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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
_____________________
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                      .
Commission File Number 0-19528
QUALCOMM Incorporated
(Exact name of registrant as specified in its charter)
Delaware
 
95-3685934
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
 
 
 
 
5775 Morehouse Dr.,
San Diego,
California
 
92121-1714
(Address of Principal Executive Offices)
 
(Zip Code)
(858) 587-1121
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.0001 par value
 QCOM
Nasdaq Stock Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No 
The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on July 29, 2019, was as follows:
Class
 
Number of Shares
Common Stock, $0.0001 per share par value
 
1,215,657,726
 
 
 
 
 





QUALCOMM Incorporated
Form 10-Q
For the Quarter Ended June 30, 2019
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
QUALCOMM Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share data)
(Unaudited)
 
June 30,
2019
 
September 30,
2018
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
13,923

 
$
11,777

Marketable securities
435

 
311

Accounts receivable, net
2,390

 
2,904

Inventories
1,774

 
1,693

Other current assets
682

 
699

Total current assets
19,204

 
17,384

Deferred tax assets
1,172

 
936

Property, plant and equipment, net
3,037

 
2,975

Goodwill
6,308

 
6,498

Other intangible assets, net
2,350

 
2,955

Other assets
2,062

 
1,970

Total assets
$
34,133

 
$
32,718

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Trade accounts payable
$
1,587

 
$
1,825

Payroll and other benefits related liabilities
1,014

 
1,081

Unearned revenues
527

 
500

Short-term debt
3,000

 
1,005

Other current liabilities
4,725

 
6,978

Total current liabilities
10,853

 
11,389

Unearned revenues
1,251

 
1,620

Income taxes payable
2,114


2,312

Long-term debt
13,426

 
15,365

Other liabilities
1,026

 
1,225

Total liabilities
28,670

 
31,911

 
 
 
 
Commitments and contingencies (Note 6)

 

 
 
 
 
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; 1,218 and 1,219 shares issued and outstanding, respectively
581

 

Retained earnings
4,687

 
542

Accumulated other comprehensive income
195

 
265

Total stockholders’ equity
5,463

 
807

Total liabilities and stockholders’ equity
$
34,133

 
$
32,718

See accompanying notes.

3



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Revenues:
 
 
 
 
 
 
 
Equipment and services
$
3,531

 
$
4,110

 
$
11,037

 
$
12,750

Licensing
6,104

 
1,467

 
8,422

 
4,083

Total revenues
9,635

 
5,577

 
19,459

 
16,833

Costs and expenses:
 
 
 
 
 
 
 
Cost of revenues
2,114

 
2,491

 
6,481

 
7,394

Research and development
1,380

 
1,416

 
3,957

 
4,237

Selling, general and administrative
547

 
655

 
1,646

 
2,297

Other
277

 
112

 
408

 
1,605

Total costs and expenses
4,318

 
4,674

 
12,492

 
15,533

Operating income
5,317

 
903

 
6,967

 
1,300

Interest expense
(160
)
 
(212
)
 
(477
)
 
(561
)
Investment and other income, net
344

 
243

 
377

 
454

Income before income taxes
5,501

 
934

 
6,867

 
1,193

Income tax (expense) benefit
(3,352
)
 
268

 
(2,987
)
 
(5,644
)
Net income (loss)
$
2,149

 
$
1,202

 
$
3,880

 
$
(4,451
)
 
 
 
 
 
 
 
 
Basic earnings (loss) per share
$
1.77

 
$
0.81

 
$
3.20

 
$
(3.01
)
Diluted earnings (loss) per share
$
1.75

 
$
0.81

 
$
3.17

 
$
(3.01
)
Shares used in per share calculations:
 
 
 
 
 
 
 
Basic
1,217

 
1,478

 
1,214

 
1,479

Diluted
1,231

 
1,487

 
1,224

 
1,479

See accompanying notes.

