Qualcomm 2004 Annual Report Download - page 83

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their existing local bank debt (at an agreed discount) to allow the Company to retain ownership of the Vésper Towers free and clear of any
local bank security interest. The major classes of assets and liabilities sold in the Embratel sale transaction included: $25 million in accounts
receivable, $5 million in inventory, $24 million in other current assets, $95 million in property, plant and equipment, $6 million in other assets,
$52 million in accounts payable, $5 million in payroll and other benefits related liabilities, $6 million in unearned revenue, $1 million in other
current liabilities, $14 million in long-term debt and $3 million in other liabilities. The Company realized a net loss of $52 million on the Embratel
sale transaction during the first quarter of fiscal 2004, including a $74 million loss on the net assets sold to Embratel and a $46 million loss
related to the recognition of cumulative foreign currency translation losses previously included in stockholders’ equity, partially offset by $68 million
in gains related to the extinguishment of local bank debt and the settlement of other liabilities.
On November 19, 2002, the Company won bids to acquire personal mobile service (SMP) licenses in certain regions of Brazil. Approximately
$8 million of the approximate $82 million purchase price for the SMP licenses was paid in December 2002. The remaining Brazilian real-
denominated obligation was financed by the Brazilian government at an interest rate of 12% per annum, plus an adjustment for inflation. These
SMP licenses were not included in the Embratel sale transaction. In December 2003, the Company initiated a waiver and return of the SMP
licenses to Anatel, the telecommunications regulatory agency in Brazil. In February 2004, the waiver and return of the SMP licenses was approved
by Anatel, and the license debt was extinguished. The Company realized a net gain of $19 million as a result of the removal of the $104 million
SMP licenses and the related $123 million debt and accrued interest during the second quarter of fiscal 2004.
On March 2, 2004, the Company sold TowerCo to Embratel in a separately negotiated transaction (the TowerCo sale transaction) for $45 million
in cash. TowerCo’s assets were primarily comprised of $5 million in property, plant and equipment. The Company realized a net gain of $40 million
on the TowerCo sale transaction during the second quarter of fiscal 2004. As a result of the disposition of the remaining operations and assets
related to the Vésper Operating Companies, the Company determined that the results of operations and cash flows related to the Vésper Operating
Companies, including the results related to TowerCo and the SMP licenses and the gains and losses realized on the Embratel and TowerCo
sales transactions, should be presented as discontinued operations in its consolidated statements of operations and cash flows. The Company’s
statements of operations and cash flows for all prior periods have been adjusted to present the discontinued operations. At September 30, 2004,
the Company had no remaining assets or liabilities related to the Vésper Operating Companies, TowerCo or the SMP licenses recorded on its
consolidated balance sheet.
Revenues of $36 million, $123 million and $125 million were reported in the loss from discontinued operations during fiscal 2004, 2003 and
2002, respectively.Proforma results for fiscal 2002, assuming the acquisition of the Vésper Operating Companies had been made at the
beginning of fiscal 2002, are not presented because they would not differ materially from reported results.
NOTE 12. AUCTION DISCOUNT VOUCHER
The Company was awarded a $125 million Auction Discount Voucher (ADV) by the Federal Communications Commission (FCC) in June 2000
as the result of a legal ruling. The ADV is fully transferable and may, subject to certain conditions, be used in whole or in part by any entity in
any FCC spectrum auction over a period of three years, including those in which the Company is not a participant. During November 2002, the
FCC amended the terms of the ADV to allow the Company to use the ADV to satisfy existing FCC debt of other companies. The FCC agreed to
extend the ADV twice, most recently in June 2004. The ADV was scheduled to expire in September 2004, but the Company used the remaining
ADV prior to its expiration.
The Company used approximately $77 million of the ADV’s value prior to fiscal 2004. During fiscal 2004, the Company recorded $4 million in
other operating income and $4 million in selling, general and administrative expenses in the QSI segment for cooperative marketing expenses
incurred, with no effect on net income, related to an arrangement under which a portion of the ADV was transferred to a wireless operator prior
to fiscal 2004.
During fiscal 2004, the Company transferred approximately $18 million of the ADV’s value to a wireless operator for approximately $17 million
in cash. As a result of this transfer,the Company recorded an additional $17 million in other operating income in the QSI segment during fis-
cal 2004. The Company recorded $47 million in other income in the QSI segment during fiscal 2003 related to transfers of the ADV’s value to
wireless operators.
The Company also used approximately $30 million of the ADV during fiscal 2004 as final payment for wireless licenses granted in fiscal 2004
in which the Company was the highest bidder in a FCC auction held during fiscal 2003. On a cumulative basis, the Company used $38 million
of the ADV as payment for these wireless licenses, for which the Company had no cost basis at September 30, 2004. The ADV had no remaining
value at September 30, 2004.
NOTE 13. SUBSEQUENT EVENTS
In October 2004, the Company completed the acquisition of the approximate 86% of the outstanding capital stock of Iridigm Display Corporation,
aprivately held display technology company, that it did not already own for approximately $160 million in cash and the exchange of stock options
with an aggregate estimated fair value of approximately $17 million. Also in October 2004, the Company completed the acquisition of Trigenix
Limited, a privately held mobile user interface company, for approximately $33 million in cash.
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