Why is QUALCOMM reporting pro forma financial results instead of standard GAAP results?

QUALCOMM is reporting pro forma results to provide investors with what it believes is a clearer understanding of its ongoing core operating businesses and performance. The company excludes items such as the QSI segment, share-based compensation, certain tax benefits, and acquired in-process R&D, arguing these are either unrelated to operational performance or are for comparison purposes, especially following the adoption of FAS 123R. However, QUALCOMM emphasizes that these pro forma figures are non-GAAP and should be reviewed alongside their standard GAAP financial statements.

What specific items are excluded in QUALCOMM's pro forma financial results?

The pro forma financial information presented by QUALCOMM excludes the QUALCOMM Strategic Initiatives (QSI) segment, estimated share-based compensation, tax benefits related to prior years, and acquired in-process R&D expense. The company also presents pro forma cash flow that includes marketable securities, viewing certain of these as liquid assets for operations that don't meet the strict definition of cash equivalents under GAAP.

How does QUALCOMM define 'free cash flow' and why is it important to investors?

QUALCOMM defines free cash flow as net cash provided by operating activities less capital expenditures. The company presents this metric to help investors understand the amount of cash flow generated that is available to grow its business and create long-term shareholder value. Management and investors use free cash flow to value the company and compare its operating performance with industry peers.

Where can I find the reconciliation between QUALCOMM's GAAP and pro forma financial results?

The filing states that reconciliations between total QUALCOMM (GAAP) results and QUALCOMM pro forma results, as well as between total QUALCOMM (GAAP) cash flow and QUALCOMM pro forma changes in cash, cash equivalents, and marketable securities, are presented in the press release attached to this 8-K filing as Exhibit 99.1.

QCOM 8-K: Earnings & Results

Summary

QUALCOMM Incorporated (QCOM) filed an 8-K on January 25, 2006, to report its first quarter fiscal year 2006 financial results. A key aspect of this filing is the extensive use of pro forma financial information, which excludes certain items such as the QUALCOMM Strategic Initiatives (QSI) segment, share-based compensation, tax benefits related to prior years, and acquired in-process R&D expense. The company explains that this pro forma presentation is intended to provide investors with a clearer view of ongoing core operating businesses and performance on a comparable basis, especially considering the adoption of FAS 123R and management's perspective on operational performance versus investment fluctuations. Investors should note that while QUALCOMM's management uses this pro forma data for internal assessment and believes it is useful for benchmarking and comparability, it is a non-GAAP measure. The company emphasizes that these pro forma results should be considered alongside, not as a substitute for, GAAP financial measures. Reconciliations between GAAP and pro forma figures are provided in the attached press release (Exhibit 99.1), which is the primary source of the detailed financial results.

Key Highlights

1The 8-K filing on January 25, 2006, pertains to QUALCOMM's financial results for the first quarter ended December 25, 2005.
2The company heavily utilizes pro forma financial information in its reporting, excluding items like QSI, share-based compensation, prior year tax benefits, and acquired in-process R&D.
3Pro forma reporting is presented to offer investors a clearer view of core operating business performance and comparability, particularly in light of new accounting standards (FAS 123R).
4Management views the excluded items (QSI, share-based compensation) as unrelated to ongoing operational performance.
5Pro forma cash flow, including marketable securities, is presented to analyze liquidity and cash management strategies.
6Free cash flow (operating cash flow less capital expenditures) is provided as a measure of cash available for business growth and shareholder value.
7QUALCOMM stresses that pro forma measures are non-GAAP and should be considered in addition to, not as a substitute for, GAAP results.

QUALCOMM INC/DE 8-K Report, Financial Results (Jan 25, 2006)

Summary

Key Highlights

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