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 -

PR Newswire

SAN DIEGO, Nov. 6, 2013 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (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.



Research and Development



($ in millions)

Non-GAAP


QSI


Share-Based
Compensation


Acquisition-
Related
Items


GAAP

Fourth quarter fiscal 2013

$

1,182


$

1


$

164


$

1


$

1,348

As % of revenues

18%











21%

Fourth quarter fiscal 2012

$

961


$

1


$

152


$


$

1,114

As % of revenues

20%








23%

Year-over-year change ($)

23%


N/M


8%


N/M


21%


N/M - Not Meaningful

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.



Selling, General and Administrative



($ in millions)

Non-GAAP


QSI


Share-Based
Compensation


Acquisition-
Related
Items


GAAP

Fourth quarter fiscal 2013

$

547


$

10


$

94


$

6


$

657

As % of revenues

8%








10%

Fourth quarter fiscal 2012

$

491


$

3


$

112


$

21


$

627

As % of revenues

10%








13%

Year-over-year change ($)

11%


N/M


(16%)


N/M


5%


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

N/M - Not Meaningful

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.



Qualcomm's Business Outlook Summary









FIRST FISCAL QUARTER



Q1 FY13

Results

Current Guidance

Q1 FY14 Estimates (2)


Revenues


$6.02B


$6.3B - $6.9B



Year-over-year change


increase 5% - 15%



Non-GAAP diluted earnings per share (EPS)


$1.26


$1.10 - $1.20



Year-over-year change


decrease 5% - 13%



Diluted EPS attributable to QSI


($0.01)



($0.01)



Diluted EPS attributable to share-based compensation


($0.12)



($0.13)



Diluted EPS attributable to acquisition-related items


($0.04)



($0.04)



GAAP diluted EPS


$1.09


$0.92 - $1.02



Year-over-year change


decrease 6% - 16%



Metrics




MSM chip shipments

182M


195M - 210M



Year-over-year change


increase 7% - 15%



Total reported device sales (1)

approx. $53.3B*


approx. $57.5B - $63.5B*



Year-over-year change


increase 8% - 19%



*Est. sales in September quarter, reported in December quarter












FISCAL YEAR



FY 2013

Results

Current Guidance FY
2014 Estimates (2) (3)


Revenues


$24.87B


$26.0B - $27.5B



Year-over-year change


increase 5% - 11%



Non-GAAP diluted EPS


$4.51


$4.95 - $5.15



Year-over-year change


increase 10% - 14%



Diluted EPS attributable to QSI


$0.02



($0.03)



Diluted EPS attributable to share-based compensation


($0.51)



($0.51)



Diluted EPS attributable to acquisition-related items


($0.16)



($0.16)



Diluted EPS attributable to tax items


$0.04


N/A



GAAP diluted EPS


$3.91


$4.25 - $4.45



Year-over-year change


increase 9% - 14%



Metrics




Est. fiscal year* 3G/4G device average selling price range (1)

approx. $223 - $229


approx. $216 - $230



*Shipments in Sept. to June quarters, reported in Dec. to Sept. quarters









CALENDAR YEAR Device Estimates (1)



Prior Guidance

Calendar 2013

Estimates

Current Guidance

Calendar 2013

Estimates

Current Guidance

Calendar 2014

Estimates


Est. 3G/4G device shipments





March quarter

approx. 244M - 248M

approx. 244M - 248M

not provided


June quarter

not provided

approx. 260M - 264M

not provided


September quarter

not provided

not provided

not provided


December quarter

not provided

not provided

not provided


Est. calendar year range (approx.)

1,015M - 1,085M

1,075M - 1,125M

1,220M - 1,300M


Est. calendar year midpoint (approx.) (4)

1,050M

1,100M

1,260M



(1)

Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based and CDMA/OFDMA multimode subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period (collectively, 3G/4G devices). The reported quarterly estimated ranges of average selling prices (ASPs) and unit shipments are determined based on the information as reported to us by our licensees during the relevant period and our own estimates of the selling prices and unit shipments for licensees that do not provide such information. Not all licensees report sales, selling prices and/or unit shipments the same way (e.g., some licensees report selling prices net of permitted deductions, such as transportation, insurance and packing costs, while other licensees report selling prices and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. Total reported device sales, estimated unit shipments and estimated ASPs for a particular period may include prior period activity that was not reported by the licensee until such particular period.