4



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Net income (loss)
$
2,149

 
$
1,202

 
$
3,880

 
$
(4,451
)
Other comprehensive income (loss), net of income taxes:
 
 
 
 
 
 
 
Foreign currency translation gains (losses)
14

 
(237
)
 
(27
)
 
(64
)
Reclassification of foreign currency translation losses included in net income (loss)

 

 
1

 

Reclassification of net other-than-temporary losses on available-for-sale securities included in net income (loss)

 

 

 
1

Net unrealized gains (losses) on other available-for-sale securities

 
3

 
(6
)
 
2

Reclassification of net realized losses (gains) on available-for-sale securities included in net income (loss)

 
2

 
(1
)
 
(7
)
Net unrealized gains (losses) on derivative instruments
6

 
3

 
23

 
(3
)
Reclassification of net realized (gains) losses on derivative instruments included in net income (loss)
(2
)
 
7

 
(4
)
 
10

Other gains (losses)
4

 

 
(5
)
 

Total other comprehensive income (loss)
22

 
(222
)
 
(19
)
 
(61
)
Comprehensive income (loss)
$
2,171

 
$
980

 
$
3,861

 
$
(4,512
)

See accompanying notes.

5



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
Operating Activities:
 
 
 
Net income (loss)
$
3,880

 
$
(4,451
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization expense
1,051

 
1,165

Income tax provision in excess of income tax payments
2,206

 
4,958

Non-cash portion of share-based compensation expense
698

 
659

Net gains on marketable securities and other investments
(340
)
 
(101
)
Indefinite and long-lived asset impairment charges
203

 
96

Impairment losses on marketable securities and other investments
111

 
40

Other items, net
(207
)
 
(46
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, net
1,451

 
470

Inventories
(95
)
 
245

Other assets
15

 
72

Trade accounts payable
(267
)
 
(296
)
Payroll, benefits and other liabilities
(2,534
)
 
1,698

Unearned revenues
(113
)
 
(178
)
Net cash provided by operating activities
6,059

 
4,331

Investing Activities:
 
 
 
Capital expenditures
(570
)
 
(625
)
Purchases of debt and equity marketable securities

 
(5,835
)
Proceeds from sales and maturities of debt and equity marketable securities
124

 
9,105

Acquisitions and other investments, net of cash acquired
(185
)
 
(192
)
Proceeds from other investments
45

 
207

Other items, net
117

 
(45
)
Net cash (used) provided by investing activities
(469
)
 
2,615

Financing Activities:
 
 
 
Proceeds from short-term debt
4,808

 
9,385

Repayment of short-term debt
(4,813
)
 
(7,198
)
Repayment of long-term debt

 
(1,571
)
Proceeds from issuance of common stock
264

 
387

Repurchases and retirements of common stock
(1,088
)
 
(1,425
)
Dividends paid
(2,257
)
 
(2,600
)
Payments of tax withholdings related to vesting of share-based awards
(225
)
 
(273
)
Payment of purchase consideration related to RF360 joint venture
(44
)
 
(157
)
Other items, net
(91
)
 
(54
)
Net cash used by financing activities
(3,446
)
 
(3,506
)
Effect of exchange rate changes on cash and cash equivalents
2

 
(19
)
Net increase in total cash and cash equivalents
2,146

 
3,421

Total cash and cash equivalents at beginning of period
11,777

 
37,029

Total cash and cash equivalents at end of period
$
13,923

 
$
40,450

 
 
 
 
Reconciliation to the condensed consolidated balance sheets
 
 
 
Cash and cash equivalents
$
13,923

 
$
35,619

Restricted cash and restricted cash equivalents included in other assets

 
4,831

Total cash and cash equivalents at end of period
$
13,923

 
$
40,450

See accompanying notes.

