Qualcomm Announces Fourth Quarter and Fiscal 2013 Results

-- Fiscal 2013 Revenues $24.9 billion

-- GAAP EPS $3.91, Non-GAAP EPS $4.51

- Record Fiscal Year Results -

SAN DIEGO, Nov. 7, 2013 /PRNewswire/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the fiscal fourth quarter and year ended September 29, 2013.

"I am very pleased with our record financial performance this year as we delivered revenues of $25 billion, up 30% versus last year. Our technologies underpin the global growth of wireless data, and our semiconductor solutions are used across the industry's flagship smartphones," said Dr. Paul E. Jacobs, chairman and CEO of Qualcomm. "Looking forward, we expect continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China with the anticipated launch of LTE. Qualcomm remains well positioned from a growth standpoint, and we expect double-digit compound annual growth rates for both revenues and earnings per share over the next five years."

GAAP Results

Fourth Quarter Fiscal 2013*

• Revenues: ⁽¹⁾ $6.48 billion, up 33 percent year-over-year (y-o-y) and 4 percent sequentially.
• Operating income: ⁽¹⁾ $1.59 billion, up 29 percent y-o-y and down 5 percent sequentially.
• Net income: ⁽²⁾ $1.50 billion, up 18 percent y-o-y and down 5 percent sequentially.
• Diluted earnings per share: ⁽²⁾ $0.86, up 18 percent y-o-y and down 4 percent sequentially.
• Effective tax rate: ⁽¹⁾ 18 percent.
• Operating cash flow: $2.52 billion, up 79 percent y-o-y; 39 percent of revenues.
• Return of capital to stockholders: $3.91 billion, including $3.32 billion through repurchases of 50.7 million shares of common stock and $592 million, or $0.35 per share, of cash dividends paid.

⁽¹⁾ Throughout this news release, fiscal 2012 results for FLO TV are presented as discontinued operations. Revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates are from continuing operations (i.e., before adjustments for noncontrolling interests and, for fiscal 2012, discontinued operations), unless otherwise stated.

⁽²⁾ Throughout this news release, net income and diluted earnings per share are attributable to Qualcomm (i.e., after adjustments for noncontrolling interests and discontinued operations), unless otherwise stated.

Fiscal 2013*

• Revenues: $24.87 billion, up 30 percent y-o-y.
• Operating income: $7.23 billion, up 27 percent y-o-y.
• Net income: $6.85 billion, up 12 percent y-o-y.
• Diluted earnings per share: $3.91, up 11 percent y-o-y.
• Effective tax rate: 16 percent.
• Operating cash flow: $8.78 billion, up 46 percent y-o-y; 35 percent of revenues.
• Return of capital to stockholders: $6.66 billion, including $4.61 billion through repurchases of 71.7 million shares of common stock and $2.05 billion, or $1.20 per share, of cash dividends paid.

Non-GAAP Results

Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.

Fourth Quarter Fiscal 2013*

• Revenues: $6.48 billion, up 33 percent y-o-y and 4 percent sequentially.
• Operating income: $1.94 billion, up 20 percent y-o-y and down 5 percent sequentially.
• Net income: $1.82 billion, up 18 percent y-o-y and even sequentially.
• Diluted earnings per share: $1.05, up 18 percent y-o-y and 2 percent sequentially.
• Effective tax rate: 16 percent.
• Free cash flow (defined as net cash from operating activities less capital expenditures): $2.38 billion, up 92 percent y-o-y; 37 percent of revenues.

Fiscal 2013*

• Revenues: $24.87 billion, up 30 percent y-o-y.
• Operating income: $8.66 billion, up 22 percent y-o-y.
• Net income: $7.91 billion, up 22 percent y-o-y.
• Diluted earnings per share: $4.51, up 22 percent y-o-y.
• Effective tax rate: 17 percent.
• Free cash flow: $8.08 billion, up 55 percent y-o-y; 32 percent of revenues.

Detailed reconciliations between results reported in accordance with GAAP and Non-GAAP results are included within this news release.

* The following should be considered in regards to the year-over-year and sequential comparisons: Fiscal fourth quarter and fiscal 2013 GAAP and Non-GAAP results included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision. Fiscal 2012 GAAP results included $776 million in earnings, net of income taxes, for discontinued operations, primarily a result of a $1.2 billion gain associated with the sale of substantially all of our 700 MHz spectrum.

Key Business Metrics

Fourth Quarter Fiscal 2013

• MSM™ chip shipments: 190 million units, up 35 percent y-o-y and 10 percent sequentially.
• June quarter total reported device sales: approximately $60.2 billion, up 29 percent y-o-y and 7 percent sequentially.
  • June quarter estimated 3G/4G device shipments: approximately 260 to 264 million units, at an estimated average selling price of approximately $227 to $233 per unit.

