OJ -- Here's the news on QCOM... I've got a LEAP and sold puts on it today...
stockselector.com.
QUALCOMM REPORTS SECOND FISCAL QUARTER EARNINGS;
4/20/99 4:16:46 PM
$.82 Operating EPS, Excluding Non-Recurring Charges
SAN DIEGO, April 20 /PRNewswire/ -- QUALCOMM Incorporated (Nasdaq: QCOM) today reported revenues of $932 million and a net loss of $43 million, or $.59 per share (diluted), for the second quarter of fiscal 1999 (see Financial Data comparisons). Excluding non-recurring charges of $166 million associated primarily with the sale of the Company's terrestrial Code Division Multiple Access (CDMA) wireless infrastructure business and the restructuring of its workforce, the Company reported record net income in the second quarter of $65 million, or $.82 earnings per share (diluted). This represents an increase in net income excluding non-recurring items of 250 percent over second quarter of fiscal 1998. Revenues in the second quarter of fiscal 1999 increased 23 percent over the second quarter of fiscal 1998. The growth was primarily due to improved communications systems revenues consisting of strong sales of CDMA phones, Application Specific Integrated Circuits (ASICs) and OmniTRACS, as well as increased royalties.
"The events of this quarter proved to be pivotal in our Company's 14-year history. We entered into a series of agreements with Ericsson which will result in a global resolution of our mutual patent disputes and the sale of our infrastructure business," said Dr. Irwin M. Jacobs, chairman and CEO of QUALCOMM Incorporated. "We saw robust demand for CDMA phones and chip sets and we announced innovative new products, including the Thin Phone(TM) and our sixth generation MSM(TM) phone chip. Our royalty revenues grew significantly as a result of increased CDMA product shipments by our licensees, which we believe is a clear indicator of the growth of CDMA technology around the globe. Our focus is to continue to support the growth of CDMA, to strengthen and grow our core businesses and to improve operational efficiency and profitability."
Pro Forma Financial Information Pro forma financial information is provided for the purpose ofevaluating what the Company's operating results would have been excluding both non-recurring charges and operating results of the terrestrial CDMA wireless infrastructure business being sold to Ericsson. For the second quarter of fiscal 1999, pro forma revenues were $908 million, pro forma gross profit was 36 percent, pro forma net income was $98 million, and pro forma earnings per share were $1.20 (diluted). The financial results of the third quarter of fiscal 1999 will include operations of the infrastructure business until the closing date of the Ericsson transaction, which is expected on or after May 24, 1999 following receipt of the necessary regulatory approvals and other customary closing conditions. The Company also plans to report pro forma information for the third quarter of fiscal 1999.
On March 25, 1999, QUALCOMM announced a series of definitive agreements with Ericsson. These agreements included (a) the purchase by Ericsson of certain assets and the assumption of certain liabilities related to the Company's terrestrial CDMA wireless infrastructure business, (b) joint support of a single world CDMA standard with three optional modes for the next generation of wireless communications, (c) the signing of cross-licensing agreements, and (d) the settlement of legal disputes between QUALCOMM and Ericsson.
Non-recurring pre-tax charges of $166 million were reported primarily in connection with the sale of the terrestrial CDMA wireless infrastructure business, write-down of certain infrastructure business related assets not being acquired by Ericsson, restructuring of the workforce and loss on cancellation of a portion of Leap Wireless warrants. In the third quarter of fiscal 1999, the Company expects additional non-recurring expenses of approximately $100 million relating to the sale of the infrastructure business. This includes compensation expenses related to employees being transferred to Ericsson.