6



QUALCOMM Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share data)
(Unaudited)
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Total stockholders’ equity, beginning balance
$
3,866

 
$
23,735

 
$
807

 
$
30,725

 
 
 
 
 
 
 
 
Common stock and paid-in capital:
 
 
 
 
 
 
 
Balance at beginning of period
384

 
495

 

 
274

Common stock issued under employee benefit plans and the related tax benefits
85

 
50

 
262

 
393

Repurchases and retirements of common stock
(69
)
 
(668
)
 
(205
)
 
(1,093
)
Share-based compensation
263

 
200

 
749

 
699

Tax withholdings related to vesting of share-based payments
(82
)
 
(77
)
 
(225
)
 
(273
)
Balance at end of period
581

 

 
581

 

 
 
 
 
 
 
 
 
Retained earnings:
 
 
 
 
 
 
 
Balance at beginning of period
3,309

 
22,695

 
542

 
30,067

Cumulative effect of accounting changes (Note 1)

 

 
3,455

 

Net income (loss)
2,149

 
1,202

 
3,880

 
(4,451
)
Repurchases and retirements of common stock

 
(332
)
 
(883
)
 
(332
)
Dividends
(771
)
 
(921
)
 
(2,307
)
 
(2,640
)
Balance at end of period
4,687

 
22,644

 
4,687

 
22,644

 
 
 
 
 
 
 
 
Accumulated other comprehensive income:
 
 
 
 
 
 
 
Balance at beginning of period
173

 
545

 
265

 
384

Cumulative effect of accounting changes (Note 1)




(51
)


Other comprehensive income (loss)
22

 
(222
)
 
(19
)
 
(61
)
Balance at end of period
195

 
323

 
195

 
323

 
 
 
 
 
 
 
 
Total stockholders’ equity, ending balance
$
5,463

 
$
22,967

 
$
5,463

 
$
22,967

 
 
 
 
 
 
 
 
Dividends per share announced
$
0.62

 
$
0.62

 
$
1.86

 
$
1.76


See accompanying notes.

7


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Note 1. Basis of Presentation and Significant Accounting Policies Update
Financial Statement Preparation. These condensed consolidated financial statements have been prepared 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 notes required by GAAP for complete financial statements. In the opinion of management, the interim financial information 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 our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year. We operate and report using a 52-53 week fiscal year ending on the last Sunday in September. Each of the three-month and nine-month periods ended June 30, 2019 and June 24, 2018 included 13 weeks and 39 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 our 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.
Revision of Prior Period Financial Statements. As previously disclosed, in connection with the preparation of our condensed consolidated financial statements for the three months ended December 30, 2018, we identified an immaterial error related to the recognition of certain royalty revenues of our QTL (Qualcomm Technology Licensing) segment in the quarterly and annual periods in fiscal 2018 and third and fourth quarters and annual period in fiscal 2017. In accordance with SAB No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” we evaluated the error and determined that the related impact was not material to our financial statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our results of operations for the three months ended December 30, 2018. Accordingly, we have revised previously reported financial information for such immaterial error, as previously disclosed in our Quarterly Report on Form 10-Q for the first and second quarters of fiscal 2019. A summary of revisions to certain previously reported financial information presented herein for comparative purposes is included in Note 11. We will also correct previously reported financial information for such immaterial error in our future filings, as applicable.
Earnings (Loss) Per Common Share. Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed by dividing net income by the combination of dilutive common share equivalents, comprised of shares issuable under our share-based compensation plans and shares subject to accelerated share repurchase agreements, if any, and the weighted-average number of common shares outstanding during the reporting period. Due to the net loss for the nine months ended June 24, 2018, all of the common share equivalents issuable under share-based compensation plans had an anti-dilutive effect and were therefore excluded from the computation of diluted loss per share. The following table provides information about the diluted earnings (loss) per share calculation (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Dilutive common share equivalents included in diluted shares
13.9

 
9.0

 
9.3

 

Shares of common stock equivalents not included because the effect would be anti-dilutive or certain performance conditions were not satisfied at the end of the period
0.7

 
0.6

 
9.9

 
43.2



8


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Share-Based Compensation. Total share-based compensation expense, related to all of our share-based awards, was comprised as follows (in millions):
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Cost of revenues
$
8

 
$
9

 
$
23

 
$
30

Research and development
164

 
140

 
479

 
447

Selling, general and administrative
74

 
40

 
196

 
182

Share-based compensation expense before income taxes
246

 
189

 
698

 
659

Related income tax benefit
(48
)
 
(34
)
 
(127
)
 
(111
)
 
