Qualcomm 2002 Annual Report Download - page 85

QUALCOMM 2002 ANNUAL REPORT PAGE 83
These pro forma results have been prepared for comparative purposes only and
may not be indicative of the operating results, which actually would have occurred
had the combination been in effect at the beginning of the respective periods or of
future operating results of the consolidated entities.
NOTE 14. DISPOSITION OF ASSETS AND OTHER CHARGES
In February 2000, the Company sold its terrestrial-based CDMA wireless con-
sumer phone business, including its phone inventory, manufacturing equipment and
customer commitments, to Kyocera Wireless (Kyocera). QUALCOMM received
$242 million, including interest, during fiscal 2000 for the net assets sold. QUALCOMM
recorded $83 million in charges during fiscal 2000 to reflect the estimated difference
between the carrying value of the net assets and the consideration received
from Kyocera, less costs to sell, and employee termination costs. Under the agree-
ment with Kyocera, Kyocera agreed to purchase a majority of its CDMA integrated
circuit sets and system software requirements from QUALCOMM for a period of five
years. Kyocera will continue its existing royalty-bearing CDMA license agreement
with QUALCOMM.
As part of the agreement with Kyocera, QUALCOMM formed a new subsidiary that
has a substantial number of employees from QUALCOMM Consumer Products busi-
ness to provide services to Kyocera on a cost-plus basis to support Kyocera’s phone
business for up to three years. This arrangement will expire in February 2003.
Kyocera has informed the Company that it intends to offer employment to substan-
tially all employees of the subsidiary. During fiscal 2002, 2001 and 2000, revenues
resulting from this arrangement were $105 million, $107 million and $69 million,
respectively; earnings before taxes were not material.
The Company leases certain facilities to Kyocera under noncancelable operating
leases, with provisions for cost-of-living increases. The leases expire on various dates
through February 20, 2005 and generally provide for renewal options thereafter.
Future minimum rentals in each of the next three years from fiscal 2003 to 2005 are
$10 million, $9 million and $4 million.
NOTE 15. SUBSEQUENT EVENTS
On November 8, 2002, Pegaso paid $435 million in full satisfaction of the bridge
loan facility (Note 11).
On November 12, 2002, $9 million of the Company’s commitment to extend long-
term financing to certain CDMA customers of Ericsson was cancelled (Note 3).
On November 14, 2002, the FCC adopted an order granting relief to Auction 35 bid-
ders that were the high bidders for Next
Wave licenses. Leap has until the end of
December 2002 to elect to terminate its obligation to purchase these licenses (Note 11).
On November 18, 2002, the District Court for Boulder County, Colorado granted
the Company’s motion to dismiss 66 of the remaining 67 plaintiffs from the lawsuit in
the matter of Schwartz, et al v. QUALCOMM (Note 11).
On November 19, 2002, the Company won bids to acquire mobile licenses in the
state of Sao Paulo (excluding Sao Paulo metro), the state of Minas Gerais, and in the
Northeast region of Brazil (license Areas 2, 4, and 10, respectively). The new mobile
licenses cover areas with a combined population in excess of 64 million. The mobile
licenses overlap with approximately 47% of Vésper Holding’s existing Wireless Local
Loop areas. None of the mobile licenses cover an area outside of Vesper Holding’s
current coverage areas. Approximately $8 million of the approximate $83 million total
purchase price is payable by December 19, 2002. The remaining $75 million Brazilian
real-denominated obligation is financed by the Brazilian government at an interest
rate of 12%, plus an adjustment for inflation, payable in six equal annual installments.
The first such installment payment is due in 36 months (Note 13).
NOTE 16. SUMMARIZED QUARTERLY DATA (UNAUDITED)
The following financial information reflects all normal recurring adjustments that
are, in the opinion of management, necessary for a fair statement of the results of the
interim periods.