QUALCOMM Incorporated Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Debt (Notes)

Debt (Notes)

9 Months Ended

Jun. 25, 2017

Revolving Credit Facility. In November 2016, the Company amended and restated its existing Revolving Credit Facility that provides for unsecured revolving facility loans, swing line loans and letters of credit (Amended and Restated Revolving Credit Facility) to increase the aggregate amount available to $5.0 billion, of which $530 million and $4.47 billion will expire in February 2020 and November 2021, respectively. The Company had not previously borrowed any funds under the existing Revolving Credit Facility. Proceeds from the Amended and Restated Revolving Credit Facility are expected to be used for general corporate purposes. Loans under the Amended and Restated Revolving Credit Facility will bear interest, at the option of the Company, at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the Amended and Restated Revolving Credit Facility) or the Base Rate (determined in accordance with the Amended and Restated Revolving Credit Facility), in each case plus an applicable margin based on the Company’s long-term unsecured senior, non-credit enhanced debt ratings. The initial margins over the reserve-adjusted Eurocurrency Rate and the Base Rate will be 0.70% and 0.00% per annum, respectively. The Amended and Restated Revolving Credit Facility has a facility fee, which initially accrues at a rate of 0.05% per annum. At June 25, 2017, the Company had not borrowed any funds under the Amended and Restated Revolving Credit Facility.

Commercial Paper Program. The Company has an unsecured commercial paper program, which provides for the issuance of up to $5.0 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 25, 2017 and September 25, 2016, the Company had $999 million and $1.7 billion, respectively, of outstanding commercial paper recorded as short-term debt with weighted-average interest rates of 0.97% and 0.52%, respectively, which included fees paid to the commercial paper dealers and weighted-average remaining days to maturity of 28 days and 36 days, respectively. The carrying value of the outstanding commercial paper approximated its estimated fair value at June 25, 2017 and September 25, 2016.

Bridge Loan Facility. In October 2016, the Company entered into commitment letters pursuant to which the Company received commitments for senior unsecured bridge facility loans in an aggregate principal amount up to $13.6 billion (Bridge Loan Facility). Proceeds from the Bridge Loan Facility, if drawn, were intended to be used to finance, in part, the proposed acquisition of NXP by Qualcomm River Holdings B.V., a wholly owned subsidiary of the Company (Qualcomm River Holdings) (Note 8). Subsequently, the commitments available under the Bridge Loan Facility were reduced to $7.1 billion upon the Company entering into a $4.0 billion Term Loan Facility, described below, and the sale of certain assets by NXP Semiconductors N.V. for estimated net cash proceeds of $2.5 billion in February 2017. In May 2017, in connection with the Company’s issuance of an aggregate principal amount of $11.0 billion of unsecured floating-rate and fixed-rate notes, described below, the commitments available under the Bridge Loan Facility were reduced such that there were no remaining commitments available, and the Bridge Loan Facility was terminated. The Company had not previously borrowed any funds under the Bridge Loan Facility. The Bridge Loan Facility had a ticking fee, which accrued at a rate of 0.05% per annum commencing on December 26, 2016.

Term Loan Facility. In November 2016, the Company entered into a Credit Agreement that provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $4.0 billion (Term Loan Facility). Proceeds from the Term Loan Facility, if drawn, will be used to finance the proposed acquisition of NXP. Commitments under the Term Loan Facility will expire on the first to occur of (i) the consummation of the proposed acquisition of NXP without using loans under the Term Loan Facility, (ii) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP and (iii) October 27, 2017 (unless such date is extended in accordance with the NXP purchase agreement). Loans under the Term Loan Facility will mature on the third anniversary of the date on which they are funded and will bear interest at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the Term Loan Facility) or the Base Rate (determined in accordance with the Term Loan Facility), in each case plus an applicable margin based on the Company’s long-term unsecured senior, non-credit enhanced debt ratings. The initial margins over the reserve-adjusted Eurocurrency Rate and the Base Rate will be 0.875% and 0.00% per annum, respectively. The Term Loan Facility has a ticking fee, which initially accrues at a rate of 0.05% per annum commencing on December 26, 2016. At June 25, 2017, the Company had not borrowed any funds under the Term Loan Facility.

