Qualcomm 1999 Annual Report Download - page 52

48
QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards
No. 130 (“FAS 130”), “Reporting Comprehensive Income,” in the first
quarter of fiscal 1999. As required by FAS 130, the Company displays the
accumulated balance of other comprehensive income or loss separate-
ly in the equity section of the consolidated balance sheets. Prior year
financial statements have been reclassified to conform to the current
year presentation. Total comprehensive income, which is comprised of
net income and other comprehensive income (loss), amounted to
approximately $285 million, $107 million and $92 million for fiscal years
1999, 1998, and 1997, respectively. Components of accumulated other
comprehensive income (loss) consist of the following (in thousands):
Years Ended September 30,
1999 1998 1997
Foreign currency translation $ (27,778) $ (1,678) $ 60
Change in unrealized gain on
securities, net of income taxes 110,690 — —
$ 82,912 $ (1,678) $ 60
Stock Split
On April 14, 1999, the Company’s Board of Directors declared a two-
for-one stock split of the Company’s common stock in the form of a
stock dividend. The stock dividend was distributed on May 10, 1999 to
stockholders of record on April 21, 1999. On November 2, 1999, the
Company‘s Board of Directors approved, subject to stockholders‘
approval, a four-for-one stock split of the Company‘s common stock and
an increase in the number of authorized shares of common stock to
three billion shares. The Board of Directors also authorized a special
meeting of stockholders for the purposes of approving the stock split
and the proposed share increase. The special stockholder‘s meeting
was held on December 20, 1999. Stockholders approved the stock split
and the increase in the authorized number of shares. The stock divi-
dend was distributed on December 31, 1999 to stockholders of record
on December 20, 1999. Stockholders’ equity has been restated to give
retroactive recognition to the stock split for all periods presented by
reclassifying the par value of the additional shares arising from the
split from paid-in capital to common stock. All references in the finan-
cial statements and notes to number of shares and per share amounts
have been restated to reflect this stock split.
Net Earnings Per Common Share
Basic earnings per common share are calculated by dividing net
income by the weighted average number of common shares outstand-
ing during the reporting period. Diluted earnings per common share
(“diluted EPS”) reflect the potential dilutive effect, determined by the
treasury stock method, of additional common shares that are issuable
upon exercise of outstanding stock options and warrants, as follows (in
thousands):
Years Ended September 30,
1999 1998 1997
Options 13,794 8,248 7,720
Warrants —1,270 1,384
13,794 9,518 9,104
Options outstanding during the years ended September 30, 1999,
1998 and 1997 to purchase approximately 3,373,000, 7,161,000, and
3,526,000 shares of common stock, respectively, were not included in
the computation of diluted EPS because the options’ exercise prices
were greater than the average market prices of the common stock dur-
ing the period and, therefore, the effect would be anti-dilutive. The
conversion of the Trust Convertible Preferred Securities (Note 7)
is not assumed for purposes of computing diluted EPS for fiscal 1999,
1998 and 1997 since its effect would be anti-dilutive.
Future Accounting Requirements
In June 1998, the Financial Accounting Standards Board (“FASB”)
issued Statement of Financial Accounting Standards No. 133 (“FAS
133”), “Accounting for Derivative Instruments and Hedging Activities.”
In May 1999, the FASB voted to delay the effective date of FAS 133 by
one year. The Company will be required to adopt FAS 133 for fiscal year
2001. This statement establishes a new model for accounting
for derivatives and hedging activities. Under FAS 133, all derivatives
must be recognized as assets and liabilities and measured at fair value.
The Company has not completed its determination of the impact of the
adoption of this new accounting standard on its consolidated financial
position or results of operations.
SPIN-OFF OF LEAP WIRELESS INTERNATIONAL, INC.
On September 23, 1998, the Company completed the spin-off and
distribution (the “Distribution” or “Leap Wireless Spin-off”) to its
stockholders of shares of Leap Wireless International, Inc., a Delaware
corporation (“Leap Wireless”).
In connection with the Distribution, the Company transferred to
Leap Wireless its joint venture and equity interests in certain domestic
and international emerging terrestrial-based wireless telecommunica-
tions operating companies and recorded a $17 million liability in
connection with its agreement to transfer its ownership interest in
Telesystems of Ukraine (“TOU”), a wireless telecommunications com-
pany in Ukraine, and its working capital loan receivable from TOU
(“TOU assets”) to Leap Wireless if certain events occurred within 18
months of the Leap Wireless Spin-off. During the first six months of fis-
cal 1999, the Company provided an additional $2 million working
capital loan to TOU and recorded 100% of the losses of TOU, net of elim-
inations, because the other investors’ equity interests were depleted.
During March 1999, the Company reassessed the recoverability of TOU
assets in light of recent developments affecting the TOU business and
the disposition of other assets related to the terrestrial CDMA wireless
infrastructure business (Note 13). As a result, the Company recorded a
$15 million non-operating charge to write off the TOU assets, as well as
a $12 million charge to operations to write off other assets related to
the TOU contract (Note 13), and the adjusted liability to transfer TOU to
Leap Wireless of $15 million was reversed against equity as an adjust-
ment to the Distribution. As of September 30, 1999, all TOU assets were
written off.
2