$
198

 
$
155

 
$
571

 
$
548


At June 30, 2019, total unrecognized compensation expense related to nonvested restricted stock units granted prior to that date was $1.2 billion, which is expected to be recognized over a weighted-average period of 2.1 years. At June 30, 2019, we had outstanding 26.9 million restricted stock units and 1.1 million stock options that contain only a service requirement.
Recently Adopted Accounting Pronouncements.
Revenue Recognition: In May 2014, the Financial Accounting Standards Board (FASB) issued new accounting guidance related to revenue recognition (ASC 606), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition accounting guidance and requires increased disclosures. The new accounting guidance defines a five-step approach that requires a company to recognize revenue as control of goods or services transfers to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. We adopted ASC 606 in the first quarter of fiscal 2019 using the modified retrospective transition method only to those contracts that were not completed as of October 1, 2018. We recognized the cumulative effect of initially applying the new revenue accounting guidance as an adjustment to opening retained earnings. Prior period results have not been restated and continue to be reported in accordance with the accounting guidance in effect for those periods (ASC 605). We have implemented new accounting policies, systems, processes and internal controls necessary to support the requirements of ASC 606.
Adoption of this new accounting guidance most significantly impacts the timing of sales-based royalty revenues, which are the vast majority of our QTL segment’s revenues. Prior to adoption, we recognized sales-based royalties as revenues in the period in which such royalties were reported by licensees, which was after the conclusion of the quarter in which the licensees’ sales occurred and when all other revenue recognition criteria had been met. Under the new accounting guidance, we estimate and recognize sales-based royalties in the period in which the associated sales occur, subject to certain constraints on our ability to estimate such amounts, resulting in an acceleration of revenue recognition compared to the historical method under ASC 605. Since we do not invoice for sales-based royalties estimated and recognized in any given quarter until after the conclusion of that quarter (which is generally the following quarter when such royalties are reported by licensees), revenues recognized from sales-based royalties results in unbilled receivables (included in accounts receivable, net on the consolidated balance sheet). The adoption of ASC 606 did not otherwise have a material impact.
The new accounting guidance also impacts the timing of recognizing certain customer incentives, which are recorded as a reduction to revenues in the period that the related revenues are earned. Prior to adoption, we accounted for certain customer incentive arrangements, including volume-related and other pricing rebates or cost reimbursements for marketing and other activities involving certain of our products and technologies, in part based on the maximum potential liability. Under the new accounting guidance, we estimate the amount of all customer incentives.

9


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table summarizes the cumulative effects of adopting the new revenue accounting guidance (substantially all of which related to the impact to QTL’s sales-based royalties) on our condensed consolidated balance sheet at October 1, 2018 (in millions):
 
Balance as of September 30,
2018
 
Adjustment
 
Opening Balance as of October 1,
2018
Assets
 
 
 
 
 
Accounts receivable, net
$
2,904

 
$
957

 
$
3,861

Other current assets
699

 
1

 
700

Deferred tax assets
936

 
(98
)
 
838

Other assets
1,970

 
1

 
1,971

 
 
 


 


Liabilities
 
 
 
 
 
Unearned revenues, current
$
500

 
$
6

 
$
506

Other current liabilities
6,978

 
125

 
7,103

Unearned revenues
1,620

 
(110
)
 
1,510

 
 
 
 
 
 
Stockholders’ equity
 
 
 
 
 
Retained earnings
$
542

 
$
840

 
$
1,382

The following tables summarize the impacts of adopting the new revenue accounting guidance on our condensed consolidated balance sheet and statements of operations (in millions):
 
As of June 30, 2019
Balance Sheet
As Reported
ASC 606
 
Adjustment
 
ASC 605
Assets
 
 
 
 
 
Accounts receivable, net
$
2,390

 
$
(1,070
)
 
$
1,320

Other current assets
682

 
(32
)
 
650

Deferred tax assets
1,172

 
106

 
1,278

Other assets
2,062

 
(1
)
 
2,061

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Unearned revenues, current
$
527

 
$
(41
)
 
$
486

Other current liabilities
4,725

 
(31
)
 
