QUALCOMM Announces Fourth Quarter And Fiscal 2001 Results
Company Implements SEC Staff Accounting Bulletin No. 101
Prior to SAB 101 Fourth Quarter Pro Forma Revenues $682 Million; EPS $0.23, $1.02 fiscal 2001; Following SAB 101 $651 Million, EPS $0.20, $0.98 fiscal 2001
SAN DIEGO--(BUSINESS WIRE)--Nov. 6, 2001-- QUALCOMM's fourth quarter and fiscal 2001 earnings conference call will be broadcast live on November 6, 2001 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 1-800-633-8284 and international callers may dial 1-858-812-6440. Both U.S. and international callers should use reservation number 19766843.
All Results Presented Below Are SAB 101 Adjusted
QUALCOMM Incorporated (NASDAQ: QCOM - news) today reported its fourth quarter and fiscal 2001 results. During the fourth quarter of fiscal 2001, the Company adopted and implemented the Securities and Exchange Commission's Staff Accounting Bulletin No. 101 (SAB 101) and applied the effect retroactively to the beginning of fiscal 2001(1). After this change, pro forma revenues were $651 million for the fourth quarter of fiscal 2001, an increase of 6 percent over the year ago period. Pro forma revenues were $2.7 billion for fiscal 2001 and fiscal 2000. Pro forma earnings per share were $0.20 in the fourth quarter of fiscal 2001, compared to $0.23 per share in both the year ago period and the third quarter of fiscal 2001.
These results are $0.02 per share lower than the forecast we made in July 2001 after adjusting for SAB 101. The shortfall was entirely related to lower interest on carrier loans in the QWS segment. We did not accrue interest in the quarter on loans to Pegaso, an operator in Mexico. Pegaso is currently engaged in strategic discussions with a third party for a potential sale/merger and we are actively working with Pegaso and the third party to complete a transaction or, alternatively, to assist Pegaso in raising additional funds. We have engaged advisors to assist in this effort and we believe the enterprise value of Pegaso is greater than the debt outstanding as indicated by the advisors. However, as the transaction did not close on the targeted date of October 31, 2001 and such additional financing is not certain, we ceased accruing interest on those loans effective at the beginning of the fiscal fourth quarter. Pro forma earnings per share were $0.98 for fiscal 2001 and $1.01 for fiscal 2000 (see page 14 for a complete presentation of pro forma adjustments). Other than this one item affecting interest income, operating results were in line with the forecast we made in July 2001.
``All business units, including technology licensing and wireless semiconductors, met our forecasts for operating profits in the fourth quarter and we continued on target for major advances in CDMA capabilities and proliferation,'' said Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM. ``The early deployment and rapid consumer acceptance of CDMA2000 1X in South Korea set a world milestone in the true commercial application of wireless networks to support high-speed data and spectrally-efficient, high-quality voice. Unicom made great progress in the deployment of a large CDMA network throughout China, and wireless carriers in India and other regions around the world began their CDMA plans and network deployments. The International Telecommunications Union (ITU) recognized the most powerful third generation technology, CDMA2000 1xEV-DO, as a third generation IMT-2000 standard. This technology, which supports broadband mobile and fixed internet access at data rates of up to 2.4 Megabits per second, completed field trials and will be introduced commercially in early 2002.''
``Our technology licensing (QTL) business achieved record revenues and earnings with sixteen new licenses, including seven in China, and twenty-four extensions to existing licenses to cover WCDMA,'' Dr. Jacobs said. ``Our wireless semiconductor (QCT) business introduced a broad array of industry-leading chips, several with extensive multimedia capabilities and GPS-based precise position location, to support the rapid deployment of CDMA2000 1X and 1xEV-DO handsets and infrastructure. We continued our R&D investments to complete the development of low-cost, multi-mode (GSM/GPRS/CDMA), multi-band chipsets to enable true worldwide roaming. We launched our Internet Services (QIS) business this year, and signed agreements with 13 wireless carriers and 17 manufacturers worldwide supporting introduction of a broad set of personal consumer and business applications utilizing the BREW platform. We conducted a commercial trial of BREW with KT FreeTel, which led to a definitive agreement for a full commercial launch. As we begin fiscal 2002, we look forward to the full scale deployment of CDMA2000 1X networks with exciting BREW-enabled applications driving the continued expansion of CDMA worldwide.''
The SAB 101 accounting change decreased pro forma earnings before taxes for the fourth quarter and fiscal 2001 by a net of $32 million and $51 million, respectively. The main reason for the decrease was that license fees that would have been recorded upon signing are now being amortized over periods of up to seven years. The impact of SAB 101 on pro forma earnings per share for the fourth quarter and fiscal 2001 was a decrease of $0.03 and $0.04, respectively. The impact of SAB 101 as of September 30, 2001 resulted in net unearned income of $296 million, which will be amortized to earnings in future periods. The accounting change is expected to have a minimal net effect on fiscal 2002 results as the amortization of deferred revenue created by SAB 101 is expected to be offset by deferring recognition of new license fees which would have been taken into earnings under the prior accounting rules. SAB 101 is expected to smooth licensing revenues over time and make future QTL segment results more predictable.
(1) Note: SAB 101 changes the timing of revenue recognition related to up-front license fees and certain hardware product sales. Prior to the adoption of SAB No. 101, non-refundable up-front license fees were generally recorded as revenue on the effective date of the license agreement. Certain hardware product sales were recorded as revenue when title and risk of loss passed to the customer. With the adoption of SAB No. 101, up-front license fees and certain hardware product sales (primarily OmniTRACS® units), when contracted with a continuing service obligation, will be recognized over future periods. Quarterly income statement information for fiscal 2001 and 2000, inclusive of this accounting change, is available on our Investor Relations web page at www.qualcomm.com.
Reported revenues for the fourth quarter of fiscal 2001 were $651 million compared to $615 million in the year ago period, an increase of 6 percent. Reported income before taxes was $62 million in the fourth quarter of fiscal 2001 compared to income before taxes of $212 million in the year ago period (see page 14 for reconciliation of reported to pro forma results). During the fourth quarter of fiscal 2001, the Company recorded $44 million in charges to establish reserves against all remaining Globalstar-related assets.....................................
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