x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 95-3685934 (I.R.S. Employer Identification No.) | |
5775 Morehouse Dr., San Diego, California (Address of Principal Executive Offices) | 92121-1714 (Zip Code) |
Large accelerated filer x | Accelerated filer o | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Class | Number of Shares | |
Common Stock, $0.0001 per share par value | 1,473,648,385 |
Page | ||
QUALCOMM Incorporated | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(In millions, except per share data) | ||||
(Unaudited) |
June 26, 2016 | September 27, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,885 | $ | 7,560 | |||
Marketable securities | 11,225 | 9,761 | |||||
Accounts receivable, net | 1,939 | 1,964 | |||||
Inventories | 1,338 | 1,492 | |||||
Deferred tax assets | — | 635 | |||||
Other current assets | 592 | 687 | |||||
Total current assets | 20,979 | 22,099 | |||||
Marketable securities | 13,922 | 13,626 | |||||
Deferred tax assets | 2,075 | 1,453 | |||||
Property, plant and equipment, net | 2,341 | 2,534 | |||||
Goodwill | 5,657 | 5,479 | |||||
Other intangible assets, net | 3,669 | 3,742 | |||||
Other assets | 2,143 | 1,863 | |||||
Total assets | $ | 50,786 | $ | 50,796 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 1,572 | $ | 1,300 | |||
Payroll and other benefits related liabilities | 874 | 861 | |||||
Unearned revenues | 535 | 583 | |||||
Short-term debt | 1,749 | 1,000 | |||||
Other current liabilities | 2,113 | 2,356 | |||||
Total current liabilities | 6,843 | 6,100 | |||||
Unearned revenues | 2,426 | 2,496 | |||||
Long-term debt | 10,024 | 9,969 | |||||
Other liabilities | 855 | 817 | |||||
Total liabilities | 20,148 | 19,382 | |||||
Commitments and contingencies (Note 7) | |||||||
Stockholders’ equity: | |||||||
Qualcomm stockholders’ equity: | |||||||
Preferred stock, $0.0001 par value; 8 shares authorized; none outstanding | — | — | |||||
Common stock and paid-in capital, $0.0001 par value; 6,000 shares authorized; 1,473 and 1,524 shares issued and outstanding, respectively | 169 | — | |||||
Retained earnings | 30,134 | 31,226 | |||||
Accumulated other comprehensive income | 344 | 195 | |||||
Total Qualcomm stockholders’ equity | 30,647 | 31,421 | |||||
Noncontrolling interests | (9 | ) | (7 | ) | |||
Total stockholders’ equity | 30,638 | 31,414 | |||||
Total liabilities and stockholders’ equity | $ | 50,786 | $ | 50,796 |
See Accompanying Notes to Condensed Consolidated Financial Statements. |
QUALCOMM Incorporated | ||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(In millions, except per share data) | ||||
(Unaudited) |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Revenues: | |||||||||||||||
Equipment and services | $ | 3,875 | $ | 3,840 | $ | 11,311 | $ | 13,459 | |||||||
Licensing | 2,169 | 1,992 | 6,059 | 6,366 | |||||||||||
Total revenues | 6,044 | 5,832 | 17,370 | 19,825 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of equipment and services revenues | 2,534 | 2,451 | 7,210 | 8,126 | |||||||||||
Research and development | 1,268 | 1,407 | 3,922 | 4,133 | |||||||||||
Selling, general and administrative | 620 | 621 | 1,817 | 1,749 | |||||||||||
Other (Note 2) | 30 | 118 | (270 | ) | 1,181 | ||||||||||
Total costs and expenses | 4,452 | 4,597 | 12,679 | 15,189 | |||||||||||
Operating income | 1,592 | 1,235 | 4,691 | 4,636 | |||||||||||
Interest expense | (75 | ) | (32 | ) | (221 | ) | (34 | ) | |||||||
Investment income, net (Note 2) | 176 | 195 | 403 | 634 | |||||||||||
Income before income taxes | 1,693 | 1,398 | 4,873 | 5,236 | |||||||||||
Income tax expense | (250 | ) | (215 | ) | (770 | ) | (1,029 | ) | |||||||
Net income | 1,443 | 1,183 | 4,103 | 4,207 | |||||||||||
Net loss attributable to noncontrolling interests | 1 | 1 | 3 | 2 | |||||||||||
Net income attributable to Qualcomm | $ | 1,444 | $ | 1,184 | $ | 4,106 | $ | 4,209 | |||||||
Basic earnings per share attributable to Qualcomm | $ | 0.98 | $ | 0.74 | $ | 2.76 | $ | 2.57 | |||||||
Diluted earnings per share attributable to Qualcomm | $ | 0.97 | $ | 0.73 | $ | 2.74 | $ | 2.53 | |||||||
Shares used in per share calculations: | |||||||||||||||
Basic | 1,471 | 1,608 | 1,487 | 1,638 | |||||||||||
Diluted | 1,486 | 1,629 | 1,500 | 1,661 | |||||||||||
Dividends per share announced | $ | 0.53 | $ | 0.48 | $ | 1.49 | $ | 1.32 |
See Accompanying Notes to Condensed Consolidated Financial Statements. |
QUALCOMM Incorporated | ||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
(In millions) | ||||
(Unaudited) |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Net income | $ | 1,443 | $ | 1,183 | $ | 4,103 | $ | 4,207 | |||||||
Other comprehensive income (loss), net of income taxes: | |||||||||||||||
Foreign currency translation gains (losses) | 5 | 7 | (6 | ) | (25 | ) | |||||||||
Reclassification of foreign currency translation losses included in net income | 15 | — | 21 | — | |||||||||||
Noncredit other-than-temporary impairment losses and subsequent changes in fair value related to certain available-for-sale debt securities | 1 | (9 | ) | (49 | ) | (19 | ) | ||||||||
Reclassification of other-than-temporary losses on available-for-sale securities included in net income | 27 | 31 | 128 | 92 | |||||||||||
Net unrealized gains on other available-for-sale securities | 176 | 20 | 135 | 14 | |||||||||||
Reclassification of net realized gains on available-for-sale securities included in net income | (35 | ) | (76 | ) | (76 | ) | (251 | ) | |||||||
Net unrealized (losses) gains on derivative instruments | (4 | ) | 58 | (4 | ) | 58 | |||||||||
Reclassification of net realized gains on derivative instruments included in net income | (1 | ) | — | — | — | ||||||||||
Total other comprehensive income (loss) | 184 | 31 | 149 | (131 | ) | ||||||||||
Total comprehensive income | 1,627 | 1,214 | 4,252 | 4,076 | |||||||||||
Comprehensive loss attributable to noncontrolling interests | 1 | 1 | 3 | 2 | |||||||||||
Comprehensive income attributable to Qualcomm | $ | 1,628 | $ | 1,215 | $ | 4,255 | $ | 4,078 |
See Accompanying Notes to Condensed Consolidated Financial Statements. |
QUALCOMM Incorporated | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(In millions) | ||||
(Unaudited) |
Nine Months Ended | |||||||
June 26, 2016 | June 28, 2015 | ||||||
Operating Activities: | |||||||
Net income | $ | 4,103 | $ | 4,207 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization expense | 1,092 | 888 | |||||
Indefinite and long-lived asset impairment charges | 94 | 304 | |||||
Income tax provision (less than) in excess of income tax payments | (236 | ) | 159 | ||||
Gain on sale of wireless spectrum | (380 | ) | — | ||||
Non-cash portion of share-based compensation expense | 730 | 793 | |||||
Incremental tax benefits from share-based compensation | (3 | ) | (98 | ) | |||
Net realized gains on marketable securities and other investments | (142 | ) | (399 | ) | |||
Impairment losses on marketable securities and other investments | 138 | 161 | |||||
Other items, net | — | (29 | ) | ||||
Changes in assets and liabilities: | |||||||
Accounts receivable, net | 39 | 438 | |||||
Inventories | 169 | (122 | ) | ||||
Other assets | 153 | (897 | ) | ||||
Trade accounts payable | 263 | (769 | ) | ||||
Payroll, benefits and other liabilities | (434 | ) | (406 | ) | |||
Unearned revenues | (270 | ) | (408 | ) | |||
Net cash provided by operating activities | 5,316 | 3,822 | |||||
Investing Activities: | |||||||
Capital expenditures | (389 | ) | (815 | ) | |||
Purchases of available-for-sale securities | (12,960 | ) | (13,118 | ) | |||
Proceeds from sales and maturities of available-for-sale securities | 10,303 | 11,897 | |||||
Purchases of trading securities | (177 | ) | (1,034 | ) | |||
Proceeds from sales and maturities of trading securities | 779 | 1,008 | |||||
Proceeds from sales of other marketable securities | 450 | — | |||||
Proceeds from sales of property, plant and equipment | 15 | 161 | |||||
Acquisitions and other investments, net of cash acquired | (663 | ) | (325 | ) | |||
Proceeds from sale of wireless spectrum | 232 | — | |||||
Other items, net | 181 | 6 | |||||
Net cash used by investing activities | (2,229 | ) | (2,220 | ) | |||
Financing Activities: | |||||||
Proceeds from short-term debt | 6,633 | 2,813 | |||||
Proceeds from long-term debt | — | 9,937 | |||||
Repayment of short-term debt | (5,885 | ) | (1,814 | ) | |||
Proceeds from issuance of common stock | 422 | 571 | |||||
Repurchases and retirements of common stock | (3,698 | ) | (9,016 | ) | |||
Dividends paid | (2,208 | ) | (2,142 | ) | |||
Incremental tax benefits from share-based compensation | 3 | 98 | |||||
Other items, net | (32 | ) | 41 | ||||
Net cash (used) provided by financing activities | (4,765 | ) | 488 | ||||
Effect of exchange rate changes on cash and cash equivalents | 3 | (10 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (1,675 | ) | 2,080 | ||||
Cash and cash equivalents at beginning of period | 7,560 | 7,907 | |||||
Cash and cash equivalents at end of period | $ | 5,885 | $ | 9,987 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Cost of equipment and services revenues | $ | 10 | $ | 10 | $ | 31 | $ | 33 | |||||||
Research and development | 152 | 176 | 478 | 508 | |||||||||||
Selling, general and administrative | 73 | 85 | 221 | 252 | |||||||||||
Share-based compensation expense before income taxes | 235 | 271 | 730 | 793 | |||||||||||
Related income tax benefit | (38 | ) | (58 | ) | (126 | ) | (145 | ) | |||||||
$ | 197 | $ | 213 | $ | 604 | $ | 648 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Inventories (in millions) | |||||||
June 26, 2016 | September 27, 2015 | ||||||
Raw materials | $ | 3 | $ | 1 | |||
Work-in-process | 694 | 550 | |||||
Finished goods | 641 | 941 | |||||
$ | 1,338 | $ | 1,492 |
Other Current Liabilities (in millions) | |||||||
June 26, 2016 | September 27, 2015 | ||||||
Customer incentives and other customer-related liabilities | $ | 1,685 | $ | 1,894 | |||
Other | 428 | 462 | |||||
$ | 2,113 | $ | 2,356 |
Investment Income, Net (in millions) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Interest and dividend income | $ | 156 | $ | 128 | $ | 451 | $ | 400 | |||||||
Net realized gains on marketable securities | 56 | 117 | 99 | 381 | |||||||||||
Net realized gains on other investments | 13 | 5 | 43 | 18 | |||||||||||
Impairment losses on marketable securities | (20 | ) | (42 | ) | (109 | ) | (131 | ) | |||||||
Impairment losses on other investments | (13 | ) | (13 | ) | (29 | ) | (30 | ) | |||||||
Equity in net losses of investees | (18 | ) | (10 | ) | (49 | ) | (23 | ) | |||||||
Other | 2 | 10 | (3 | ) | 19 | ||||||||||
$ | 176 | $ | 195 | $ | 403 | $ | 634 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Qualcomm Stockholders’ Equity | Noncontrolling Interests | Total Stockholders’ Equity | |||||||||
Balance at September 27, 2015 | $ | 31,421 | $ | (7 | ) | $ | 31,414 | ||||
Net income (loss) | 4,106 | (3 | ) | 4,103 | |||||||
Other comprehensive income | 149 | — | 149 | ||||||||
Common stock issued under employee benefit plans and related tax benefits | 364 | — | 364 | ||||||||
Share-based compensation | 771 | — | 771 | ||||||||
Tax withholdings related to vesting of share-based payments | (216 | ) | — | (216 | ) | ||||||
Dividends | (2,250 | ) | — | (2,250 | ) | ||||||
Stock repurchases | (3,699 | ) | — | (3,699 | ) | ||||||
Other | 1 | 1 | 2 | ||||||||
Balance at June 26, 2016 | $ | 30,647 | $ | (9 | ) | $ | 30,638 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Foreign Currency Translation Adjustment | Noncredit Other-than-Temporary Impairment Losses and Subsequent Changes in Fair Value for Certain Available-for-Sale Debt Securities | Net Unrealized Gain (Loss) on Other Available-for-Sale Securities | Net Unrealized Gain (Loss) on Derivative Instruments | Total Accumulated Other Comprehensive Income | |||||||||||||||
Balance at September 27, 2015 | $ | (160 | ) | $ | 4 | $ | 297 | $ | 54 | $ | 195 | ||||||||
Other comprehensive (loss) income before reclassifications | (6 | ) | 8 | 135 | (4 | ) | 133 | ||||||||||||
Reclassifications from accumulated other comprehensive income (loss) | 21 | (11 | ) | 6 | — | 16 | |||||||||||||
Other comprehensive income (loss) | 15 | (3 | ) | 141 | (4 | ) | 149 | ||||||||||||
Balance at June 26, 2016 | $ | (145 | ) | $ | 1 | $ | 438 | $ | 50 | $ | 344 |
2016 | 2015 | ||||||||||||||
Per Share | Total | Per Share | Total | ||||||||||||
First quarter | $ | 0.48 | $ | 730 | $ | 0.42 | $ | 710 | |||||||
Second quarter | 0.48 | 726 | 0.42 | 702 | |||||||||||
Third quarter | 0.53 | 794 | 0.48 | 771 | |||||||||||
$ | 1.49 | $ | 2,250 | $ | 1.32 | $ | 2,183 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
June 26, 2016 | September 27, 2015 | ||||||||||
Amount | Effective Rate | Amount | Effective Rate | ||||||||
Floating-rate notes due May 18, 2018 | $ | 250 | 0.97% | $ | 250 | 0.66% | |||||
Floating-rate notes due May 20, 2020 | 250 | 1.24% | 250 | 0.94% | |||||||
Fixed-rate 1.40% notes due May 18, 2018 | 1,250 | 0.53% | 1,250 | 0.43% | |||||||
Fixed-rate 2.25% notes due May 20, 2020 | 1,750 | 1.55% | 1,750 | 1.62% | |||||||
Fixed-rate 3.00% notes due May 20, 2022 | 2,000 | 1.91% | 2,000 | 2.08% | |||||||
Fixed-rate 3.45% notes due May 20, 2025 | 2,000 | 3.46% | 2,000 | 3.46% | |||||||
Fixed-rate 4.65% notes due May 20, 2035 | 1,000 | 4.74% | 1,000 | 4.74% | |||||||
Fixed-rate 4.80% notes due May 20, 2045 | 1,500 | 4.71% | 1,500 | 4.71% | |||||||
Total principal | 10,000 | 10,000 | |||||||||
Unamortized discount, including debt issuance costs | (59 | ) | (63 | ) | |||||||
Hedge accounting fair value adjustments | 83 | 32 | |||||||||
Total long-term debt | $ | 10,024 | $ | 9,969 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
QCT | QTL | QSI | Reconciling Items | Total | |||||||||||||||
For the three months ended | |||||||||||||||||||
June 26, 2016 | |||||||||||||||||||
Revenues | $ | 3,853 | $ | 2,038 | $ | 12 | $ | 141 | $ | 6,044 | |||||||||
EBT | 365 | 1,749 | (5 | ) | (416 | ) | 1,693 | ||||||||||||
June 28, 2015 | |||||||||||||||||||
Revenues | $ | 3,853 | $ | 1,931 | $ | — | $ | 48 | $ | 5,832 | |||||||||
EBT | 289 | 1,654 | (49 | ) | (496 | ) | 1,398 | ||||||||||||
For the nine months ended | |||||||||||||||||||
June 26, 2016 | |||||||||||||||||||
Revenues | $ | 11,285 | $ | 5,780 | $ | 33 | $ | 272 | $ | 17,370 | |||||||||
EBT | 1,125 | 4,945 | 400 | (1,597 | ) | 4,873 | |||||||||||||
June 28, 2015 | |||||||||||||||||||
Revenues | $ | 13,529 | $ | 6,162 | $ | — | $ | 134 | $ | 19,825 | |||||||||
EBT | 2,185 | 5,395 | (82 | ) | (2,262 | ) | 5,236 | ||||||||||||
Total assets | |||||||||||||||||||
June 26, 2016 | $ | 2,620 | $ | 548 | $ | 937 | $ | 46,681 | $ | 50,786 | |||||||||
September 27, 2015 | 2,923 | 438 | 812 | 46,623 | $ | 50,796 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Revenues | |||||||||||||||
Nonreportable segments | $ | 142 | $ | 49 | $ | 274 | $ | 138 | |||||||