(2)

Q1 and FY 2014 guidance excludes the expected gain on sale of the North and Latin American operations of our Omnitracs division. We expect the transaction to close in the first quarter of fiscal 2014. Upon close, we expect to record a gain on sale of approx. $0.22 to $0.25 EPS.

(3)

FY 2014 guidance includes an estimate of the benefit related to approx. $4 billion in stock repurchases that we plan to complete over the course of fiscal 2014 under our current stock repurchase program. FY 2014 guidance also reflects an annual effective tax rate that includes an estimate of the United States federal R&D tax credit expected to be generated through December 31, 2013, the date on which the credit will expire.

(4)

The midpoints of the estimated calendar year ranges are identified for comparison purposes only and do not indicate a higher degree of confidence in the midpoints.



N/A - Not Applicable

Sums may not equal totals due to rounding.



Results of Business Segments


The following table reconciles our Non-GAAP results to our GAAP results (in millions, except per share data):




























SEGMENTS

QCT

QTL

QWI

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)

Share-Based Compensation (2)

Acquisition-Related Items (2)

Tax Items

GAAP

Q4 - FISCAL 2013


Revenues

$4,457

$1,874

$154

($5)

$6,480



$—


$—


$—


$—


$6,480


Change from prior year


42%


19%

(4%)

N/M


33%








33%


Change from prior quarter


6%


 

—%

(3%)

N/M


4%








4%


Operating income (loss)





$1,940


($11)

($274)

($67)


$—


$1,588


Change from prior year






20%


N/M


4%


25%




29%


Change from prior quarter





(5%)


(57%)


2%


6%




(5%)


EBT

$702

$1,622

$12

($163)

$2,173


($11)

($274)

($67)


$—


$1,821


Change from prior year


44%


18%

N/M

N/M


13%



48%


4%


25%





19%


Change from prior quarter

(5%)

(1%)

N/M

N/M

(2%)


N/M


2%


6%




(5%)


EBT as % of revenues


16%


87%


8%

N/M


34%








28%


Net income (loss)





$1,818


($24)

($226)

($67)


$—


$1,501


Change from prior year






18%


N/M

(2%)


14%

N/M



18%


Change from prior quarter






 

—%


N/M

(2%)

(5%)

N/A


(5%)


Diluted EPS





$1.05


($0.01)

($0.13)

($0.04)


$—


$0.86


Change from prior year






18%


N/M


 

—%


 

—%

N/M



18%


Change from prior quarter






2%


N/M


 

—%


 

—%

N/A


(4%)


Diluted shares used





1,738


1,738

1,738

1,738

1,738


1,738


Q3 - FISCAL 2013


Revenues

$4,222

$1,867

$158

($4)

$6,243



$—


$—


$—


$—


$6,243


Operating income (loss)





2,035


(7)

(280)

(71)


1,677


EBT

$738

$1,633

($16)

($145)

2,210


51

(280)

(71)


1,910


Net income (loss)





1,823


43

(222)

(64)


1,580


Diluted EPS





$1.03


$0.02

($0.13)

($0.04)


$—


$0.90


Diluted shares used





1,765


1,765

1,765

1,765

1,765


1,765


Q4 - FISCAL 2012


Revenues

$3,129

$1,572

$161

$9

$4,871



$—


$—


$—


$—


$4,871


Operating income (loss)





1,612


(4)

(284)

(89)


1,235


EBT

$486

$1,370

($1)

$65

1,920


(21)

(284)

(89)


1,526


Discontinued
operations,
net of tax


23


23


Net income (loss)





1,547


14

(222)

(78)

10


1,271


Diluted EPS





$0.89


$0.01

($0.13)

($0.04)

$0.01


$0.73


Diluted shares used





1,745


1,745

1,745

1,745

1,745


1,745


Q1 - FISCAL 2013


Revenues

$4,120

$1,757

$146

($5)

$6,018



$—


$—


$—


$—


$6,018


Operating income (loss)





2,447


(8)

(281)

(70)

 


2,088


EBT

$1,068

$1,532

($3)

$98

2,695


(17)

(281)

(70)


2,327


Net income (loss)





2,204


(12)

(219)

(67)


1,906


Diluted EPS





$1.26


($0.01)

($0.12)

($0.04)


