evaluating
what the Company's operating results would have been excluding both
non-recurring charges and operating results of the terrestrial CDMA wireless
infrastructure business. For the third quarter of fiscal 1999, pro forma
revenues were $966 million, pro forma gross profit was 42 percent, pro forma
net income was $154 million, and pro forma earnings per share were
$.86 (diluted).
Non-recurring pre-tax charges of $117 million were reported in connection
with the sale of the terrestrial CDMA wireless infrastructure business
(primarily employee-related costs) and including the write-down of certain
infrastructure business related assets not being acquired.
Highlights of Financial Performance
Communications Systems
Communications systems revenues increased 9 percent to $824 million in the
third quarter of fiscal 1999 from $759 million in the year ago quarter, with
increased sales of ASICs, OmniTRACS units and CDMA phones. Communications
systems revenues in the third quarter of fiscal 1998 included significantly
higher revenues from Globalstar gateways, terrestrial CDMA wireless
infrastructure products and QUALCOMM Personal Electronics (QPE) sales to Sony.
Excluding these items in the year ago quarter, revenue growth would have been
49 percent. Communications systems gross margin for the third quarter of
fiscal 1999 was 35 percent compared to 24 percent in the third quarter of
fiscal 1998, reflecting improved margins in all product areas with the
exception of infrastructure products.
Total CDMA phone shipments for the third fiscal quarter of 1999 were over
1.7 million units (cumulatively over 12 million). Component shortages limited
production growth and margin improvement of the Company's phone products in
the third fiscal quarter of 1999. These shortages are expected to continue
and could affect the Company's results in the fourth fiscal quarter of 1999.
Total MSM phone chip shipments for the third quarter of fiscal 1999 were over
11 million units (cumulatively over 50 million). In addition to substantial
growth in the shipment of MSM phone chips, the book-to-bill ratio for the
ASICs business was 1.2 for the third quarter of fiscal 1999. The book-to-bill
ratio means the Company has $1.20 in ASICs orders for every $1.00 of product
shipped. Total OmniTRACS shipments were approximately 12 thousand units
(cumulatively over 290,000).
License, Royalty and Development Fees
License, royalty and development fees for the third quarter of fiscal
1999 were $93 million, including $6 million of license fees, compared to
$77 million last quarter and $47 million for the year ago quarter.
Contract Services
Contract services revenues were $88 million in the third quarter of fiscal
1999 compared to $70 million for the year ago quarter. The increase in
revenues was attributable to the development agreement with Globalstar, the
activities of which are expected to decline in future quarters.
Operating Income/Expenses
Operating income excluding non-recurring charges more than quadrupled,
increasing 303 percent to $215 million in the third quarter of fiscal 1999
compared to $53 million during the year ago quarter. The increase was
attributable to higher revenues and improved gross margins in all product
areas with the exception of infrastructure products. Operating income as a
percent of revenues more than tripled, increasing to 21 percent for the third
quarter of fiscal 1999 from 6 percent in the year ago quarter. Operating
expenses (research and development, selling and marketing and general and
administrative) excluding non-recurring charges for the third quarter of
fiscal 1999 decreased to 20 percent of revenues compared to 23 percent of
revenues during the year ago quarter.
Taxes
The Company's effective tax rate for fiscal 1999 is currently estimated to
be 35 percent compared to an effective tax rate of 30 percent in fiscal 1998.
The effective tax rate for fiscal 2000 may increase as a result of higher
earnings relative to investment tax credits.
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 business
areas include CDMA phones; integrated CDMA chipsets and system software;
technology licensing; and satellite-based systems including OmniTRACS(R) and
portions of the Globalstar(TM) system. Headquartered in San Diego, Calif.,
QUALCOMM is a FORTUNE 500(R) company traded on 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 the risk that
the rate of growth in the CDMA subscriber population will decrease; risks
associated with the scale-up and operations of CDMA systems; risks associated
with component shortages; risks associated with the ability to sustain or
improve operational efficiency and profitability; risks associated with
developments in current or future litigation; risks related to customer
receivables and performance guarantees; risks associated with timing and
receipt of license fees and royalties; risks associated with strategic
opportunities or acquisitions the Company may pursue; risks
associated with international business activities; risks associated with
changes in economic conditions of the various markets the Company serves, 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 and Thin Phone 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.
