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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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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)
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95-3685934
(I.R.S. Employer
Identification No.)
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5775 Morehouse Dr., San Diego, California
(Address of Principal Executive Offices)
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92121-1714
(Zip Code)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Class
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|
Number of Shares
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Common Stock, $0.0001 per share par value
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|
1,477,041,037
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|
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Page
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||
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QUALCOMM Incorporated
|
||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||
(In millions, except per share data)
|
||||
(Unaudited)
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December 25,
2016 |
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September 25,
2016 |
||||
ASSETS
|
|||||||
Current assets:
|
|
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|
||||
Cash and cash equivalents
|
$
|
6,885
|
|
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$
|
5,946
|
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Marketable securities
|
3,927
|
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12,702
|
|
||
Accounts receivable, net
|
2,085
|
|
|
2,219
|
|
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Inventories
|
1,910
|
|
|
1,556
|
|
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Other current assets
|
972
|
|
|
558
|
|
||
Total current assets
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15,779
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|
|
22,981
|
|
||
Marketable securities
|
18,973
|
|
|
13,702
|
|
||
Deferred tax assets
|
2,312
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|
|
2,030
|
|
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Property, plant and equipment, net
|
2,270
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|
|
2,306
|
|
||
Goodwill
|
5,686
|
|
|
5,679
|
|
||
Other intangible assets, net
|
3,338
|
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|
3,500
|
|
||
Other assets
|
4,008
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|
|
2,161
|
|
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Total assets
|
$
|
52,366
|
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$
|
52,359
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
Current liabilities:
|
|
|
|
||||
Trade accounts payable
|
$
|
1,648
|
|
|
$
|
1,858
|
|
Payroll and other benefits related liabilities
|
865
|
|
|
934
|
|
||
Unearned revenues
|
487
|
|
|
509
|
|
||
Short-term debt
|
1,749
|
|
|
1,749
|
|
||
Other current liabilities
|
3,245
|
|
|
2,261
|
|
||
Total current liabilities
|
7,994
|
|
|
7,311
|
|
||
Unearned revenues
|
2,278
|
|
|
2,377
|
|
||
Long-term debt
|
9,935
|
|
|
10,008
|
|
||
Other liabilities
|
953
|
|
|
895
|
|
||
Total liabilities
|
21,160
|
|
|
20,591
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 6)
|
|
|
|
||||
|
|
|
|
||||
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; 1,478 and 1,476 shares issued and outstanding, respectively
|
214
|
|
|
414
|
|
||
Retained earnings
|
30,815
|
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|
30,936
|
|
||
Accumulated other comprehensive income
|
186
|
|
|
428
|
|
||
Total Qualcomm stockholders’ equity
|
31,215
|
|
|
31,778
|
|
||
Noncontrolling interests
|
(9
|
)
|
|
(10
|
)
|
||
Total stockholders’ equity
|
31,206
|
|
|
31,768
|
|
||
Total liabilities and stockholders’ equity
|
$
|
52,366
|
|
|
$
|
52,359
|
|
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
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Revenues:
|
|
|
|
||||
Equipment and services
|
$
|
4,139
|
|
|
$
|
4,087
|
|
Licensing
|
1,860
|
|
|
1,688
|
|
||
Total revenues
|
5,999
|
|
|
5,775
|
|
||
Costs and expenses:
|
|
|
|
||||
Cost of revenues
|
2,443
|
|
|
2,534
|
|
||
Research and development
|
1,311
|
|
|
1,352
|
|
||
Selling, general and administrative
|
591
|
|
|
578
|
|
||
Other (Note 2)
|
876
|
|
|
(374
|
)
|
||
Total costs and expenses
|
5,221
|
|
|
4,090
|
|
||
Operating income
|
778
|
|
|
1,685
|
|
||
Interest expense
|
(90
|
)
|
|
(74
|
)
|
||
Investment income, net (Note 2)
|
182
|
|
|
99
|
|
||
Income before income taxes
|
870
|
|
|
1,710
|
|
||
Income tax expense
|
(189
|
)
|
|
(214
|
)
|
||
Net income
|
681
|
|
|
1,496
|
|
||
Net loss attributable to noncontrolling interests
|
1
|
|
|
2
|
|
||
Net income attributable to Qualcomm
|
$
|
682
|
|
|
$
|
1,498
|
|
|
|
|
|
||||
Basic earnings per share attributable to Qualcomm
|
$
|
0.46
|
|
|
$
|
1.00
|
|
Diluted earnings per share attributable to Qualcomm
|
$
|
0.46
|
|
|
$
|
0.99
|
|
Shares used in per share calculations:
|
|
|
|
||||
Basic
|
1,478
|
|
|
1,502
|
|
||
Diluted
|
1,495
|
|
|
1,517
|
|
||
|
|
|
|
||||
Dividends per share announced
|
$
|
0.53
|
|
|
$
|
0.48
|
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
|
QUALCOMM Incorporated
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
||||
(In millions)
|
||||
(Unaudited)
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Net income
|
$
|
681
|
|
|
$
|
1,496
|
|
Other comprehensive income (loss), net of income taxes:
|
|
|
|
||||
Foreign currency translation losses
|
(27
|
)
|
|
(14
|
)
|
||
Reclassification of foreign currency translation losses included in net income
|
—
|
|
|
1
|
|
||
Noncredit other-than-temporary impairment losses related to certain available-for-sale debt securities and subsequent changes in fair value
|
6
|
|
|
(27
|
)
|
||
Reclassification of net other-than-temporary losses on available-for-sale securities included in net income
|
79
|
|
|
47
|
|
||
Net unrealized losses on other available-for-sale securities
|
(210
|
)
|
|
(109
|
)
|
||
Reclassification of net realized gains on available-for-sale securities included in net income
|
(92
|
)
|
|
(25
|
)
|
||
Net unrealized gains on derivative instruments
|
2
|
|
|
1
|
|
||
Total other comprehensive loss
|
(242
|
)
|
|
(126
|
)
|
||
Total comprehensive income
|
439
|
|
|
1,370
|
|
||
Comprehensive loss attributable to noncontrolling interests
|
1
|
|
|
2
|
|
||
Comprehensive income attributable to Qualcomm
|
$
|
440
|
|
|
$
|
1,372
|
|
See Accompanying Notes to Condensed Consolidated Financial Statements.
