<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 24, 1999
QUALCOMM INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-19528 95-3685934
(Commission File No.) (IRS Employer Identification No.)
6455 LUSK BOULEVARD
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (619) 587-1121
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 24, 1999 (the "Closing Date"), QUALCOMM Incorporated ("QUALCOMM")
sold certain of its assets related to its terrestrial CDMA wireless
infrastructure business (the "Assets") to Telefonaktiebolaget LM Ericsson
(publ), a Swedish company ("Ericsson") pursuant to that certain Asset Purchase
Agreement dated March 24, 1999 between QUALCOMM and Ericsson (the "Asset
Purchase Agreement"). QUALCOMM received $98,097,000 in cash on the Closing Date.
Total consideration will be based on a final determination of net assets as of
the Closing Date.
A description of the transaction is set forth in the Press Release
issued by QUALCOMM dated May 24, 1999, a copy of which is attached hereto as
Exhibit 99.1.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
(1) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION OF QUALCOMM INCORPORATED.
The following unaudited pro forma condensed consolidated
financial information is being filed herewith:
<TABLE>
<CAPTION>
Page:
<S> <C>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
at March 28, 1999 4
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Six Months ended March 28, 1999 5
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Year ended September 30, 1998 6
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Information 7
</TABLE>
(c) EXHIBITS.
2.1 Asset Purchase Agreement dated March 24, 1999 between
QUALCOMM Incorporated and Telefonaktiebolaget LM
Ericsson (publ) (incorporated herein by reference to
QUALCOMM's Form 10-Q for the three month period ended
March 28, 1999 and filed with the Securities and
Exchange Commission on May 11, 1999).
2.2 Amendment No. 1 dated as of May 24, 1999 to the Asset
Purchase Agreement dated as of March 24, 1999 between
QUALCOMM Incorporated and Telefonaktiebolaget LM
Ericsson (publ).(1)
99.1 Press Release dated May 24, 1999.
- ---------------
(1) Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Omitted portions will be filed separately with the
Securities and Exchange Commission.
3
<PAGE> 4
QUALCOMM INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 28, 1999
-----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA(a)
---------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................... $ 121,253 $ 98,097(b) $ 219,350
Investments .................................. 83,395 0 83,395
Accounts receivable, net ..................... 814,213 (2,164)(c) 812,049
Finance receivables .......................... 59,457 0 59,457
Inventories, net ............................. 254,477 (68,586)(d) 185,891
Other current assets ......................... 215,514 (2,905)(e) 212,609
----------- ----------- -----------
Total current assets ....................... 1,548,309 24,442 1,572,751
Property, plant and equipment, net ........... 557,899 (76,780)(f) 481,119
Finance receivables, net ..................... 352,525 (27,469)(g) 325,056
Other assets ................................. 162,663 (3,550)(h) 159,113
----------- ----------- -----------
Total assets .............................. $ 2,621,396 $ (83,357) $ 2,538,039
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities...... $ 662,781 $ (5,064)(i) $ 657,717
Unearned revenue ............................. 62,858 (1,998)(j) 60,860
Bank lines of credit ......................... 64,000 0 64,000
Current portion of long-term debt ............ 3,062 0 3,062
----------- ----------- -----------
Total current liabilities .................. 792,701 (7,062) 785,639
Long-term debt ............................... 2,360 0 2,360
Other liabilities ............................ 44,411 0 44,411
----------- ----------- -----------
Total liabilities .......................... 839,472 (7,062) 832,410
Minority interest in consolidated subsidiaries 45,073 0 45,073
----------- ----------- -----------
Company-obligated mandatorily redeemable
trust convertible preferred securities
of a subsidiary trust holding solely debt
securities of the Company ................... 660,000 0 660,000
----------- ----------- -----------
Stockholders' equity:
Preferred stock, $0.0001 par value ......... -- 0 --
Common stock, $0.0001 par value (q) ........ 15 0 15
Paid-in capital (q) ........................ 1,102,305 0 1,102,305
Retained earnings (deficit) ................ 5,910 (76,295)(b)-(j) (70,385)
Accumulated other comprehensive loss ....... (31,379) 0 (31,379)
----------- ----------- -----------
Total stockholders' equity ............... 1,076,851 (76,295) 1,000,556
----------- ----------- -----------
Total liabilities and stockholders' equity ... $ 2,621,396 $ (83,357) $ 2,538,039
=========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial information
4
<PAGE> 5
QUALCOMM INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 28, 1999
----------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA(a)