$—


$1.09


Diluted shares used





1,751


1,751

1,751

1,751

1,751


1,751






























SEGMENTS

QCT

QTL

QWI

Non-GAAP Reconciling Items (1)

Non-GAAP (2)

QSI (2)

Share-Based Compensation (2)

Acquisition-Related Items (2)

Tax Items

GAAP

12 MONTHS - FISCAL 2013


Revenues

$16,715

$7,554

$613

($16)

$24,866



$—


$—


$—


$—


$24,866


Change from prior year


38%


19%

(3%)

N/M


30%








30%


Operating income (loss)





$8,657


($31)

($1,103)

($293)


$—


$7,230


Change from prior year






22%



73%

(7%)

(10%)




27%


EBT

$3,189

$6,590

($8)

($237)

$9,534


$56

($1,103)

($293)


$—


$8,194


Change from prior year


39%


18%


47%

N/M


19%


N/M

(7%)

(10%)




25%


EBT as % of revenues


19%


87%

(1%)

N/M


38%








33%


Net income (loss)





$7,911


$43

($886)

($279)

$64


$6,853


Change from prior year






22%


(94%)

(9%)

(15%)

N/M



12%


Diluted EPS





$4.51


$0.02

($0.51)

($0.16)

$0.04


$3.91


Change from prior year






22%


(95%)

(9%)

(14%)

N/M



11%


Diluted shares used





1,754


1,754

1,754

1,754

1,754


1,754


12 MONTHS - FISCAL 2012


Revenues

$12,141

$6,327

$633

$20

$19,121



$—


$—


$—


$—


$19,121


Operating income (loss)





7,100


(116)

(1,035)

(267)


5,682


EBT

$2,296

$5,585

($15)

$168

8,034


(170)

(1,035)

(267)


6,562


Discontinued
operations,
net of tax


777

(1)


776


Net income (loss)





6,463


690

(811)

(243)

10


6,109


Diluted EPS





$3.71


$0.40

($0.47)

($0.14)

$0.01


$3.51


Diluted shares used





1,741


1,741

1,741

1,741

1,741


1,741




(1)

Non-GAAP reconciling items related to revenues consisted primarily of nonreportable segment revenues less intersegment eliminations. Non-GAAP reconciling items related to earnings before taxes consist primarily of certain costs of equipment and services revenues, research and development expenses, sales and marketing expenses, other operating expenses and certain investment income or losses and interest expense that are not allocated to the segments for management reporting purposes; nonreportable segment results; and the elimination of intersegment profit.

(2)

At fiscal year end, the sum of the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is allocated to tax provisions (benefits) among the columns.



N/M - Not Meaningful

N/A - Not Applicable

Sums may not equal totals due to rounding.

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 (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



Supplemental Information

(Unaudited)




























Three Months Ended September 29, 2013


Non-GAAP
Results

QSI

Share-Based Compensation

Acquisition-
Related Items (a)

GAAP

Results

($ in millions, except per share data)

















Cost of equipment and services revenues


$

2,638



$



$

16



$

60



$

2,714



R&D


1,182



1



164



1



1,348



SG&A


547



10



94



6



657



Other expenses


173

(b)








173



Operating income (loss)


1,940



(11)



(274)



(67)



1,588



Investment income, net


$

233

(c)


$

(d)


$



$



$

233



Tax rate


16%



N/M



18%



—%



18%



Net income (loss)


$

1,818



$

(24)



$

(226)



$

(67)



$

1,501



Diluted EPS


$

1.05



$

(0.01)



$

(0.13)



$

(0.04)



$

0.86




(a)

Included amortization and impairment of certain intangible assets and the recognition of the step-up of inventories to fair value.

(b)

Included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision.

(c)

Included $168 million in interest and dividend income, $112 million in net realized gains on investments and $7 million in gains on deconsolidation of subsidiaries, partially offset by $35 million in other-than-temporary losses on investments, $18 million in net losses on derivatives and $1 million in interest expense.

(d)

Included $17 million in net realized gains on investments and $1 million in interest and dividend income, offset by $16 million in losses on deconsolidation of subsidiaries, $1 million in other-than-temporary losses on investments and $1 million in equity in net losses of investees.


































