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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 19, 1999
QUALCOMM INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19528 95-3685934
(Commission File No.) (IRS Employer Identification No.)
5775 MOREHOUSE DRIVE
SAN DIEGO, CALIFORNIA 92121-1714
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 587-1121
6455 LUSK BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(Former address of principal executive offices and zip code)
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ITEM 5. OTHER EVENTS.
On July 19, 1999, QUALCOMM Incorporated announced its earnings for the
third fiscal quarter of 1999. The press release containing this announcement is
attached as Exhibit 99.1 hereto and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
99.1 Press release dated July 19, 1999.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
QUALCOMM INCORPORATED
Dated: July 19, 1999 By: /s/ Anthony S. Thornley
-------------------------
Anthony S. Thornley
Executive Senior Vice President and
Chief Financial Officer
3
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INDEX TO EXHIBITS
99.1 Press release dated July 19, 1999.
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
QUALCOMM Contact:
Julie Cunningham
Vice President, Investor Relations
1-(858) 658-4224 (ph) 1-(858) 651-9303 (fax)
e-mail:[email protected]
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, 1999 - 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.
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 2 of 8
(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
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 3 of 8
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
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 4 of 8
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 the 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
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 5 of 8
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.
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 6 of 8
<TABLE>
<CAPTION>
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1999 1999
Dollars in thousands except 3rd Qtr Non-Recurring 3rd Qtr
per share data As Reported Charges As Adjusted
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
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
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</TABLE>
FINANCIAL DATA - THIRD QUARTER FISCAL 1999 VS. THIRD QUARTER FISCAL 1998
EXCLUDING NON-RECURRING CHARGES/GAINS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Dollars in thousands except 1999 1998 Change 1999 1998 Change
per share data 3rd Qtr 3rd Qtr % 9 months 9 months %
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: 35% EFFECTIVE TAX RATE HAS BEEN ASSUMED FOR FISCAL YEAR 1999 NUMBER
PRESENTATIONS.
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 7 of 8
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
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JUNE 27, SEPTEMBER 27,
1999 1998
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<S> <C> <C>
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
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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
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TOTAL ASSETS $ 2,977,436 $ 2,566,713
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LIABILITIES AND STOCKHOLDERS' EQUITY
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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
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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
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,977,436 $ 2,566,713
=========== ===========
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</TABLE>
NOTE: RESTATED SEPTEMBER 27, 1998 STOCKHOLDERS' EQUITY FOR STOCK SPLIT ON MAY
10, 1999.
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QUALCOMM Reports Third Fiscal Quarter 1999 Results Page 8 of 8
QUALCOMM INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
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THREE MONTHS ENDED NINE MONTHS ENDED
- --------------------------------------------------------------------------------------------------------------------------------
JUNE 27 JUNE 28 JUNE 27 JUNE 28
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
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
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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
</TABLE>
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.
