Qualcomm 1999 Annual Report Download - page 56

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QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation from the expected statutory federal
income tax expense to the Company’s actual income tax expense for
the years ended September 30 (in thousands):
1999 1998 1997
Expected income tax expense at federal
statutory tax rate $ 107,363 $ 52,036 $ 37,956
State income tax expense, net of federal
benefit 15,951 7,732 5,639
Foreign taxes 36,657 7,075 4,407
Permanent differences 2,108 5,754 3,523
Tax benefit from recognition of deferred tax
assets — — (21,531)
Tax credits (56,800) (34,015) (16,201)
Other 528 1,560 2,707
Actual income tax expense $ 105,807 $ 40,142 $ 16,500
At September 30, 1999 and 1998, the Company had net deferred tax
assets as follows (in thousands):
1999 1998
Income recognition differences $ 116,179 $ 84,793
Unused net operating losses 73,962 1,497
Tax credits 51,864 6,959
$ 242,005 $ 93,249
At September 30, 1999, the Company had unused net operating loss-
es, manufacturing, research, foreign tax and alternative minimum tax
credits expiring from 2002 through 2019. The unused net operating tax
losses were generated by the exercise of non-qualified employee
stock options.
Cash amounts paid for income taxes were $68 million, $58 million
and $18 million for fiscal 1999, 1998 and 1997, respectively.
EMPLOYEE BENEFIT PLANS
Employee Savings and Retirement Plan
The Company has a 401(k) plan that allows eligible employees to
contribute up to 15% of their salary, subject to annual limits. The
Company matches a portion of the employee contributions and may, at
its discretion, make additional contributions based upon earnings. The
Company’s contribution expense for fiscal 1999, 1998 and 1997 was $17
million, $10 million and $6 million, respectively.
Stock Option Plans
The Board of Directors may grant options to selected employees,
directors and consultants to the Company to purchase shares of the
Company’s common stock at a price not less than the fair market value
of the stock at the date of grant. The 1991 Stock Option Plan (the
“Plan”), as amended, authorizes up to 73,800,000 shares to be granted
no later than August 2001. The Plan provides for the grant of both incen-
tive stock options and non-qualified stock options. Generally, options
outstanding vest over a one to six year period and are exercisable for
up to ten years from the grant date. At September 30, 1999, options for
8,209,000 shares were exercisable at prices ranging from $7.58 to $34.22
for an aggregate exercise price of $151 million.
The Company has a Non-Employee Directors’ Stock Option Plan
which authorizes 2,140,000 shares to be granted no later than February
2013. This plan provides for non-qualified stock options to be granted to
non-employee directors at fair market value, vesting over periods not
exceeding five years and are exercisable for up to ten years from the
grant date. At September 30, 1999, options for 800,000 shares were exer-
cisable at prices ranging from $11.13 to $23.54 per share for an
aggregate exercise price of $11 million.
A summary of stock option transactions for the plans follows (num-
ber of shares in thousands):
Options Options Outstanding
Available Number Exercise Price Per Share
for Grant of Shares Range Average
SEPTEMBER 30, 1996 4,210 32,146 $ 0.25–$ 26.22 $ 15.78
Additional shares reserved 10,800
Options granted (8,582) 8,582 18.75–31.19 23.65
Options canceled 1,348 (1,348) 3.41 –30.13 18.64
Options exercised — (2,416) 0.25 –23.16 8.22
SEPTEMBER 30, 1997 7,776 36,964 $ 2.50–$ 31.19 $ 18.00
Additional shares reserved 10,940
Options granted (12,308) 12,308 22.28–34.98 29.10
Options canceled 1,618 (1,618) 7.75 –34.98 21.61
Options exercised — (2,580) 3.41 –28.88 12.47
SEPTEMBER 23, 1998(a) 8,026 45,074 $ 2.50–$ 34.98 $ 21.21
Options granted (96) 96 8.99–34.22 24.44
Options canceled 26 (26) 20.45 –31.18 26.93
SEPTEMBER 30, 1998 7,956 45,144 $ 2.45–$ 34.22 $ 20.75
Additional shares reserved 7,000
Options granted (4,741) 4,741 19.80 –192.40 52.12
Options canceled 6,334 (6,334) 2.45 –117.56 23.39
Options exercised —(12,248) 2.45 –34.22 17.55
SEPTEMBER 30, 1999 16,549 31,303 $ 4.37 –$ 192.40 $ 26.23
(a) On September 23, 1998, in connection with the Leap Wireless Spin-off, the Company
adjusted the option exercise prices to maintain the economic value of the options that
existed at the time of the Spin-off. The range and weighted average exercise prices of
options outstanding at September 23, 1998 were $2.45 to $34.22 and $20.75, respectively,
as adjusted in connection with the Leap Wireless Spin-off.
The following table summarizes information about fixed stock options
outstanding at September 30, 1999 (number of shares in thousands):
Options Outstanding
Weighted
Average Options Exercisable
Remaining Weighted Weighted
Contractual Average Average
Range of Number Life Exercise Number Exercise
Exercise Prices of Shares (In Years) Price of Shares Price
$ 4.37 –$ 16.51 6,885 4.6 $ 12.84 4,430 $ 12.53
$ 16.75 –$ 22.46 6,841 6.7 19.81 1,939 19.70
$ 22.50 –$ 27.35 6,242 7.6 24.30 1,602 23.86
$ 27.42 –$ 29.47 5,961 8.7 27.97 691 28.11
$ 29.99 –$ 77.00 4,871 8.6 43.13 347 31.59
$ 95.31 –$ 192.40 503 9.8 136.24 — 0.00
$ 4.37 –$ 192.40 31,303 7.1 26.23 9,009 18.02
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