Twelve Months Ended September 29, 2013


Non-GAAP
Results

QSI

Share-Based Compensation

Acquisition-
Related Items (e)

Tax Items (f)

GAAP

Results

($ in millions, except per share data)




















Cost of equipment and services revenues


$

9,485



$



$

71



$

264



$



$

9,820



R&D


4,318



4



642



3





4,967



SG&A


2,075



27



390



26





2,518



Other expenses


331

(g)










331



Operating income (loss)


8,657



(31)



(1,103)



(293)





7,230



Investment income, net


$

877

(h)


$

87

(i)


$



$



$



$

964



Tax rate



17%




38%




20%




5%



N/A




16%



Net income (loss)


$

7,911



$

43



$

(886)



$

(279)



$

64



$

6,853



Diluted EPS


$

4.51



$

0.02



$

(0.51)



$

(0.16)



$

0.04



$

3.91




(e)

Included amortization and impairment of certain intangible assets, expense associated with the termination of a contract and the recognition of the step-up of inventories to fair value.

(f)

Included a $64 million tax benefit as a result of the retroactive reinstatement of the federal R&D tax credit related to fiscal 2012.

(g)

Included a $173 million charge, or $0.10 per share, related to the recent verdict in our litigation with ParkerVision and a $158 million loss, or $0.06 per share, that resulted from an impairment charge on certain long-lived assets related to our QMT division.

(h)

Included $689 million in interest and dividend income, $259 million in net realized gains on investments and $6 million in gains on deconsolidation of subsidiaries, partially offset by $71 million in other-than-temporary losses on investments, $5 million in interest expense and $1 million in net losses on derivatives.

(i)

Included $110 million in net realized gains on investments, $8 million in interest and dividend income, $6 million in gains on deconsolidation of subsidiaries and $1 million in net gains on derivatives, partially offset by $18 million in interest expense, $14 million in other-than-temporary losses on investments and $6 million in equity in net losses of investees.



N/M - Not Meaningful

N/A - Not Applicable

Sums may not equal totals due to rounding.



Reconciliation of Non-GAAP Free Cash Flows to

Net Cash Provided by Operating Activities (GAAP)

and Other Supplemental Disclosures

(In millions)

(Unaudited)


















Three Months Ended September 29, 2013


Non-GAAP


QSI


Share-Based
Compensation


GAAP

Net cash provided (used) by operating activities

$

2,583



$

(7)



$

(53)


(a)

$

2,523


Less: capital expenditures

(200)







(200)


Free cash flow

$

2,383



$

(7)



$

(53)



$

2,323










Revenues

$

6,480



$



$



$

6,480


Operating cash flow as % of revenues

40%



N/A



N/A



39%


Free cash flow as % of revenues

37%



N/A



N/A



36%











Twelve Months Ended September 29, 2013


Non-GAAP


QSI


Share-Based
Compensation


GAAP

Net cash provided (used) by operating activities

$

9,052



$

(43)



$

(231)


(a)

$

8,778


Less: capital expenditures

(973)



(75)





(1,048)


Free cash flow

$

8,079



$

(118)



$

(231)



$

7,730










Revenues

$

24,866



$



$



$

24,866


Operating cash flow as % of revenues

36%



N/A



N/A



35%


Free cash flow as % of revenues

32%



N/A



N/A



31%











Three Months Ended September 30, 2012


Non-GAAP


QSI


Share-Based
Compensation


GAAP

Net cash provided (used) by operating activities

$

1,476



$

(26)



$

(41)


(a)

$

1,409


Less: capital expenditures

(234)



(16)





(250)


Free cash flow

$

1,242



$

(42)



$

(41)



$

1,159










Revenues

$

4,871



$



$



$

4,871


Operating cash flow as % of revenues

30%



N/A



N/A



29%


Free cash flow as % of revenues

25%



N/A



N/A



24%











Twelve Months Ended September 30, 2012


Non-GAAP


QSI


Share-Based
Compensation


GAAP

Net cash provided (used) by operating activities

$

6,382



$

(216)



$

(168)


(a)

$

5,998


Less: capital expenditures

(1,183)



(101)





(1,284)


Free cash flow

$

5,199



$

(317)



$

(168)



$

4,714










Revenues

$

19,121



$



$



$

19,121


Operating cash flow as % of revenues

33%



N/A



N/A



31%


Free cash flow as % of revenues

27%



N/A



N/A



25%




(a)

Incremental tax benefits from share-based compensation during the period.