|
QUALCOMM Incorporated
|
||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||
(In millions)
|
||||
(Unaudited)
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
681
|
|
|
$
|
1,496
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization expense
|
329
|
|
|
364
|
|
||
Indefinite and long-lived asset impairment charges
|
32
|
|
|
2
|
|
||
Income tax provision less than income tax payments
|
(113
|
)
|
|
(103
|
)
|
||
Gain on sale of wireless spectrum
|
—
|
|
|
(380
|
)
|
||
Non-cash portion of share-based compensation expense
|
239
|
|
|
247
|
|
||
Incremental tax benefits from share-based compensation
|
(35
|
)
|
|
(2
|
)
|
||
Net realized gains on marketable securities and other investments
|
(147
|
)
|
|
(49
|
)
|
||
Impairment losses on marketable securities and other investments
|
143
|
|
|
63
|
|
||
Other items, net
|
(4
|
)
|
|
(13
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
|
131
|
|
|
646
|
|
||
Inventories
|
(354
|
)
|
|
291
|
|
||
Other assets
|
(16
|
)
|
|
66
|
|
||
Trade accounts payable
|
(208
|
)
|
|
50
|
|
||
Payroll, benefits and other liabilities
|
785
|
|
|
98
|
|
||
Unearned revenues
|
(84
|
)
|
|
(37
|
)
|
||
Net cash provided by operating activities
|
1,379
|
|
|
2,739
|
|
||
Investing Activities:
|
|
|
|
||||
Capital expenditures
|
(129
|
)
|
|
(128
|
)
|
||
Purchases of available-for-sale marketable securities
|
(4,117
|
)
|
|
(3,737
|
)
|
||
Proceeds from sales and maturities of available-for-sale marketable securities
|
6,891
|
|
|
3,113
|
|
||
Purchases of trading securities
|
—
|
|
|
(149
|
)
|
||
Proceeds from sales and maturities of trading securities
|
—
|
|
|
121
|
|
||
Proceeds from sales of other marketable securities
|
—
|
|
|
200
|
|
||
Deposit of investments designated as collateral
|
(1,950
|
)
|
|
—
|
|
||
Acquisitions and other investments, net of cash acquired
|
(57
|
)
|
|
(450
|
)
|
||
Proceeds from sale of wireless spectrum
|
—
|
|
|
232
|
|
||
Other items, net
|
43
|
|
|
82
|
|
||
Net cash provided (used) by investing activities
|
681
|
|
|
(716
|
)
|
||
Financing Activities:
|
|
|
|
||||
Proceeds from short-term debt
|
2,727
|
|
|
1,089
|
|
||
Repayment of short-term debt
|
(2,727
|
)
|
|
(1,090
|
)
|
||
Proceeds from issuance of common stock
|
131
|
|
|
99
|
|
||
Repurchases and retirements of common stock
|
(444
|
)
|
|
(2,050
|
)
|
||
Dividends paid
|
(784
|
)
|
|
(717
|
)
|
||
Incremental tax benefits from share-based compensation
|
35
|
|
|
2
|
|
||
Other items, net
|
(42
|
)
|
|
2
|
|
||
Net cash used by financing activities
|
(1,104
|
)
|
|
(2,665
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(17
|
)
|
|
(5
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
939
|
|
|
(647
|
)
|
||
Cash and cash equivalents at beginning of period
|
5,946
|
|
|
7,560
|
|
||
Cash and cash equivalents at end of period
|
$
|
6,885
|
|
|
$
|
6,913
|
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Cost of equipment and services revenues
|
$
|
9
|
|
|
$
|
10
|
|
Research and development
|
153
|
|
|
165
|
|
||
Selling, general and administrative
|
77
|
|
|
72
|
|
||
Share-based compensation expense before income taxes
|
239
|
|
|
247
|
|
||
Related income tax benefit
|
(49
|
)
|
|
(60
|
)
|
||
|
$
|
190
|
|
|
$
|
187
|
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
Inventories (in millions)
|
|
|
|
||||
|
December 25,
2016 |
|
September 25,
2016 |
||||
Raw materials
|
$
|
—
|
|
|
$
|
1
|
|
Work-in-process
|
1,016
|
|
|
847
|
|
||
Finished goods
|
894
|
|
|
708
|
|
||
|
$
|
1,910
|
|
|
$
|
1,556
|
|
Other Current Liabilities (in millions)
|
|
|
|
||||
|
December 25,
2016 |
|
September 25,
2016 |
||||
Customer incentives and other customer-related liabilities
|
$
|
1,985
|
|
|
$
|
1,710
|
|
Charge related to the KFTC investigation (Note 6)
|
868
|
|
|
—
|
|
||
Other
|
392
|
|
|
551
|
|
||
|
$
|
3,245
|
|
|
$
|
2,261
|
|
Investment Income, Net (in millions)
|
|
|
|
||||
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Interest and dividend income
|
$
|
167
|
|
|
$
|
136
|
|
Net realized gains on marketable securities
|
139
|
|
|
43
|
|
||
Net realized gains on other investments
|
8
|
|
|
6
|
|
||
Impairment losses on marketable securities
|
(122
|
)
|
|
(49
|
)
|
||
Impairment losses on other investments
|
(21
|
)
|
|
(14
|
)
|
||
Equity in net earnings (losses) of investees
|
3
|
|
|
(20
|
)
|
||
Net gains (losses) on derivative investments
|
8
|
|
|
(3
|
)
|
||
|
$
|
182
|
|
|
$
|
99
|
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
|
Qualcomm Stockholders’ Equity
|
|
Noncontrolling Interests
|
|
Total Stockholders’ Equity
|
||||||
Balance at September 25, 2016
|
$
|
31,778
|
|
|
$
|
(10
|
)
|
|
$
|
31,768
|
|
Net income (loss)
|
682
|
|
|
(1
|
)
|
|
681
|
|
|||
Other comprehensive loss
|
(242
|
)
|
|
—
|
|
|
(242
|
)
|
|||
Common stock issued under employee benefit plans and related tax benefits
|
161
|
|
|
—
|
|
|
161
|
|
|||
Share-based compensation
|
255
|
|
|
—
|
|
|
255
|
|
|||