Intersegment eliminations | (1 | ) | (1 | ) | (2 | ) | (4 | ) | |||||||
$ | 141 | $ | 48 | $ | 272 | $ | 134 | ||||||||
EBT | |||||||||||||||
Unallocated cost of equipment and services revenues | $ | (130 | ) | $ | (65 | ) | $ | (397 | ) | $ | (217 | ) | |||
Unallocated research and development expenses | (199 | ) | (188 | ) | (602 | ) | (624 | ) | |||||||
Unallocated selling, general and administrative expenses | (121 | ) | (137 | ) | (373 | ) | (402 | ) | |||||||
Unallocated other expense, net | (30 | ) | (98 | ) | (110 | ) | (1,161 | ) | |||||||
Unallocated interest expense | (74 | ) | — | (217 | ) | — | |||||||||
Unallocated investment income, net | 185 | 193 | 388 | 655 | |||||||||||
Nonreportable segments | (47 | ) | (201 | ) | (286 | ) | (512 | ) | |||||||
Intersegment eliminations | — | — | — | (1 | ) | ||||||||||
$ | (416 | ) | $ | (496 | ) | $ | (1,597 | ) | $ | (2,262 | ) |
Three Months Ended | Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||||||
Cost of equipment and services revenues | $ | 99 | $ | 55 | $ | 345 | $ | 184 | |||||||
Research and development expenses | 2 | 3 | 7 | 11 | |||||||||||
Selling, general and administrative expenses | 23 | 20 | 79 | 45 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Severance Costs | Other Costs | Total | |||||||||
Beginning balance of restructuring accrual | $ | 122 | $ | 31 | $ | 153 | |||||
Additional costs | 50 | 67 | 117 | ||||||||
Cash payments | (143 | ) | (80 | ) | (223 | ) | |||||
Adjustments | (9 | ) | (3 | ) | (12 | ) | |||||
Ending balance of restructuring accrual | $ | 20 | $ | 15 | $ | 35 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | |||||||||||||||
Cash equivalents | $ | 3,698 | $ | 1,538 | $ | — | $ | 5,236 | |||||||
Marketable securities | |||||||||||||||
U.S. Treasury securities and government-related securities | 853 | 1,295 | — | 2,148 | |||||||||||
Corporate bonds and notes | — | 17,159 | — | 17,159 | |||||||||||
Mortgage- and asset-backed and auction rate securities | — | 1,999 | 60 | 2,059 | |||||||||||
Equity and preferred securities and equity funds | 1,106 | 459 | — | 1,565 | |||||||||||
Debt funds | — | 2,216 | — | 2,216 | |||||||||||
Total marketable securities | 1,959 | 23,128 | 60 | 25,147 | |||||||||||
Derivative instruments | — | 88 | — | 88 | |||||||||||
Other investments | 295 | — | — | 295 | |||||||||||
Total assets measured at fair value | $ | 5,952 | $ | 24,754 | $ | 60 | $ | 30,766 | |||||||
Liabilities | |||||||||||||||
Derivative instruments | $ | — | $ | 11 | $ | — | $ | 11 | |||||||
Other liabilities | 295 | — | — | 295 | |||||||||||
Total liabilities measured at fair value | $ | 295 | $ | 11 | $ | — | $ | 306 |
Nine Months Ended | |||||||
June 26, 2016 | June 28, 2015 | ||||||
Beginning balance of Level 3 | $ | 224 | $ | 269 | |||
Total realized and unrealized gains or losses: | |||||||
Included in investment income, net | (3 | ) | 3 | ||||
Included in other comprehensive income (loss) | (2 | ) | (4 | ) | |||
Purchases | 2 | 62 | |||||
Sales | (103 | ) | (46 | ) | |||
Settlements | (41 | ) | (57 | ) | |||
Transfers out of Level 3 | (17 | ) | — | ||||
Ending balance of Level 3 | $ | 60 | $ | 227 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Current | Noncurrent | ||||||||||||||
June 26, 2016 | September 27, 2015 | June 26, 2016 | September 27, 2015 | ||||||||||||
Trading: | |||||||||||||||
U.S. Treasury securities and government-related securities | $ | — | $ | — | $ | — | $ | 12 | |||||||
Corporate bonds and notes | — | — | — | 364 | |||||||||||
Mortgage- and asset-backed and auction rate securities | — | — | — | 242 | |||||||||||
Total trading | — | — | — | 618 | |||||||||||
Available-for-sale: | |||||||||||||||
U.S. Treasury securities and government-related securities | 217 | 156 | 1,931 | 691 | |||||||||||
Corporate bonds and notes | 9,381 | 7,926 | 7,778 | 7,112 | |||||||||||
Mortgage- and asset-backed and auction rate securities | 1,521 | 1,302 | 538 | 263 | |||||||||||
Equity and preferred securities and equity funds | 106 | 377 | 1,459 | 1,253 | |||||||||||
Debt funds | — | — | 2,216 | 2,909 | |||||||||||
Total available-for-sale | 11,225 | 9,761 | 13,922 | 12,228 | |||||||||||
Fair value option: | |||||||||||||||
Debt fund | — | — | — | 780 | |||||||||||
Total marketable securities | $ | 11,225 | $ | 9,761 | $ | 13,922 | $ | 13,626 |
Years to Maturity | ||||||||||||||||||||||
Less Than One Year | One to Five Years | Five to Ten Years | Greater Than Ten Years | No Single Maturity Date | Total | |||||||||||||||||
$ | 3,987 | $ | 12,341 | $ | 2,103 | $ | 788 | $ | 4,363 | $ | 23,582 |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
Gross Realized Gains | Gross Realized Losses | Net Realized Gains | |||||||||
For the three months ended | |||||||||||
June 26, 2016 | $ | 62 | $ | (8 | ) | $ | 54 | ||||
June 28, 2015 | 126 | (10 | ) | 116 | |||||||
For the nine months ended | |||||||||||
June 26, 2016 | $ | 146 | $ | (30 | ) | $ | 116 | ||||
June 28, 2015 | 434 | (48 | ) | 386 |
Cost | Unrealized Gains | Unrealized Losses | Fair Value | ||||||||||||
June 26, 2016 | |||||||||||||||
Equity securities | $ | 1,355 | $ | 254 | $ | (44 | ) | $ | 1,565 | ||||||
Debt securities (including debt funds) | 23,461 | 292 | (171 | ) | 23,582 | ||||||||||
$ | 24,816 | $ | 546 | $ | (215 | ) | $ | 25,147 | |||||||
September 27, 2015 | |||||||||||||||
Equity securities | $ | 1,394 | $ | 264 | $ | (28 | ) | $ | 1,630 | ||||||
Debt securities (including debt funds) | 20,459 | 185 | (285 | ) | 20,359 | ||||||||||
$ | 21,853 | $ | 449 | $ | (313 | ) | $ | 21,989 |
June 26, 2016 | |||||||||||||||
Less than 12 months | More than 12 months | ||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||
U.S. Treasury securities and government-related securities | $ | 421 | $ | (2 | ) | $ | 35 | $ | (1 | ) | |||||
Corporate bonds and notes | 3,054 | (36 | ) | 1,488 | (82 | ) | |||||||||
Mortgage- and asset-backed and auction rate securities | 537 | (5 | ) | 265 | (2 | ) | |||||||||
Equity and preferred securities and equity funds | 447 | (43 | ) | 5 | (1 | ) | |||||||||
Debt funds | 318 | (4 | ) | 863 | (39 | ) | |||||||||
$ | 4,777 | $ | (90 | ) | $ | 2,656 | $ | (125 | ) |
September 27, 2015 | |||||||||||||||
Less than 12 months | More than 12 months | ||||||||||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||
U.S. Treasury securities and government-related securities | $ | 304 | $ | (4 | ) | $ | — | $ | — | ||||||
Corporate bonds and notes | 7,656 | (93 | ) | 368 | (62 | ) | |||||||||
Mortgage- and asset-backed and auction rate securities | 862 | (3 | ) | 108 | (1 | ) | |||||||||
Equity and preferred securities and equity funds | 392 | (28 | ) | 17 | — | ||||||||||
Debt funds | 1,792 | (117 | ) | 124 | (5 | ) | |||||||||
$ | 11,006 | $ | (245 | ) | $ | 617 | $ | (68 | ) |
QUALCOMM Incorporated | ||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | ||||
(Unaudited) |
• | We shipped approximately 201 million Mobile Station Modem (MSM) integrated circuits for CDMA- and OFDMA-based wireless devices, a decrease of 11%, compared to approximately 225 million MSM integrated circuits in the year ago quarter. Despite the decline in MSM shipments, QCT’s revenues remained flat compared to the year ago quarter primarily due to the decrease related to lower MSM and accompanying RF and PM unit shipments, offset by net increases in revenues related to higher connectivity shipments resulting from the acquisition of CSR, and the net impact of higher-priced product mix and lower average selling prices. |
• | Total reported device sales were approximately $62.6 billion, an increase of approximately 4%, compared to approximately $60.4 billion in the year ago quarter.(1) QTL’s revenues increased by 6% compared to the year ago quarter primarily due to the recognition of revenues related to prior periods pertaining to the dismissal of the arbitration with LG Electronics, Inc. (LGE) and an increase in reported sales of CDMA-based products (including multimode products that also implement OFDMA) primarily related to devices shipped in prior periods, partially offset by decreases in revenues per reported unit and recognition of unearned licensed fees. |
• | Worldwide cellular connections grew sequentially by approximately 1% to reach approximately 7.4 billion.(2) |
• | Worldwide 3G/4G connections (CDMA-based, OFDMA-based and CDMA/OFDMA multimode) grew sequentially by approximately 4% to approximately 3.8 billion, which was approximately 52% of total cellular connections.(2) |
(1) | Total reported device sales is the sum of all reported sales in U.S. dollars (as reported to us by our licensees) of all licensed CDMA-based, OFDMA-based and CDMA/OFDMA multimode subscriber devices (including handsets, modules, modem cards and other subscriber devices) by our licensees during a particular period (collectively, 3G/4G devices). Not all licensees report sales the same way (e.g., some licensees report sales net of permitted deductions, including transportation, insurance, packing costs and other items, while |
(2) | According to GSMA Intelligence estimates as of July 18, 2016 for the quarter ended June 30, 2016. |
• | China continues to present significant opportunities for us, particularly with the rollout of 3G/4G LTE multimode. We expect the ongoing rollout of 4G services in China will encourage competition and growth, bring the benefits of 3G/4G LTE multimode to consumers, encourage consumers to replace 2G (GSM) and 3G devices and enable new opportunities beyond mobile applications (e.g., machine-to-machine). |
• | We expect that the increased availability of low-tier 3G/4G smartphone products will help enable further expansion of 3G and 3G/4G multimode in emerging regions. |
• | In February 2015, we reached a resolution with the China National Development and Reform Commission (NDRC) regarding its investigation of us relating to China’s Anti-Monopoly Law and agreed to implement a rectification plan that modifies certain of our business practices in China. The rectification plan provides, among other things, that for licenses of only our 3G and 4G essential Chinese patents for branded devices sold for use in China starting on January 1, 2015 (and reported to us starting in the third quarter of fiscal 2015), we will charge running royalties at royalty rates of 5% for 3G CDMA or WCDMA devices (including multimode 3G/4G devices) and 3.5% for 4G devices that do not implement CDMA or WCDMA (including 3-mode LTE-TDD devices), in each case using a royalty base of 65% of the net selling price. |
• | Despite the resolution of the NDRC investigation, China continues to present significant challenges for us. We continue to believe that certain licensees are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes 3G/4G units that we believe are not being reported by certain licensees), and certain companies, including unlicensed companies, are delaying execution of new license agreements. While we have reached agreements with many licensees, negotiations with certain other licensees and unlicensed companies are ongoing. We believe that the conclusion of new agreements with these licensees will result in improved reporting by these licensees, including with respect to sales of three-mode devices (i.e., devices that implement GSM, TD-SCDMA and LTE-TDD) sold in China. However, litigation and/or other actions (such as the litigation against Meizu Technology Co., Ltd. described in “Notes to Condensed Consolidated Financial statements, Note 7. Commitments and Contingencies”) may be necessary to compel licensees to report and pay the required royalties for sales they have not previously reported and/or to compel unlicensed companies to execute licenses. |
• | Regulatory authorities in other jurisdictions continue to investigate our business practices as well. |
• | Our business, particularly QCT, expects to be impacted by: concentration of device share among companies within the premium tier; second sourcing decisions made by our large customers with internally or externally sourced alternatives; and intense competition, particularly in China. |
• | We continue to invest significant resources toward advancements in 4G LTE and 5G technologies, OFDM-based WLAN technologies, audio and video codecs, wireless baseband chips, our converged computing/communications (Snapdragon) chips, graphics, connectivity, multimedia products, software and services, which contribute to the expansion of our intellectual property portfolio. We are also investing in targeted opportunities that utilize our existing technical and business expertise to deploy new business models and enter into new industry segments, such as products for the connected home and the Internet of Things; automotive; networking; mobile computing; small cells and addressing the challenge of meeting the increased demand for data; very high speed connectivity; data centers; mobile health; wireless charging and machine learning, including robotics. |
• | We expect that 3G/4G device prices will continue to vary broadly due to the increased penetration of smartphones combined with competition throughout the world at all price tiers and growth in sales of non-handset connected devices. Additionally, varying rates of economic growth by region and stronger growth of device shipments in emerging regions as compared to developed regions, are expected to continue to impact the average and range of selling prices of 3G/4G devices. |
• | In the fourth quarter of fiscal 2015, we announced a Strategic Realignment Plan designed to improve execution, enhance financial performance and drive profitable growth as we work to create sustainable long-term value for stockholders. As part of this Strategic Realignment Plan, among other actions, we are implementing a cost reduction plan and plan to reduce our annual costs from fiscal 2015 levels (adjusted for variable compensation) of $7.3 billion (as announced on July 22, 2015) by approximately $1.1 billion through a series of targeted reductions across Qualcomm’s businesses, particularly in QCT. We also initiated a plan to reduce annual share-based compensation grants by approximately $300 million. We expect these cost reduction initiatives to be substantially implemented by the end of fiscal 2016. Restructuring activities were initiated in the fourth quarter of fiscal 2015, and a total of $300 million in net restructuring and restructuring-related charges were incurred through the third quarter of fiscal 2016. We expect to incur additional restructuring and restructuring-related charges of approximately $25 million to $100 million. |
