Quarterly report pursuant to Section 13 or 15(d)

Composition of Certain Financial Statement Items (Notes)

Composition of Certain Financial Statement Items (Notes)
3 Months Ended
Dec. 27, 2020
Balance Sheet Related Disclosures [Abstract]  
Composition of Certain Financial Statement Items Composition of Certain Financial Statement Items
Inventories (in millions)
December 27,
September 27,
Raw materials $ 138  $ 94 
Work-in-process 1,192  1,155 
Finished goods 1,222  1,349 
$ 2,552  $ 2,598 
Revolving Credit Facility. On December 8, 2020, we entered into a Revolving Credit Facility replacing our prior Amended and Restated Revolving Credit Facility. There were no outstanding borrowings under the Amended and Restated Revolving Credit Facility at the time of termination. The Revolving Credit Facility provides for unsecured revolving facility loans, swing line loans and letters of credit in an aggregate amount of up to $4.5 billion, which expires on December 8, 2025. At December 27, 2020, no amounts were outstanding under the Revolving Credit Facility. The Revolving Credit Facility requires that we comply with certain financial covenants, including that we maintain an interest coverage ratio, as defined in the agreement. At December 27, 2020, we were in compliance with the applicable covenants under the Revolving Credit Facility.
Revenues. We disaggregate our revenues by segment (Note 6) and type of products and services (as presented on our condensed consolidated statement of operations), and for our QCT segment by revenue stream, which is based on industry segment or application in which our products are sold (as presented below). In certain cases, the determination of QCT revenues by industry segment or application requires the use of certain assumptions. Substantially all of QCT’s revenues consist of equipment revenues that are recognized at a point in time, and substantially all of QTL’s revenues represent licensing revenues that are recognized over time and are principally from royalties generated through our licensees’ sales of mobile handsets. QCT revenue streams were as follows (in millions):
Three Months Ended
December 27,
December 29,
Handsets (1) $ 4,216  $ 2,352 
RFFE (2) 1,061  413 
Automotive (3) 212  147 
IoT (4) 1,044  706 
Total QCT revenues $ 6,533  $ 3,618 
(1) Includes revenues from products sold for use in mobile handsets, excluding RFFE (radio frequency front-end) components.
(2) Includes all revenues from sales of 4G, 5G sub-6 and 5G millimeter wave RFFE products (a substantial portion of which are sold for use in handsets).
(3) Includes revenues from products sold for use in automobiles, including telematics, connectivity and digital cockpit.
(4) Internet of things (IoT) revenues primarily include products sold for use in cellular and non-cellular connected devices within the following industry segments or applications: consumer, computing, industrial, fixed wireless broadband, voice and music and wireless networking.
Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were $110 million and $92 million for the three months ended December 27, 2020 and December 29, 2019, respectively, and primarily related to QTL royalty revenues recognized related to devices sold in prior periods (including adjustments to prior period royalty estimates, in part based on actual reporting of royalties by our licensees) and certain QCT customer incentives.
Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In the three months ended December 27, 2020 and December 29, 2019, we recognized revenues of $185 million and $178 million, respectively, that were recorded as unearned revenues at September 27, 2020 and September 29, 2019, respectively.
Remaining performance obligations, substantially all of which are included in unearned revenues, represent the aggregate amount of the transaction price of certain customer contracts yet to be recognized as revenues as of the end of the reporting period and exclude revenues related to (a) contracts that have an original expected duration of one year or less and
(b) sales-based royalties (i.e., future royalty revenues) pursuant to our license agreements. Our remaining performance obligations are primarily comprised of certain customer contracts for which QTL received license fees upfront. At December 27, 2020, we had $1.2 billion of remaining performance obligations, of which $403 million, $496 million, $238 million, $65 million and $26 million was expected to be recognized as revenues for the remainder of fiscal 2021 and each of the subsequent four years from fiscal 2022 through 2025, respectively, and no amounts thereafter.
Concentrations. A significant portion of our revenues are concentrated with a small number of customers/licensees of our QCT and QTL segments. Revenues from three customers/licensees comprised 34%, 13% and 10% of total consolidated revenues in the first quarter fiscal 2021, as compared to 14%, 17% and 13% of total consolidated revenues in the first quarter of fiscal 2020. In the first quarter of fiscal 2020, one additional customer/licensee also comprised 12% of total consolidated revenues. The comparability of customer/licensee concentrations for the interim periods presented are impacted by the timing of customer/licensee device launches and/or innovation cycles and other seasonal trends, among other fluctuations in demand.
Accounts receivable at December 27, 2020 and September 27, 2020 included $1.2 billion and $1.3 billion, respectively, excluding the impact of foreign withholding taxes, from Huawei related to the remaining amounts due under the previously disclosed settlement agreement to be paid in installments by the end of June 2021 and estimated royalties for sales made in the December 2020 and September 2020 quarters, respectively, under the global patent license agreement with Huawei. Subsequent to December 27, 2020, Huawei paid the second installment of $500 million (excluding the impact of foreign withholding taxes) under the settlement agreement in accordance with the agreed upon payment schedule.
Investment and Other Income, Net (in millions)
Three Months Ended
December 27,
December 29,
Interest and dividend income $ 21  $ 59 
Net gains on marketable securities 118  11 
Net gains on other investments 34  48 
Net gains on deferred compensation plan assets 54  30 
Impairment losses on other investments (1) (72)
Net gains on derivative investments
Equity in net losses of investees (2) (10)
Net losses on foreign currency transactions (14) (3)
$ 219  $ 65