Tax withholdings related to vesting of share-based payments
|
(172
|
)
|
|
—
|
|
|
(172
|
)
|
|||
Dividends
|
(801
|
)
|
|
—
|
|
|
(801
|
)
|
|||
Stock repurchases
|
(444
|
)
|
|
—
|
|
|
(444
|
)
|
|||
Other
|
(2
|
)
|
|
2
|
|
|
—
|
|
|||
Balance at December 25, 2016
|
$
|
31,215
|
|
|
$
|
(9
|
)
|
|
$
|
31,206
|
|
|
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 25, 2016
|
$
|
(161
|
)
|
|
$
|
6
|
|
|
$
|
532
|
|
|
$
|
51
|
|
|
$
|
428
|
|
Other comprehensive (loss) income before reclassifications
|
(27
|
)
|
|
6
|
|
|
(210
|
)
|
|
2
|
|
|
(229
|
)
|
|||||
Reclassifications from accumulated other comprehensive income (loss)
|
—
|
|
|
11
|
|
|
(24
|
)
|
|
—
|
|
|
(13
|
)
|
|||||
Other comprehensive (loss) income
|
(27
|
)
|
|
17
|
|
|
(234
|
)
|
|
2
|
|
|
(242
|
)
|
|||||
Balance at December 25, 2016
|
$
|
(188
|
)
|
|
$
|
23
|
|
|
$
|
298
|
|
|
$
|
53
|
|
|
$
|
186
|
|
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)
|
|
December 25, 2016
|
|
September 25, 2016
|
||||||||
|
Amount
|
|
Effective
Rate
|
|
Amount
|
|
Effective
Rate
|
||||
Floating-rate notes due May 18, 2018
|
$
|
250
|
|
|
1.24%
|
|
$
|
250
|
|
|
1.14%
|
Floating-rate notes due May 20, 2020
|
250
|
|
|
1.52%
|
|
250
|
|
|
1.42%
|
||
Fixed-rate 1.40% notes due May 18, 2018
|
1,250
|
|
|
1.36%
|
|
1,250
|
|
|
0.93%
|
||
Fixed-rate 2.25% notes due May 20, 2020
|
1,750
|
|
|
2.04%
|
|
1,750
|
|
|
1.69%
|
||
Fixed-rate 3.00% notes due May 20, 2022
|
2,000
|
|
|
2.53%
|
|
2,000
|
|
|
2.04%
|
||
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
|
(55
|
)
|
|
|
|
(57
|
)
|
|
|
||
Hedge accounting fair value adjustments
|
(10
|
)
|
|
|
|
65
|
|
|
|
||
Total long-term debt
|
$
|
9,935
|
|
|
|
|
$
|
10,008
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
||||||||||
December 25, 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
4,101
|
|
|
$
|
1,811
|
|
|
$
|
14
|
|
|
$
|
73
|
|
|
$
|
5,999
|
|
EBT
|
724
|
|
|
1,532
|
|
|
(17
|
)
|
|
(1,369
|
)
|
|
870
|
|
|||||
December 27, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues
|
$
|
4,096
|
|
|
$
|
1,607
|
|
|
$
|
9
|
|
|
$
|
63
|
|
|
$
|
5,775
|
|
EBT
|
590
|
|
|
1,339
|
|
|
359
|
|
|
(578
|
)
|
|
1,710
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
|
|
|
|
|
|
|
|
|
||||||||||
December 25, 2016
|
$
|
3,037
|
|
|
$
|
873
|
|
|
$
|
956
|
|
|
$
|
47,500
|
|
|
$
|
52,366
|
|
September 25, 2016
|
2,995
|
|
|
644
|
|
|
910
|
|
|
47,810
|
|
|
52,359
|
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Revenues
|
|
|
|
||||
Nonreportable segments
|
$
|
73
|
|
|
$
|
64
|
|
Intersegment eliminations
|
—
|
|
|
(1
|
)
|
||
|
$
|
73
|
|
|
$
|
63
|
|
EBT
|
|
|
|
||||
Unallocated cost of revenues
|
$
|
(95
|
)
|
|
$
|
(150
|
)
|
Unallocated research and development expenses
|
(269
|
)
|
|
(216
|
)
|
||
Unallocated selling, general and administrative expenses
|
(145
|
)
|
|
(127
|
)
|
||
Unallocated other expenses, net
|
(876
|
)
|
|
(6
|
)
|
||
Unallocated interest expense
|
(89
|
)
|
|
(70
|
)
|
||
Unallocated investment income, net
|
184
|
|
|
114
|
|
||
Nonreportable segments
|
(79
|
)
|
|
(124
|
)
|
||
Intersegment eliminations
|
—
|
|
|
1
|
|
||
|
$
|
(1,369
|
)
|
|
$
|
(578
|
)
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Cost of revenues
|
$
|
84
|
|
|
$
|
140
|
|
Research and development expenses
|
3
|
|
|
3
|
|
||
Selling, general and administrative expenses
|
61
|
|
|
29
|
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
2,385
|
|
|
$
|
3,850
|
|
|
$
|
—
|
|
|
$
|
6,235
|
|
Marketable securities
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities and government-related securities
|
915
|
|
|
975
|
|
|
—
|
|
|
1,890
|
|
||||
Corporate bonds and notes
|
—
|
|
|
17,747
|
|
|
—
|
|
|
17,747
|
|
||||
Mortgage- and asset-backed and auction rate securities
|
—
|
|
|
1,524
|
|
|
42
|
|
|
1,566
|
|
||||
Equity and preferred securities and equity funds
|
88
|
|
|
476
|
|
|
—
|
|
|
564
|
|
||||
Debt funds
|
—
|
|
|
1,133
|
|
|
—
|
|
|
1,133
|
|
||||
Total marketable securities
|
1,003
|
|
|
21,855
|
|
|
42
|
|
|
22,900
|
|
||||
Derivative instruments
|
—
|
|
|
11
|
|
|
—
|
|
|
11
|
|
||||
Other investments
|
330
|
|
|
—
|
|
|
—
|
|
|
330
|
|
||||
Total assets measured at fair value
|
$
|
3,718
|
|
|
$
|
25,716
|
|
|
$
|
42
|
|
|
$
|
29,476
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative instruments
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
21
|
|
Other liabilities
|
329
|
|
|
—
|
|
|
—
|
|
|
329
|
|
||||
Total liabilities measured at fair value
|
$
|
329
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
350
|
|
|
Three Months Ended
|
||||||
|
December 25,
2016 |
|
December 27,
2015 |
||||
Beginning balance of Level 3
|
$
|
43
|
|
|
$
|
224
|
|
Total realized and unrealized gains or losses:
|
|
|
|
||||
Included in other comprehensive income (loss)
|
—
|
|
|
(1
|
)
|
||
Sales
|
—
|
|
|
(1
|
)
|
||
Settlements
|
(1
|
)
|
|
(36
|
)
|
||
Transfers out of Level 3
|
—
|
|
|
(12
|
)
|
||
Ending balance of Level 3