• | In January 2016, we announced that we had reached an agreement with TDK Corporation to form a joint venture, under the name RF360 Holdings Singapore Pte. Ltd., to enable delivery of radio frequency front-end (RFFE) modules and RF filters into fully integrated products for mobile devices and Internet of Things (IoT) applications, among others. The joint venture will initially be owned 51% by us and 49% by TDK. Certain intellectual property, patents and filter and module design and manufacturing assets will be carved out of existing TDK businesses and be acquired by the joint venture, with certain assets acquired by us. The purchase price of our interest in the joint venture and the assets to be transferred to us is $1.2 billion, to be adjusted for working capital, outstanding indebtedness and certain capital expenditures, among other things. Additionally, we have the option to acquire (and TDK has an option to sell) TDK’s interest in the joint venture for $1.15 billion 30 months after the closing date. TDK will be entitled to up to a total of $200 million in payments based on sales of RF filter functions over the three-year period after the closing date, which is a substitute for and in lieu of any right of TDK to receive any profit sharing, distributions, dividends or other payments of any kind or nature. The transaction is subject to receipt of regulatory approvals and other closing conditions and is expected to close by early calendar 2017. |
Revenues (in millions) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
June 26, 2016 | June 28, 2015 | Change | June 26, 2016 | June 28, 2015 | Change | ||||||||||||||||||
Equipment and services | $ | 3,875 | $ | 3,840 | $ | 35 | $ | 11,311 | $ | 13,459 | $ | (2,148 | ) | ||||||||||
Licensing | 2,169 | 1,992 | 177 | 6,059 | 6,366 | (307 | ) | ||||||||||||||||
$ | 6,044 | $ | 5,832 | $ | 212 | $ | 17,370 | $ | 19,825 | $ | (2,455 | ) |
Costs and Expenses (in millions) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
June 26, 2016 | June 28, 2015 | Change | June 26, 2016 | June 28, 2015 | Change | ||||||||||||||||||
Cost of equipment and services (E&S) revenues | $ | 2,534 | $ | 2,451 | $ | 83 | $ | 7,210 | $ | 8,126 | $ | (916 | ) | ||||||||||
Cost as % of E&S revenues | 65 | % | 64 | % | 64 | % | 60 | % |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
June 26, 2016 | June 28, 2015 | Change | June 26, 2016 | June 28, 2015 | Change | ||||||||||||||||||
Research and development | $ | 1,268 | $ | 1,407 | $ | (139 | ) | $ | 3,922 | $ | 4,133 | $ | (211 | ) | |||||||||
% of revenues | 21 | % | 24 | % | 23 | % | 21 | % | |||||||||||||||
Selling, general, and administrative | $ | 620 | $ | 621 | $ | (1 | ) | $ | 1,817 | $ | 1,749 | $ | 68 | ||||||||||
% of revenues | 10 | % | 11 | % | 10 | % | 9 | % | |||||||||||||||
Other | $ | 30 | $ | 118 | $ | (88 | ) | $ | (270 | ) | $ | 1,181 | $ | (1,451 | ) |
Interest Expense and Net Investment Income (in millions) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
June 26, 2016 | June 28, 2015 | Change | June 26, 2016 | June 28, 2015 | Change | ||||||||||||||||||
Interest expense | $ | 75 | $ | 32 | $ | 43 | $ | 221 | $ | 34 | $ | 187 | |||||||||||
Investment income, net | |||||||||||||||||||||||
Interest and dividend income | $ | 156 | $ | 128 | $ | 28 | $ | 451 | $ | 400 | $ | 51 | |||||||||||
Net realized gains on marketable securities | 56 | 117 | (61 | ) | 99 | 381 | (282 | ) | |||||||||||||||
Net realized gains on other investments | 13 | 5 | 8 | 43 | 18 | 25 | |||||||||||||||||
Impairment losses on marketable securities and other investments | (33 | ) | (55 | ) | 22 | (138 | ) | (161 | ) | 23 | |||||||||||||
Equity in net losses of investees | (18 | ) | (10 | ) | (8 | ) | (49 | ) | (23 | ) | (26 | ) | |||||||||||
Other | 2 | 10 | (8 | ) | (3 | ) | 19 | (22 | ) | ||||||||||||||
$ | 176 | $ | 195 | $ | (19 | ) | $ | 403 | $ | 634 | $ | (231 | ) |
Income Tax Expense (in millions) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
June 26, 2016 | June 28, 2015 | Change | June 26, 2016 | June 28, 2015 | Change | ||||||||||||||||||
Income tax expense | $ | 250 | $ | 215 | $ | 35 | $ | 770 | $ | 1,029 | $ | (259 | ) | ||||||||||
Effective tax rate | 15 | % | 15 | % | — | 16 | % | 20 | % | (4 | %) |
Three Months Ended | Nine Months Ended | ||||||||||
June 26, 2016 | June 28, 2015 | June 26, 2016 | June 28, 2015 | ||||||||
Expected income tax provision at federal statutory tax rate | 35 | % | 35 | % | 35 | % | 35 | % | |||
Benefits from foreign income taxed at other than U.S. rates | (14 | %) | (22 | %) | (15 | %) | (13 | %) | |||
Benefits related to the research and development tax credit | (1 | %) | (1 | %) | (3 | %) | (3 | %) | |||
Worthless stock deduction of domestic subsidiary | (6 | %) | — | (2 | %) | — | |||||
Tax audit impacts, net | — | — | — | (1 | %) | ||||||
Other | 1 | % | 3 | % | 1 | % | 2 | % | |||
Effective tax rate | 15 | % | 15 | % | 16 | % | 20 | % |
(in millions) | QCT | QTL | QSI | ||||||||
Three Months Ended June 26, 2016 | |||||||||||
Revenues | $ | 3,853 | $ | 2,038 | $ | 12 | |||||
EBT (1) | 365 | 1,749 | (5 | ) | |||||||
EBT as a % of revenues | 9 | % | 86 | % | |||||||
Three Months Ended June 28, 2015 | |||||||||||
Revenues | $ | 3,853 | $ | 1,931 | $ | — | |||||
EBT (1) | 289 | 1,654 | (49 | ) | |||||||
EBT as a % of revenues | 8 | % | 86 | % | |||||||
Nine Months Ended June 26, 2016 | |||||||||||
Revenues | $ | 11,285 | $ | 5,780 | $ | 33 | |||||
EBT (1) | 1,125 | 4,945 | 400 | ||||||||
EBT as a % of revenues | 10 | % | 86 | % | |||||||
Nine Months Ended June 28, 2015 | |||||||||||
Revenues | $ | 13,529 | $ | 6,162 | $ | — | |||||
EBT (1) | 2,185 | 5,395 | (82 | ) | |||||||
EBT as a % of revenues | 16 | % | 88 | % |
(1) | Earnings (loss) before taxes. |
June 26, 2016 | September 27, 2015 | $ Change | % Change | |||||||||||
Cash, cash equivalents and marketable securities | $ | 31,032 | $ | 30,947 | $ | 85 | — | |||||||
Accounts receivable, net | 1,939 | 1,964 | (25 | ) | (1 | %) | ||||||||
Inventories | 1,338 | 1,492 | (154 | ) | (10 | %) | ||||||||
Short-term debt | 1,749 | 1,000 | 749 | 75 | % | |||||||||
Long-term debt | 10,024 | 9,969 | 55 | 1 | % |
Nine Months Ended | ||||||||||||||
June 26, 2016 | June 28, 2015 | $ Change | % Change | |||||||||||
Net cash provided by operating activities | $ | 5,316 | $ | 3,822 | $ | 1,494 | 39 | % | ||||||
Net cash used by investing activities | (2,229 | ) | (2,220 | ) | (9 | ) | — | |||||||
Net cash (used) provided by financing activities | (4,765 | ) | 488 | (5,253 | ) | N/M |
• | We expect the majority of the charges incurred in connection with our Strategic Realignment Plan will result in cash payment. Our restructuring accrual was $35 million at June 26, 2016, and we expect to incur additional restructuring and restructuring-related charges of approximately $25 million to $100 million in fiscal 2016 and 2017. |
• | Our purchase obligations at June 26, 2016, some of which relate to research and development activities and capital expenditures, totaled $3.0 billion and $1.2 billion for fiscal 2016 and 2017, respectively, and $1.7 billion thereafter. |
• | Our research and development expenditures were $3.9 billion during the first nine months of fiscal 2016 and $5.5 billion in fiscal 2015, and we expect to continue to invest heavily in research and development for new technologies, applications and services for voice and data communications, primarily in the wireless industry. |
• | Cash outflows for capital expenditures were $389 million during the first nine months of fiscal 2016 and $994 million in fiscal 2015. We expect to continue to incur capital expenditures in the future to support our business, including research and development activities. Future capital expenditures may be impacted by transactions that are currently not forecasted. |
• | In January 2016, we announced that we had reached agreement with TDK Corporation to form a joint venture, under the name RF360 Holdings Singapore Pte. Ltd. The joint venture will initially be owned 51% by us and 49% by TDK. The purchase price due upon close of the transaction is $1.2 billion, to be adjusted for working capital, outstanding indebtedness and certain capital expenditures, among other things. Additionally, we have the option to acquire (and TDK has an option to sell) TDK’s interest in the joint venture for $1.15 billion 30 months after the closing date. We expect to use existing cash resources to fund the acquisition. TDK will be entitled to up to a total of $200 million in payments based on sales of RF filter functions over the three-year period after the closing date. The transaction is subject to regulatory approvals and other closing conditions and is expected to close by early calendar 2017. |
• | We expect to continue making strategic investments and acquisitions, the amounts of which could vary significantly, to open new opportunities for our technologies, obtain development resources, grow our patent portfolio or pursue new businesses. |
• | wireless operators and industries beyond traditional cellular communications deploy alternative technologies; |
• | wireless operators delay 3G and 3G/4G multimode network deployments, expansions or upgrades and/or delay moving 2G customers to 3G, 3G/4G multimode or 4G wireless devices; |
• | LTE, an OFDMA-based 4G wireless technology, is not more widely deployed or further commercial deployment is delayed; |
• | government regulators delay making sufficient spectrum available for 3G and/or 3G/4G networks, thereby restricting the expansion of 3G/4G wireless connectivity to keep pace with consumer demand; |
• | wireless operators are unable to drive improvements in 3G or 3G/4G multimode network performance and/or capacity; |
• | our customers’ and licensees’ revenues and sales of products, particularly premium-tier products, and services using these technologies do not grow or do not grow as quickly as anticipated due to, for example, the maturity of smartphone penetration in developed regions (where premium-tier products are common) or a reduction in the rate of device replacements by consumers; and/or |
• | we are unable to drive the adoption of our products and services into networks and devices based on CDMA, OFDMA and other communications technologies. |
• | differentiate our integrated circuit products with innovative technologies across multiple products and features (e.g., modem, radio frequency front end, central, graphics and/or other processors, camera and connectivity) and with smaller geometry process technologies that drive performance; |
• | develop and offer integrated circuit products at competitive cost and price points to effectively cover both emerging and developed geographic regions and all device tiers; |
• | continue to drive the adoption of our integrated circuit products into the most popular device models and across a broad spectrum of devices, such as smartphones, tablets, automobiles, wearable and other connected devices and infrastructure products; |
• | maintain and/or accelerate demand for our integrated circuit products at the premium device tier, while increasing the adoption of our products in mid- and low-tier devices and in the turnkey product channel, in part by strengthening our integrated circuit product roadmap for, and developing channel relationships in, emerging geographic regions, such as China and India, and by providing turnkey products, which incorporate our integrated circuits, for low- and mid-tier smartphones and tablets; |
• | continue to be a leader in 4G technology evolution, including expansion of our LTE-based single mode licensing program, and continue to innovate and introduce 4G turnkey, integrated products and services that differentiate us from our competition; |
• | be a leader serving original equipment manufacturers, high level operating systems (HLOS) providers, operators and other industry participants as competitors, new industry entrants and other factors continue to affect the industry landscape; |
• | be a preferred partner (and sustain preferred relationships) providing integrated circuit products that support multiple operating system and infrastructure platforms to industry participants that effectively commercialize new devices using these platforms; |
• | increase and/or accelerate demand for our wired and wireless connectivity products, including networking products for consumers, carriers and enterprise equipment and connected devices; |
• | identify potential acquisition targets that will grow or sustain our business or address strategic needs, reach agreement on terms acceptable to us and effectively integrate these new businesses and/or technologies; |
• | create stand-alone value and/or contribute to the success of our existing businesses through acquisitions and other transactions (and/or by developing customer, licensee and/or vendor relationships) in new industry segments and/or disruptive technologies, products and/or services (such as products for the connected home and the Internet of Things, automotive, networking, mobile computing, mobile health, machine learning, including robotics, and wireless charging among others); |
• | become a leading supplier of radio frequency front end products, which are designed to address cellular radio frequency band fragmentation while improving radio frequency performance and assist original equipment manufacturers in developing multiband, multimode mobile devices; and/or |
• | continue to develop brand recognition to effectively compete against better known companies in mobile computing and other consumer driven segments and to deepen our presence in significant emerging geographic regions. |
• | a reduction, interruption, delay or limitation in our product supply sources; |
• | a failure by our suppliers to procure raw materials or to provide or allocate adequate manufacturing or test capacity for our products; |
• | our suppliers’ inability to react to shifts in product demand or an increase in raw material or component prices; |
• | the loss of a supplier or the inability of a supplier to meet performance or quality specifications or delivery schedules; and/or |
• | additional expense and/or production delays as a result of qualifying a new supplier and commencing volume production or testing in the event of a loss of or a decision to add or change a supplier. |
• | requiring us to use cash to pay the principal of and interest on our indebtedness, thereby reducing the amount of cash available for other purposes; |
• | limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, stock repurchases, dividends or other general corporate and other purposes; |
• | limiting our flexibility in planning for, or reacting to, changes in our business and our industry; and/or |
• | increasing our vulnerability to interest rate fluctuations to the extent a portion of our debt has variable interest rates. |
• | Our products and those of our customers and licensees that are sold outside the United States may become less price-competitive, which may result in reduced demand for those products and/or downward pressure on average selling prices; |
• | Certain of our revenues, such as royalties, that are derived from licensee or customer sales denominated in foreign currencies could decrease; |
