Qualcomm 1999 Annual Report Download - page 54

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QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At September 30, 1999, commitments to extend long-term financing
for possible future sales to customers, other than Globalstar (Note 11),
totaled approximately $420 million, which the Company expects to fund
over the next five years. Such commitments are subject to the cus-
tomers meeting certain conditions established in the financing
arrangements. Commitments represent the estimated amounts to be
financed under these arrangements; actual financing may be in lesser
amounts. These commitments include the total finance commitments
associated with the sale of certain assets to Ericsson (Note 13).
September 30,
1999 1998
(In thousands)
Inventories, net:
Raw materials $ 161,481 $ 180,957
Work-in-process 51,003 81,479
Finished goods 45,457 124,100
$ 257,941 $ 386,536
Property, plant and equipment, net:
Land $ 36,310 $ 36,310
Buildings and improvements 285,762 250,883
Computer equipment 244,605 340,623
Machinery and equipment 274,353 257,516
Furniture and office equipment 16,515 26,910
Leasehold improvements 33,207 27,074
890,752 939,316
Less accumulated depreciation and amortization (334,761) (329,634)
$ 555,991 $ 609,682
At September 30, 1999, buildings and leasehold improvements with
a net book value of $54 million, including accumulated depreciation of
$14 million, are leased or held for lease to third parties.
INVESTMENT INCOME (EXPENSE), NET
Investment income (expense), net for the years ended September 30
is comprised as follows (in thousands):
1999 1998 1997
Interest income $ 50,392 $ 39,484 $ 34,845
Realized gains on marketable securities 5,663 2,950 13,400
Loss on cancellation of warrants (Note 2) (3,273) — —
Write-off of investment in other entity —(20,000) —
Minority interest in income of consolidated
subsidiaries (13,066) (48,366) (2,979)
Equity in losses of investees (15,140) (20,731) —
$ 24,576 $ (46,663) $ 45,266
DEBT AND CREDIT FACILITIES
On March 11, 1998, the Company and a group of banks entered into
a $400 million unsecured revolving credit facility (the “Credit Facility”)
under which the banks are committed to make loans to the Company
and to extend letters of credit on behalf of the Company. The Credit
Facility expires in March 2001, and may be extended on an annual basis
thereafter, subject to approval of a requisite percentage of the lenders.
At the Company’s option, interest is at the applicable LIBOR rate or the
greater of the administrative agent’s reference rate or 0.5% plus the
Federal Funds effective rate, each plus an applicable margin. The
amount available for borrowing is reduced by letters of credit out-
standing. The Company is currently obligated to pay commitment fees
equal to 0.175% per annum on the unused amount of the Credit Facility.
The Credit Facility includes certain restrictive financial and operating
covenants. The weighted average interest rates were 5.8% and 6.2% on
outstanding borrowings during fiscal 1999 and 1998, respectively. At
September 30, 1999, there were no amounts or letters of credit out-
standing under the Credit Facility. At September 30, 1998, there were
borrowings of $80 million and letters of credit of $8 million outstanding
under the Credit Facility; the weighted average interest rate on out-
standing borrowings was 6.2%.
Under terms of two identical revolving credit agreements, negotiat-
ed in 1996 and expiring in July 2000, QUALCOMM Personal Electronics
(“QPE”) (Note 11) may borrow a total of $150 million. Borrowings under
the facilities, which are drawn in equal amounts, totaled $112 million
and $71 million at September 30, 1999 and 1998, respectively. The inter-
est rate under the facilities is at the applicable LIBOR rate plus 0.5%.
The weighted average interest rate on outstanding borrowings was
5.9%, 6.2% and 6.0% during fiscal 1999, 1998 and 1997, respectively, and
6.0% and 6.4% at September 30, 1999 and 1998, respectively. The credit
facilities include covenants which, among other things, require QPE to
maintain a minimum tangible net worth. The credit facilities are non-
recourse to the Company and the minority interest holder in QPE and are
collateralized by QPE’s accounts receivable which, at September 30,
1999, on a consolidated basis, amounted to $65 million. Under the terms
of the credit facilities, amounts that QPE may borrow outside of the
credit facilities are limited.
The fair value of the Company’s bank lines of credit are estimated
based on comparison with similar issues or current rates offered to the
Company for debt of the same remaining maturities. At September 30,
1999 and 1998, the estimated fair value of the Company’s bank lines of
credit approximated their carrying value.
The annual principal installments for capital leases and other oblig-
ations are $3 million in fiscal 2000 and $1 million in 2001.
Cash amounts paid for interest were $11 million in each of fiscal
years 1999, 1998 and 1997.
TRUST CONVERTIBLE PREFERRED SECURITIES OF SUBSIDIARY
In February 1997, QUALCOMM Financial Trust I (the “Trust”), the
Company’s wholly-owned subsidiary trust created under the laws of
the State of Delaware, completed a private placement of $660 million
of 53/4% Trust Convertible Preferred Securities. The sole assets of the
Trust are QUALCOMM Incorporated 53/4% Convertible Subordinated
Debentures due February 24, 2012. The obligations of the Trust related
to the Trust Convertible Preferred Securities are fully and unconditionally
guaranteed by the Company. The Trust Convertible Preferred Securities
are convertible into Company common stock at the rate of 1.3764 shares
of Company common stock for each Trust Convertible Preferred Security
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