What is the primary purpose of the pro forma financial information presented in this filing?

The pro forma financial information is used by QUALCOMM's management to evaluate, assess, and benchmark the company's operating results on a consistent and comparable basis. It aims to provide a clearer view of the performance and efficiency of the company's ongoing core operating businesses by excluding items such as strategic investments, share-based compensation, certain tax benefits, and acquired in-process R&D, which are considered unrelated to ongoing operational performance or introduce non-operational volatility.

Why does QUALCOMM exclude share-based compensation from its pro forma results?

QUALCOMM excludes estimated share-based compensation because management views its valuation (affected by stock price, volatility, interest rates, etc.) as theoretical and not directly tied to operational performance. Additionally, it's not a cash-expendable expense, making it distinct from operational cash flows.

How does QUALCOMM define and use free cash flow?

QUALCOMM defines free cash flow as net cash provided by operating activities less capital expenditures. Management uses this metric to understand the cash flow available to grow the business, create shareholder value, value the company, and compare its operating performance with industry peers.

What are the key differences between QUALCOMM's pro forma cash flow and GAAP cash flow reporting?

QUALCOMM's pro forma cash flow includes marketable securities, which management views as liquid assets readily available to fund operations, acquisitions, and dividends. In contrast, GAAP cash flow reporting treats purchases and sales of marketable securities as inflows and outflows, whereas QUALCOMM considers these cash management transactions for internal analysis of its cash position.

QCOM 8-K: Earnings & Results

Summary

QUALCOMM Incorporated (QCOM) filed an 8-K report on July 19, 2006, announcing its financial results for the third quarter ended June 25, 2006. The report primarily references an attached press release (Exhibit 99.1) which presents pro forma financial information used by management to assess operational performance. This pro forma presentation excludes the QUALCOMM Strategic Initiatives (QSI) segment, estimated share-based compensation, certain tax benefits, and acquired in-process R&D expenses. Management utilizes these non-GAAP measures to gain a more comparable and meaningful view of ongoing core business operations, segment performance, and executive compensation decisions. Furthermore, the filing highlights the company's use of pro forma cash flow, which includes marketable securities to analyze liquidity, as management considers certain marketable securities to be readily available for funding various corporate activities. The report also defines and emphasizes the use of free cash flow (operating cash flow less capital expenditures) as a key metric for understanding cash available for business growth and shareholder value creation. Investors are advised to consider this non-GAAP information in conjunction with, not as a substitute for, GAAP-based financial measures.

Key Highlights

1QUALCOMM announced its Q3 2006 financial results on July 19, 2006, via an 8-K filing and accompanying press release.
2The company is using pro forma financial information, excluding certain items, to assess operational performance and segment efficiency.
3Key exclusions from pro forma results include the QSI segment, share-based compensation, certain tax benefits, and acquired in-process R&D.
4Management uses pro forma figures to benchmark performance against competitors and inform compensation decisions.
5Pro forma cash flow includes marketable securities, viewed by management as liquid assets for operational needs and strategic uses.
6Free cash flow is presented as a key metric for evaluating cash generated for business growth and shareholder value.
7Investors are cautioned that pro forma measures are non-GAAP and should be used alongside, not instead of, GAAP financial statements.

QUALCOMM INC/DE 8-K Report, Financial Results (Jul 19, 2006)

Summary

Key Highlights

Frequently Asked Questions