|
$
|
42
|
|
|
$
|
174
|
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
|
Current
|
|
Noncurrent
|
||||||||||||
|
December 25,
2016 |
|
September 25,
2016 |
|
December 25,
2016 |
|
September 25,
2016 |
||||||||
Available-for-sale:
|
|
|
|
|
|
|
|
||||||||
U.S. Treasury securities and government-related securities
|
$
|
251
|
|
|
$
|
1,116
|
|
|
$
|
1,639
|
|
|
$
|
1,099
|
|
Corporate bonds and notes
|
3,312
|
|
|
10,159
|
|
|
14,435
|
|
|
8,584
|
|
||||
Mortgage- and asset-backed and auction rate securities
|
176
|
|
|
1,363
|
|
|
1,390
|
|
|
534
|
|
||||
Equity and preferred securities and equity funds
|
88
|
|
|
64
|
|
|
476
|
|
|
1,682
|
|
||||
Debt funds
|
100
|
|
|
—
|
|
|
1,033
|
|
|
1,803
|
|
||||
|
$
|
3,927
|
|
|
$
|
12,702
|
|
|
$
|
18,973
|
|
|
$
|
13,702
|
|
|
Gross Realized Gains
|
|
Gross Realized Losses
|
|
Net Realized Gains
|
||||||
For the three months ended
|
|
|
|
|
|
||||||
December 25, 2016
|
$
|
248
|
|
|
$
|
(109
|
)
|
|
$
|
139
|
|
December 27, 2015
|
50
|
|
|
(12
|
)
|
|
38
|
|
|
Cost
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Fair Value
|
||||||||
December 25, 2016
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
$
|
478
|
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
564
|
|
Debt securities (including debt funds)
|
22,269
|
|
|
111
|
|
|
(44
|
)
|
|
22,336
|
|
||||
|
$
|
22,747
|
|
|
$
|
197
|
|
|
$
|
(44
|
)
|
|
$
|
22,900
|
|
September 25, 2016
|
|
|
|
|
|
|
|
||||||||
Equity securities
|
$
|
1,554
|
|
|
$
|
204
|
|
|
$
|
(12
|
)
|
|
$
|
1,746
|
|
Debt securities (including debt funds)
|
24,363
|
|
|
388
|
|
|
(93
|
)
|
|
24,658
|
|
||||
|
$
|
25,917
|
|
|
$
|
592
|
|
|
$
|
(105
|
)
|
|
$
|
26,404
|
|
QUALCOMM Incorporated
|
||||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
||||
(Unaudited)
|
|
December 25, 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
|
$
|
263
|
|
|
$
|
(11
|
)
|
|
$
|
5
|
|
|
$
|
—
|
|
Corporate bonds and notes
|
1,681
|
|
|
(28
|
)
|
|
59
|
|
|
—
|
|
||||
Mortgage- and asset-backed and auction rate securities
|
89
|
|
|
(2
|
)
|
|
59
|
|
|
(1
|
)
|
||||
Debt funds
|
489
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
||||
|
$
|
2,522
|
|
|
$
|
(43
|
)
|
|
$
|
123
|
|
|
$
|
(1
|
)
|
|
September 25, 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
|
$
|
444
|
|
|
$
|
(5
|
)
|
|
$
|
16
|
|
|
$
|
—
|
|
Corporate bonds and notes
|
2,775
|
|
|
(12
|
)
|
|
1,033
|
|
|
(65
|
)
|
||||
Mortgage- and asset-backed and auction rate securities
|
337
|
|
|
(3
|
)
|
|
211
|
|
|
(2
|
)
|
||||
Equity and preferred securities and equity funds
|
312
|
|
|
(4
|
)
|
|
130
|
|
|
(8
|
)
|
||||
Debt funds
|
—
|
|
|
—
|
|
|
309
|
|
|
(6
|
)
|
||||
|
$
|
3,868
|
|
|
$
|
(24
|
)
|
|
$
|
1,699
|
|
|
$
|
(81
|
)
|
•
|
We shipped approximately
217 million
Mobile Station Modem (MSM) integrated circuits for CDMA- and OFDMA-based wireless devices,
a decrease
of
10%
compared to approximately
242 million
MSM integrated circuits in the year ago quarter. Despite the decline in MSM shipments, QCT’s revenues remained substantially flat compared to the year ago quarter primarily due to higher-priced product mix and an increase in revenues related to other products, primarily related to higher connectivity shipments.
|
•
|
Total reported device sales were approximately
$62.9 billion
,
an increase
of approximately
4%
compared to approximately
$60.6 billion
in the year ago quarter.
(1)
QTL’s revenues increased by 13% compared to the prior year quarter primarily due to increases in reported sales of CDMA-based products (including multimode products that also implement OFDMA) and revenues per reported unit. The increase in revenues per reported unit was primarily attributable to the deferral of royalty revenues due to an arbitration with LG Electronics, Inc. in the first quarter of fiscal 2016, partially offset by a decrease in recognition of unearned license fees. QTL revenues and EBT in the
first
quarter of
fiscal 2017
continued to be impacted negatively by units that we believe are not being reported by certain licensees and sales of certain unlicensed products.
|
•
|
On December 27, 2016, the Korea Fair Trade Commission (KFTC) announced that it had reached a decision in its investigation of us, finding that we have violated provisions of the Korean Monopoly Regulation and Fair Trade Act (MRFTA). On January 22, 2017, we received the KFTC’s formal written decision. The KFTC ordered certain remedial actions and imposed a fine of approximately 1.03 trillion Korean Won (approximately $868 million based on exchange rates at December 25, 2016), which was recorded as a charge to other expenses in the first quarter of fiscal 2017. We believe that our business practices do not violate the MRFTA. We intend to challenge the decision in the Seoul High Court and seek a stay of the decision’s remedial order.
|
•
|
Worldwide cellular connections grew sequentially by approximately
1%
to reach approximately
7.5 billion
.