Long-Term Debt. In May 2017, the Company issued an aggregate principal amount of $11.0 billion of unsecured floating-rate and fixed-rate notes with varying maturities. The proceeds from the notes of approximately $10.95 billion, net of underwriting discounts and offering expenses, are intended to be used to finance, in part, the Company’s proposed acquisition of NXP and other related transactions and for general corporate purposes. The following table provides a summary of the Company’s long-term debt (in millions except percentages):



		June 25, 2017				September 25, 2016
		Amount			Effective Rate	Amount			Effective Rate
May 2015 Issuance
	Floating-rate three-month LIBOR plus 0.27% notes due May 18, 2018	$	250		1.50%	$	250		1.14%
	Floating-rate three-month LIBOR plus 0.55% notes due May 20, 2020	250			1.78%	250			1.42%
	Fixed-rate 1.40% notes due May 18, 2018	1,250			1.69%	1,250			0.93%
	Fixed-rate 2.25% notes due May 20, 2020	1,750			2.07%	1,750			1.69%
	Fixed-rate 3.00% notes due May 20, 2022	2,000			2.51%	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%
May 2017 Issuance
	Floating-rate three-month LIBOR plus 0.36% notes due May 20, 2019	750			1.68%	—
	Floating-rate three-month LIBOR plus 0.45% notes due May 20, 2020	500			1.74%	—
	Floating-rate three-month LIBOR plus 0.73% notes due January 30, 2023	500			2.00%	—
	Fixed-rate 1.85% notes due May 20, 2019	1,250			2.00%	—
	Fixed-rate 2.10% notes due May 20, 2020	1,500			2.20%	—
	Fixed-rate 2.60% notes due January 30, 2023	1,500			2.70%	—
	Fixed-rate 2.90% notes due May 20, 2024	1,500			3.01%	—
	Fixed-rate 3.25% notes due May 20, 2027	2,000			3.46%	—
	Fixed-rate 4.30% notes due May 20, 2047	1,500			4.47%	—
	Total principal	21,000				10,000
	Unamortized discount, including debt issuance costs	(110		)		(57		)
	Hedge accounting fair value adjustments	9				65
	Total	$	20,899			$	10,008
Reported as:
	Short-term debt	$	1,496			$	—
	Long-term debt	19,403				10,008
	Total	$	20,899			$	10,008

Interest is payable in arrears quarterly for the floating-rate notes and semi-annually for the fixed-rate notes. The Company’s 2019 floating-rate notes, 2020 floating-rate notes, 2019 fixed-rate notes and 2020 fixed-rate notes issued in May 2017 for an aggregate principal amount of $4.0 billion are subject to a special mandatory redemption at a price equal to 101% of the aggregate principal amount, plus accrued and unpaid interest to, but excluding, the date of such mandatory redemption. The redemption is required on the first to occur of (i) the termination of the NXP purchase agreement or (ii) October 27, 2017 (or such later date on or prior to June 1, 2018 to which such date is extended in accordance with the NXP purchase agreement). The Company may redeem the other 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 other 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. The obligations under the notes rank equally in right of payment with all of the Company’s other senior unsecured indebtedness and will effectively rank junior to all liabilities of the Company’s subsidiaries. At June 25, 2017 and September 25, 2016, the aggregate fair value of the notes, based on Level 2 inputs, was approximately $21.5 billion and $10.6 billion, respectively.

In connection with the May 2015 debt issuance, the Company 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 in interest expense in the current period. The Company did not enter into similar interest rate swaps in connection with the May 2017 debt issuance.

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 $289 million and $270 million in the nine months ended June 25, 2017 and June 26, 2016.

Debt Covenants. The Amended and Restated Revolving Credit Facility and the Term Loan Facility require, and the Bridge Loan Facility and prior Revolving Credit Facility required, 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 each of the respective agreements, of not less than three to one at the end of each fiscal quarter. At June 25, 2017 and September 25, 2016, the Company was in compliance with the applicable covenants under each facility outstanding at such time.