Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation

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Basis of Presentation
 6 Months Ended
Mar. 31, 2013
Notes to Financial Statements [Abstract]  
Note 1 - Basis of Presentation
Note 1 - Basis of Presentation
Financial Statement Preparation. These condensed consolidated financial statements have been prepared by QUALCOMM Incorporated (collectively with its subsidiaries, the Company or Qualcomm) in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the interim data includes all normal recurring adjustments necessary for a fair statement of the results for the interim periods. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. The Company operates and reports using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three-month and six-month periods ended March 31, 2013 and March 25, 2012 included 13 weeks and 26 weeks, respectively.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and the disclosure of contingent amounts in the Company’s condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year presentation.
Earnings Per Common Share. Basic earnings per common share is computed by dividing net income attributable to Qualcomm by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed by dividing net income attributable to Qualcomm by the combination of dilutive common share equivalents, comprised of shares issuable under the Company’s share-based compensation plans and shares subject to written put options, and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an award, if any, the amount of compensation cost for future service that the Company has not yet recognized, if any, and the estimated tax benefits that would be recorded in paid-in capital, when an award is settled are assumed to be used to repurchase shares in the current period, if any. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three and six months ended March 31, 2013 were 41,007,000 and 41,235,000, respectively. The incremental dilutive common share equivalents, calculated using the treasury stock method, for the three and six months ended March 25, 2012 were 44,100,000 and 40,576,000, respectively.
Employee stock options to purchase approximately 326,000 and 486,000 shares of common stock during the three and six months ended March 31, 2013, respectively, and employee stock options to purchase approximately 504,000 and 2,488,000 shares of common stock during the three and six months ended March 25, 2012, respectively, were outstanding but not included in the calculation of diluted earnings per common share because the effect would be anti-dilutive. Put options outstanding during the three and six months ended March 25, 2012 to purchase 11,800,000 shares of common stock were not included in the earnings per common share computation because the put options’ exercise prices were less than the average market price of the common stock while they were outstanding, and therefore, the effect on diluted earnings per common share would be anti-dilutive. No put options were outstanding during the three and six months ended March 31, 2013. In addition, other common stock equivalents of 77,000 and 38,000 shares outstanding during the three and six months ended March 31, 2013, respectively, and 733,000 and 704,000 shares outstanding during the three and six months ended March 25, 2012, respectively, were not included in the computation of diluted earnings per common share because the effect would be anti-dilutive.
Share-Based Compensation. Total estimated share-based compensation expense, related to all of the Company’s share-based awards, was comprised as follows (in millions):
 
Three Months Ended
 
Six Months Ended
 
March 31,
2013
 
March 25,
2012
 
March 31,
2013
 
March 25,
2012
Cost of equipment and services revenues
$
17

 
$
17

 
$
37

 
$
36

Research and development
156

 
126

 
313

 
253

Selling, general and administrative
95

 
97

 
201

 
198

Share-based compensation expense before income taxes
268

 
240

 
551

 
487

Related income tax benefit
(48
)
 
(56
)
 
(111
)
 
(109
)
Share-based compensation expense, net of income taxes
$
220

 
$
184

 
$
440

 
$
378

The Company recorded $71 million and $82 million in share-based compensation expense during the six months ended March 31, 2013 and March 25, 2012, respectively, related to share-based awards granted during those periods.
At March 31, 2013, total unrecognized compensation costs related to non-vested stock options and restricted stock units granted prior to that date were $144 million and $1.2 billion, respectively, which are expected to be recognized over weighted-average periods of 0.9 and 1.6 years, respectively. During the six months ended March 31, 2013 and March 25, 2012, net share-based awards granted, after forfeitures and cancellations, represented 0.4% and 0.5%, respectively, of outstanding shares as of the beginning of each fiscal period, and total share-based awards granted represented 0.4% and 0.6%, respectively, of outstanding shares as of the end of each fiscal period.