(2)
|
•
|
Worldwide 3G/4G connections (CDMA-based, OFDMA-based and CDMA/OFDMA multimode) grew sequentially by approximately
4%
to approximately
4.2 billion
, which was approximately 56% 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 other licensees report sales and then identify the amount of permitted deductions in their reports), and the way in which licensees report such information may change from time to time. In addition, certain licensees may not report (in the quarter in which they are contractually obligated to report) their sales of certain types of subscriber units, which (as a result of audits, legal actions or for other reasons) may be reported in a subsequent quarter. Accordingly, total reported device sales for a particular period may include prior period activity that was not reported by the licensee until such particular period.
|
(2)
|
According to GSMA Intelligence estimates as of
January 23, 2017
for the quarter ended December 31, 2016.
|
•
|
On October 27, 2016, we announced a definitive agreement under which Qualcomm River Holdings, B.V., an indirect, wholly owned subsidiary of QUALCOMM Incorporated, will acquire NXP Semiconductors N.V. Pursuant to the definitive agreement, Qualcomm River Holdings has commenced a tender offer to acquire all of the issued and outstanding common shares of NXP for $110 per share in cash, for estimated total cash consideration of $38 billion. NXP is a leader in high-performance, mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure identification, network processing and RF power products. The transaction is expected to close by the end of calendar 2017 and is subject to receipt of regulatory approvals in various jurisdictions and other closing conditions, including the tender of specified percentages (which vary from 70% to 95% based on certain circumstances as provided in the definitive agreement) of the issued and outstanding common shares of NXP in the offer. The tender offer is not subject to any financing condition; however, we intend to fund the transaction with cash held by foreign entities and new debt. We expect that this will require us to devote significant resources and management time and attention prior to close; take on significant debt; and utilize a substantial portion of our cash, cash equivalents and marketable securities.
|
•
|
Consumer demand for 3G/4G smartphone products is increasing in emerging regions driven by availability of lower-tier-3G/4G devices. We expect the ongoing rollout of 4G services in emerging regions will encourage competition and growth, bringing the benefits of 3G/4G LTE multimode to consumers.
|
•
|
We expect our business, particularly QCT, to continue to be impacted by industry dynamics, including:
|
•
|
Concentration of device share among a few companies within the premium tier, resulting in significant supply chain leverage for those companies;
|
•
|
Decisions by companies to utilize their own internally-developed integrated circuit products or our competitors’ integrated circuit products in a portion of their devices;
|
•
|
Intense competition, particularly in China, as our competitors expand their product offerings and/or reduce the prices of their products as part of a strategy to attract new and/or retain customers; and
|
•
|
Lengthening replacement cycles in developed regions, where the smartphone industry is mature, premium-tier smartphones are common and consumer demand is increasingly driven by new product launches and/or innovation cycles, and from increasing consumer demand in emerging regions where premium-tier smartphones are less common and replacement cycles are on average longer than in developed regions.
|
•
|
We continue to believe that certain licensees, particularly in China, are not fully complying with their contractual obligations to report their sales of licensed products to us, and certain companies, including unlicensed companies, particularly in emerging regions, including China, are delaying execution of new license agreements. We have made substantial progress in reaching agreements with many companies, primarily in China. However, negotiations with certain licensees and unlicensed companies are ongoing. We believe that the conclusion of new agreements with these companies 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. Additionally, we believe our increased efforts in the areas of compliance will also improve reporting, but will also result in increased costs to the business. Litigation and/or other actions 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, and other regulatory authorities may do so in the future. An unfavorable resolution of one or more of these matters could have a material adverse effect on our business with remedies that include, among others, injunctions, monetary damages or fines or other orders to pay money, and the issuance of orders to cease certain conduct and/or modify our business practices. Additionally, certain of our direct and indirect customers and licensees have pursued, and others may in the future pursue, litigation or arbitration against us related to our business. The unfavorable resolution of one or more of these matters could have a material adverse effect on our business, including monetary damages. These activities may also require the investment of significant management time and attention and may result in increased legal costs. See “Notes to Condensed Consolidated Financial Statements, Note 6. Commitments and Contingencies” elsewhere in this Quarterly Report.
|
•
|
We continue to invest significant resources toward advancements in 4G LTE and 5G technologies, OFDM-based WLAN technologies, wireless baseband chips, our converged computing/communications (Snapdragon) chips, radio frequency front-end (RFFE), connectivity, graphics, audio and video codecs, multimedia products, software and services, which contribute to the expansion of our intellectual property portfolio. We are also investing in targeted opportunities that leverage our existing technical and business expertise to deploy new business models and enter into new industry segments, such as products for: automotive; the Internet of Things (IoT), including the connected home, smart cities and wearables; data center; networking; computing; mobile health; and machine learning, including robotics, among others.
|
•
|
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 RFFE modules and RF filters into fully integrated products for mobile devices and IoT applications, among others. The joint venture will initially be owned
51%
by Qualcomm Global Trading Pte. Ltd., a Singapore corporation and wholly-owned subsidiary of ours (Qualcomm Global Trading) and
49%
by EPCOS AG, a German Aktiengesellschaft and wholly-owned subsidiary of TDK Corporation (EPCOS). Certain intellectual property, patents and filter and module design and manufacturing assets will be carved out of existing TDK businesses and be owned by the joint venture, and certain assets will be acquired directly by affiliates of ours. The purchase price of Qualcomm Global Trading’s 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, Qualcomm Global Trading has the option to acquire (and EPCOS has an option to sell) EPCOS’s interest in the joint venture for
$1.15 billion
30 months
after the closing date. EPCOS 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 EPCOS to receive any profit sharing, distributions, dividends or other payments of any kind or nature. Every required regulatory agency has either approved the transaction or declined to exercise jurisdiction. The completion of the transaction remains subject to satisfaction of additional conditions and is expected to close in the second quarter of fiscal 2017.
