Qualcomm 2004 Annual Report Download - page 76

QUALCOMM 72
Notes to Consolidated Financial Statements continued
Participating Preferred Stock and reserved such shares for issuance upon exercise of the preferred share purchase rights. At September 30,
2004 and 2003, no shares of preferred stock were outstanding.
Preferred Share Purchase Rights Plan
The Company has a Preferred Share Purchase Rights Plan (Rights Plan) to protect stockholders’ rights in the event of a proposed takeover of
the Company. Under the Rights Plan, the Company declared a dividend of one preferred share purchase right (a Right) for each share of the
Company’s common stock outstanding. Pursuant to the Rights Plan, each Right entitles the registered holder to purchase from the Company
aone one-hundredth share of Series A Junior Participating Preferred Stock, $0.0001 par value per share, subject to adjustment for subsequent
stock splits, at a purchase price of $250. In November 1999, the Rights Plan was amended to provide that the purchase price be set at $400.
The Rights are exercisable only if a person or group (an Acquiring Person) acquires beneficial ownership of 15% or more of the Company’s
outstanding shares of common stock. Upon exercise, holders, other than an Acquiring Person, will have the right, subject to termination, to
receive the Company’s common stock or other securities, cash or other assets having a market value, as defined, equal to twice such purchase
price. The Rights, which expire on September 25, 2005, are redeemable in whole, but not in part, at the Company’s option at any time for a
price of $0.005 per Right.
Stock Repurchase Program
On February 10, 2003, the Company authorized the expenditure of up to $1 billion to repurchase shares of the Company’s common stock over
atwo-year period. During fiscal 2003, the Company bought 9,830,000 shares at a net aggregate cost of $158 million. While the Company did
not repurchase any of the Company’s common stock under this program during fiscal 2004, the Company continues to evaluate repurchases
under this program. At September 30, 2004, $834 million remains authorized for repurchases under the program. Repurchased shares are
retired upon repurchase.
In connection with the Company’s stock repurchase program, the Company sold put options under three separate contracts with independent
thirdparties during fiscal 2004 that may have required the Company to purchase 3,000,000 shares of its common stock upon exercise. The
Company accounted for the written put options in accordance with Statement of Financial Standards No. 150 (FAS 150), “Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and Equity.” In the event the put options were exercised, the contracts
required that the options be physically settled in cash. The Company determined that the put options should be classified as liabilities in
accordance with FAS 150. As such, the Company recorded the $5 million in premiums received as additions to other current liabilities, and
changes in the fair values of the put options were recognized in the Company’sstatement of operations. The Company repurchased all of the
put options during fiscal 2004. The net gain recorded in investment income related to the put options, including premiums received, during
fiscal 2004 was $5 million.
During fiscal 2003, the Company sold put options under three separate contracts with independent third parties that required the Company to
purchase 3,000,000 shares of its common stock upon exercise. All of these put options expired unexercised. The Company classified the put
options as permanent equity in accordance with Emerging Issues Task Force Issue No. 00-19, “Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company’sOwn Stock,” which was subsequently amended by FAS 150. As such, the Company recorded
the $7 million in premiums received as paid-in capital.
Dividends
On February 11, 2003, the Company announced its first common stock dividend of $0.025 per share. On July 16, 2003, the Company announced
an increase in its quarterly dividend from $0.025 to $0.035 per share on common stock. On March 2, 2004, the Company announced an increase
in its quarterly dividend from $0.035 to $0.050 per share on common stock. On July 13, 2004, the Company announced an increase in its
quarterly dividend from $0.050 to $0.070 per shareon common stock. Cash dividends announced in fiscal 2004 and 2003 wereas follows
(in millions, except per share data):
2004 2003
Per Share Total Per Share Total
First quarter $0.070 $112 $ — $ —
Second quarter 0.050 81 0.025 39
Thirdquarter — — 0.025 40
Fourth quarter 0.070 114 0.035 56
Total $0.190 $307 $0.085 $135
NOTE 8. EMPLOYEE BENEFIT PLANS
Employee Savings and Retirement Plan
The Company has a 401(k) plan that allows eligible employees to contribute up to 50% of their eligible compensation, subject to annual limits.
The Company matches a portion of the employee contributions and may, at its discretion, make additional contributions based upon earnings.
The Company’s contribution expense for fiscal 2004, 2003 and 2002 was $21 million, $20 million and $20 million, respectively.
Stock Option Plans
The Company may grant options to selected employees, directors and consultants to the Company to purchase shares of the Company’s common
stock at a price not less than the fair market value of the stock at the date of grant. The 2001 Stock Option Plan (the 2001 Plan) was adopted and