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Communications systems .................. $ 1,591,362 $ (47,618)(k) $ 1,543,744
Contract services ....................... 161,266 0 161,266
License, royalty and development fees ... 120,990 0 120,990
----------- ----------- -----------
Total revenues ........................ 1,873,618 (47,618) 1,826,000
----------- ----------- -----------
Operating expenses:
Communications systems .................. 1,153,365 (57,942)(l) 1,095,423
Contract services ....................... 112,800 0 112,800
Research and development ................ 203,075 (61,729)(m) 141,346
Selling and marketing ................... 123,364 (25,124)(n) 98,240
General and administrative .............. 102,053 (13,401)(o) 88,652
Other ................................... 95,824 0 95,824
----------- ----------- -----------
Total operating expenses ............. 1,790,481 (158,196) 1,632,285
----------- ----------- -----------
Operating income .......................... 83,137 110,578 193,715
Interest income ........................... 14,035 0 14,035
Interest expense .......................... (8,774) 0 (8,774)
Net gain on sale of investments ........... 5,663 0 5,663
Loss on cancellation of warrants .......... (3,273) 0 (3,273)
Other ..................................... (52,531) 0 (52,531)
Distributions on trust convertible
preferred securities of subsidiary trust (19,703) 0 (19,703)
Minority interest in income of consolidated
subsidiaries ............................ (6,543) 0 (6,543)
Equity in losses of investees ............. (5,995) 0 (5,995)
----------- ----------- -----------
Income before income taxes ................ 6,016 110,578 116,594
Income tax expense ........................ (106) (44,200)(p) (44,306)
----------- ----------- -----------
Net income ................................ $ 5,910 $ 66,378 $ 72,288
=========== =========== ===========
Net earnings per common share (q):
Basic ................................... $ 0.04 $ 0.51
=========== ===========
Diluted ................................. $ 0.04 $ 0.48
=========== ===========
Shares used in per share calculation:
Basic ................................... 143,030 143,030
=========== ===========
Diluted ................................. 146,526 152,040
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial information
5
<PAGE> 6
QUALCOMM INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
----------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA(a)
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Communications systems .................. $ 2,863,092 $ (218,073)(k) $ 2,645,019
Contract services ....................... 270,388 0 270,388
License, royalty and development fees ... 214,390 0 214,390
----------- ----------- -----------
Total revenues ........................ 3,347,870 (218,073) 3,129,797
----------- ----------- -----------
Operating expenses:
Communications systems .................. 2,136,297 (166,079)(l) 1,970,218
Contract services ....................... 197,102 0 197,102
Research and development ................ 349,483 (143,880)(m) 205,603
Selling and marketing ................... 246,975 (65,995)(n) 180,980
General and administrative .............. 163,372 (24,687)(o) 138,685
Other ................................... 11,976 0 11,976
----------- ----------- -----------
Total operating expenses .............. 3,105,205 (400,641) 2,704,564
----------- ----------- -----------
Operating income .......................... 242,665 182,568 425,233
Interest income ........................... 39,484 0 39,484
Interest expense .......................... (8,058) 0 (8,058)
Net gain on sale of investments ........... 2,950 0 2,950
Write-off of investment in other entity ... (20,000) 0 (20,000)
Distributions on trust convertible
preferred securities of subsidiary trust (39,270) 0 (39,270)
Minority interest in income of consolidated
subsidiaries ............................ (48,366) 0 (48,366)
Equity in losses of investees ............. (20,731) 0 (20,731)
----------- ----------- -----------
Income before income taxes ................ 148,674 182,568 331,242
Income tax expense ........................ (40,142) (82,418)(p) (122,560)
----------- ----------- -----------
Net income ................................ $ 108,532 $ 100,150 $ 208,682
=========== =========== ===========
Net earnings per common share (q):
Basic ................................... $ 0.78 $ 1.49
=========== ===========
Diluted ................................. $ 0.73 $ 1.40
=========== ===========
Shares used in per share calculation:
Basic ................................... 138,406 156,574
=========== ===========
Diluted ................................. 147,924 166,092
=========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial information
6
<PAGE> 7
QUALCOMM INCORPORATED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
(a) The unaudited pro forma condensed consolidated financial statements give
retroactive effect to the sale of certain assets related to QUALCOMM's
terrestrial CDMA wireless infrastructure business to Telefonaktiebolaget
LM Ericsson ("Ericsson") as if the sale had occurred as of March 28,
1999.