|
Revenues (in millions)
|
|||||||||||
|
Three Months Ended
|
||||||||||
|
December 25,
2016 |
|
December 27,
2015 |
|
Change
|
||||||
Equipment and services
|
$
|
4,139
|
|
|
$
|
4,087
|
|
|
$
|
52
|
|
Licensing
|
1,860
|
|
|
1,688
|
|
|
172
|
|
|||
|
$
|
5,999
|
|
|
$
|
5,775
|
|
|
$
|
224
|
|
|
Three Months Ended
|
||||||||||
|
December 25,
2016 |
|
December 27,
2015 |
|
Change
|
||||||
Research and development
|
$
|
1,311
|
|
|
$
|
1,352
|
|
|
$
|
(41
|
)
|
% of revenues
|
22
|
%
|
|
23
|
%
|
|
|
||||
Selling, general, and administrative
|
$
|
591
|
|
|
$
|
578
|
|
|
$
|
13
|
|
% of revenues
|
10
|
%
|
|
10
|
%
|
|
|
||||
Other
|
$
|
876
|
|
|
$
|
(374
|
)
|
|
$
|
1,250
|
|
|
Three Months Ended
|
||||
|
December 25,
2016 |
|
December 27,
2015 |
||
Expected income tax provision at federal statutory tax rate
|
35
|
%
|
|
35
|
%
|
Benefits from foreign income taxed at other than U.S. rates
|
(15
|
%)
|
|
(17
|
%)
|
Benefits related to the research and development tax credit
|
(1
|
%)
|
|
(6
|
%)
|
Nondeductible charge related to the KFTC investigation
|
2
|
%
|
|
—
|
%
|
Other
|
1
|
%
|
|
1
|
%
|
Effective tax rate
|
22
|
%
|
|
13
|
%
|
(in millions)
|
QCT
|
|
QTL
|
|
QSI
|
||||||
Three Months Ended December 25, 2016
|
|
|
|
|
|
||||||
Revenues
|
$
|
4,101
|
|
|
$
|
1,811
|
|
|
$
|
14
|
|
EBT
(1)
|
724
|
|
|
1,532
|
|
|
(17
|
)
|
|||
EBT as a % of revenues
|
18
|
%
|
|
85
|
%
|
|
|
|
|||
Three Months Ended December 27, 2015
|
|
|
|
|
|
||||||
Revenues
|
$
|
4,096
|
|
|
$
|
1,607
|
|
|
$
|
9
|
|
EBT
(1)
|
590
|
|
|
1,339
|
|
|
359
|
|
|||
EBT as a % of revenues
|
14
|
%
|
|
83
|
%
|
|
|
(1)
|
Earnings (loss) before taxes.
|
|
December 25,
2016 |
|
September 25,
2016 |
|
$ Change
|
|
% Change
|
|||||||
Cash, cash equivalents and marketable securities
|
$
|
29,785
|
|
|
$
|
32,350
|
|
|
$
|
(2,565
|
)
|
|
(8
|
%)
|
Accounts receivable, net
|
2,085
|
|
|
2,219
|
|
|
(134
|
)
|
|
(6
|
%)
|
|||
Inventories
|
1,910
|
|
|
1,556
|
|
|
354
|
|
|
23
|
%
|
|||
Short-term debt
|
1,749
|
|
|
1,749
|
|
|
—
|
|
|
—
|
%
|
|||
Long-term debt
|
9,935
|
|
|
10,008
|
|
|
(73
|
)
|
|
(1
|
%)
|
|
Three Months Ended
|
|||||||||||||
|
December 25,
2016 |
|
December 27,
2015 |
|
$ Change
|
|
% Change
|
|||||||
Net cash provided by operating activities
|
$
|
1,379
|
|
|
$
|
2,739
|
|
|
$
|
(1,360
|
)
|
|
(50
|
%)
|
Net cash provided (used) by investing activities
|
681
|
|
|
(716
|
)
|
|
1,397
|
|
|
N/M
|
|
|||
Net cash used by financing activities
|
(1,104
|
)
|
|
(2,665
|
)
|
|
1,561
|
|
|
(59
|
%)
|
•
|
Our purchase obligations at
December 25, 2016
, some of which relate to research and development activities and capital expenditures, totaled
$3.7 billion
and
$879 million
for fiscal 2017 and 2018, respectively, and
$1.0 billion
thereafter.
|
•
|
Our research and development expenditures were
$1.3 billion
in the first quarter of
fiscal 2017
and $5.2 billion in
fiscal 2016
, and we expect to continue to invest heavily in research and development for new technologies, applications and services for voice and data communications.
|
•
|
Cash outflows for capital expenditures were
$129 million
in the first quarter of
fiscal 2017
and $539 million in
fiscal 2016
. 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 connection with the KFTC investigation, we are obligated to pay a fine of approximately 1.03 trillion Korean Won (approximately $868 million based on exchange rates at December 25, 2016) within 60 days of the KFTC’s formal written decision, which was issued on January 22, 2017.
|
•
|
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 Qualcomm Global Trading Pte. Ltd., a Singapore corporation and wholly-owned subsidiary of ours (Qualcomm Global Trading) and
49%
by EPCOS AG, a German Aktiengesellschaft and wholly-owned subsidiary of TDK Corporation (EPCOS). 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, Qualcomm Global Trading has the option to acquire (and EPCOS has an option to sell) EPCOS’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. EPCOS 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. Every required regulatory agency has either approved the transaction or declined to exercise jurisdiction. The completion of the transaction remains subject to satisfaction of additional conditions and is expected to close in the second quarter of fiscal 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.
|
•
|
we could be required to pay a termination fee to NXP of
$2.0 billion
;
|
•
|
we will have incurred and may continue to incur costs relating to the proposed transaction, many of which are payable by us whether or not the proposed transaction is completed;
|
•
|
matters relating to the proposed transaction (including integration planning) require substantial commitments of time and resources by our management team and numerous others throughout our organization, which could otherwise have been devoted to other opportunities;
|
•
|
we may be subject to legal proceedings related to the proposed transaction or the failure to complete the proposed transaction;
|
•
|
the failure to consummate the proposed transaction may result in negative publicity and a negative perception of us in the investment community; and
|
•
|
any disruptions to our business resulting from the announcement and pendency of the proposed transaction, including any adverse changes in our relationships with our customers, suppliers, partners or employees, may continue or intensify in the event the proposed transaction is not consummated.
