Qualcomm 2005 Annual Report Download - page 79
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The Company presents fi nancial information excluding certain items
in addition to GAAP results in order to provide supplemental informa-
tion about the Company’s operating performance. Pro forma fi nancial
measurements are used by management to evaluate, assess and
benchmark the Company’s operating results, and the Company
believes that pro forma reporting represents relevant and useful
information that is widely used by analysts, investors and other
interested parties in its industry.
Prior to fi scal 2003, the Company presented pro forma results
excluding amortization of goodwill and other acquisition-related
intangible assets, payroll expenses on stock option exercises and
other items that were viewed as unrelated to the Company’s ongoing
operating performance. Beginning in fi scal 2003, the goodwill provi-
sions of FASB Statement No. 142 resulted in a substantial reduction
in the difference between GAAP and pro forma earnings. Therefore,
in fi scal 2003, the Company began reporting results primarily exclud-
ing only the QUALCOMM Strategic Initiatives (QSI) segment. In the
fourth quarter of fi scal 2004, the Company began recording royalty
revenue based solely on royalty reports received from licensees for
royalty-bearing sales of equipment in the prior quarter. Therefore,
results prior to this change have been adjusted as though this new
method of recording royalties had been in effect for all periods to
provide a comparable presentation. In fi scal 2005, pro forma results
also exclude one-time tax benefi ts related to prior years.
The Company presents pro forma fi nancial information excluding the
QUALCOMM Strategic Initiatives (QSI) segment to facilitate evalua-
tion of the Company’s 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 view of
the operating and liquidity performance of the Company because it
excludes the effect of fl uctuations in the values of investments that
are unrelated to the Company’s operational performance.
The Company presents pro forma fi nancial results for fi scal 2001,
2002, 2003 and 2004 as though the new method of recording royal-
ties had been in effect throughout those years to facilitate evaluation
by management, investors and analysts of the results for those years
on a comparable basis to the Company’s current results, current
guidance and future periods. The Company believes that this pre-
sentation is useful in evaluating its performance on a consistent
and comparable basis.
The Company presents pro forma results for fi scal 2005 excluding
one-time tax benefi ts related to fi scal 2004 to facilitate an under-
standing of its ongoing tax rate and after tax earnings. The Company
believes that this presentation is useful in evaluating its performance
on a consistent and comparable basis.
The Company presents free cash fl ow, defi ned as net cash provided
by operating activities less capital expenditures, for fi scal 2001 to
fi scal 2005 to facilitate an understanding of the amount of cash fl ow
generated that is available to grow its business and to create long-
term shareholder value. The Company believes that this presentation
is useful in evaluating its operating performance and fi nancial strength.
In addition, management and investors use this measure to value the
Company and to compare its operating performance with other com-
panies in the industry.
The non-GAAP fi nancial information presented herein should be con-
sidered in addition to, not as a substitute for, or superior to, fi nancial
measures calculated in accordance with GAAP. In addition, pro forma
and free cash fl ow are not terms defi ned by GAAP, and, as a result,
the Company’s measures of pro forma and free cash fl ow results might
be different than similarly titled measures used by other companies.
Note Regarding Use of Non-GAAP Financial Measures