Qualcomm 2002 Annual Report Download - page 83

QUALCOMM 2002 ANNUAL REPORT PAGE 81
NOTE 13. ACQUISITIONS
VÉSPER HOLDING, LTD.
In fiscal 1999, the Company acquired an approximate 16% ownership interest in
Vésper Sao Paulo S.A. and Vésper S.A. (the Vésper Operating Companies). The Vésper
Operating Companies were formed by a consortium of investors to provide fixed wire-
less and wireline telephone services in the northern, northeast and eastern regions
of Brazil and in the state of Sao Paulo. In addition, the Company extended long-term
financing to the Vésper Operating Companies related to the Company’s financing
arrangement with Ericsson (Note 3). On November 13, 2001, QUALCOMM consum-
mated a series of transactions as part of an overall financial restructuring (the
Restructuring) of the Vésper Operating Companies.
Pursuant to the Restructuring, the Company and VeloCom (Note 4) committed to
invest $266 million and $80 million, respectively, in a newly formed holding company
called Vésper Holding. Vésper Holding acquired certain liabilities of the Vésper
Operating Companies from their vendors for $135 million and the issuance of war-
rants to purchase an approximate 7% interest in Vésper Holding, and the vendors
released in full any claims that they might have against the Company, VeloCom, the
Vésper Operating Companies and other related parties arising from or related to the
acquired liabilities. In a series of related transactions, Vésper Holding agreed to con-
tribute the acquired liabilities to the Vésper Operating Companies in exchange for
equity securities and to cancel the contributed liabilities. At September 30, 2002, the
Company directly owned 72% of the issued and outstanding equity of Vésper Holding,
and the Company indirectly owned an additional 11.9% of Vésper Holding through its
ownership interest in VeloCom, totaling an 83.9% direct and indirect interest.
The purchase price allocation, based on the estimated fair values of acquired
assets and liabilities assumed, included $307 million for property, plant and equip-
ment, $39 million for licenses, and $31 million for other intangible assets. Property,
plant and equipment are depreciated over useful lives ranging from 2 to 18 years.
Licenses and other intangible assets are amortized over their useful lives of 18 years
and 3 to 18 years, respectively.
When the Company obtained its controlling interest in Vésper Holding, Accounting
Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments
in Common Stock,” required that the Company adjust its prior period results to
account for its original 16% ownership interest in the Vésper Operating Companies,
predecessors to Vésper Holding, using the equity method of accounting. As a result,
the Company recorded $6 million, $150 million and $48 million of equity in losses of
the Vésper Operating Companies for fiscal 2002 (pre-acquisition), 2001, and 2000
respectively. The Company recorded a $59 million reduction in finance receivables, an
$18 million reduction in other assets and a $77 million reduction to retained earnings
at September 30, 2001. The Company had previously recorded $121 million in asset
impairment charges and other-than-temporary losses on other investments during
fiscal 2001. Because those charges did not exceed the losses recorded as a result of
using the equity method, the net loss for fiscal 2001 increased by $29 million. The
Company did not record any asset impairment charges or other-than-temporary
losses during fiscal 2000, and as a result of using the equity method, the net income
for fiscal 2000 decreased by $48 million.
Due to the Company’s practice of consolidating foreign subsidiaries one month
in arrears, the consolidated financial statements for fiscal 2002 included $130 million
in losses, net of minority interest of Vésper Holding, from November 13, 2001 to
August 31, 2002. The consolidated financial statements for fiscal 2002 also included
$30 million of equity losses related to Vésper Holding (pre-acquisition) and VeloCom.
Pro forma operating results for the Company, assuming the acquisition of Vésper
Holding had been made at the beginning of the periods ended September 30, are as
follows (in thousands, except per share data):
(Unaudited) 2002 2001 2000
Revenues $3,059,398 $2,805,266 $3,244,428
Net income (loss) $ 335,746 $ (974,221) $ 374,034
Basic earnings (loss)
per common share $ 0.44 $ (1.29) $ 0.52
Diluted earnings (loss)
per common share $ 0.41 $ (1.29) $ 0.48
These pro forma results have been prepared for comparative purposes only and
may not be indicative of the results of operations that actually would have occurred
had the combination been in effect at the beginning of the respective periods or of
future results of operations of the consolidated entities.