Qualcomm 2004 Annual Report Download - page 71

Finance Receivables
Finance receivables, which are included in other assets, result from arrangements in which the Company has agreed to provide its customers
or certain CDMA customers of Telefonaktiebolaget LM Ericsson (Ericsson) with long-term interest bearing debt financing for the purchase of
equipment and/or services. Finance receivables were comprised as follows:
September 30,
(In millions) 2004 2003
Finance receivables $ 3 $205
Allowances (1) (18)
2 187
Current maturities, net 25
Noncurrent finance receivables, net $— $182
At September 30, 2004 and 2003, the fair value of finance receivables approximated $2 million and $198 million, respectively. The fair value
of finance receivables is estimated by discounting the future cash flows using current interest rates at which similar financing would be provided
to similar customers for the same remaining maturities.
The Company had various financing arrangements, including a bridge loan facility, an equipment loan facility, and interim and additional interim
loan facilities, with Pegaso Comunicaciones y Sistemas S.A. de C.V., a wholly owned subsidiary of Pegaso Telecomunicaciones, S.A. de C.V., a
CDMA wireless operator in Mexico (collectively referred to as Pegaso). On September 10, 2002, Telefónica Móviles (Telefónica) acquired a 65%
controlling interest in Pegaso. On October 10, 2002, Pegaso paid $82 million in full satisfaction of the interim and additional interim loans. On
November 8, 2002, Pegaso paid $435 million in full satisfaction of the bridge loan facility. The Company used approximately $139 million of
the bridge loan proceeds to purchase outstanding vendor debt owed by Pegaso to other lenders. On June 13, 2003, Pegaso prepaid $281 million
of the equipment loan facility,including accrued interest, in accordance with certain terms of the equipment loan facility. On December 15, 2003,
Pegaso prepaid $193 million, including accrued interest, in full satisfaction of the equipment loan facility. The Company recognized $12 million,
$41 million and $9 million in interest income related to the Pegaso financing arrangements during fiscal 2004, 2003 and 2002, respectively,
including $10 million and $23 million of deferred interest income recorded as a result of the prepayments in fiscal 2004 and 2003, respectively.
Along-termfinancing commitment for $346 million under an arrangement with Ericsson expired on November 6, 2003. At September 30, 2004,
the Company has a remaining commitment to extend up to $118 million in long-term financing to certain CDMA customers of Ericsson. The
funding of this commitment, if it occurs, is not subject to a fixed expiration date and is subject to the CDMA customers meeting conditions
prescribed in the financing arrangement and, in certain cases, to Ericsson also financing a portion of such sales and services. Financing under
this arrangement is generally collateralized by the related equipment. The commitment represents the maximum amount to be financed; actual
financing may be in lesser amounts.
Inventories
September 30,
(In millions) 2004 2003
Raw materials $ 20 $ 18
Work-in-process 33
Finished goods 131 89
$154 $110
Inventories werereduced by $8 million from September 30, 2003 as a result of discontinued operations (Note 11).
Property, Plant and Equipment
September 30,
(In millions) 2004 2003
Land $47 $47
Buildings and improvements 413 338
Computer equipment 430 379
Machineryand equipment 413 449
Furniture and office equipment 24 22
Leasehold improvements 54 43
1,381 1,278
Less accumulated depreciation and amortization (706) (656)
$ 675 $ 622
Depreciation and amortization expense from continuing operations related to property, plant and equipment for fiscal 2004, 2003 and 2002 was
$133 million, $117 million and $93 million, respectively. The gross and net carrying values of property, plant and equipment were reduced by
$170 million and $103 million, respectively,from September 30, 2003 as a result of discontinued operations (Note 11).
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