Qualcomm 2002 Annual Report Download - page 52

For fiscal 2001, asset impairment and related charges were $518 million, com-
pared to $46 million for fiscal 2000. Asset impairment and related charges during
fiscal 2001 were comprised primarily of $519 million in charges resulting from
management’s determination that certain assets related to the Globalstar business
were impaired. Asset impairment and related charges during fiscal 2000 were pri-
marily related to the sale of the terrestrial-based CDMA wireless consumer phone
business in February 2000.
For fiscal 2001, other operating expenses were $51 million, compared to $32 million
in fiscal 2000. Other operating expenses for fiscal 2001 were comprised of a $62 million
arbitration decision against us, offset by $11 million in other income related to the
irrevocable transfer of a portion of an FCC Auction Discount Voucher to a third-party.
Other operating expenses during fiscal 2000 were comprised primarily of employee
termination and other costs related to the sale of the terrestrial-based CDMA wire-
less consumer phone business in February 2000.
Interest expense was $10 million for fiscal 2001, compared to $5 million for fiscal
2000. The increase was primarily related to interest charges resulting from an arbi-
tration decision against us, offset by lower interest expense resulting from decreased
bank borrowings.
Net investment expense was $317 million for fiscal 2001, compared to net invest-
ment income of $446 million for fiscal 2000. The change was primarily comprised as
follows (in millions):
Years Ended September 30,
2001 2000 Change
Interest income:
Corporate $ 135 $ 108 $ 27
QSI 108 137 (29)
Net realized gains on investments:
Corporate 11 — 11
QSI 59 270 (211)
Other-than-temporary losses
on marketable securities (147) — (147)
Other-than-temporary losses
on other investments (51) — (51)
Change in fair values of
derivative investments (243) — (243)
Minority interest in income of
consolidated subsidiaries (4) (6) 2
Equity in losses of investees (185) (63) (122)
$(317) $446 $(763)
The increase in interest income on corporate cash and marketable debt securities
was a result of higher average interest-bearing balances. The decline in QSI interest
income was primarily a result of the cessation of interest income recognition on
Globalstar finance receivables in fiscal 2001. The other-than-temporary losses on
marketable securities during fiscal 2001 primarily related to a $134 million loss on
our investments in Netzero, Inc., which subsequently completed a merger with Juno
Online Services, Inc. and became United Online, Inc. The market value of our invest-
ment in United Online, Inc. was $38 million as of November 22, 2002, as compared to
our adjusted cost basis of $10 million. We did not record any other-than temporary losses
on marketable securities during fiscal 2000. The change in fair values of derivative
instruments primarily resulted from $213 million in losses related to declines in the
price of Leap Wireless common stock, which reduced the fair values of our warrants to
acquire Leap Wireless common stock. Equity in losses of investees increased primarily
as a result of an increase in the equity in losses of Vésper Holding in fiscal 2001.
There were no distributions on Trust Convertible Preferred Securities in fiscal
2001 due to the conversion of all remaining Trust Convertible Preferred Securities into
common stock during fiscal 2000. We recorded $13 million in distributions for fiscal 2000.
Other non-operating charges were approximately $167 million in fiscal 2001, com-
pared to $2 million in fiscal 2000. Other non-operating charges in fiscal 2001 were
primarily comprised of a $120 million write-down of the note receivable from
VeloCom to its fair value and $58 million in write-downs of recorded values of a note
receivable from Globalstar and warrants to acquire partnership interests in
Globalstar to their estimated fair values.
Income tax expense was $105 million for fiscal 2001, compared to $527 million for
fiscal 2000. The annual effective tax rate was negative 23% for fiscal 2001, compared
to a 46% rate for fiscal 2000. The estimated annual effective tax rate was negative
primarily as a result of foreign taxes paid for which it is more likely than not we will
not receive a tax benefit. The difference in the tax rate from the prior year is primarily
due to the loss for fiscal 2001 resulting from certain asset impairment and related
charges. We have provided a valuation allowance on substantially all of our deferred
tax assets because of uncertainty regarding their realizability due to the expectation
that deductions from future employee stock option exercises will exceed future tax-
able income. Our net deferred tax assets increased by $631 million in fiscal 2001, and
the resulting increase in the valuation allowance was reflected in part as an increase
to the tax expense and in part as a reduction of stockholders’ equity. The total expense
related to the increase in the valuation allowance was $185 million.
We recorded an $18 million loss, net of taxes, in fiscal 2001 as the net cumulative
effect of changes in accounting principle at September 30, 2000. The cumulative
effect of the adoption of SAB 101 was a $147 million loss, net of taxes, offset by a
$129 million gain, net of taxes, resulting from the cumulative effect of the adoption of
FAS 133. The gain resulting from the adoption of FAS 133 related primarily to the
MANAGEMENT’S DISCUSSION AND ANALYSIS continued