Quarterly report pursuant to Section 13 or 15(d)

Debt (Notes)

v3.10.0.1
Debt (Notes)
9 Months Ended
Jun. 24, 2018
Debt Disclosure [Abstract]  
Debt
Debt
Revolving Credit Facility. The Company has an Amended and Restated Revolving Credit Facility (2016 Amended and Restated Revolving Credit Facility) that provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $5.0 billion, of which $530 million and $4.47 billion will expire in February 2020 and November 2021, respectively. Proceeds from the 2016 Amended and Restated Revolving Credit Facility, if drawn, are expected to be used for general corporate purposes. At June 24, 2018 and September 24, 2017, the Company had not borrowed any funds under the 2016 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 24, 2018 and September 24, 2017, the Company had $3.2 billion and $999 million, respectively, of outstanding commercial paper included in short-term debt with a weighted-average interest rate of 2.34% and 1.19%, respectively, which included fees paid to the commercial paper dealers, and weighted-average remaining days to maturity of 46 days and 45 days, respectively. The carrying value of the outstanding commercial paper approximated its estimated fair value at June 24, 2018 and September 24, 2017.
NXP-Related Credit and Term Loan Facilities. If the Company has not received regulatory approval from SAMR or other material developments have not occurred, the Company expects to terminate the NXP Acquisition after July 25, 2018 at 11:59 p.m. New York time (Note 8). As a result, the following credit agreements are expected to remain undrawn and terminate in accordance with their terms.
The Company is party to a credit agreement, as amended, that provides for senior unsecured delayed-draw revolving facility loans in an aggregate amount of $3.0 billion (as amended, the 2018 Revolving Credit Facility). Proceeds from the 2018 Revolving Credit Facility, if drawn, will be used in part to finance the NXP Acquisition and for general corporate purposes. Commitments under the 2018 Revolving Credit Facility expire on the first to occur of (i) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP, (ii) if the closing date under the 2018 Revolving Credit Facility has not occurred, the date that is five business days following July 25, 2018 and (iii) the termination of the commitments in accordance with the provisions of the 2018 Revolving Credit Facility providing for voluntary and mandatory commitment reductions. In the event the NXP Acquisition is terminated, these commitments will expire. Loans under the 2018 Revolving Credit Facility, if drawn, will mature on December 31, 2018 and will bear interest, at the option of the Company, at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the 2018 Revolving Credit Facility) or the Base Rate (determined in accordance with the 2018 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 based on Qualcomm’s debt ratings as of June 24, 2018 will be 0.75% and 0.00% per annum, respectively. The 2018 Revolving Credit Facility has a ticking fee, which is based on Qualcomm’s debt ratings and initially accrues at a rate of 0.05% per annum commencing on March 6, 2018. At June 24, 2018, the Company had not borrowed any funds under the 2018 Revolving Credit Facility.
The Company is party to a credit agreement, as amended, that provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $4.0 billion (as amended, the 2016 Term Loan Facility). Proceeds from the 2016 Term Loan Facility, if drawn, will be used to finance the NXP Acquisition. Commitments under the 2016 Term Loan Facility expire on the first to occur of (i) the consummation of the proposed acquisition of NXP without using loans under the 2016 Term Loan Facility, (ii) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP and (iii) the date that is five business days following July 25, 2018. In the event the NXP Acquisition is terminated, these commitments will expire. At June 24, 2018 and September 24, 2017, the Company had not borrowed any funds under the 2016 Term Loan Facility.