• | Our foreign suppliers may raise their prices if they are impacted by currency fluctuations, resulting in higher than expected costs and lower margins; and/or |
• | Foreign exchange hedging transactions that we engage in to reduce the impact of currency fluctuations may require the payment of structuring fees, limit the U.S. dollar value of royalties from licensees’ sales that are denominated in foreign currencies, cause earnings volatility if the hedges do not qualify for hedge accounting and expose us to counterparty risk if the counterparty fails to perform. |
Total Number of Shares Purchased | Average Price Paid Per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2) | ||||||||||
(In thousands) | (In thousands) | (In millions) | |||||||||||
March 28, 2016 to April 24, 2016 | — | $ | — | — | $ | 3,311 | |||||||
April 25, 2016 to May 22, 2016 | — | — | — | 3,311 | |||||||||
May 23, 2016 to June 26, 2016 | 1,832 | 54.56 | 1,832 | 3,211 | |||||||||
Total | 1,832 | 1,832 |
(1) | Average Price Paid Per Share excludes cash paid for commissions. |
(2) | On March 9, 2015, we announced a repurchase program authorizing us to repurchase up to $15 billion of our common stock. At June 26, 2016, $3.2 billion remained authorized for repurchase. The stock repurchase program has no expiration date. |
Exhibit Number | Exhibit Description | Form | File No./ Film No. | Date of First Filing | Exhibit Number | Filed Herewith | ||||||
2.2 | Master Transaction Agreement, dated January 13, 2016, by and among Qualcomm Global Trading Pte. Ltd., each other Purchaser Group member, TDK Japan, each other Seller Group member, and, solely for purposes of Section 10.9 thereof, QUALCOMM Incorporated. | 8-K | 000-19528/ 161339867 | 1/13/2016 | 2.1 | |||||||
3.1 | Restated Certificate of Incorporation, as amended. | X | ||||||||||
3.2 | Amended and Restated Bylaws. | 8-K | 000-19528/ 161769723 | 7/15/2016 | 3.2 | |||||||
4.1 | Indenture, dated May 20, 2015, between the Company and U.S. Bank National Association, as trustee. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.1 | |||||||
4.2 | Officers’ Certificate, dated May 20, 2015, for the Floating Rate Notes due 2018, the Floating Rate Notes due 2020, the 1.400% Notes due 2018, the 2.250% Notes due 2020, the 3.000% Notes due 2022, the 3.450% Notes due 2025, the 4.650% Notes due 2035 and the 4.800% Notes due 2045. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.2 | |||||||
4.3 | Form of Floating Rate Notes due 2018. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.3 | |||||||
4.4 | Form of Floating Rate Notes due 2020. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.4 | |||||||
4.5 | Form of 1.400% Notes due 2018. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.5 | |||||||
4.6 | Form of 2.250% Notes due 2020. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.6 | |||||||
4.7 | Form of 3.000% Notes due 2022. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.7 | |||||||
4.8 | Form of 3.450% Notes due 2025. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.8 | |||||||
4.9 | Form of 4.650% Notes due 2035. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.9 | |||||||
4.10 | Form of 4.800% Notes due 2045. | 8-K | 000-19528/ 15880967 | 5/21/2015 | 4.10 | |||||||
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Steve Mollenkopf. | X | ||||||||||
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for George S. Davis. | X | ||||||||||
32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for Steve Mollenkopf. | X | ||||||||||
32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, for George S. Davis. | X | ||||||||||
101.INS | XBRL Instance Document. | X | ||||||||||
101.SCH | XBRL Taxonomy Extension Schema. | X | ||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | X | ||||||||||
101.LAB | XBRL Taxonomy Extension Labels Linkbase. | X | ||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. | X | ||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | X |
QUALCOMM Incorporated | |
/s/ George S. Davis | |
George S. Davis | |
Executive Vice President and Chief Financial Officer | |
1. | I have reviewed this Quarterly Report on Form 10-Q of QUALCOMM Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Steve Mollenkopf | |
Steve Mollenkopf | |
Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of QUALCOMM Incorporated; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ George S. Davis | |
George S. Davis | |
Executive Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Steve Mollenkopf | |
Steve Mollenkopf | |
Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ George S. Davis | |
George S. Davis | |
Executive Vice President and Chief Financial Officer |
Document and Entity Information Document - shares |
9 Months Ended | |
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Jun. 26, 2016 |
Jul. 18, 2016 |
|
Document Information [Line Items] | ||
Entity Registrant Name | QUALCOMM INC/DE | |
Entity Registrant State of Incorporation | Delaware | |
Entity Address | 5775 Morehouse Dr. | |
Entity City | San Diego | |
Entity State | California | |
Entity Zip Code | 92121-1714 | |
Entity Phone Number | (858) 587-1121 | |
Entity Employer ID | 953685934 | |
Entity Central Index Key | 0000804328 | |
Current Fiscal Year End Date | --09-25 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 26, 2016 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 1,473,648,385 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes |
CONDENSED CONSOLIDATED BALANCE SHEETS PARENTHETICALS - $ / shares shares in Millions |
Jun. 26, 2016 |
Sep. 27, 2015 |
---|---|---|
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 8 | 8 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 6,000 | 6,000 |
Common stock, shares issued | 1,473 | 1,524 |
Common stock, shares outstanding | 1,473 | 1,524 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 26, 2016 |
Jun. 28, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Revenues: | ||||
Equipment and services | $ 3,875 | $ 3,840 | $ 11,311 | $ 13,459 |
Licensing | 2,169 | 1,992 | 6,059 | 6,366 |
Total revenues | 6,044 | 5,832 | 17,370 | 19,825 |
Costs and expenses: | ||||
Cost of equipment and services revenues | 2,534 | 2,451 | 7,210 | 8,126 |
Research and development | 1,268 | 1,407 | 3,922 | 4,133 |
Selling, general and administrative | 620 | 621 | 1,817 | 1,749 |
Other (Note 2) | 30 | 118 | (270) | 1,181 |
Total costs and expenses | 4,452 | 4,597 | 12,679 | 15,189 |
Operating income | 1,592 | 1,235 | 4,691 | 4,636 |
Interest expense | (75) | (32) | (221) | (34) |
Investment income, net (Note 2) | 176 | 195 | 403 | 634 |
Income before income taxes | 1,693 | 1,398 | 4,873 | 5,236 |
Income tax expense | (250) | (215) | (770) | (1,029) |
Net income | 1,443 | 1,183 | 4,103 | 4,207 |
Net loss attributable to noncontrolling interests | 1 | 1 | 3 | 2 |
Net income attributable to Qualcomm | $ 1,444 | $ 1,184 | $ 4,106 | $ 4,209 |
Basic earnings per share attributable to Qualcomm | $ 0.98 | $ 0.74 | $ 2.76 | $ 2.57 |
Diluted earnings per share attributable to Qualcomm | $ 0.97 | $ 0.73 | $ 2.74 | $ 2.53 |
Shares used in per share calculations: | ||||
Basic | 1,471 | 1,608 | 1,487 | 1,638 |
Diluted | 1,486 | 1,629 | 1,500 | 1,661 |
Dividends per share announced | $ 0.53 | $ 0.48 | $ 1.49 | $ 1.32 |
Basis of Presentation (Notes) |
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Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation Financial Statement Preparation. These condensed consolidated financial statements have been prepared by QUALCOMM Incorporated (collectively with its subsidiaries, the Company or Qualcomm) in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 2015. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three-month and nine-month periods ended June 26, 2016 and June 28, 2015 included 13 weeks and 39 weeks, respectively. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation. Earnings Per Common Share. Basic earnings per common share are computed by dividing net income attributable to Qualcomm by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed by dividing net income attributable to Qualcomm by the sum of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and shares subject to written put options and/or accelerated share repurchase agreements, if any, and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost for future service that the Company has not yet recognized, if any, and the estimated tax benefits that would be recorded in paid-in capital when an award is settled, if any, are assumed to be used to repurchase shares in the current period. The dilutive common share equivalents, calculated using the treasury stock method, for the three and nine months ended June 26, 2016 were 14,812,000 and 13,325,000, respectively, and 20,749,000 and 22,447,000 for the three and nine months ended June 28, 2015, respectively. Shares of common stock equivalents outstanding that were not included in the computation of diluted earnings per common share because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period were 1,378,000 and 3,150,000 during the three and nine months ended June 26, 2016, respectively, and 16,711,000 and 6,067,000 during the three and nine months ended June 28, 2015, respectively. Share-Based Compensation. Total share-based compensation expense, related to all of the Company’s share-based awards, was comprised as follows (in millions):
The Company recorded $170 million and $173 million in share-based compensation expense during the nine months ended June 26, 2016 and June 28, 2015, respectively, related to share-based awards granted during those periods. At June 26, 2016, total unrecognized compensation expense related to non-vested restricted stock units granted prior to that date was $1.2 billion, which is expected to be recognized over a weighted-average period of 2.0 years. During the nine months ended June 26, 2016 and June 28, 2015, net share-based awards granted, after forfeitures and cancellations, represented 0.7% and 0.8%, respectively, of outstanding shares as of the beginning of each fiscal period, and total share-based awards granted represented 1.0% and 0.9%, respectively, of outstanding shares as of the end of each fiscal period. Recent Accounting Pronouncements. In November 2015, the Financial Accounting Standards Board (FASB) issued new guidance related to accounting for income taxes, which requires all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The Company early adopted the new guidance prospectively in the second quarter of fiscal 2016. Prior period amounts have not been adjusted. In May 2014, the FASB issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The new guidance will be effective for the Company starting in the first quarter of fiscal 2019. Adoption one year early is permitted. Two methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods presented or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is recognized as an adjustment to the opening retained earnings balance. The Company does not intend to adopt the new guidance early and is in the process of determining the adoption method as well as the effects the adoption will have on its consolidated financial statements. In January 2016, the FASB issued new guidance on classifying and measuring financial instruments, which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk be recognized separately in other comprehensive income. Additionally, it changes the disclosure requirements for financial instruments. The new guidance will be effective for the Company starting in the first quarter of fiscal 2019. Early adoption is permitted for certain provisions. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt certain provisions early. In February 2016, the FASB issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of fiscal 2020. Early adoption is permitted. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. In March 2016, the FASB issued new guidance that changes the accounting for share-based payments. Under the new guidance, excess tax benefits associated with share-based payment awards will be recognized in the income statement when the awards vest or settle, rather than in stockholders’ equity. In addition, it will increase the number of shares an employer can withhold to cover income taxes on share-based payment awards and still qualify for the exemption to liability classification. The new guidance will be effective for the Company starting in the first quarter of fiscal 2018. Early adoption is permitted in any annual or interim period. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. In June 2016, the FASB issued new guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. |
Composition of Certain Financial Statement Items (Notes) |
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Notes to Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Composition of Certain Financial Statement Items | Composition of Certain Financial Statement Items
Other Income, Costs and Expenses. Other expenses in the three months ended June 26, 2016 consisted of restructuring and restructuring-related charges related to the Company’s Strategic Realignment Plan (Note 10). Other income in the nine months ended June 26, 2016 included a gain of $380 million on the sale of wireless spectrum in the United Kingdom that was held by the QSI (Qualcomm Strategic Initiatives) segment in the first quarter of fiscal 2016 for $232 million in cash and $275 million in deferred payments due in 2020 to 2023, which were recorded at their present values in other assets. Other income in the nine months ended June 26, 2016 also included $158 million in restructuring and restructuring-related charges, which were partially offset by a $48 million gain on the sale of the Company’s business that provided augmented reality applications, both of which related to the Company’s Strategic Realignment Plan. Other expenses in the three months ended June 28, 2015 consisted of $151 million and $11 million in impairment charges on goodwill and intangible assets, respectively, related to the Company’s content services business and one of our display businesses, partially offset by a $44 million gain on the sale of certain property, plant and equipment. Other expenses in the nine months ended June 28, 2015 included a $975 million charge resulting from the resolution reached with the China National Development and Reform Commission (NDRC) in the second quarter of fiscal 2015 regarding the NDRC’s investigation of the Company relating to China’s Anti-Monopoly Law. Other expenses in the nine months ended June 28, 2015 also included $255 million and $11 million in impairment charges on goodwill and intangible assets, respectively, related to the Company’s content and push-to-talk services and display businesses, partially offset by $60 million in gains on sales of certain property, plant and equipment.