N/A - Not Applicable



Reconciliation of Non-GAAP Tax Rates to GAAP Tax Rates (a)

(In millions)

(Unaudited)


























Three Months Ended September 29, 2013


Non-GAAP Results


QSI


Share-Based Compensation


Acquisition-
Related Items


Tax Items


GAAP
Results

Income (loss) from continuing operations before income taxes

$

2,173



$

(11)



$

(274)



$

(67)



$



$

1,821


Income tax (expense) benefit

(354)



(14)



48







(320)


Income (loss) from continuing operations

$

1,819



$

(25)



$

(226)



$

(67)



$



$

1,501














Tax rate

16%



N/M



18%



—%



N/A



18%















Twelve Months Ended September 29, 2013


Non-GAAP Results


QSI


Share-Based Compensation


Acquisition-
Related Items


Tax Items (b)


GAAP
Results

Income (loss) from continuing operations before income taxes

$

9,534



$

56



$

(1,103)



$

(293)



$



$

8,194


Income tax (expense) benefit

(1,623)



(21)



217



14



64



(1,349)


Income (loss) from continuing operations

$

7,911



$

35



$

(886)



$

(279)



$

64



$

6,845














Tax rate

17%



38%



20%



5%



N/A



16%
















(a)

At fiscal year end, the sum of the quarterly tax provision (benefit) for each column equals the annual tax provision (benefit) for each column computed in accordance with GAAP. In interim quarters, the sum of these provisions (benefits) may not equal the total GAAP tax provision, and this difference is allocated to tax provisions (benefits) among the columns.

(b)

During fiscal 2013, we recorded a tax benefit of $64 million related to fiscal 2012 due to the retroactive reinstatement of the United States federal R&D tax credit.



N/M - Not Meaningful

N/A - Not Applicable



Qualcomm Incorporated

CONSOLIDATED BALANCE SHEETS

(In millions, except per share data)

(Unaudited)










September 29,
2013


September 30,
2012

ASSETS

Current assets:




Cash and cash equivalents

$

6,142



$

3,807


Marketable securities

8,824



8,567


Accounts receivable, net

2,142



1,459


Inventories

1,302



1,030


Deferred tax assets

573



309


Other current assets

572



473


   Total current assets

19,555



15,645


Marketable securities

14,440



14,463


Deferred tax assets

1,059



1,412


Assets held for sale

72



1,109


Property, plant and equipment, net

2,995



2,851


Goodwill

3,976



3,917


Other intangible assets, net

2,553



2,938


Other assets

866



677


   Total assets

$

45,516



$

43,012






LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Trade accounts payable

$

1,554



$

1,298


Payroll and other benefits related liabilities

839



664


Unearned revenues

501



545


Liabilities held for sale

43



1,072


Other current liabilities

2,276



1,723


   Total current liabilities

5,213



5,302


Unearned revenues

3,666



3,739


Other liabilities

550



426


   Total liabilities

9,429



9,467






Stockholders' equity:




Qualcomm stockholders' equity:




Preferred stock, $0.0001 par value; issuable in series; 8 shares authorized; none outstanding




Common stock, $0.0001 par value; 6,000 shares authorized; 1,685 and 1,706 shares issued and outstanding, respectively




Paid-in capital

9,874



11,956


Retained earnings

25,461



20,701


Accumulated other comprehensive income

753



866


   Total Qualcomm stockholders' equity

36,088



33,523


Noncontrolling interests

(1)



22


   Total stockholders' equity

36,087



33,545


      Total liabilities and stockholders' equity

$

45,516



$

43,012




Qualcomm Incorporated

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

(Unaudited)


















Three Months Ended


Twelve Months Ended


September 29,
2013


September 30,
2012


September 29,
2013


September 30,
2012

Revenues:








   Equipment and services

$

4,513



$

3,213



$

16,988



$

12,465


   Licensing

1,967



1,658



7,878



6,656


      Total revenues

6,480



4,871



24,866



19,121










Costs and expenses:








   Cost of equipment and services revenues

2,714



1,841



9,820



7,096


   Research and development

1,348



1,114



4,967



3,915


   Selling, general and administrative

657



627



2,518



2,270


   Other

173



54



331



158


      Total costs and expenses

4,892



3,636



17,636



13,439










Operating income

1,588



1,235



7,230



5,682










Investment income, net

233



291



964



880


      Income from continuing operations before income taxes

1,821



1,526



8,194



6,562


Income tax expense

(320)



