Qualcomm 2004 Annual Report Download - page 37

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Note Regarding Use of Non-GAAP Financial Measures
The Company presents financial information excluding certain items in addition to GAAP results in order to provide supplemental information
on the Company’s operating performance. Pro forma results have been presented for financial comparisons and have primarily excluded the
QUALCOMM Strategic Initiatives (QSI) segment, amortization of goodwill and other acquisition-related intangible assets, payroll expenses on
stock option exercises and other charges that were unrelated to the Company’s ongoing operating performance. Beginning in fiscal 2003, the
goodwill provisions of FASB Statement No. 142 resulted in a substantial reduction in the difference between GAAP and pro forma earnings.
Therefore, in fiscal 2003, QUALCOMM began reporting results excluding only the QSI segment.
The Company presents financial information excluding the QUALCOMM Strategic Initiatives (QSI) segment to facilitate evaluation by manage-
ment, investors and analysts of its ongoing core operating businesses, including QUALCOMM CDMA Technologies (QCT), QUALCOMM
Technology Licensing (QTL) and QUALCOMM Wireless & Internet (QWI). QSI results relate to strategic investments for which the Company
has exit strategies of varying durations. Management believes that the information excluding QSI presents a more representative measure of the
operating performance of the Company because it excludes the effect of fluctuations in value of investments that are unrelated to the Company's
operational performance. Pro forma financial information should be considered in addition to, not as a substitute for, or superior to, financial
measures calculated in accordance with GAAP. Reconciliations between pro forma results and total QUALCOMM results are as follows:
Reconciliation Between Pro Forma and GAAP Earnings (Loss)
($ millions, except per share data) 2004 2003 2002 2001 2000
Pro Forma Earnings:
Earnings from continuing operations before taxes $ 2,316 $1,733 $1,221 $ 1,076 $1,156
Income tax expense (636) (572) (427) (366) (428)
Net income $ 1,680 $1,161 $ 794 $ 710 $ 728
Diluted earnings per share(a) $ 1.00 $ 0.71 $ 0.49 $ 0.44(b) 0.46(c)
QSI:
(Loss) earnings from continuing operations before taxes $ (3) $ (168) $ (346) $ (1,125) $ 343
Income tax benefit (expense) 48 36 331 194 (153)
Loss from discontinued operations, net of income taxes(d) (5) (202) (165) — —
Net income (loss) $ 40 $ (334) $ (180) $ (931) $ 190
Diluted earnings (loss) per share(a) $ 0.02 $ (0.20) $ (0.11) $ (0.62)(b) $ 0.12
Other pro forma adjustments:
Amortization of goodwill and other intangible assets $ — $ — $ (259) $ (256) $ (205)
Stock option payroll tax expense — — (6) (13) (27)
Globalstar — — 4 (57) —
Legal settlement — — — (69) —
Sale of phone business — — — — (148)
SAB 101 adjustments ————49
Employee Termination Charges — — — — (14)
Other — — 8 (11) (5)
Total pro forma adjustments — — (253) (406) (350)
Income tax (expense) benefit — — (1) 67 54
Net loss $ — $ — $ (254) $ (339) $ (296)
Diluted loss per share(a) $ — $ — $ (0.16) $ (0.22)(b) $ (0.18)
GAAP Earnings (Loss)
Earnings (loss) from continuing operations before taxes $ 2,313 $1,565 $ 622 $ (455) $1,149
Income tax expense (588) (536) (97) (105) (527)
Income (loss) from continuing operations
before accounting change 1,725 1,029 525 (560) 622
Accounting change, net of tax — — — (18) —
Loss from discontinued operations, net of tax(d) (5) (202) (165) — —
Net income (loss) $ 1,720 $ 827 $ 360 $ (578) $ 622
Earnings (loss) before accounting change $ 1.03 $ 0.63 $ 0.32 $ (0.37)(b) $ 0.39(c)
Accounting change, net of tax — — — (0.01)(b) —
Loss from discontinued operations, net of tax(d) — (0.12) (0.10) — —
Diluted earnings (loss) per share(a) $ 1.03 $ 0.51 $ 0.22 $ (0.38)(b) $ 0.39(c)
Shares used in per sharecalculations(a):
Diluted shares 1,675 1,636 1,619 1,512 1,600
(a) We effected a four-for-one stock split in December 1999 and a two-for-one stock split in August 2004. All references to number of shares and per share
amounts have been restated to reflect these stock splits.
(b) The diluted sharebase used for the GAAP results excludes the potential dilutive effect of 51.2 million common share equivalents related to outstanding stock
options, calculated using the treasurystock method, as these shares areanti-dilutive. For pro forma results, these shares are dilutive and are, therefore,
included in the pro forma per share calculation.
(c) Net income in the computation of diluted EPS for fiscal 2000 was increased by $7 million, representing the assumed savings of distributions, net of taxes, on
Trust Convertible Preferred Securities.
(d) During fiscal 2004, the Company sold its consolidated subsidiaries, the Vésper Operating Companies and TowerCo, and returned personal mobile
service (SMP) licenses to Anatel, the telecommunications regulatory agency in Brazil. The results of operations of the Vésper Operating Companies and
TowerCo, including gains and losses realized on the sales transactions and the SMP licenses, are presented as discontinued operations. The Company’s
statements of operations and cash flows for all prior periods have been adjusted to present the discontinued operations.
QUALCOMM 33
Financials