|
•
|
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, 4G, new unlicensed technologies that we are developing in conjunction with 3G and 4G, as well as for 5G, thereby restricting the ability of wireless operators to deploy or expand the use of these technologies;
|
•
|
wireless operators delay or do not 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;
|
•
|
our intellectual property and technical leadership included in the 5G standardization effort is different than in 3G and 4G standards;
|
•
|
the standardization and/or deployment of 5G technology is delayed; and/or
|
•
|
we are unable to drive the adoption of our products and services into networks and devices, including devices beyond traditional cellular applications, based on CDMA, OFDMA and other communications technologies.
|
•
|
differentiate our integrated circuit products with innovative technologies across multiple products and features (e.g., modem, RFFE, 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, other computing devices, 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, 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 in areas where single-mode products are commercialized, 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 semiconductor component products, including RFFE, and 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 standalone value and/or contribute to the success of our existing businesses through acquisitions, joint ventures 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 automotive, the IoT, including the connected home, smart cities and wearables, data center, networking, computing, mobile health and machine learning, including robotics, 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;
|
•
|
be a leader in 5G technology development, standardization, intellectual property creation and licensing and develop and commercialize 5G integrated circuit products and services; and/or
|
•
|
continue to develop brand recognition to effectively compete against better known companies in 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;
|
•
|
our suppliers’ delay in developing leading process technologies, or inability to develop or maintain leading process technologies, including transitions to smaller geometry process technologies;
|
•
|
the loss of a supplier or the inability of a supplier to meet performance, quality or yield 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)
|
||||||
September 26, 2016 to October 23, 2016
|
1,307
|
|
|
$
|
65.70
|
|
|
1,307
|
|
|
$
|
2,900
|
|
October 24, 2016 to November 20, 2016
|
1,770
|
|
|
67.40
|
|
|
1,770
|
|
|
2,781
|
|
||
November 21, 2016 to December 25, 2016
|
3,570
|
|
|
66.78
|
|
|
3,570
|
|
|
2,543
|
|
||
Total
|
6,647
|
|
|
|
|
|
6,647
|
|
|
|
|
(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
December 25, 2016
,
$2.5 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. (2)
|
|
8-K
|
|
000-19528/ 161339867
|
|
1/13/2016
|
|
2.1
|
|
|
2.3
|
|
Amendment #1, dated December 20, 2016, to 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. (2)
|
|
|
|
|
|
|
|
|
|
X
|
2.4
|
|
Amendment #2, dated January 19, 2017, to 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. (2)
|
|
|
|
|
|
|
|
|
|
X
|
2.5
|
|
Purchase Agreement dated as of October 27, 2016 by and between Qualcomm River Holdings, B.V. and NXP Semiconductors N.V. (2)
|
|
8-K
|
|
000-19528/ 161956228
|
|
10/27/2016
|
|
2.1
|
|
|
3.1
|
|
Restated Certificate of Incorporation, as amended.
|
|
10-Q
|
|
000-19528/ 161775595
|
|
7/20/2016
|
|
3.1
|
|
|
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
|
|
|
10.35
|
|
Qualcomm Incorporated 2017 Director Compensation Plan (1)
|
|
8-K
|
|
000-19528/ 161931217
|
|
10/11/2016
|
|
99.1
|
|
|
10.39
|
|
Letter Agreement, dated as of October 27, 2016, by and between QUALCOMM Incorporated and Qualcomm River Holdings B.V.
|
|
8-K
|
|
000-19528/ 161956228
|
|
10/27/2016
|
|
10.1
|
|
|
10.40
|
|
Credit Agreement among QUALCOMM Incorporated, the lenders party thereto and Goldman Sachs Bank USA, as Administrative Agent, dated as of November 8, 2016.
|
|
8-K
|
|
000-19528/ 161985209
|
|
11/9/2016
|
|
10.1
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10.41
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Amended and Restated Credit Agreement among QUALCOMM Incorporated, the lenders party thereto and Bank of America, N.A., as Administrative Agent, dated as of November 8, 2016.
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8-K
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000-19528/ 161985209
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11/9/2016
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10.2
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10.42
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Letter of Credit and Reimbursement Agreement between Qualcomm River Holdings B.V. and Mizuho Bank, Ltd., dated as of November 22, 2016.
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8-K
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000-19528/ 162023573
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11/29/2016
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10.1
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10.43
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First Amendment to Letter of Credit and Reimbursement Agreement between Qualcomm River Holdings B.V. and Mizuho Bank, Ltd., dated as of November 23, 2016.
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8-K
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000-19528/ 162023573
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11/29/2016
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10.2
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10.44
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Continuing Agreement for Standby Letters of Credit between Qualcomm River Holdings B.V. and The Bank of Tokyo-Mitsubishi UFJ, Ltd., dated as of November 22, 2016.
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8-K
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000-19528/ 162023573
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11/29/2016
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10.3
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10.45
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Reimbursement and Security Agreement between Qualcomm River Holdings B.V. and Sumitomo Mitsui Banking Corporation, dated as of November 22, 2016.
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8-K
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000-19528/ 162023573
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11/29/2016
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10.4
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10.46
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Letter of Credit Application by QUALCOMM Incorporated to Bank of America, N.A., dated as of November 23, 2016.
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8-K
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000-19528/ 162023573
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11/29/2016
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10.5
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10.47
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Form of 2017 Annual Cash Incentive Plan Performance Unit Agreement (1)
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X
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31.1
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Steve Mollenkopf.
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X
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31.2
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Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for George S. Davis.
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X
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32.1
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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.
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X
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32.2
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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.
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X
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101.INS
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XBRL Instance Document.
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X
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101.SCH
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XBRL Taxonomy Extension Schema.
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X
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase.
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X
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101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase.
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X
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase.
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X
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase.