(b) Reflects the cash proceeds received by QUALCOMM on the closing date.
Total consideration will be based on a final determination of net assets
as of the closing date.
(c) Reflects accounts receivable, net of reserves, to be sold to Ericsson.
(d) Reflects inventories, net of reserves, to be sold to Ericsson.
(e) Reflects prepaid expenses, other current assets and the current portion
of deferred costs to be sold to Ericsson.
(f) Reflects property and equipment, net of accumulated depreciation, to be
sold to Ericsson.
(g) Reflects revenue recognized in connection with customer contracts to be
assumed by Ericsson under the percent of completion method in excess of
amounts billed for which financing terms will be extended.
(h) Reflects the noncurrent portion of deferred costs and other noncurrent
assets to be sold to Ericsson.
(i) Reflects accrued contract losses and accrued warranty costs related to
customer contract obligations to be assumed by Ericsson.
(j) Reflects cash collected in advance of revenues recognized on customer
contracts which will be assumed by Ericsson and for which financing
terms have not been extended.
(k) Reflects revenues related to customer contracts and ancillary products
sold by the terrestrial CDMA wireless infrastructure business to be
assumed by Ericsson.
(l) Reflects cost of sales related to customer contracts and ancillary
products sold by the terrestrial CDMA wireless infrastructure business
to be assumed by Ericsson.
(m) Reflects research and development expenses related to the terrestrial
CDMA wireless infrastructure business to be assumed by Ericsson.
(n) Reflects selling and marketing expenses related to the terrestrial CDMA
wireless infrastructure business to be assumed by Ericsson.
(o) Reflects general and administrative expense related to the terrestrial
CDMA wireless infrastructure business to be assumed by Ericsson.
(p) Pro forma adjustments have been tax effected at a 45% incremental income
tax rate for the year ended September 30, 1998 and at a 40% incremental
income tax rate for the six months ended March 28, 1999.
7
<PAGE> 8
(q) On April 14, 1999, QUALCOMM's Board of Directors declared a two-for-one
stock split of QUALCOMM's common stock. The stock dividend was
distributed on May 10, 1999 to stockholders of record on April 21, 1999.
Historical and pro forma net earnings (loss) per common share, common
stock and paid-in-capital are presented giving retroactive effect to the
stock split. Pro forma net earnings per common share for the year ended
September 30, 1998 are calculated assuming conversion of 18,168,000
shares of trust convertible preferred securities into common stock as
such conversion is dilutive.
8
<PAGE> 9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUALCOMM INCORPORATED
Dated: June 8, 1999 By: /S/ ANTHONY S. THORNLEY
---------------------------------
Anthony S. Thornley
Executive Vice President and
Chief Financial Officer
9
<PAGE> 10
INDEX TO EXHIBITS
2.1 Asset Purchase Agreement dated March 24, 1999 between QUALCOMM
Incorporated and Telefonaktiebolaget LM Ericsson (publ)
(incorporated herein by reference to QUALCOMM's Form 10-Q for
the three month period ended March 28, 1999 and filed with the
Securities and Exchange Commission on May 11, 1999).
2.2 Amendment No. 1 dated as of May 24, 1999 to the Asset Purchase
Agreement dated as of March 24, 1999 between QUALCOMM
Incorporated and Telefonaktiebolaget LM Ericsson (publ).(1)
99.1 Press Release dated May 24, 1999.
- ----------------
(1) Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment. Omitted portions will be filed separately with the
Securities and Exchange Commission.
10
<PAGE> 1
- ----------------------------------------------
*** Text Omitted and Filed Separately
Confidential Treatment Requested Under
17 C.F.R. Sections 200.80(b)(4), 200.83 and EXHIBIT 2.2
240.24b-2
- ----------------------------------------------
AMENDMENT NO. 1, dated as of May 24, 1999 (this "Amendment"), to the Asset
Purchase Agreement, dated as of March 24, 1999 (the "Purchase Agreement"),
between QUALCOMM INCORPORATED, a Delaware corporation (the "Seller"), and
TELEFONAKTIEBOLAGET LM ERICSSON (publ), a corporation organized under the laws
of Sweden (the "Purchaser"). Capitalized terms used but not defined herein
are used as defined in the Purchase Agreement.
