Qualcomm 1999 Annual Report Download - page 55

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QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(equivalent to a conversion price of $36.328215 per share of common
stock). Distributions on the Trust Convertible Preferred Securities are
payable quarterly by the Trust. The Trust Convertible Preferred Securities
are subject to mandatory redemption on February 24, 2012, at a redemp-
tion price of $50 per preferred security. The Company has the right and
intends to redeem the Trust Convertible Preferred Securities, in whole or
in part, on or after March 4, 2000. The Company will pay a premium over
the initial conversion price if securities are redeemed prior to March 4,
2002. As a result of the Leap Wireless Spin-off, and pursuant to a resolu-
tion of the Board of Directors of QUALCOMM, each QUALCOMM Trust
Convertible Preferred Security is convertible, subject and pursuant to the
terms of the Convertible Subordinated Debentures, into both QUALCOMM
common stock and Leap Wireless common stock at the rate of 1.3764 and
0.17205 shares, respectively, for each QUALCOMM Trust Convertible
Preferred Security.
The Company may cause the Trust to defer the payment of distribu-
tions for successive periods of up to twenty consecutive quarters.
During such periods, accrued distributions on the Trust Convertible
Preferred Securities will compound quarterly and the Company may not
declare or pay distributions on its common stock or debt securities that
rank equal or junior to the Convertible Subordinated Debentures. Also
during such period, if holders of Trust Convertible Preferred Securities
convert such securities into the Company’s common stock, the holder
will not receive any cash related to the deferred distribution.
During fiscal 1997, issuance costs of $19 million related to the Trust
Convertible Preferred Securities were deferred and are being amor-
tized over the period until mandatory redemption of the securities in
February 2012.
During fiscal 1999, 8,910 Trust Convertible Preferred Securities were
converted into common stock. The Company has reserved 18,156,000
shares of common stock as of September 30, 1999 for possible conver-
sion of the Trust Convertible Preferred Securities at the option of the
holders (Note 16).
As of September 30, 1999 and 1998, the estimated fair value of the
Trust Convertible Preferred Securities was approximately $3,571 mil-
lion and $552 million, respectively, based on the last reported bid price.
CAPITAL STOCK
Preferred Stock
The Company has 8,000,000 shares of preferred stock authorized for
issuance in one or more series, at a par value of $0.0001 per share. In
conjunction with the distribution of Preferred Share Purchase Rights,
the Company’s Board of Directors designated 1,500,000 shares of pre-
ferred stock as Series A Junior Participating Preferred Stock and
reserved such shares for issuance upon exercise of the Preferred
Share Purchase Rights. At September 30, 1999 and 1998, no shares of
preferred stock were outstanding.
Common Stock Warrants
In November 1991, the Company issued seven-year warrants to
purchase 1,564,000 shares of common stock at $2.75 per share to a com-
pany for the relinquishment of all its claims to participate in certain
future royalties, license fees and profits. During August 1998, the
Company issued 1,410,000 shares of common stock upon the full net
exercise of the warrants.
Preferred Share Purchase Rights Plan
During fiscal 1996, the Board of Directors implemented a Preferred
Share Purchase Rights Plan (“Rights Plan”) to protect stockholders’
rights in the event of a proposed takeover of the Company. Under the
Rights Plan, the Company declared a dividend of one preferred share
purchase right (a “Right”) for each share of the Company’s common
stock outstanding as of October 16, 1995. Similar Rights will generally
be issued in respect to common stock subsequently issued. Pursuant to
the Rights Plan, each Right entitles the registered holder to purchase
from the Company a one one-hundredth share of Series A Junior
Participating Preferred Stock, $0.0001 par value per share, at a pur-
chase price of $250. In November 1999, the Rights Plan was amended to
provide that the purchase price be set at $1,600, subject to adjustment
to $400 upon consummation of the four-for-one stock split approved by
the Company’s Board of Directors in November 1999 (Note 16). The
Rights are exercisable only if a person or group (an “Acquiring
Person”) acquires beneficial ownership of 15% or more of the
Company’s outstanding shares of common stock. Upon exercise, holders,
other than an Acquiring Person, will have the right, subject to termina-
tion, to receive the Company’s common stock or other securities, cash
or other assets having a market value, as defined, equal to twice such
purchase price. The Rights, which expire on September 25, 2005, are
redeemable in whole, but not in part, at the Company’s option at any
time for a price of $0.005 per Right.
INCOME TAXES
The components of income tax provision for the years ended
September 30 are as follows (in thousands):
1999 1998 1997
Current provision:
Federal $ 143,534 $ 86,488 $ 71,891
State 22,211 1,916 2,288
Foreign 36,657 7,319 4,407
202,402 95,723 78,586
Deferred benefit:
Federal (86,996) (46,862) (51,186)
State (9,599) (8,719) (10,900)
(96,595) (55,581) (62,086)
$ 105,807 $ 40,142 $ 16,500
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