(286)



(1,349)



(1,279)


      Income from continuing operations

1,501



1,240



6,845



5,283


Discontinued operations, net of income taxes



23





776


      Net income

1,501



1,263



6,845



6,059


Net loss attributable to noncontrolling interests



8



8



50


      Net income attributable to Qualcomm

$

1,501



$

1,271



$

6,853



$

6,109










Basic earnings per share attributable to Qualcomm:








   Continuing operations

$

0.88



$

0.73



$

3.99



$

3.14


   Discontinued operations



0.02





0.45


   Net income

$

0.88



$

0.75



$

3.99



$

3.59


Diluted earnings per share attributable to Qualcomm:








   Continuing operations

$

0.86



$

0.72



$

3.91



$

3.06


   Discontinued operations



0.01





0.45


   Net income

$

0.86



$

0.73



$

3.91



$

3.51


Shares used in per share calculations:








   Basic

1,703



1,704



1,715



1,700


   Diluted

1,738



1,745



1,754



1,741










Dividends per share announced

$

0.35



$

0.25



$

1.20



$

0.93


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



Qualcomm Incorporated

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


















Three Months Ended


Twelve Months Ended


September 29, 2013


September 30, 2012


September 29, 2013


September 30, 2012

Operating Activities:








Net income

$

1,501



$

1,263



$

6,845



$

6,059


Adjustments to reconcile net income to net cash provided by operating activities:








   Depreciation and amortization expense

273



257



1,017



897


   Gain on sale of wireless spectrum







(1,179)


   Goodwill and long-lived asset impairment charges

1



59



192



84


   Revenues related to non-monetary exchanges

(30)



(30)



(123)



(122)


   Income tax provision in excess of income tax payments

48



156



268



395


   Non-cash portion of share-based compensation expense

274



283



1,105



1,035


   Incremental tax benefit from share-based compensation

(53)



(41)



(231)



(168)


   Net realized gains on marketable securities and other investments

(129)



(155)



(369)



(369)


   Net impairment losses on marketable securities and other investments

36



19



85



83


Other items, net

82



10



104



(52)


Changes in assets and liabilities, net of effects of acquisitions:








   Accounts receivable, net

(235)



(207)



(680)



(456)


   Inventories

399



(199)



(300)



(252)


   Other assets

(98)



(209)



(209)



(240)


   Trade accounts payable

(291)



174



307



371


   Payroll, benefits and other liabilities

700



71



752



(341)


   Unearned revenues

45



(42)



15



253


   Net cash provided by operating activities

2,523



1,409



8,778



5,998


Investing Activities:








Capital expenditures

(200)



(250)



(1,048)



(1,284)


Purchases of available-for-sale securities

(1,839)



(3,707)



(13,951)



(15,511)


Proceeds from sales and maturities of available-for-sale securities

6,157



4,084



13,494



9,858


Purchases of trading securities

(654)



(1,729)



(3,312)



(4,009)


Proceeds from sales and maturities of trading securities

1,002



1,763



3,367



3,060


Proceeds from sale of wireless spectrum







1,925


Acquisitions and other investments, net of cash acquired

(13)



(156)



(192)



(833)


Other items, net

(4)



(7)



64



(83)


   Net cash provided (used) by investing activities

4,449



(2)



(1,578)



(6,877)


Financing Activities:








Borrowing under loans and debentures





534



710


Repayment of loans and debentures





(439)



(591)


Proceeds from issuance of common stock

561



355



1,525



1,714


Incremental tax benefit from share-based compensation

53



41



231



168


Repurchases and retirements of common stock

(3,321)



(841)



(4,610)



(1,313)


Dividends paid

(592)



(426)



(2,055)



(1,583)


Other items, net

(66)



(146)



(31)



138


   Net cash used by financing activities

(3,365)



(1,017)



(4,845)



(757)


Changes in cash and cash equivalents held for sale





(15)




Effect of exchange rate changes on cash

2



5



(5)



(19)


   Net increase (decrease) in cash and cash equivalents

3,609



395



2,335



(1,655)


Cash and cash equivalents at beginning of year

2,533



3,412



3,807



5,462


   Cash and cash equivalents at end of year

$

6,142



$

3,807



$

6,142



$

3,807


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

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