The Company is party to a credit agreement, as amended, that provides for senior unsecured delayed-draw term facility loans in an aggregate amount of $7.0 billion (as amended, the 2018 Term Loan Facility). Proceeds from the 2018 Term Loan Facility, if drawn, will be used in part to finance the NXP Acquisition and for general corporate purposes. Commitments under the 2018 Term Loan Facility expire on the first to occur of (i) the consummation of the proposed acquisition of NXP without using loans under the 2018 Term Loan Facility, (ii) the termination of Qualcomm River Holdings’s obligation to consummate the proposed acquisition of NXP, (iii) the date that is five business days following July 25, 2018 and (iv) the termination of the commitments in accordance with the provisions of the 2018 Term Loan Facility providing for voluntary and mandatory commitment reductions. In the event the NXP Acquisition is terminated, these commitments will expire. Loans under the 2018 Term Loan Facility, if drawn, will mature on December 31, 2018 and will bear interest, at the option of the Company, at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the 2018 Term Loan Facility) or the Base Rate (determined in accordance with the 2018 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 based on Qualcomm’s debt ratings as of June 24, 2018 will be 0.875% and 0.00% per annum, respectively. The 2018 Term Loan Facility has a ticking fee, which is based on Qualcomm’s debt ratings and initially accrues at a rate of 0.05% per annum commencing on March 6, 2018. At June 24, 2018, the Company had not borrowed any funds under the 2018 Term Loan Facility.
Long-term Debt. In May 2018, the Company initiated private offerings to exchange the Company’s floating-rate notes due 2019, floating-rate notes due 2020, fixed-rate 1.85% notes due 2019 and fixed-rate 2.10% notes due 2020 (collectively, the Old Notes) issued in May 2017 that were subject to special mandatory redemption provisions. The Company offered certain eligible holders of the Old Notes the option to exchange Old Notes for (i) new notes that have the same principal amount and terms of the Old Notes, except for a new special mandatory redemption date of November 1, 2018 and maturity dates that are one day after the applicable maturity dates for the applicable series of Old Notes and (ii) a cash fee of 0.25% of the principal amount of the Old Notes. For holders not eligible to participate in the exchanges, the Company offered to repurchase the Old Notes pursuant to cash tender offers for 100.25% of the principal amount of the Old Notes. The offers to exchange and offers to repurchase the Company’s 2.10% fixed-rate notes due 2020 were not accepted because the amount of such notes validly tendered and not withdrawn in the applicable exchange offer was not sufficient to meet the minimum tender condition. On May 31, 2018, the Company exchanged $122 million of Old Notes for new notes and repurchased $71 million of Old Notes in the aggregate pursuant to the offers to exchange and the offers to repurchase. Also on May 31, 2018, the Company called for full redemption of all of its then-outstanding 1.85% fixed-rate notes due 2019 and 2.10% fixed-rate notes due 2020 pursuant to the optional redemption provision in the fixed-rate notes, and irrevocably deposited cash of $2.8 billion with the trustee of the notes, which represented an amount sufficient to satisfy and discharge such fixed-rate notes in full. On June 8, 2018, the Company called for full redemption all of its then-outstanding floating-rate notes due 2019 and floating-rate notes due 2020 pursuant to the special mandatory redemption provisions in the floating-rate notes. On July 2, 2018, $2.6 billion was paid to the holders of the fixed-rate notes in full redemption of such notes out of the $2.8 billion in cash previously deposited with the trustee, with the excess amount then refunded to the Company. On July 6, 2018, $1.2 billion was paid to the holders of the floating-rate notes in full redemption of such notes. At June 24, 2018, the $2.8 billion of irrevocably deposited cash was included in other current assets and the Old Notes redeemed in July 2018 were included in short-term debt.
The following table provides a summary of the Company’s long-term debt (in millions, except percentages):
 