Net impairment losses on marketable securities related to the noncredit portion of losses on debt securities recognized in other comprehensive income were negligible in the three months ended June 26, 2016 and June 28, 2015 and $37 million and $10 million in the nine months ended June 26, 2016 and June 28, 2015, respectively. |
Income Taxes (Notes) |
9 Months Ended |
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Jun. 26, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company estimates its annual effective income tax rate to be approximately 17% for fiscal 2016, which is less than its 19% effective income tax rate for fiscal 2015. Tax benefits from foreign income taxed at rates lower than rates in the United States are expected to be approximately 15% in fiscal 2016, compared to 14% in fiscal 2015. The annual effective tax rate for fiscal 2016 reflects a tax benefit of $101 million from a worthless stock deduction on a domestic subsidiary of the Company’s former QMT division, which was accounted for discretely during the third quarter. During the first quarter of fiscal 2016, the United States government permanently reinstated the federal research and development tax credit retroactively to January 1, 2015. As a result of the reinstatement, the Company recorded a tax benefit of $79 million in the first quarter of fiscal 2016 related to fiscal 2015. The annual effective tax rate for fiscal 2015 reflected the fine imposed by the NDRC of $975 million (Note 2), which was not deductible for tax purposes and was substantially attributable to a foreign jurisdiction, and a $61 million tax benefit as a result of a favorable tax audit settlement with the Internal Revenue Service, both of which were accounted for discretely in the second quarter of fiscal 2015. During the first quarter of fiscal 2015, the United States government reinstated the federal research and development tax credit retroactively to January 1, 2014 through December 31, 2014. As a result of the reinstatement, the annual effective tax rate for fiscal 2015 also reflected a tax benefit of $101 million recorded in the first quarter of fiscal 2015 related to fiscal 2014. The effective tax rate of 15% for the third quarter of fiscal 2016 was less than the estimated annual effective tax rate of 17% primarily due to a $101 million tax benefit recorded discretely in the third quarter resulting from a worthless stock deduction on a domestic subsidiary of the Company’s former QMT division, partially offset by changes in the Company’s estimates related to foreign earnings taxed at rates that are less than the United States federal tax rate and the benefit of the retroactive reinstatement of the United States federal research and development credit recorded discretely during the first quarter of fiscal 2016 related to fiscal 2015. Unrecognized tax benefits were $210 million and $40 million at June 26, 2016 and September 27, 2015, respectively. Certain of the Company’s existing tax positions are expected to continue to generate an increase in unrecognized tax benefits through fiscal 2016. The Company believes that it is reasonably possible that the total amounts of unrecognized tax benefits at June 26, 2016 may increase or decrease in the next 12 months. |
Stockholders' Equity (Notes) |
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Stockholders' Equity Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Changes in stockholders’ equity for the nine months ended June 26, 2016 were as follows (in millions):
Accumulated Other Comprehensive Income. Changes in the components of accumulated other comprehensive income, net of income taxes, in Qualcomm stockholders’ equity during the nine months ended June 26, 2016 were as follows (in millions):
Reclassifications from accumulated other comprehensive income related to net gains on available-for-sale securities of $22 million and $5 million for the three and nine months ended June 26, 2016, respectively, and $48 million and $166 million for the three and nine months ended June 28, 2015, respectively, were recorded in investment income, net (Note 2). Reclassifications from accumulated other comprehensive income related to foreign currency translation losses of $15 million and $21 million for the three and nine months ended June 26, 2016, respectively, were recorded in selling, general and administrative expenses and other operating expenses. Reclassifications from accumulated other comprehensive income related to foreign currency translation adjustments during the three and nine months ended June 28, 2015 were negligible. Stock Repurchase Program. On March 9, 2015, the Company announced a stock repurchase program authorizing it to repurchase up to $15 billion of the Company’s common stock. The stock repurchase program has no expiration date. In May 2015, the Company entered into two accelerated share repurchase agreements (ASR Agreements) with two financial institutions under which the Company paid an aggregate of $5.0 billion upfront to the financial institutions and received from them an initial delivery of 57,737,000 shares of the Company’s common stock, which were retired. The ASR Agreements were settled in the fourth quarter of fiscal 2015. During the nine months ended June 28, 2015, the Company repurchased and retired an additional 56,652,000 shares of common stock for $4.0 billion, before commissions. During the nine months ended June 26, 2016, the Company repurchased and retired 70,168,000 shares of common stock for $3.7 billion, before commissions. At June 26, 2016, $3.2 billion remained authorized for repurchase under the Company’s stock repurchase program. Dividends. On July 12, 2016, the Company announced a cash dividend of $0.53 per share on the Company’s common stock, payable on September 21, 2016 to stockholders of record as of the close of business on August 31, 2016. During the nine months ended June 26, 2016 and June 28, 2015, dividends charged to retained earnings were as follows (in millions, except per share data):
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Employee Benefit Plans (Notes) |
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Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans Equity Compensation Plans. On March 8, 2016, the Company’s stockholders approved the Qualcomm Incorporated 2016 Long-Term Incentive Plan (the 2016 Plan), which replaced the Qualcomm Incorporated 2006 Long-Term Incentive Plan (the Prior Plan). Effective on and after that date, no new awards will be granted under the Prior Plan, although all outstanding awards under the Prior Plan will remain outstanding according to their terms and the terms of the Prior Plan. The 2016 Plan provides for the grant of incentive and nonstatutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance units, performance shares, deferred compensation awards and other stock-based awards. The share reserve under the 2016 Plan is equal to 90,000,000 shares, plus approximately 20,120,000 shares that were available for future grant under the Prior Plan on March 8, 2016, for a total of approximately 110,120,000 shares available for grant under the 2016 Plan on that date. This share reserve is automatically increased as provided in the 2016 Plan by the number of shares subject to stock options granted under the Prior Plan and outstanding as of March 8, 2016, which after that date expire or for any reason are forfeited, canceled or terminated, and by two times the number of shares subject to any awards other than stock options granted under the Prior Plan and outstanding as of March 8, 2016, which after that date expire, are forfeited, canceled or terminated, fail to vest, are not earned due to any performance goal that is not met, are otherwise reacquired without having become vested, or are paid in cash, exchanged by a participant or withheld by the Company to satisfy any tax withholding or tax payment obligations related to such award. The Board of Directors of the Company may amend or terminate the 2016 Plan at any time. Certain amendments, including an increase in the share reserve, require stockholder approval. |
Debt (Notes) |
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Debt | Debt Revolving Credit Facility. The Company has a Revolving Credit Facility that provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $4.0 billion, expiring in February 2020. The Revolving Credit Facility requires that the Company comply with certain covenants, including one financial covenant to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization to consolidated interest expense, as defined in the Revolving Credit Facility, of not less than three to one at the end of each fiscal quarter. At June 26, 2016 and September 27, 2015, the Company was in compliance with the covenants, and the Company had not borrowed any funds under the Revolving Credit Facility. Commercial Paper Program. The Company has an unsecured commercial paper program, which provides for the issuance of up to $4.0 billion of commercial paper. Net proceeds from this program are used for general corporate purposes. Maturities of commercial paper can range from 1 day to up to 397 days. At June 26, 2016 and September 27, 2015, the Company had $1.7 billion and $1.0 billion, respectively, of outstanding commercial paper recorded as short-term debt with weighted-average interest rates of 0.50% and 0.19%, respectively, which included fees paid to the commercial paper dealers, and weighted-average remaining days to maturity of 37 days and 38 days, respectively. The carrying value of the outstanding commercial paper approximated its estimated fair value at June 26, 2016 and September 27, 2015. Long-term Debt. The following table provides a summary of the Company’s long-term debt (in millions except percentages):
The interest rate on the floating rate notes due in 2018 and 2020 for a particular interest period will be a per annum rate equal to three-month LIBOR as determined on the interest determination date plus 0.27% and 0.55%, respectively. Interest is payable in arrears quarterly for the floating-rate notes and semi-annually for the fixed-rate notes. The Company may redeem the fixed-rate notes at any time in whole, or from time to time in part, at specified make-whole premiums as defined in the applicable form of note. The Company may not redeem the floating-rate notes prior to maturity. The Company is not subject to any financial covenants under the notes nor any covenants that would prohibit the Company from incurring additional indebtedness ranking equal to the notes, paying dividends, issuing securities or repurchasing securities issued by it or its subsidiaries. At June 26, 2016 and September 27, 2015, the aggregate fair value of the notes, based on Level 2 inputs, was approximately $10.4 billion and $9.6 billion, respectively. The Company has entered into interest rate swaps with an aggregate notional amount of $3.0 billion, which effectively converted all of the fixed-rate notes due in 2018 and approximately 43% and 50% of the fixed-rate notes due in 2020 and 2022, respectively, into floating-rate notes. The net gains and losses on the interest rate swaps, as well as the offsetting gains or losses on the related fixed-rate notes attributable to the hedged risks, are recognized in earnings as interest expense in the current period. The effective interest rates for the notes include the interest on the notes, amortization of the discount, which includes debt issuance costs, and if applicable, adjustments related to hedging. Cash interest paid related to the Company’s commercial paper program and long-term debt, net of cash received from the related interest rate swaps, was $270 million during the nine months ended June 26, 2016. Cash interest paid related to the Company’s commercial paper program and long-term debt was negligible in the nine months ended June 28, 2015. |
Commitments and Contingencies (Notes) |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings. ParkerVision, Inc. v. QUALCOMM Incorporated: On July 20, 2011, ParkerVision filed a complaint against the Company in the United States District Court for the Middle District of Florida alleging that certain of the Company’s products infringed seven of its patents alleged to cover direct down-conversion receivers. ParkerVision’s complaint sought damages and injunctive and other relief. Subsequently, ParkerVision narrowed its allegations to assert only four patents. On October 17, 2013, the jury returned a verdict finding all asserted claims of the four at-issue patents to be infringed and finding that none of the asserted claims were invalid. On October 24, 2013, the jury returned a separate verdict assessing total past damages of $173 million and finding that the Company’s infringement was not willful. The Company recorded the verdict amount in fiscal 2013 as a charge in other expenses. On June 20, 2014, the court granted the Company’s motion to overturn the infringement verdict, denied the Company’s motion to overturn the invalidity verdict and denied ParkerVision’s motions for injunctive relief and ongoing royalties as moot. The court then entered judgment in the Company’s favor. As a result of the court’s judgment, the Company is not liable for any damages to ParkerVision, and therefore, the Company reversed all recorded amounts related to the damages verdict in fiscal 2014. On June 25, 2014, ParkerVision filed a notice of appeal with the court. The Court of Appeals for the Federal Circuit heard the appeal on May 8, 2015 and issued a decision on July 31, 2015. The decision affirmed the District Court’s finding of non-infringement and granted in part the Company’s cross-appeal, holding 10 of the 11 asserted claims invalid. A subsequent Petition for Rehearing by ParkerVision was denied on October 2, 2015. On February 29, 2016, ParkerVision filed a petition for certiorari with the United States Supreme Court asking for review of the Federal Circuit’s decision. On March 28, 2016, the United States Supreme Court denied ParkerVision’s petition. No further appeals are available to ParkerVision in this matter. On May 1, 2014, ParkerVision filed another complaint against the Company in the United States District Court for the Middle District of Florida alleging patent infringement. On August 21, 2014, ParkerVision amended the complaint, now captioned ParkerVision, Inc. v. QUALCOMM Incorporated, Qualcomm Atheros, Inc., HTC Corporation, HTC America, Inc., Samsung Electronics Co., LTD., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, broadening the allegations. ParkerVision alleged that the Company infringes 11 additional patents and seeks damages and injunctive and other relief. On September 25, 2015, ParkerVision filed a motion with the court to sever some claims against the Company and all other defendants into a separate lawsuit. In addition, on December 3, 2015, ParkerVision dismissed six patents from the lawsuit and granted the Company and all other defendants a covenant not to assert those patents against any existing products. On February 2, 2016, after agreement among the parties, the District Court stayed the remainder of the case pending the resolution of the complaint filed by ParkerVision against the Company and other parties with the United States International Trade Commission (ITC) described below. On December 14, 2015, ParkerVision filed a third complaint against the Company in the United States District Court for the Middle District of Florida alleging patent infringement. Apple Inc., Samsung Electronics Co., LTD., Samsung Electronics America, Inc., Samsung Telecommunications America, LLC, Samsung Semiconductor, Inc., LG Electronics, Inc., LG Electronics U.S.A., Inc. and LG Electronics MobileComm U.S.A., Inc. are also named defendants. The complaint asserts four additional patents and seeks damages and other relief. On December 15, 2015, ParkerVision filed a complaint with the ITC pursuant to Section 337 of the Tariff Act of 1930 against the same parties asserting the same four patents. The complaint seeks an exclusion order barring the importation of products that use either of two Company transceivers or one Samsung transceiver and a cease and desist order preventing the Company and the other defendants from carrying out commercial activities within the United States related to such products. On January 13, 2016, the Company served its answer to the District Court complaint. On January 15, 2016, the ITC instituted an investigation. The ITC scheduled a hearing to begin on August 24, 2016. The ITC’s target date for completion of the investigation is April 21, 2017. The District Court case was stayed on February 12, 2016 pending completion of the ITC investigation. The Company believes ParkerVision’s claims in the above matters are without merit. Nvidia Corporation v. QUALCOMM Incorporated: On September 4, 2014, Nvidia filed a complaint in the United States District Court for the District of Delaware and also with the ITC pursuant to Section 337 of the Tariff Act of 1930 against the Company, Samsung Electronics