Fiscal 2013

• MSM chip shipments: 716 million units, up 21 percent y-o-y.
• Total reported device sales: approximately $231.2 billion, up 23 percent y-o-y.
  • Estimated 3G/4G device shipments: approximately 1,017 to 1,033 million units, at an estimated average selling price of approximately $223 to $229 per unit.

Cash and Marketable Securities

Our cash, cash equivalents and marketable securities totaled $29.4 billion at the end of fiscal 2013, compared to $26.8 billion a year ago and $30.4 billion at the end of the third quarter of fiscal 2013. On October 24, 2013, we announced a cash dividend of $0.35 per share payable on December 19, 2013 to stockholders of record as of December 2, 2013. During the fourth quarter of fiscal 2013, we repurchased and retired 50.7 million shares of common stock for $3.32 billion.

Non-GAAP research and development (R&D) expenses increased 23 percent y-o-y primarily due to an increase in costs to develop CDMA-based 3G, OFDMA-based 4G LTE and other technologies for integrated circuit and related software products and to expand our intellectual property portfolio.

Non-GAAP selling, general and administrative (SG&A) expenses increased 11 percent y-o-y primarily due to increases in selling and marketing, patent-related and employee-related expenses.

Effective Income Tax Rates

Our fiscal 2013 annual effective income tax rates were 16 percent for GAAP and 17 percent for Non-GAAP. The fiscal 2013 GAAP effective tax rate included a tax benefit of $64 million related to the retroactive extension of the United States federal research and development tax credit related to fiscal 2012. This benefit was excluded from our Non-GAAP results.

Business Outlook

The following statements are forward looking, and actual results may differ materially. The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.

Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our business outlook to the extent they are reasonably certain; however, actual results may vary materially from the business outlook.

Our outlook for fiscal 2014 diluted earnings per share includes an estimate of the benefit related to approximately $4 billion in stock repurchases that we plan to complete over the course of fiscal 2014 under our current stock repurchase program.

On August 21, 2013, we entered into a definitive agreement under which we agreed to sell the North and Latin American operations of our Omnitracs division for $800 million, subject to closing conditions, including receipt of regulatory approvals. We expect the transaction to close in the first quarter of fiscal 2014. Upon close, we expect to record a gain on sale of approximately $0.22 to $0.25 earnings per share, which has been excluded from our fiscal first quarter and fiscal 2014 outlook.

The following table summarizes GAAP and Non-GAAP guidance based on the current business outlook. The Non-GAAP business outlook presented below is consistent with the presentation of Non-GAAP results included elsewhere herein.

Conference Call

Qualcomm's fiscal fourth quarter and fiscal 2013 earnings conference call will be broadcast live on November 6, 2013, beginning at 1:45 p.m. Pacific Time (PT) at http://investor.qualcomm.com/events.cfm. This conference call will include a discussion of "Non-GAAP financial measures" as defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these Non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP, as well as other financial and statistical information to be discussed on the conference call, will be posted at www.qualcomm.com/investor immediately prior to commencement of the call. An audio replay will be available at http://investor.qualcomm.com/events.cfm and via telephone following the live call for 30 days thereafter. To listen to the replay via telephone, U.S. callers may dial (855) 859-2056 and international callers may dial (404) 537-3406. Callers should use reservation number 87075999.

Note Regarding Use of Non-GAAP Financial Measures

The Non-GAAP financial information presented herein should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. In addition, "Non-GAAP" is not a term defined by GAAP, and as a result, the Company's measure of Non-GAAP results might be different than similarly titled measures used by other companies. Reconciliations between GAAP and Non-GAAP results are presented herein.

The Company uses Non-GAAP financial information (i) to evaluate, assess and benchmark the Company's operating results on a consistent and comparable basis; (ii) to measure the performance and efficiency of the Company's ongoing core operating businesses, including the QCT (Qualcomm CDMA Technologies), QTL (Qualcomm Technology Licensing) and QWI (Qualcomm Wireless & Internet) segments; and (iii) to compare the performance and efficiency of these segments against each other and against competitors. Non-GAAP measurements of the following financial data are used by the Company: revenues, cost of equipment and services revenues, R&D expenses, SG&A expenses, operating income, net investment income, income or earnings before income taxes, effective tax rate, net income, diluted earnings per share, operating cash flow and free cash flow. The Company is able to assess what it believes is a more meaningful and comparable set of financial performance measures for the Company and its business segments by using Non-GAAP information. As a result, management compensation decisions and the review of executive compensation by the Compensation Committee of the Board of Directors focus primarily on Non-GAAP financial measures applicable to the Company and its business segments. The Company presents Non-GAAP financial information to provide greater transparency to investors with respect to its use of such information in financial and operational decision-making.

