Qualcomm 2005 Annual Report Download - page 68
Download and view the complete annual report
Please find page 68 of the 2005 Qualcomm annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Notes to Consolidated Financial Statements continued
64 qualcomm 2005
Property, Plant and Equipment
Sept. 25, Sept. 26,
(in millions) 2005 2004
Land $ 65 $ 47
Buildings and improvements 614 413
Computer equipment 520 430
Machinery and equipment 544 413
Furniture and offi ce equipment 33 24
Leasehold improvements 107 54
Property under capital leases 2 —
1,885 1,381
Less accumulated depreciation and amortization (863) (706)
$1,022 $ 675
Depreciation and amortization expense from continuing operations
related to property, plant and equipment for fi scal 2005, 2004 and
2003 was $177 million, $133 million and $117 million, respectively.
At September 25, 2005 and September 26, 2004, buildings and
improvements and leasehold improvements with a net book value
of $36 million and $38 million, respectively, including accumulated
depreciation and amortization of $30 million and $27 million, respec-
tively, were leased to third parties or held for lease to third parties.
Future minimum rental income on facilities leased to others in each
of the next four years from fi scal 2006 to 2009 are $9 million,
$9 million, $7 million and $1 million, respectively.
Goodwill and Other Intangible Assets
The Company’s reportable segment assets do not include goodwill
(Note 10). The Company allocates goodwill to its reporting units for
annual testing purposes. Goodwill was allocable to reporting units
included in the Company’s reportable segments at September 25,
2005 as follows: $298 million in QUALCOMM CDMA Technologies,
$73 million in QUALCOMM Technology Licensing, $72 million in
QUALCOMM Wireless & Internet, and $128 million in QUALCOMM
MEMS Technology (a nonreportable segment included in reconciling
items in Note 10). The increase in goodwill from September 26,
2004 to September 25, 2005 was the result of the Company’s
business acquisitions (Note 11), partially offset by currency
translation adjustments.
The components of purchased intangible assets, which are included
in other assets, were as follows (in millions):
Sept. 25, 2005 Sept. 26, 2004
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
Wireless licenses $164 $(17) $ 77 $(11)
Marketing-related 21 (9) 21 (8)
Technology-based 116 (48) 77 (37)
Customer-related 17 (13) 15 (12)
Other 7 (1) 7 (1)
Total intangible
assets $325 $(88) $197 $(69)
Wireless licenses increased as a result of the Company’s acquisition
of additional 700MHz spectrum in the United States during fi scal
2005 for its MediaFLO USA business (Note 10). Increases in other
intangible asset categories primarily resulted from acquisitions
during fi scal 2005 (Note 11).
All of the Company’s purchased intangible assets other than certain
wireless licenses in the amount of $84 million and goodwill are subject
to amortization. Amortization expense from continuing operations for
fi scal 2005, 2004 and 2003 was $19 million, $17 million and $18 mil-
lion, respectively. Amortization expense related to these intangible
assets is expected to be $22 million in fi scal 2006, $19 million in
fi scal 2007, $16 million in fi scal 2008, $15 million in fi scal 2009 and
$14 million in fi scal 2010.
Capitalized software development costs, which are included in other
assets, were $43 million and $44 million at September 25, 2005 and
September 26, 2004, respectively. Accumulated amortization on
capitalized software was $42 million and $39 million at September 25,
2005 and September 26, 2004, respectively. Amortization expense
from continuing operations related to capitalized software for fi scal
2005, 2004 and 2003 was $4 million, $13 million and $12 million,
respectively.
NOTE 4. INVESTMENTS IN OTHER ENTITIES
Inquam Limited
Since October 2000, the Company and another investor (the Other
Investor) have provided equity and debt funding to Inquam Limited
(Inquam). Inquam owns, develops and manages wireless CDMA-based
communications systems, either directly or indirectly, primarily in
Romania and Portugal. The Company recorded $33 million in equity in
losses of Inquam during fi scal 2005, as compared to $59 million and
$99 million for fi scal 2004 and 2003, respectively. At September 25,
2005 and September 26, 2004, the Company’s equity and debt invest-
ments in Inquam totaled $26 million and $42 million, respectively, net
of equity in losses. The Company had no remaining funding commitment
under its bridge loan agreement at September 25, 2005.
During fi scal 2005, Inquam secured new long-term fi nancing (the new
facilities). The Company and the Other Investor each guaranteed 50%
of a portion of the amounts owed under certain of the new facilities,
up to a combined maximum of $54 million. Amounts outstanding under
the new facilities subject to the guarantee totaled $49 million as of
September 25, 2005. The guarantee expires and the new facilities
mature on December 25, 2011.
In October 2005, the Company and the Other Investor agreed to
restructure Inquam. Upon close of the restructuring, which is expected
to occur in the fi rst half of fi scal 2006, the Portugal companies will
be spun-off through the exchange of portions of the Company’s and
the Other Investor’s debt investments for direct equity interests in
the Portugal companies. Inquam, which will continue to own the
Romania companies, will repurchase certain minority equity interests.
Immediately after the restructuring, the Company will hold an approx-
imate 49.7% equity interest in Inquam and a 23% equity interest in
the Portugal companies, which is expected to be reduced over time
as the Other Investor makes the further investments in the Portugal