Prior to fiscal 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 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, the Company began reporting results primarily excluding only the Qualcomm Strategic Initiatives (QSI) segment. In the fourth quarter of fiscal 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 fiscal 2005, pro forma results also exclude one-time tax benefits related to prior years. The Company presents pro forma financial information excluding the Qualcomm Strategic Initiatives (QSI) segment to facilitate evaluation 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 fluctuations in the values of investments that are unrelated to the Company’s operational performance. The Company presents pro forma financial results for fiscal 2001, 2002, 2003 and 2004 as though the new method of recording royalties 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 presentation is useful in evaluating its performance on a consistent and comparable basis. The Company presents pro forma results for fiscal 2005 excluding one-time tax benefits related to fiscal 2004 to facilitate an understanding 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 flow, defined as net cash provided by operating activities less capital expenditures, for fiscal 2001 to fiscal 2005 to facilitate an understanding of the amount of cash flow 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 financial strength. In addition, management and investors use this measure to value the Company and to compare its operating performance with other companies in the industry. 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, pro forma and free cash flow are not terms defined by GAAP, and, as a result, the Company’s measures of pro forma and free cash flow results might be different than similarly titled measures used by other companies. |