Non-GAAP information used by management excludes QSI and certain share-based compensation, acquisition-related items and tax items.

• QSI is excluded because the Company expects to exit its strategic investments at various times, and the effects of fluctuations in the value of such investments and realized gains or losses are viewed by management as unrelated to the Company's operational performance.
• Share-based compensation expense primarily relates to restricted stock units and stock options. Certain share-based compensation is excluded because management views such expenses as unrelated to the operating activities of the Company's ongoing core businesses. Further, the fair values of share-based awards are affected by factors that are variable on each grant date, which may include the Company's stock price, stock market volatility, expected award life, risk-free interest rates and expected dividend payouts in future years.
• Acquisition-related items relate to amortization and impairment of certain intangible assets, recognition of the step-up of inventories to fair value and the related tax effects of these items starting with acquisitions completed in the third quarter of fiscal 2011, as well as any tax effects from restructuring the ownership of such acquired assets. Additionally, starting with acquisitions completed in the fourth quarter of fiscal 2012, the Company began excluding expenses related to the termination of contracts that limit the use of the acquired intellectual property. These acquisition-related items are excluded and are not allocated to the Company's segments because management views such expenses as unrelated to the operating activities of the Company's ongoing core businesses. In addition, these charges are impacted by the size and timing of acquisitions, potentially obscuring period to period comparisons of the Company's operating businesses.
• Certain tax items that are unrelated to the fiscal year in which they were recorded are excluded in order to provide a clearer understanding of the Company's ongoing Non-GAAP tax rate and after tax earnings.

The Company presents free cash flow, defined as net cash provided by operating activities less capital expenditures, to facilitate an understanding of the amount of cash flow generated that is available to grow its business and to create long-term stockholder value. In addition, management uses this measure to evaluate the Company's performance and to compare its operating performance with other companies in the industry.

About Qualcomm

Qualcomm Incorporated (Nasdaq: QCOM) is a world leader in 3G, 4G and next-generation wireless technologies. Qualcomm Incorporated includes Qualcomm's licensing business, QTL, and the vast majority of its patent portfolio. Qualcomm Technologies, Inc., a wholly-owned subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm's engineering, research and development functions, and substantially all of its products and services businesses, including its semiconductor business, QCT. For more than 25 years, Qualcomm ideas and inventions have driven the evolution of digital communications, linking people everywhere more closely to information, entertainment and each other. For more information, visit www.qualcomm.com.

Note Regarding Forward-Looking Statements

In addition to the historical information contained herein, this news release contains forward-looking statements that are inherently subject to risks and uncertainties, including but not limited to statements regarding the expected continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China; our being well positioned from a growth standpoint; expectations for double-digit compound annual growth rates for both revenues and earnings per share over the next five years; our business outlook; and our estimates and guidance related to revenues, GAAP and Non-GAAP diluted earnings per share, MSM chip shipments, total reported device sales, 3G/4G device average selling price ranges and 3G/4G device shipments, ranges and midpoints. Forward-looking statements are generally identified by words such as "estimates," "guidance," "expects," "anticipates," "intends," "plans," "believes," "seeks" and similar expressions. Actual results may differ materially from those referred to in the forward-looking statements due to a number of important factors, including but not limited to risks associated with the commercial deployment of CDMA, OFDMA and other technologies, continuing growth in our customers' and licensees' sales of products and services based on these technologies and our ability to continue to drive customer demand for our products and services based on these technologies; competition; our dependence on a small number of customers and licensees; the continued and future success of our licensing programs; attacks on our licensing business model, including current and future legal proceedings or actions of governmental or quasi-governmental bodies or standards or industry organizations; the enforcement and protection of our intellectual property rights; the commercial success of our new technologies, products and services; claims by third parties that we infringe their intellectual property; our dependence on a limited number of third-party suppliers; our stock price and earnings volatility; government regulations and policies; strategic transactions and investments; global economic conditions that impact the mobile communications industry; foreign currency fluctuations; and failures in our products or services or in the products of our customers, including those resulting from security vulnerabilities, defects or errors. These and other risks are set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 29, 2013 filed with the SEC. Our reports filed with the SEC are available on our website at www.qualcomm.com. We undertake no obligation to update, or continue to provide information with respect to, any forward-looking statement or risk factor, whether as a result of new information, future events or otherwise.

Qualcomm and MSM are trademarks of Qualcomm Incorporated, registered in the United States and other countries. All other trademarks are the property of their respective owners.

Qualcomm Contact:
Warren Kneeshaw
Phone: 1-858-658-4813
e-mail: ir@qualcomm.com

Certain prior period amounts have been reclassified to conform to the current period presentation.

Certain prior period amounts have been reclassified to conform to the current period presentation.