Highlights of Financial Performance Communications Systems Communications systems revenues increased 24 percent to $774million in the second quarter of fiscal 1999 from $626 million in the year ago quarter, with strong sales of CDMA phones, ASICs and OmniTRACS units. Communications systems gross margin for the second quarter of fiscal 1999 excluding non-recurring charges was 28 percent compared to 22 percent in the second quarter of fiscal 1998, reflecting improved margins in all product areas with the exception of infrastructure products. Total product shipments for the second fiscal quarter of 1999 were over 1.7 million CDMA phones (over 10 million cumulatively), nine million MSM phone chips (over 40 million cumulatively), and approximately 11,000 OmniTRACS units (280,000 cumulatively). In addition to substantial growth in the shipment of MSM phone chips, the book-to-bill ratio for the ASICs business was 1:7 for the second quarter of fiscal 1999. The book-to-bill ratio means the Company has $1.70 in ASICs orders for every $1.00 of product shipped. License and Royalty Fees License, royalty and development fees for the second quarter offiscal 1999 were $77 million, comprised substantially of royalties, compared to $70 million for the year ago quarter. However, the $70 million of license, royalty and development fees for the year ago quarter included a significant amount of one-time license fees, as well as an upward adjustment of $18 million due to the Company's adoption in that quarter of accrual-based royalty revenue recognition. The $77 million in license, royalty and development fees for the second quarter of fiscal 1999 also represents a 73 percent increase over the $44 million in license, royalty and development fees for the first quarter of fiscal 1999. Contract Services Contract services revenues were $81 million in the second quarterof fiscal 1999 compared to $65 million for the year ago quarter. The increase in revenues was attributable to activity on the development agreement with Globalstar. Operating Income/Expenses Operating income excluding non-recurring charges more thandoubled, increasing 125 percent to $115 million in the second quarter of fiscal 1999 compared to $51 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 nearly doubled, increasing to 12 percent for the second quarter of fiscal 1999 from 7 percent in the year ago period.
Operating expenses (research and development, selling and marketing and general and administrative) excluding non-recurring charges for the second quarter of fiscal 1999 increased to $203 million compared to $175 million during the year ago period, but held constant at 22 percent of total revenues.
Taxes The Company's effective tax rate for fiscal 1999 is currentlyestimated to be 35 percent compared to an effective tax rate of 29 percent in fiscal 1998. Stock Split On April 14, 1999, QUALCOMM's Board of Directors declared atwo-for-one stock split of the Company's Common Stock. The non-taxable stock dividend will be distributed on May 10, 1999 to stockholders of record on April 21, 1999. QUALCOMM Incorporated (Nasdaq: QCOM) is a leader in developing anddelivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. The Company's major business areas include CDMA phones; Application Specific Integrated Circuits (ASICs); 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 with fiscal 1998 revenues in excess of U.S. $3 billion. For more information, please visit the Company's web site at qualcomm.com. Except for the historical information contained herein, this newsrelease 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 closing conditions to agreements signed with Ericsson will not be satisfied, 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 the ability to improve operational efficiency and profitability, risks associated with developments in current or future litigation, risks associated with timing and receipt of license fees and royalties, risks associated with vendor financing and 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 ofQUALCOMM Incorporated. All other trademarks are the property of their respective manufacturers. MSM and Thin Phone are trademarks of QUALCOMM Incorporated. Globalstar is a trademark of Loral QUALCOMM Satellite Services, Incorporated. Financial Data -- Second Quarter Fiscal 1999 1999 Non-Recurring 1999 Dollars in thousands except 2nd Qtr Charges 2nd Qtr per share data As Reported