W I T N E S S E T H
WHEREAS, the Seller and the Purchaser have entered into the Purchase
Agreement; and
WHEREAS, the Seller and the Purchaser desire to amend the Purchase
Agreement in certain respects;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants set forth herein, the Seller and the Purchaser hereby agree as
follows:
SECTION 1. Amendments to Purchase Agreement Regarding Purchase Price,
Purchase Price Adjustments and Exclusion of Certain Assets. (a) The Purchase
Agreement is hereby amended as follows:
(i) Clause (iv) of Section 2.01(a) of the Purchase Agreement is amended
by adding immediately after the phrase "ordinary course of business" the phrase
[***]
(ii) Clause (vi) of Section 2.01(a) of the Purchase Agreement is amended
by adding immediately after the phrase "Excluded Contracts" the phrase [***]
(iii) Clause (v) of Section 2.01(b) of the Purchase Agreement is amended
by deleting the word "and" with inserting a comma in its place and adding
immediately after the phrase "ordinary course of business" the phrase [***]
(iv) Clause (x) of Section 2.01(b) of the Purchase Agreement is amended
by deleting the word "and" from the end thereof.
(v) Section 2.01(b) of the Purchase Agreement is amended by adding a new
clause (xi) thereto to read in its entirety as follows:
*** Confidential Treatment Requested
<PAGE> 2
2
[***]
(vi) Clause (xi) of Section 2.01(b) of the Purchase Agreement is
renumbered as clause (xii).
(vii) Section 2.03 of the Purchase Agreement is amended by deleting the
amount [***] and inserting in its place the amount "98,097,000".
(viii) The second parenthetical of the first sentence of Section 2.08(a)
of the Purchase Agreement is amended by (A) adding immediately before the phrase
"except that it shall include", the phrase [***].
(ix) Section 2.08(b)(ii) of the Purchase Agreement is amended by adding
at the end of the first sentence thereof the following:
"; provided further, however, that the Purchaser may not dispute amounts
reflected on the Closing Statement of Net Assets on the basis that the
[***] do not comply with U.S. GAAP (it being understood that the
Purchaser may dispute amounts solely on the basis that such amounts were
not arrived at on a basis consistent with the preparation of the January
Statement of Net Assets (except to the extent such inconsistency is
mandated by Section 2.08(a)), that such amounts reflect clerical or
mathematical error or that such amounts do not properly adjust to
include only the book value of the Assets and the Assumed Liabilities
and to eliminate the book value of the Excluded Assets and the Excluded
Liabilities)".
(x) The second sentence of Section 2.08(c) of the Purchase Agreement
is amended to read in its entirety as follows:
"Subject to the limitation set forth in Section 2.08(b)(iv), within
three Business Days of the Closing Statement of Net Assets being deemed
final, a Purchase Price Adjustment shall be made as follows:
- --------------
*** Confidential Treatment Requested.
<PAGE> 3
(i) in the event that [***] exceeds the Closing Net Book Value by at
least the Adjustment Threshold, then the Purchase Price shall be adjusted
downward in an amount equal to such excess over the Adjustment Threshold,
and the Seller shall, within three Business Days of such determination,
pay the amount of such excess, together with interest thereon, from the
Closing Date through the date of payment, at the rate of interest publicly
announced by Citibank, N.A. or any successor thereto in New York, New York
from time to time as its reference rate from the Closing Date to the date
of such payment, to the Purchaser by wire transfer in immediately
available funds; and
(ii) in the event that the Closing Net Book Value exceeds [***] by at
least the Adjustment Threshold, then the Purchase Price shall be adjusted
upward in an amount equal to such excess over the Adjustment Threshold,
and the Purchaser shall, within three Business Days of such determination,
pay the amount of such excess, together with interest thereon, from the
Closing Date through the date of payment, at the rate of interest publicly
announced by Citibank, N.A. or any successor thereto in New York, New York
from time to time as its reference rate from the Closing Date to the date
of such payment, to the Seller by wire transfer in immediately available
funds."