 
June 24, 2018
 
September 24, 2017
 
 
Amount
 
Effective
Rate
 
Amount
 
Effective
Rate
May 2015 Notes
 
 
 
 
 
 
 
 
Floating-rate three-month LIBOR plus 0.27% notes due May 18, 2018
$

 
 
 
$
250

 
1.65%
 
Floating-rate three-month LIBOR plus 0.55% notes due May 20, 2020
250

 
2.94%
 
250

 
1.92%
 
Fixed-rate 1.40% notes due May 18, 2018

 
 
 
1,250

 
1.93%
 
Fixed-rate 2.25% notes due May 20, 2020
1,750

 
3.08%
 
1,750

 
2.20%
 
Fixed-rate 3.00% notes due May 20, 2022
2,000

 
3.66%
 
2,000

 
2.65%
 
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 Notes
 
 
 
 
 
 
 
 
Floating-rate three-month LIBOR plus 0.36% notes due May 20, 2019
695

 
3.88%
 
750

 
1.80%
 
Floating-rate three-month LIBOR plus 0.45% notes due May 20, 2020
485

 
4.54%
 
500

 
1.86%
 
Floating-rate three-month LIBOR plus 0.73% notes due January 30, 2023
500

 
3.16%
 
500

 
2.11%
 
Fixed-rate 1.85% notes due May 20, 2019
1,127

 
3.55%
 
1,250

 
2.00%
 
Fixed-rate 2.10% notes due May 20, 2020
1,500

 
4.09%
 
1,500

 
2.19%
 
Fixed-rate 2.60% notes due January 30, 2023
1,500

 
2.70%
 
1,500

 
2.70%
 
Fixed-rate 2.90% notes due May 20, 2024
1,500

 
3.01%
 
1,500

 
3.01%
 
Fixed-rate 3.25% notes due May 20, 2027
2,000

 
3.46%
 
2,000

 
3.46%
 
Fixed-rate 4.30% notes due May 20, 2047
1,500

 
4.74%
 
1,500

 
4.47%
May 2018 Notes
 
 
 
 
 
 
 
 
Floating-rate three-month LIBOR plus 0.36% notes due May 21, 2019
52

 
3.08%
 

 
 
 
Floating-rate three-month LIBOR plus 0.45% notes due May 21, 2020
14

 
3.00%
 

 
 
 
Fixed-rate 1.85% notes due May 21, 2019
56

 
2.28%
 

 
 
Total principal
19,429

 
 
 
21,000

 
 
 
Unamortized discount, including debt issuance costs
(90
)
 
 
 
(106
)
 
 
 
Hedge accounting fair value adjustments
(48
)
 
 
 

 
 
 
Total
$
19,291

 
 
 
$
20,894

 
 
Reported as:
 
 
 
 
 
 
 
 
Short-term debt
$
3,913

 
 
 
$
1,496

 
 
 
Long-term debt
15,378

 
 
 
19,398

 
 
 
Total
$
19,291

 
 
 
$
20,894

 
 

At June 24, 2018 and September 24, 2017, the aggregate fair value of the notes, based on Level 2 inputs, was approximately $18.9 billion and $21.5 billion, respectively.
The Company’s floating-rate notes due 2019, floating-rate notes due 2020 and 1.85% fixed-rate notes due 2019 issued in May 2018 for an aggregate principal amount of $122 million 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 May 2018 Notes). The redemption is required on the first to occur of (i) the termination of the NXP purchase agreement or (ii) November 1, 2018, if the NXP transaction has not closed as of such date. In the event the NXP Acquisition is terminated, the May 2018 Notes will be redeemed in accordance with their terms. 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 other floating-rate notes prior to maturity. 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 24, 2018, the Company had outstanding interest rate swaps with an aggregate notional amount of $1.8 billion related to the May 2015 Notes, which effectively converted 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 recorded in earnings in interest expense in the current period. The Company did not enter into similar interest rate swaps in connection with issuance of the May 2017 Notes or May 2018 Notes.
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. Interest is payable in arrears quarterly for the floating-rate notes and semi-annually for the fixed-rate notes. 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 $594 million and $289 million in the nine months ended June 24, 2018 and June 25, 2017, respectively.
Debt Covenants. The 2016 Amended and Restated Revolving Credit Facility, the 2016 Term Loan Facility, the 2018 Revolving Credit Facility and the 2018 Term Loan Facility require 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. 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 24, 2018 and September 24, 2017, the Company was in compliance with the applicable covenants under each facility outstanding at such time.