As Adjusted Revenue $932,395 -- $932,395 Gross Profit $308,620 $10,123 $318,743 Gross Profit % 33% -- 34% R&D $102,713 $3,063 $99,650 Selling & Marketing $53,628 $459 $53,169 G&A $51,266 $665 $50,601 Other Operating Expenses $95,824 $95,824 $0 Total Operating Expenses $927,206 $100,011 $827,195 Operating Income $5,189 $110,134 $115,323 Operating Income % 1% -- 12% Other Non-Operating Expense $70,757 $55,804 $14,953 Income (Loss) Before Taxes ($65,568) ($165,938) $100,370 Net Income (Loss) ($42,620) ($107,860) $65,240 EPS (Diluted) ($0.59) ($1.49) $0.82 Financial Data - Second Quarter Fiscal 1999 vs. Second Quarter Fiscal 1998 Excluding Non-Recurring Charges/Gains 1999 1998 Change 1999 1998 Change Dollars in 2nd Qtr 2nd Qtr % 1st Half 1st Half % thousands except Per share data Revenue $932,395 $760,553 23% $1,873,618 $1,546,407 21% Gross Profit $318,743 $226,221 41% $617,576 $458,460 35% Gross Profit % 34% 30% -- 33% 30% -- Operating Income $115,323 $51,301 125% $193,271 $116,172 66% Operating Income % 12% 7% -- 10% 8% -- Income Before Taxes $100,370 $26,222 283% $166,291 $91,805 81% Net Income $65,240 $18,618 250% $110,089 $69,181 59% EPS (Diluted) $0.82 $0.25 228% $1.44 $0.94 60% QUALCOMM Incorporated CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) ASSETS March 28, September 27, 1999 1998 Current assets: Cash and cash equivalents $121,253 $175,846 Investments 83,395 127,478 Accounts receivable, net 814,213 612,209 Finance receivables 59,457 56,201 Inventories 254,477 386,536 Other current assets 215,514 178,950 Total current assets 1,548,309 1,537,220 Property, plant and equipment, net 557,899 609,682 Finance receivables, net 352,525 287,751 Other assets 162,663 132,060 Total assets $2,621,396 $2,566,713 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $662,781 $660,428 Unearned revenue 62,858 67,123 Bank lines of credit 64,000 151,000 Current portion of long-term debt 3,062 3,058 Total current liabilities 792,701 881,609 Long-term debt 2,360 3,863 Other liabilities 44,411 25,115 Total liabilities 839,472 910,587 Minority interest in consolidated subsidiaries 45,073 38,530 Company-obligated mandatorily redeemable trust convertible preferred securities of a subsidiary trust holding solely debt securities of the Company 660,000 660,000 Stockholders' equity: Preferred stock, $0.0001 par value -- -- Common stock, $0.0001 par value 7 7 Paid-in capital 1,102,313 959,267 Retained earnings 5,910 -- Accumulated other comprehensive loss (31,379) (1,678) Total stockholders' equity 1,076,851 957,596 Total liabilities and stockholders' equity $2,621,396 $2,566,713 QUALCOMM Incorporated CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended March 28 March 29 March 28 March 29 1999 1998 1999 1998 Revenues: Communications systems $774,308 $625,572 $1,591,362 $1,302,457 Contract services 81,452 64,927 161,266 128,958 License, royalty and development fees 76,635 70,054 120,990 114,992 Total revenues 932,395 760,553 1,873,618 1,546,407 Operating expenses: Communications systems 568,441 485,279 1,153,365 992,618 Contract services 55,334 49,053 112,800 95,329 Research and development 102,713 76,946 203,075 151,747 Selling and marketing 53,628 59,728 123,364 115,826 General and administrative 51,266 38,246 102,053 74,715 Other 95,824 -- 95,824 11,976 Total operating expenses 927,206 709,252 1,790,481 1,442,211 Operating income 5,189 51,301 83,137 104,196 Interest income 8,229 9,573 14,035 21,763 Interest expense (5,459) (1,685) (8,774) (4,374) Net gain on sale of investments -- -- 5,663 2,950 Net loss on cancellation of warrants (3,273) -- (3,273) -- Other (52,531) -- (52,531) -- Distributions on trust convertible preferred securities of subsidiary trust (9,904) (9,927) (19,703) (19,725) Minority interest in income of consolidated subsidiaries (2,845) (21,642) (6,543) (17,861) Equity in losses of investees (4,974) (1,398) (5,995) (4,170) Income (loss) before income taxes (65,568) 26,222 6,016 82,779 Income tax benefit (expense) 22,948 (211) (106) (20,006) Net income (loss) ($42,620) $26,011 $5,910 $62,773 Net earnings (loss) per common share: Basic $(0.59) $0.38 $0.08 $0.91 Diluted $(0.59) $0.36 $0.08 $0.85 Shares used in per share calculation: Basic 72,307 68,934 71,515 68,705 Diluted 72,307 73,143 73,263 73,643 SOURCE QUALCOMM Incorporated
Julie Cunningham, Vice President, Investor Relations of QUALCOMM Incorporated, 619-658-4224, or fax, 619-651-9303, juliec@qualcomm.com/ |