Co., Ltd. and other Samsung entities, alleging infringement of seven patents related to graphics processing. In the ITC complaint, Nvidia sought an exclusion order barring the importation of certain consumer electronics and display device products, including some that incorporate the Company’s chipset products, that infringe, induce infringement and/or contribute to the infringement of at least one of the seven asserted graphics processing patents as well as a cease and desist order preventing the Company from carrying out commercial activities within the United States related to such products. In the District Court complaint, Nvidia sought an award of damages for the infringement of the asserted patents, a finding that such infringement was willful and treble damages for such willful infringement, and an order permanently enjoining the Company from infringing the asserted patents. The ITC instituted an investigation into Nvidia’s allegations on October 6, 2014. Nvidia later narrowed the ITC case to three asserted patents. On October 9, 2015, the Administrative Law Judge in the ITC case issued an Initial Determination finding no violation of Section 337 because none of the three patents were both valid and infringed. On October 26, 2015, Nvidia filed a petition requesting the ITC to review the Initial Determination as to two of the asserted patents, but was no longer pursuing infringement allegations with respect to the third patent. On December 14, 2015, the ITC issued its decision not to review the Initial Determination of the Administrative Law Judge. This made final the determination that the Company did not violate Section 337. Therefore, neither an exclusion order nor a cease and desist order were issued. On February 17, 2016, Nvidia filed a notice of appeal of the ITC’s determination to the United States Court of Appeals for the Federal Circuit. The District Court case was stayed on October 23, 2014 pending completion of the ITC investigation, including appeals. Nvidia has since entered into a confidential settlement agreement with Samsung and dismissed the above actions against Samsung and the Company, including its appeal of the ITC’s determination (dismissed May 11, 2016) and the District Court case (dismissed May 12, 2016). LG Electronics, Inc. (LGE) Arbitration: In December 2015, LGE filed an arbitration demand with the International Chamber of Commerce (ICC) alleging that it overpaid royalties on certain CDMA (including WCDMA) subscriber units based on the alleged effect of specific provisions in its license agreement, and that the Company breached its license agreement with LGE, as well as certain implied covenants. The arbitration demand sought determination and return of the overpayment and determination of the ongoing royalties owed by LGE. On April 16, 2016, the parties entered into agreements pursuant to which the parties agreed to settle the disputes raised by LGE in its arbitration demand, and LGE agreed to dismiss the arbitration with prejudice and release all claims brought in the arbitration against the Company. On April 18, 2016, the parties jointly moved for dismissal of the arbitration, and on April 19, 2016, the ICC acknowledged the motion for dismissal and the withdrawal of all claims. Although the Company believed LGE’s claims were without merit, it deferred the recognition of revenue related to CDMA subscriber unit royalties reported and paid by LGE in the first and second quarters of fiscal 2016 because, among other reasons, the matter was submitted to arbitration for resolution. As a result of the settlement, commencing with the third quarter of fiscal 2016, the Company is no longer deferring royalty revenues reported by LGE and recorded $235 million of revenues related to prior periods. Blackberry Limited (Blackberry) Arbitration: On April 20, 2016, the Company and Blackberry entered into an agreement to arbitrate Blackberry’s allegation that it overpaid royalties on certain past sales of subscriber units based on the alleged effect of specific provisions in its license agreement. The arbitration, which is scheduled to begin on February 27, 2017, is being conducted under the rules of the Judicial Arbitration and Mediation Services in San Diego, California. Blackberry seeks the return of the alleged overpayment. The Company believes Blackberry’s claims are without merit. 3226701 Canada, Inc. v. Qualcomm Incorporated et al. On November 30, 2015, plaintiffs filed a securities class action complaint against the Company and certain of its current and former officers in the United States District Court for the Southern District of California. On April 29, 2016, plaintiffs filed an amended complaint alleging that the Company and certain of its current and former officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by making false and misleading statements regarding the Company’s business outlook and product development between April 7, 2014 and July 22, 2015. The amended complaint seeks unspecified damages, interest, attorneys’ fees and other costs. On June 28, 2016, the Company filed a Motion to Dismiss. The Company believes the plaintiffs’ claims are without merit. QUALCOMM Incorporated v. Meizu Technology Co., Ltd.: On June 23, 2016 and June 29, 2016, the Company filed a series of actions against Meizu Technology Co., Ltd. et al. (Meizu) in the Intellectual Property Courts in Beijing and Shanghai (China). The first complaint, filed in Beijing on June 23, 2016, requests rulings that the terms of a patent license offered by the Company to Meizu comply with China’s Anti-Monopoly Law and the Company’s applicable fair, reasonable and non-discriminatory licensing commitment. The complaint also seeks a ruling that the offered patent license terms should form the basis for a patent license with Meizu for the Company’s fundamental mobile device technologies patented in China, including those relating to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards, and seeks damages for Meizu’s past use of the Company’s patented inventions. On June 29, 2016, the Company filed patent infringement complaints in the Intellectual Property Courts in Beijing and Shanghai alleging infringement of 17 patents by Zhuhai Meizu Technology Co., Ltd. et al. (Zhuhai Meizu). The patent infringement actions concern a broad range of features and technologies used in smartphones, including features relating to 3G (WCDMA and CDMA2000) and 4G (LTE) wireless communications standards, and seek to enjoin Zhuhai Meizu from manufacturing, selling and offering for sale mobile devices that infringe the asserted patents. No schedules have yet been set by the courts. Japan Fair Trade Commission (JFTC) Complaint: The JFTC received unspecified complaints alleging that the Company’s business practices are, in some way, a violation of Japanese law. On September 29, 2009, the JFTC issued a cease and desist order concluding that the Company’s Japanese licensees were forced to cross-license patents to the Company on a royalty-free basis and were forced to accept a provision under which they agreed not to assert their essential patents against the Company’s other licensees who made a similar commitment in their license agreements with the Company. The cease and desist order seeks to require the Company to modify its existing license agreements with Japanese companies to eliminate these provisions while preserving the license of the Company’s patents to those companies. The Company disagrees with the conclusions that it forced its Japanese licensees to agree to any provision in the parties’ agreements and that those provisions violate the Japanese Antimonopoly Act. The Company has invoked its right under Japanese law to an administrative hearing before the JFTC. In February 2010, the Tokyo High Court granted the Company’s motion and issued a stay of the cease and desist order pending the administrative hearing before the JFTC. The JFTC has held hearings on 33 different dates, with the next hearing scheduled for January 17, 2017. Korea Fair Trade Commission (KFTC) Complaint: On January 4, 2010, the KFTC issued a written decision finding that the Company had violated Korean law by offering certain discounts and rebates for purchases of its CDMA chipsets and for including in certain agreements language requiring the continued payment of royalties after all licensed patents have expired. The KFTC levied a fine, which the Company paid and recorded as an expense in fiscal 2010. The Company appealed to the Seoul High Court, and on June 19, 2013, the Seoul High Court affirmed the KFTC’s decision. On July 4, 2013, the Company filed an appeal with the Korea Supreme Court. There have been no material developments during fiscal 2016 with respect to this matter. Korea Fair Trade Commission (KFTC) Investigation: On March 17, 2015, the KFTC notified the Company that it is conducting an investigation of the Company relating to the Korean Monopoly Regulation and Fair Trade Act (MRFTA). On November 13, 2015, the Company received a case Examiner’s Report (ER) prepared by the KFTC’s investigative staff. The ER alleges, among other things, that the Company is in violation of Korean competition law by licensing its patents exhaustively only to device manufacturers and requiring that its chipset customers be licensed to the Company’s intellectual property. The ER also alleges that the Company obtains certain terms, including royalty terms, that are unfair or unreasonable in its license agreements through negotiations that do not conform to Korean competition law. The ER proposes remedies including modifications to certain business practices and monetary penalties. On May 27, 2016, the Company submitted a written response to the ER. The KFTC is holding hearings, which commenced on July 20, 2016. It remains difficult to predict the outcome of this matter. The Company believes that its business practices do not violate the MRFTA. The Company continues to cooperate with the KFTC as it conducts its investigation. Icera Complaint to the European Commission (Commission): On June 7, 2010, the Commission notified and provided the Company with a redacted copy of a complaint filed with the Commission by Icera, Inc. (subsequently acquired by Nvidia Corporation) alleging that the Company has engaged in anticompetitive activity. The Company was asked by the Commission to submit a preliminary response to the portions of the complaint disclosed to it, and the Company submitted its response in July 2010. Subsequently, the Company provided additional documents and information as requested by the Commission. On July 16, 2015, the Commission announced that it had initiated formal proceedings in this matter. On December 8, 2015, the Commission announced that it had issued a Statement of Objections expressing its preliminary view that between 2009 and 2011, the Company engaged in predatory pricing by selling certain baseband chipsets to two customers at prices below cost, with the intention of hindering competition. A Statement of Objections informs the subject of the investigation of the allegations against it and provides an opportunity to respond to such allegations. It is not a determination of the final outcome of the investigation. If a violation is found, a broad range of remedies is potentially available to the Commission, including imposing a fine and/or injunctive relief prohibiting or restricting certain business practices. It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the Commission. The Company believes that its business practices do not violate the EU competition rules. European Commission (Commission) Investigation: On October 15, 2014, the Commission notified the Company that it is conducting an investigation of the Company relating to Articles 101 and/or 102 of the Treaty on the Functioning of the European Union (TFEU). On July 16, 2015, the Commission announced that it had initiated formal proceedings in this matter. On December 8, 2015, the Commission announced that it had issued a Statement of Objections expressing its preliminary view that since 2011 the Company has paid significant amounts to a customer on condition that it exclusively use the Company’s baseband chipsets in its smartphones and tablets. This conduct has allegedly reduced the customer’s incentives to source chipsets from the Company’s competitors and harmed competition and innovation for certain baseband chipsets. A Statement of Objections informs the subject of the investigation of the allegations against it and provides an opportunity to respond to such allegations. It is not a determination of the final outcome of the investigation. On June 27, 2016, the Company submitted its response to the Statement of Objections. If a violation is found, a broad range of remedies is potentially available to the Commission, including imposing a fine and/or injunctive relief prohibiting or restricting certain business practices. It is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the Commission. The Company believes that its business practices do not violate the EU competition rules. Federal Trade Commission (FTC) Investigation: On September 17, 2014, the FTC notified the Company that it is conducting an investigation of the Company relating to Section 5 of the Federal Trade Commission Act (FTCA). The FTC has notified the Company that it is investigating conduct related to standard essential patents and pricing and contracting practices with respect to baseband processors and related products. If a violation of Section 5 is found, a broad range of remedies is potentially available to the FTC, including imposing a fine or requiring modifications to the Company’s business practices. At this stage of the investigation, it is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the FTC. The Company believes that its business practices do not violate the FTCA. The Company continues to cooperate with the FTC as it conducts its investigation. Taiwan Fair Trade Commission (TFTC) Investigation: On December 4, 2015, the TFTC notified the Company that it is conducting an investigation into whether the Company’s patent licensing arrangements violate the Taiwan Fair Trade Act (TFTA). On April 27, 2016, the TFTC specified that the allegations under investigation include whether: (i) the Company jointly licensed its patents rather than separately licensing standard-essential patents and non-standard-essential patents; (ii) the Company’s royalty charges are unreasonable; (iii) the Company unreasonably required licensees to grant it cross-licenses; (iv) the Company failed to provide lists of licensed patents to licensees; (v) the Company violated a FRAND licensing commitment by declining to grant licenses to chipset makers; (vi) the Company declined to sell chipsets to unlicensed potential customers; and (vii) the Company provided royalty rebates to certain companies in exchange for their exclusive use of the Company’s chipsets. If a violation is found, a broad range of remedies is potentially available to the TFTC, including imposing a fine or requiring modifications to the Company’s business practices. At this stage of the investigation, it is difficult to predict the outcome of this matter or what remedies, if any, may be imposed by the TFTC. The Company believes that its business practices do not violate the TFTA. The Company continues to cooperate with the TFTC as it conducts its investigation. The Company will continue to vigorously defend itself in the foregoing matters in which it is a defendant and which remain outstanding. However, litigation and investigations are inherently uncertain. Accordingly, the Company cannot predict the outcome of these matters. The Company has not recorded any accrual at June 26, 2016 for contingent losses associated with these matters based on its belief that losses, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. The unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s business, results of operations, financial condition or cash flows. The Company is engaged in numerous other legal actions not described above arising in the ordinary course of its business and, while there can be no assurance, believes that the ultimate outcome of these other legal actions will not have a material adverse effect on its business, results of operations, financial condition or cash flows. Indemnifications. The Company generally does not indemnify its customers and licensees for losses sustained from infringement of third-party intellectual property rights. However, the Company is contingently liable under certain product sales, services, license and other agreements to indemnify certain customers against certain types of liability and/or damages arising from qualifying claims of patent, copyright, trademark or trade secret infringement by products or services sold or provided by the Company. The Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by the Company. Through June 26, 2016, the Company has received a number of claims from its direct and indirect customers and other third parties for indemnification under such