(b) In partial consideration of the foregoing amendments, the Purchaser
waives any and all disputes relating to the January Statement of Net Assets
pursuant to Section 2.07 and agrees that no pre-Closing Purchase Price
adjustment shall be made pursuant to Section 2.07 other than as expressly set
forth above.
SECTION 2. Amendments Regarding Transferred Employees. Article VI of the
Purchase Agreement is amended as set forth in the Employee Transition Services
Agreement, dated as of the date hereof, between the Seller and the Purchaser.
SECTION 3. Effect of Amendment. Except as and to the extent expressly
modified by this Amendment, the Purchase Agreement shall remain in full force
and effect in all respects.
SECTION 4. Counterparts. This Amendment may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 5. Governing Law. This Amendment shall be governed by the laws of
the State of New York.
*** Confidential Treatment Requested
<PAGE> 4
4
(The Remainder of This Page is Intentionally Left Blank.)
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
QUALCOMM INCORPORATED
By /s/ [SIGNATURE ILLEGIBLE]
------------------------------------------
Name:
Title:
TELEFONAKTIEBOLAGET LM
ERICSSON (publ)
By /s/ [SIGNATURE ILLEGIBLE]
------------------------------------------
Name:
Title:
By /s/ [SIGNATURE ILLEGIBLE]
------------------------------------------
Name:
Title:
<PAGE> 1
Exhibit 99.1
FOR IMMEDIATE RELEASE
QUALCOMM Contacts:
Christine Trimble, Corporate Public Relations
1-(619) 651-3628 (ph) 1-(619) 651-2590 (fax)
e-mail: [email protected]
or
Julie Cunningham, Investor Relations
1-(619) 658-4224 (ph) 1-(619) 651-9303 (fax)
e-mail: [email protected]
QUALCOMM and Ericsson Close Agreements
- --CDMA Patent Disputes Settled, CDMA Infrastructure Business Acquired by
Ericsson--
SAN DIEGO -- May 24, 1999 -- QUALCOMM Incorporated (NASDAQ: QCOM) today
announced that it has closed the sale of QUALCOMM's terrestrial Code Division
Multiple Access (CDMA) wireless infrastructure business, including its R&D
resources, and assumed select customer commitments, related assets and personnel
to Ericsson.
"We are pleased that our agreements with Ericsson are now complete and all
patent disputes are behind us. Both QUALCOMM and Ericsson have worked closely to
make the transition of our infrastructure employees as smooth as possible," said
Dr. Irwin M. Jacobs, chairman and CEO of QUALCOMM Incorporated. "We look forward
to continuing our work together in support of a single CDMA standard to connect
the world."
Under the series of agreements, QUALCOMM and Ericsson both support a single CDMA
world standard with three optional modes for the next generation of wireless
communications, have entered into cross licenses for their respective patent
portfolios and have settled the pending patent infringement litigation between
the two companies. Approximately 1,200 QUALCOMM employees in San Diego, Calif.
and Boulder, Colo. are being transferred to Ericsson as part of the acquisition.
QUALCOMM Incorporated (NASDAQ: QCOM) is a leader in developing and delivering
innovative digital wireless communications products and services based on the
Company's CDMA digital technology. The Company's major business areas include
CDMA phones; integrated CDMA chipsets and system software; technology licensing;
and satellite-based systems including OmniTRACS(R) and portions of the
Globalstar(TM) system. Headquartered in San Diego, Calif., QUALCOMM is a FORTUNE
500(R) company with fiscal 1998 revenues in excess of U.S. $3 billion. For more
information, please visit the Company's web site at
<<http://www.qualcomm.com/>http://www.qualcomm.com>.
<PAGE> 2
Except for the historical information contained herein, this news release
contains forward-looking statements that are subject to risks and uncertainties,
including timely product development, the Company's ability to successfully
manufacture significant quantities of CDMA or other equipment on a timely and
profitable basis, and those related to performance guarantees, change in
economic conditions of the various markets the Company serves, as well as the
other risks detailed from time to time in the Company's SEC reports, including
the report on Form 10-K for the year ended September 27, 1998, and most recent
Form 10-Q. ###
QUALCOMM and OmniTRACS are registered trademarks of QUALCOMM Incorporated.
Globalstar is a trademark of Loral QUALCOMM Satellite Services, Incorporated.
All other trademarks are the property of their respective owners.
