Qualcomm 2002 Annual Report Download - page 73

QUALCOMM 2002 ANNUAL REPORT PAGE 71
Funding commitments related to these investments total $30 million at
September 30, 2002, which the Company expects to fund through fiscal 2009. Such
commitments are subject to the investees meeting certain conditions; actual equity
funding may be in lesser amounts. An investee’s failure to successfully develop and
provide competitive products and services due to lack of financing, market demand or
unfavorable economic environment could adversely affect the value of the Company’s
investment in the investee. There can be no assurance that the investees will be suc-
cessful in their efforts.
NOTE 5. DEBT AND LEASE OBLIGATIONS
The Company consolidates all assets and liabilities of Vésper Holding (Note 13),
including bank loans and capital lease obligations. The balances of these loans and
obligations at September 30, 2002 were $66 million and $42 million, respectively.
At September 30, 2002, the fair values of these loans and obligations approximated
$42 million and $36 million, respectively. The bank loans, which are denominated in
Brazilian real, bear interest at the Certificate of Deposit Inter Bank (CDI) rate (the
LIBOR rate equivalent in Brazil) plus 1.5% (approximately 19% at September 30, 2002).
The lease obligations bear interest at rates ranging from 11.25% to 14.5%. The aggregate
amounts of debt maturities and minimum capital lease payments in each of the next
four years from fiscal 2003 through 2006 are $14 million, $22 million, $22 million, and
$50 million, respectively. These debt facilities are collateralized by certain assets of
Vésper Holding. The current and long-term portions of these debt facilities are
included in other current liabilities and other liabilities, respectively.
Cash amounts paid for interest were $22 million, $11 million and $5 million in
fiscal 2002, 2001 and 2000, respectively. Cash paid for interest in fiscal 2002 is
primarily related to the Vésper Holding bank loans and capital leases. Cash paid for
interest in fiscal 2001 included $8 million related to an arbitration decision against
the Company.
NOTE 6. INVESTMENT (EXPENSE) INCOME
Investment (expense) income for the years ended September 30 was comprised as
follows (in thousands):
2002 2001* 2000*
Interest income $ 134,937 $ 243,298 $245,440
Net realized gains on marketable
securities 11,956 63,420 270,132
Net realized (losses) gains on
other investments (9,480) 6,267 —
Net realized (losses) gains on
derivative instruments (466) 459 —
Other-than-temporary losses on
marketable securities (205,811) (147,649) —
Other-than-temporary
losses on other investments (24,680) (50,749) —
Change in fair values of derivative
instruments (58,408) (243,308) —
Minority interest in loss (income)
of consolidated subsidiaries 52,498 (3,769) (6,264)
Equity in losses of investees (86,958) (185,060) (63,182)
$(186,412) $(317,091) $446,126
* As adjusted (Note 13)
NOTE 7. TRUST CONVERTIBLE PREFERRED SECURITIES OF SUBSIDIARY
In February 1997, QUALCOMM Financial Trust I (the Trust), the Company’s wholly-
owned subsidiary trust created under the laws of the State of Delaware, completed a
private placement of $660 million of 5 3/4% Trust Convertible Preferred Securities. The
sole assets of the Trust were QUALCOMM Incorporated 5 3/4% Convertible
Subordinated Debentures due February 24, 2012. Distributions on the Trust
Convertible Preferred Securities were payable quarterly by the Trust. As a result of
the Leap Wireless Spin-off in September 1998, and pursuant to a resolution of the
Board of Directors of QUALCOMM, each QUALCOMM Trust Convertible Preferred
Security was 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 5.5056 and 0.17205 shares, respectively, for each
QUALCOMM Trust Convertible Preferred Security. The Trust Convertible Preferred
Securities were subject to mandatory redemption on February 24, 2012, at a redemp-
tion price of $50 per preferred security. The Company had the right to convert the
Trust Convertible Preferred Securities, in whole or in part, on or after March 4, 2000.
The Company was required to pay a premium over the initial conversion price if secu-
rities were converted prior to March 4, 2002. During fiscal 2000, all remaining Trust
Convertible Preferred Securities were converted into approximately 72,623,000
shares of common stock.