agreements with respect to alleged infringement of third-party intellectual property rights by its products. Reimbursements under indemnification arrangements have not been material to the Company’s consolidated financial statements. The Company has not recorded any accrual for contingent liabilities at June 26, 2016 associated with these indemnification arrangements, other than nominal amounts, based on the Company’s belief that additional liabilities, while possible, are not probable. Further, any possible range of loss cannot be reasonably estimated at this time. Purchase Obligations. The Company has agreements with suppliers and other parties to purchase inventory, other goods and services and long-lived assets. Obligations under these agreements at June 26, 2016 for the remainder of fiscal 2016 and for each of the subsequent four years from fiscal 2017 through 2020 were $3.0 billion, $1.2 billion, $782 million, $702 million and $206 million, respectively, and $50 million thereafter. Of these amounts, for the remainder of fiscal 2016 and for each of the subsequent four years from fiscal 2017 through 2020, commitments to purchase integrated circuit product inventories comprised $2.6 billion, $979 million, $700 million, $647 million and $157 million, respectively, and there were no purchase commitments thereafter. Integrated circuit product inventory obligations represent purchase commitments for semiconductor die, finished goods and manufacturing services, such as wafer bump, probe, assembly and final test. Under the Company’s manufacturing relationships with its foundry suppliers and assembly and test service providers, cancellation of outstanding purchase commitments is generally allowed but requires payment of costs incurred through the date of cancellation, and in some cases, incremental fees related to capacity underutilization. Operating Leases. The Company leases certain of its land, facilities and equipment under noncancelable operating leases, with terms ranging from less than one year to 21 years and with provisions in certain leases for cost-of-living increases. Future minimum lease payments at June 26, 2016 for the remainder of fiscal 2016 and for each of the subsequent four years from fiscal 2017 through 2020 were $23 million, $89 million, $64 million, $50 million and $38 million, respectively, and $90 million thereafter. Other Commitments. At June 26, 2016, the Company was committed to fund certain strategic investments up to $316 million. Of this amount, $85 million is expected to be funded in the remainder of fiscal 2016. The remaining commitments represent the maximum amounts that do not have fixed funding dates and/or are subject to certain conditions. Actual funding may be in lesser amounts or not at all. |
Segment Information (Notes) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company is organized on the basis of products and services. The Company conducts business primarily through two reportable segments: QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing), and its QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an equity method investee. The Company also has nonreportable segments, including its small cells, data center and other wireless technology and service initiatives. The Company evaluates the performance of its segments based on earnings (loss) before income taxes (EBT) from continuing operations. Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in the Company’s management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense; certain net investment income; certain share-based compensation; and certain research and development expenses, selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include amortization of certain intangible assets, recognition of the step-up of inventories to fair value and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and long-lived asset impairment charges and litigation settlements and/or damages. Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. QSI segment assets include certain marketable securities, notes receivable, other investments and all assets of consolidated subsidiaries included in QSI. The increase in QSI assets was primarily a result of a receivable that was recorded in connection with the sale of wireless spectrum during the first quarter of fiscal 2016 (Note 2). Total segment assets differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable securities, property, plant and equipment, deferred tax assets, intangible assets and assets of nonreportable segments. The table below presents revenues, EBT and total assets for reportable segments (in millions):
Reconciling items in the previous table were as follows (in millions):
Unallocated other expense for the nine months ended June 26, 2016 was comprised of net restructuring and restructuring-related charges related to the Company’s Strategic Realignment Plan (Note 10). Unallocated other expense for the nine months ended June 28, 2015 was comprised of a charge related to the resolution reached with the NDRC and goodwill and intangible asset impairment charges related to three of the Company’s nonreportable segments, partially offset by a gain on the sale of certain property, plant and equipment (Note 2). Unallocated acquisition-related expenses were comprised as follows (in millions):
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Acquisitions (Notes) |
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Jun. 26, 2016 | |
Acquisitions [Abstract] | |
Acquisitions | Acquisitions During the nine months ended June 26, 2016, the Company acquired four businesses for total cash consideration of $392 million, net of cash acquired. Technology-based intangible assets of $257 million were recognized with a weighted-average useful life of four years. The Company recognized $171 million in goodwill related to these transactions, all of which was assigned to the Company’s QCT segment and of which $24 million is expected to be deductible for tax purposes. In January 2016, the Company announced that it had reached agreement with TDK Corporation to form a joint venture, under the name RF360 Holdings Singapore Pte. Ltd., to enable delivery of radio frequency front-end (RFFE) modules and RF filters into fully integrated products for mobile devices and Internet of Things (IoT) applications, among others. The joint venture will initially be owned 51% by the Company and 49% by TDK. Certain intellectual property, patents and filter and module design and manufacturing assets will be carved out of existing TDK businesses and be acquired by the joint venture, with certain assets acquired by the Company. The purchase price of the Company’s interest in the joint venture and the assets to be transferred to the Company is $1.2 billion, to be adjusted for working capital, outstanding indebtedness and certain capital expenditures, among other things. Additionally, the Company has the option to acquire (and TDK has an option to sell) TDK’s interest in the joint venture for $1.15 billion 30 months after the closing date. TDK will be entitled to up to a total of $200 million in payments based on sales of RF filter functions over the three-year period after the closing date, which is a substitute for and in lieu of any right of TDK to receive any profit sharing, distributions, dividends or other payments of any kind or nature. The transaction is subject to receipt of regulatory approvals and other closing conditions and is expected to close by early calendar 2017. |
Strategic Realignment Plan (Notes) |
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Strategic Realignment Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strategic Realignment Plan | Strategic Realignment Plan On July 22, 2015, the Company announced a Strategic Realignment Plan designed to improve execution, enhance financial performance and drive profitable growth as the Company works to create sustainable long-term value for stockholders. As part of this, among other actions, the Company is implementing a cost reduction plan, which includes a series of targeted reductions across the Company’s businesses, particularly in QCT, and a reduction to its annual share-based compensation grants. The Company expects these cost reduction initiatives to be substantially implemented by the end of fiscal 2016. During the nine months ended June 26, 2016, the Company recorded restructuring charges of $105 million, including consulting costs of $60 million and severance costs of $41 million, restructuring-related charges of $53 million, which primarily consisted of asset impairments, and a $48 million gain on the sale of the Company’s business that provided augmented reality applications, since such sale was executed in connection with the Strategic Realignment Plan, all of which were included in other income (Note 2) in reconciling items (Note 8). Restructuring activities were initiated in the fourth quarter of fiscal 2015, and a total of $300 million in net restructuring and restructuring-related charges were incurred through the third quarter of fiscal 2016. In connection with this plan, the Company expects to incur additional restructuring and restructuring-related charges of approximately $25 million to $100 million, which primarily consist of severance and consulting costs. The remaining costs are expected to be incurred in fiscal 2016 and 2017, and the majority are expected to be settled in cash. The restructuring accrual, a portion of which is included in payroll and other benefits related liabilities with the remainder included in other current liabilities, is expected to be substantially paid within the next 12 months. Changes in the restructuring accrual during the nine months ended June 26, 2016 were as follows (in millions):
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Fair Value Measurements (Notes) |
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Fair Value Measurements | Fair Value Measurements The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at June 26, 2016 (in millions):
Activity between Levels of the Fair Value Hierarchy. There were no significant transfers between Level 1 and Level 2 during the nine months ended June 26, 2016 and June 28, 2015. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement. The following table includes the activity for mortgage- and asset-backed and auction rate securities classified within Level 3 of the valuation hierarchy (in millions):
The Company recognizes transfers into and out of levels within the fair value hierarchy at the end of the fiscal month in which the actual event or change in circumstances that caused the transfer occurs. Transfers out of Level 3 during the nine months ended June 26, 2016 primarily consisted of debt securities with significant upgrades in credit ratings or for which there were observable inputs. There were no transfers into or out of Level 3 during the nine months ended June 28, 2015. Nonrecurring Fair Value Measurements. The Company measures certain assets at fair value on a nonrecurring basis. These assets include cost and equity method investments when they are deemed to be other-than-temporarily impaired, assets acquired and liabilities assumed in an acquisition or in a nonmonetary exchange, and property, plant and equipment and intangible assets that are written down to fair value when they are held for sale or determined to be impaired. During the nine months ended June 26, 2016, the Company updated the business plan and related internal forecast related to one of the Company’s businesses, resulting in impairment charges of $44 million to write down intangible assets, which were recorded in cost of equipment and services revenues, research and development expenses and selling, general and administrative expenses. The estimation of fair value and cash flows used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the nine months ended June 28, 2015, the Company updated the business plans and related internal forecasts related to certain of the Company’s businesses, resulting in impairment charges to write down goodwill and intangible assets (Note 2). The Company determined the fair values using an income approach. The estimation of fair value and cash flows used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3. During the nine months ended June 26, 2016 and June 28, 2015, the Company did not have any other significant assets or liabilities that were measured at fair value on a nonrecurring basis in periods subsequent to initial recognition. |
Marketable Securities (Notes) |
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities Marketable securities were comprised as follows (in millions):
In the second quarter of fiscal 2016, the Company exited an investment in a debt fund for which the Company elected the fair value option. The investment would have otherwise been recorded using the equity method. Changes in fair value associated with this investment were recognized in net investment income and were negligible for all periods presented. The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange, interest rate and/or equity, prepayment and credit risks as trading. Net gains or net losses recognized on debt securities classified as trading held at June 28, 2015 were negligible during the three and nine months ended June 28, 2015, respectively. At June 26, 2016, the contractual maturities of available-for-sale debt securities were as follows (in millions):
Debt securities with no single maturity date included debt funds, corporate bonds and notes, mortgage- and asset-backed securities and auction rate securities. The Company recorded realized gains and losses on sales of available-for-sale securities as follows (in millions):
Available-for-sale securities were comprised as follows (in millions):
The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that are classified as available-for-sale and have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):
At June 26, 2016, the Company concluded that the unrealized losses on its available-for-sale securities were temporary. Further, for common stock and for equity and debt funds with unrealized losses, the Company has the ability and the intent to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities and preferred stock with unrealized losses, the Company did not have the intent to sell, nor was it more likely than not that the Company will be required to sell, such securities before recovery or maturity. The ending balance of the credit loss portion of other-than-temporary impairments on debt securities held by the Company was $61 million and negligible at June 26, 2016 and June 28, 2015, respectively. |
Basis of Presentation (Policies) |
9 Months Ended |
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Jun. 26, 2016 | |
Basis of Presentation [Abstract] | |
Fiscal Period, Policy | The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three-month and nine-month periods ended June 26, 2016 and June 28, 2015 included 13 weeks and 39 weeks, respectively. |
Use of Estimates, Policy | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation. |
Earnings Per Share, Policy | Earnings Per Common Share. Basic earnings per common share are computed by dividing net income attributable to Qualcomm by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share are computed by dividing net income attributable to Qualcomm by the sum of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and shares subject to written put options and/or accelerated share repurchase agreements, if any, and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost for future service that the Company has not yet recognized, if any, and the estimated tax benefits that would be recorded in paid-in capital when an award is settled, if any, are assumed to be used to repurchase shares in the current period. The dilutive common share equivalents, calculated using the treasury stock method, for the three and nine months ended June 26, 2016 were 14,812,000 and 13,325,000, respectively, and 20,749,000 and 22,447,000 for the three and nine months ended June 28, 2015, respectively. Shares of common stock equivalents outstanding that were not included in the computation of diluted earnings per common share because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period were 1,378,000 and 3,150,000 during the three and nine months ended June 26, 2016, respectively, and 16,711,000 and 6,067,000 during the three and nine months ended June 28, 2015, respectively. |