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X
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QUALCOMM Incorporated
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/s/ George S. Davis
|
|
George S. Davis
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|
Executive Vice President and Chief Financial Officer
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Schedule 1(a)(i)
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Excluded Patent and Patent Applications
|
Schedule 1(a)(ii)
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Additional Patent and Patent Applications
|
Schedule X
|
Seller Retention Bonus Plan Awards
|
Schedule 2.1
|
JV Entity Names
|
Schedule 2.1(B)(I)(A)(1)
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Excluded Singapore Non-MEMS Assets
|
Schedule 2.1(b)(i)(A)(2)
|
Retained Singapore MEMS Liabilities
|
Schedule 2.1(b)(i)(A)(3)
|
Singapore Excluded Employees
|
Schedule 2.1(b)(i)(A)(4)
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MEMS Patents
|
Schedule 2.1(b)(i)(A)(5)(x)
|
Excluded Singapore MEMS Assets
|
Schedule 2.2(c)(iv)
|
License Agreement
|
Schedule 6.15(b)(i)
|
Non-Competition
|
Schedule 7.1(b)(vi)(B)
|
Deletions from Required Contract Consents Schedule
|
Schedule 7.1(b)(xiv)(A)
|
Key Employees
|
Exhibit B
|
JV Agreement
|
Exhibit H
|
License Assignment Agreement
|
Exhibit P
|
Patent Transfer Agreement
|
Exhibit FF
|
IT Carve Out Agreement
|
Exhibit GG-Schedule 2.1
|
Transitional Trademark License Agreement Schedule 2.1
|
Exhibit JJ
|
Key Employee Proprietary Rights and Invention Agreement (Sweden)/Key Employee Proprietary Rights and Invention Agreement (Managing Director)
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Definitions
|
Capitalized terms used in this Award Agreement have the meaning specified under the Plan, except as otherwise specified herein.
|
Grant Date
|
December 4, 2016
|
Performance Period
|
The Performance Period is the Company’s 2017 fiscal year.
|
Performance Goals; Amount Payable Under this Award
|
The maximum amount payable under this Award, if any, is limited to the Maximum Award Amount determined pursuant to Section I of
Attachment A
based on the Performance Goals set out therein and, subject to that limit, the amount that is actually paid under this Award, if any, will be determined pursuant to Section II of
Attachment A
.
To be eligible to receive payment with respect to this Award, your Service must be continuous from the Grant Date through the Payment Date specified below.
|
Payment Date
|
This Award shall be paid in cash no later than 30 calendar days after the Committee’s written certification of whether and the extent to which the Performance Goals have been achieved and its determination of the amount, if any, to be paid.
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Repayment Policy
|
By executing this Award Agreement, you acknowledge that any payment made with respect to this Award is subject to (a) the Qualcomm Incorporated Cash Incentive Compensation Repayment Policy as in effect from time to time, a copy of the current policy is attached to this Award Agreement as
Attachment B
and incorporated herein by reference; (b) any applicable listing standards of a national securities exchange adopted in accordance with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (regarding recovery of erroneously awarded compensation) and any implementing rules and regulations of the U.S. Securities and Exchange Commission adopted thereunder; (c) similar rules under the laws of any other jurisdiction; and (d) any policies hereinafter adopted by the Company to implement such requirements, all to the extent determined by the Company in its discretion to be applicable to you (collectively, the “
Repayment Policy
”). You hereby agree to be bound by the Repayment Policy.
|
Terms of the Plan
|
This Award is subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any conflict between this Award Agreement and the terms of the Plan, then the terms of the Plan control.
|
Attachments:
|
Attachment A
– Performance Goals
|
Base Salary
|
Target Award Amount as a Percent of Base Salary
|
Target Award Amount
|
Maximum Award Amount (200% of Target Award Amount)
|
$
|
%
|
$
|
$
|
1.
|
No amount will be payable under this Formula unless the Company’s 2017 Adjusted GAAP EPS is at least
$<<Number>>
(<<Percent>>% of the Performance Target for 2017 Adjusted GAAP EPS Performance Measure set out below).
|
2.
|
The Company fiscal 2017 Performance Measures and Performance Targets for purposes of determining the amount payable under this Formula are as follows:
|
•
|
2017 Adjusted GAAP revenues:
$<<2017 Adjusted GAAP revenues Target>>
|
•
|
2017 Adjusted GAAP EPS:
$<<2017 Adjusted GAAP EPS Target>>
|
3.
|
The weighted financial performance ratio for 2017 Adjusted GAAP revenues will be the result of 0.40 multiplied by a fraction, the numerator of which is the actual 2017 Adjusted GAAP revenues and the denominator of which is the 2017 Adjusted GAAP revenues Performance Target stated above.
|
4.
|
The weighted financial performance ratio for 2017 Adjusted GAAP EPS will be the result of 0.60 multiplied by a fraction, the numerator of which is the actual 2017 Adjusted GAAP EPS and the denominator of which is the 2017 Adjusted GAAP EPS Performance Target stated above.
|
5.
|
The resulting weighted financial performance ratios for 2017 Adjusted GAAP revenues and 2017 Adjusted GAAP EPS will then be summed (the sum referred to as the “
Weighted Financial Performance Ratio
”) and the “
Incentive Multiple
” will be calculated according to the schedule set forth below:
|
Weighted Financial Performance
|
|
Incentive Multiple
|
|
Rate of Increase / Decrease to the Incentive Multiple
|
|
|
|
|
|
> 130%
|
|
2.00
|
|
The Incentive Multiple is at the maximum of 2.00 when the Weighted Financial Performance is greater than 1.30.
|
|
|
|
|
|
130%
|
|
2.00
|
|
For each one percent that Weighed Financial Performance exceeds the objective (100%), the Incentive Multiple increases by 0.0333 from the target Incentive Multiple of 1.00 up to an Incentive Multiple of 2.00 when the Weighted Financial Performance is 130%.
|
125%
|
|
1.83
|
|
|
120%
|
|
1.67
|
|
|
115%
|
|
1.50
|
|
|
110%
|
|
1.33
|
|
|
105%
|
|
1.17
|
|
|
100%
|
|
1.00
|
|
|
|
|
|
|
|
95%
|
|
0.75
|
|
For each one percent that Weighed Financial Performance is less than the objective (100%), the Incentive Multiple decreases by 0.05 from the target Incentive Multiple of 1.00 to an Incentive Multiple of 0.00 when the Weighted Financial Performance is 80%.
|
90%
|
|
0.50
|
|
|
85%
|
|
0.25
|
|
|
80%
|
|
0.0
|
|
|
|
|
|
|
|
< 80%
|
|
0.0
|
|
The Incentive Multiple is zero (0.00) when the Weighted Financial Performance is less than 80%.
|
6.
|
Subject to the limitations of Section I and the exercise of discretion only as allowed by Section 9.5(b) of the Plan with respect to a Performance Award intended to constitute qualified performance-based compensation to a Covered Employee based on the Performance Goals set out in Section I, the amount payable under this Award shall be the result of the Target Award Amount specified above multiplied by the Incentive Multiple determined in step 5 above.
|
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
|
|