Financial Data -- Third Quarter Fiscal 1999
1999 1999
Dollars in thousands 3rd Qtr Non-Recurring 3rd Qtr
except per share data As Reported Charges As Adjusted
Revenue $1,004,066 -- $1,004,066
Gross Profit 406,399 $(6,180) 412,579
Gross Profit % 40% -- 41%
R&D 93,791 -- 93,791
Selling & Marketing 50,460 200 50,260
G&A 54,424 1,162 53,262
Other Operating Expenses 109,345 109,345 --
Total Operating Expenses 308,020 110,707 197,313
Operating Income 98,379 (116,887) 215,266
Operating Income % 10% -- 21%
Other Non-Operating Expense 7,690 -- 7,690
Income (Loss) Before Taxes 90,689 $(116,887) 207,576
Net Income 58,948 -- 134,924
EPS (Diluted) $0.35 -- $0.75
Financial Data -- Third Quarter Fiscal 1999 vs. Third Quarter Fiscal 1998
Excluding Non-Recurring Charges/Gains
Dollars in
thousands
except per 1999 1998 Change 1999 1998 Change
share data 3rd Qtr 3rd Qtr % 9 months 9 months %
Revenue $1,004,066 $875,497 15% $2,877,684 $2,421,904 19%
Gross
Profit 412,579 250,817 64% 1,030,155 709,277 45%
Gross
Profit % 41% 29% -- 36% 29% --
Operating
Income 215,266 53,353 303% 408,537 169,525 141%
Operating
Income % 21% 6% -- 14% 7% --
Income Before
Taxes 207,576 33,766 515% 318,063 129,741 145%
Net Income 134,924 24,740 445% 208,741 96,883 115%
EPS (Diluted) $0.75 $0.17 341% $1.29 $0.66 95%
Note: 35% effective tax rate has been assumed for fiscal year 1999 number
presentations.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
ASSETS
June 27, September 27,
1999 1998
Current assets:
Cash and cash equivalents $436,100 $175,846
Investments 12,074 127,478
Accounts receivable, net 747,059 612,209
Finance receivables 39,784 56,201
Inventories, net 212,941 386,536
Other current assets 245,238 178,950
Total current assets 1,693,196 1,537,220
Property, plant and equipment, net 541,178 609,682
Finance receivables, net 454,678 287,751
Other assets 288,384 132,060
Total assets $2,977,436 $2,566,713
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued liabilities $589,146 $660,428
Unearned revenue 60,697 67,123
Bank lines of credit 98,000 151,000
Current portion of long-term debt 3,054 3,058
Total current liabilities 750,897 881,609
Long-term debt 2,304 3,863
Other liabilities 106,602 25,115
Total liabilities 859,803 910,587
Minority interest in
consolidated subsidiaries 48,525 38,530
Company-obligated mandatorily
redeemable trust convertible
preferred securities of a
subsidiary trust holding solely
debt securities of the Company 659,862 660,000
Stockholders' equity:
Preferred stock, $0.0001 par
value -- --
Common stock, $0.0001 par value 15 14
Paid-in capital 1,326,963 959,260
Retained earnings 64,858 --
Accumulated other comprehensive
income (loss) 17,410 (1,678)
Total stockholders' equity 1,409,246 957,596
Total liabilities and
stockholders' equity $2,977,436 $2,566,713
Note: Restated September 27, 1998 Stockholders' Equity for stock split on
May 10, 1999.
QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
June 27 June 28 June 27 June 28
1999 1998 1999 1998
Revenues:
Communications
systems $823,561 $758,627 $2,414,923 $2,061,084
Contract services 87,860 69,947 249,126 198,905
License, royalty
and development
fees 92,645 46,923 213,635 161,915
Total revenues 1,004,066 875,497 2,877,684 2,421,904
Operating expenses:
Communications
systems 539,092 574,053 1,692,457 1,566,671
Contract services 58,575 50,627 171,375 145,956
Research and
development 93,791 92,810 296,866 244,557
Selling and
marketing 50,460 64,693 173,824 180,519
General and
administrative 54,424 39,961 156,477 114,676
Other 109,345 -- 205,169 11,976
Total operating
expenses 905,687 822,144 2,696,168 2,264,355
Operating income 98,379 53,353 181,516 157,549
Interest income 11,610 10,672 25,645 32,435
Interest expense (2,704) (1,792) (11,478) (6,166)
Net gain on sale
of investments -- -- 5,663 2,950
Loss on cancellation
of warrants -- -- (3,273) --
Other -- (20,000) (52,531) (20,000)
Distributions on
trust convertible
preferred securities
of subsidiary trust (9,694) (9,771) (29,397) (29,496)
Minority interest in
income of consolidated
subsidiaries (3,452) (18,696) (9,995) (36,557)
Equity in losses
of investees (3,450) (5,537) (9,445) (9,707)
Income before
income taxes 90,689 8,229 96,705 91,008
Income tax expense (31,741) (2,386) (31,847) (22,392)
Net income $58,948 $5,843 $64,858 $68,616
Net earnings per
common share:
Basic $0.39 $0.04 $0.45 $0.50
Diluted $0.35 $0.04 $0.42 $0.47
Shares used in per
share calculation:
Basic 150,290 138,574 145,450 137,798
Diluted 187,883 147,956 154,256 147,509
Note: The conversion of the Trust Convertible Preferred Securities was
assumed for calculation of diluted EPS for the three month period ended
June 27, 1999.
SOURCE QUALCOMM Incorporated
CO: QUALCOMM Incorporated
ST: California
IN: TLS
SU: ERN
07/19/99 16:30 EDT prnewswire.com
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