Recent Accounting Pronouncements, Policy | Recent Accounting Pronouncements. In November 2015, the Financial Accounting Standards Board (FASB) issued new guidance related to accounting for income taxes, which requires all deferred tax assets and liabilities to be classified as noncurrent on the balance sheet. The Company early adopted the new guidance prospectively in the second quarter of fiscal 2016. Prior period amounts have not been adjusted. In May 2014, the FASB issued new guidance related to revenue recognition, which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. It defines a five-step approach for recognizing revenue, which may require a company to use more judgment and make more estimates than under the current guidance. The new guidance will be effective for the Company starting in the first quarter of fiscal 2019. Adoption one year early is permitted. Two methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods presented or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is recognized as an adjustment to the opening retained earnings balance. The Company does not intend to adopt the new guidance early and is in the process of determining the adoption method as well as the effects the adoption will have on its consolidated financial statements. In January 2016, the FASB issued new guidance on classifying and measuring financial instruments, which requires that (i) all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings and (ii) when the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk be recognized separately in other comprehensive income. Additionally, it changes the disclosure requirements for financial instruments. The new guidance will be effective for the Company starting in the first quarter of fiscal 2019. Early adoption is permitted for certain provisions. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt certain provisions early. In February 2016, the FASB issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of fiscal 2020. Early adoption is permitted. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. In March 2016, the FASB issued new guidance that changes the accounting for share-based payments. Under the new guidance, excess tax benefits associated with share-based payment awards will be recognized in the income statement when the awards vest or settle, rather than in stockholders’ equity. In addition, it will increase the number of shares an employer can withhold to cover income taxes on share-based payment awards and still qualify for the exemption to liability classification. The new guidance will be effective for the Company starting in the first quarter of fiscal 2018. Early adoption is permitted in any annual or interim period. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. In June 2016, the FASB issued new guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. The new guidance will be effective for the Company starting in the first quarter of fiscal 2021. Early adoption is permitted starting in the first quarter of fiscal 2020. The Company is in the process of determining the effects the adoption will have on its consolidated financial statements as well as whether to adopt the new guidance early. |
Marketable Securities (Policies) |
9 Months Ended |
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Jun. 26, 2016 | |
Marketable Securities [Abstract] | |
Marketable Securities, Trading Securities | The Company classifies certain portfolios of debt securities that utilize derivative instruments to acquire or reduce foreign exchange, interest rate and/or equity, prepayment and credit risks as trading. |
Basis of Presentation (Tables) |
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense related to all share-based awards | Total share-based compensation expense, related to all of the Company’s share-based awards, was comprised as follows (in millions):
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Composition of Certain Financial Statement Items (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories |
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Other Current Liabilities |
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Investment Income, net |
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Stockholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Stockholders Equity | Changes in stockholders’ equity for the nine months ended June 26, 2016 were as follows (in millions):
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Accumulated Other Comprehensive Income | Changes in the components of accumulated other comprehensive income, net of income taxes, in Qualcomm stockholders’ equity during the nine months ended June 26, 2016 were as follows (in millions):
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Dividends Declared | During the nine months ended June 26, 2016 and June 28, 2015, dividends charged to retained earnings were as follows (in millions, except per share data):
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Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | The following table provides a summary of the Company’s long-term debt (in millions except percentages):
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Segment Information (Tables) |
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues and EBT for reportable segments | The table below presents revenues, EBT and total assets for reportable segments (in millions):
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Reconciling items for reportable segments - revenues | Reconciling items in the previous table were as follows (in millions):
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Reconciling items for reportable segments - EBT | Reconciling items in the previous table were as follows (in millions):
Unallocated acquisition-related expenses were comprised as follows (in millions):
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Strategic Realignment Plan (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 26, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Strategic Realignment Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs | The restructuring accrual, a portion of which is included in payroll and other benefits related liabilities with the remainder included in other current liabilities, is expected to be substantially paid within the next 12 months. Changes in the restructuring accrual during the nine months ended June 26, 2016 were as follows (in millions):
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Fair Value Measurements (Tables) |
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Notes to Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value hierarchy for assets and liabilities measured at fair value on a recurring basis | The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at June 26, 2016 (in millions):
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Activity for marketable securities classified within Level 3 of the valuation hierarchy | The following table includes the activity for mortgage- and asset-backed and auction rate securities classified within Level 3 of the valuation hierarchy (in millions):
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Marketable Securities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Marketable Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Composition of marketable securities | Marketable securities were comprised as follows (in millions):
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Contractual maturities of available-for-sale debt securities | At June 26, 2016, the contractual maturities of available-for-sale debt securities were as follows (in millions):
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Realized gains and losses on sales of available-for-sale securities | The Company recorded realized gains and losses on sales of available-for-sale securities as follows (in millions):
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Composition of available-for-sale securities | Available-for-sale securities were comprised as follows (in millions):
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Gross unrealized losses and fair values of investments in individual securities classified as available-for-sale in a continuous unrealized loss position deemed to be temporary | The following table shows the gross unrealized losses and fair values of the Company’s investments in individual securities that are classified as available-for-sale and have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for more than 12 months, aggregated by investment category (in millions):
|
Basis of Presentation Earnings Per Common Share (Details) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 26, 2016 |
Jun. 28, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Basis of Presentation [Abstract] | ||||
Dilutive common share equivalents | 14,812,000 | 20,749,000 | 13,325,000 | 22,447,000 |
Common share equivalents excluded from computation of diluted EPS | 1,378,000 | 16,711,000 | 3,150,000 | 6,067,000 |
Composition of Certain Financial Statement Items Inventories (Details) - USD ($) $ in Millions |
Jun. 26, 2016 |
Sep. 27, 2015 |
---|---|---|
Inventory, Net [Abstract] | ||
Raw materials | $ 3 | $ 1 |
Work-in-process | 694 | 550 |
Finished goods | 641 | 941 |
Inventories | $ 1,338 | $ 1,492 |
Composition of Certain Financial Statement Items Other Current Liabilities (Details) - USD ($) $ in Millions |
Jun. 26, 2016 |
Sep. 27, 2015 |
---|---|---|
Other Liabilities, Current [Abstract] | ||
Customer incentives and other customer-related liabilities | $ 1,685 | $ 1,894 |
Other | 428 | 462 |
Other current liabilities | $ 2,113 | $ 2,356 |
Composition of Certain Financial Statement Items Other Income, Costs and Expenses (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 28, 2015 |
Mar. 29, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Gain on sale of wireless spectrum | $ 380 | $ 0 | ||
Proceeds from sale of wireless spectrum | 232 | 0 | ||
Deferred payments | 275 | |||
Restructuring and restructuring-related charges | 158 | |||
Resolution of governmental investigation, Amount | $ 975 | 975 | ||
Goodwill impairment charges | $ 151 | 255 | ||
Impairment of Intangible Assets | 11 | 44 | 11 | |
Gains on sales of certain property plant and equipment | $ 44 | $ 60 | ||
Other Operating Income (Expense) [Member] | ||||
Gain (Loss) on Disposition of Business | $ 48 | |||
Minimum [Member] | ||||
Deferred payments, Due date | Jan. 01, 2020 | |||
Maximum [Member] | ||||
Deferred payments, Due date | Dec. 31, 2023 |
Composition of Certain Financial Statement Items Investment Income, Net (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 26, 2016 |
Jun. 28, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Investment Income, Net [Abstract] | ||||
Interest and dividend income | $ 156 | $ 128 | $ 451 | $ 400 |
Net realized gains on marketable securities | 56 | 117 | 99 | 381 |
Net realized gains on other investments | 13 | 5 | 43 | 18 |
Impairment losses on marketable securities | (20) | (42) | (109) | (131) |
Impairment losses on other investments | (13) | (13) | (29) | (30) |
Equity in net losses of investees | (18) | (10) | (49) | (23) |
Other | 2 | 10 | (3) | 19 |
Investment income, net | $ 176 | $ 195 | 403 | 634 |
Net impairment losses on marketable securities related to the noncredit portion of losses on debt securities recognized in other comprehensive income | $ 37 | $ 10 |
Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
---|---|---|---|---|---|---|---|
Jun. 26, 2016 |
Dec. 27, 2015 |
Mar. 29, 2015 |
Dec. 28, 2014 |
Jun. 28, 2015 |
Sep. 25, 2016 |
Sep. 27, 2015 |
|
Income Taxes [Line Items] | |||||||
Effective income tax rate | 15.00% | 19.00% | |||||
Tax benefits from foreign income taxed at rates lower than rates in the United States | 14.00% | ||||||
Tax benefit from a worthless stock deduction on a domestic subsidiary | $ 101 | ||||||
Tax benefit recognized in period related to prior period attributable to federal research and development tax credit | $ 79 | $ 101 | |||||
Resolution of governmental investigation, Amount | $ 975 | $ 975 | |||||
Tax benefit as a result of a favorable tax audit settlement | $ 61 | ||||||
Unrecognized Tax Benefits | $ 210 | $ 40 | |||||
Scenario, Forecast [Member] | |||||||
Income Taxes [Line Items] | |||||||
Effective income tax rate | 17.00% | ||||||
Tax benefits from foreign income taxed at rates lower than rates in the United States | 15.00% |
Stockholders' Equity Share Repurchase Program (Details) - USD ($) $ in Billions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 28, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
Mar. 09, 2015 |
|
Share Repurchase Program [Line Items] | ||||
Authorized amount | $ 15.0 | |||
Remaining authorized amount | $ 3.2 | |||
Accelerated Share Repurchase Program [Member] | ||||
Share Repurchase Program [Line Items] | ||||
Upfront Payment Under Accelerated Stock Repurchase Program | $ 5.0 | |||
Stock repurchased and retired during period, shares | 57,737,000 | |||
Open Market Repurchases [Member] | ||||
Share Repurchase Program [Line Items] | ||||
Stock repurchased and retired during period, shares | 70,168,000 | 56,652,000 | ||
Stock repurchased and retired during period, before commissions | $ 3.7 | $ 4.0 |
Stockholders' Equity Dividends (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 2 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 12, 2016 |
Aug. 31, 2016 |
Sep. 21, 2016 |
Jun. 26, 2016 |
Mar. 27, 2016 |
Dec. 27, 2015 |
Jun. 28, 2015 |
Mar. 29, 2015 |
Dec. 28, 2014 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Dividends [Line Items] | |||||||||||
Dividends per share announced | $ 0.53 | $ 0.48 | $ 0.48 | $ 0.48 | $ 0.42 | $ 0.42 | $ 1.49 | $ 1.32 | |||
Dividends charged to retained earnings | $ 794 | $ 726 | $ 730 | $ 771 | $ 702 | $ 710 | $ 2,250 | $ 2,183 | |||
Subsequent Event [Member] | |||||||||||
Dividends [Line Items] | |||||||||||
Dividends per share announced | $ 0.53 | ||||||||||
Dividends Payable, Date declared | Jul. 12, 2016 | ||||||||||
Dividends Payable, Date to be paid | Sep. 21, 2016 | ||||||||||
Dividends Payable, Date of record | Aug. 31, 2016 |
Employee Benefit Plans Employee Benefit Plans (Details) - Stock Compensation Plan [Member] |
2 Months Ended |
---|---|
Mar. 08, 2016
shares
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares authorized under the New Plan | 90,000,000 |
Number of shares available under the Prior Plan carried forward to the New Plan | 20,120,000 |
Number of shares available for grant | 110,120,000 |
Commitments and Contingencies Legal Proceedings (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Sep. 29, 2013 |
Jun. 26, 2016 |
|
Legal Proceedings [Line Items] | ||
ParkerVision verdict amount | $ 173 | |
Deferred revenue recognized upon settlement | $ 235 |
Commitments and Contingencies Purchase Obligations (Details) $ in Millions |
Jun. 26, 2016
USD ($)
|
---|---|
Unrecorded Unconditional Purchase Obligation [Line Items] | |
Remainder of fiscal 2016 - Unrecorded obligations | $ 3,000 |
Fiscal 2017 - Unrecorded obligations | 1,200 |
Fiscal 2018 - Unrecorded obligations | 782 |
Fiscal 2019 - Unrecorded obligations | 702 |
Fiscal 2020 - Unrecorded obligations | 206 |
Thereafter - Unrecorded obligations | 50 |
Inventories [Member] | |
Unrecorded Unconditional Purchase Obligation [Line Items] | |
Remainder of fiscal 2016 - Unrecorded obligations | 2,600 |
Fiscal 2017 - Unrecorded obligations | 979 |
Fiscal 2018 - Unrecorded obligations | 700 |
Fiscal 2019 - Unrecorded obligations | 647 |
Fiscal 2020 - Unrecorded obligations | 157 |
Thereafter - Unrecorded obligations | $ 0 |
Commitments and Contingencies Operating Leases (Details) $ in Millions |
9 Months Ended |
---|---|
Jun. 26, 2016
USD ($)
| |
Leases, Operating [Abstract] | |
Description of Leasing Arrangements, Operating Leases | The Company leases certain of its land, facilities and equipment under noncancelable operating leases, with terms ranging from less than one year to 21 years and with provisions in certain leases for cost-of-living increases. |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
Remainder of fiscal 2016 - Operating Leases | $ 23 |
Fiscal 2017 - Operating leases | 89 |
Fiscal 2018 - Operating leases | 64 |
Fiscal 2019 - Operating leases | 50 |
Fiscal 2020 - Operating leases | 38 |
Thereafter - Operating leases | $ 90 |
Commitments and Contingencies Other Commitments (Details) $ in Millions |
Jun. 26, 2016
USD ($)
|
---|---|
Other Commitments [Abstract] | |
Other Commitments | $ 316 |
Remainder of fiscal 2016 - Other Commitments | $ 85 |
Fair Value Measurements Activity Between Levels of the Fair Value Hierarchy, Assets (Details) - Mortgage- and asset-backed and auction rate securities [Member] - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Activity for Marketable Securities Classified Within Level 3 of the Valuation Hierarchy [Roll Forward] | ||
Beginning balance of Level 3 | $ 224 | $ 269 |
Total realized and unrealized gains or losses included in investment income, net | (3) | 3 |
Total realized and unrealized gains or losses included in other comprehensive income (loss) | (2) | (4) |
Purchases | 2 | 62 |
Sales | (103) | (46) |
Settlements | (41) | (57) |
Transfers out of Level 3 | (17) | 0 |
Ending balance of Level 3 | $ 60 | $ 227 |
Fair Value Measurements Nonrecurring Fair Value Measurements (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Jun. 28, 2015 |
Jun. 26, 2016 |
Jun. 28, 2015 |
|
Nonrecurring Fair Value Measurements [Abstract] | |||
Impairment of Intangible Assets | $ 11 | $ 44 | $ 11 |
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