4,694

Unearned revenues
1,251

 
138

 
1,389

 
 
 
 
 
 
Stockholders’ equity
 
 
 
 
 
Retained earnings
$
4,687

 
$
(1,063
)
 
$
3,624


10


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 
Three Months Ended June 30, 2019
 
Nine Months Ended June 30, 2019
Statements of Operations
As Reported
ASC 606
 
Adjustment
 
ASC 605
 
As Reported
ASC 606
 
Adjustment
 
ASC 605
Revenues
 
 
 
 
 
 
 
 
 
 
 
Equipment and services
$
3,531

 
$
(10
)
 
$
3,521

 
$
11,037

 
$
(80
)
 
$
10,957

Licensing
6,104

 
(239
)
 
5,865

 
8,422

 
(196
)
 
8,226

Investment and other income, net
344

 
(1
)
 
343

 
377

 

 
377

Income tax (expense) benefit
(3,352
)
 
49

 
(3,303
)
 
(2,987
)
 
53

 
(2,934
)
Net income
2,149

 
(201
)
 
1,948

 
3,880

 
(223
)
 
3,657


Adoption of the new accounting guidance had no impact to net cash provided (used) by operating, financing or investing activities on our condensed consolidated statement of cash flows for the nine months ended June 30, 2019.
Financial Assets: In January 2016, the FASB issued new accounting guidance on classifying and measuring financial instruments, which requires that all equity investments, other than equity-method investments, in unconsolidated entities generally be measured at fair value through earnings in the statement of operations. Additionally, it changes the disclosure requirements for financial instruments. We adopted the new accounting guidance in the first quarter of fiscal 2019 using the modified retrospective transition method for investments in marketable securities, which have readily determinable fair values, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings. Upon adoption, we reclassified $50 million of unrealized gains, net of the associated tax effects, related to our investments in marketable securities from accumulated other comprehensive income to opening retained earnings. We have applied the prospective transition method for investments in non-marketable securities, which are investments in privately held companies that do not have readily determinable fair values and will recognize, through earnings, any unrealized gains that have accumulated in the period in which there is an observable transaction, if any.
Hedge Instruments: In August 2017, the FASB issued new accounting guidance that expands and refines hedge accounting for both financial and non-financial risks, aligns the recognition and presentation of the effects of hedging instruments and hedged items in the financial statements, and includes targeted improvements related to the assessment of hedge effectiveness. The new accounting guidance also modifies disclosure requirements for hedging activities. We adopted the new accounting guidance in the first quarter of 2019 using the modified retrospective transition method and recorded a negligible adjustment to opening retained earnings. The new accounting guidance did not have a material impact on our condensed consolidated financial statements.
Statement of Cash Flows: In August 2016, the FASB issued new accounting guidance related to the classification of certain cash receipts and cash payments in the statement of cash flows. We adopted the new accounting guidance in the first quarter of fiscal 2019 using the retrospective transition method for each period presented, which did not have a material impact on our condensed consolidated statements of cash flows.
In November 2016, the FASB issued new accounting guidance that requires companies to include restricted cash and cash equivalents as a component in total cash and cash equivalents on the statement of cash flows. As a result, the consolidated statement of cash flows no longer reflects transfers between cash and cash equivalents and restricted cash and cash equivalents. We adopted the new accounting guidance in the first quarter of fiscal 2019 using the retrospective transition method, which results in certain amounts in fiscal 2018 being adjusted to conform to the new accounting guidance. This includes restricted cash and cash equivalents held during fiscal 2018 related to funds deposited as collateral for outstanding letters of credit in connection with a then proposed acquisition. Restricted cash and cash equivalents related to the outstanding letters of credit totaled $2.0 billion at the end of the fourth quarter of fiscal 2017 and third quarter of fiscal 2018. Additionally, amounts for the nine months ended June 24, 2018 have been adjusted for restricted cash and cash equivalents of $2.8 billion that was irrevocably deposited to redeem long-term debt in July 2018, resulting in a decrease in net cash used by financing activities by such amount, with a corresponding increase in total cash and cash equivalents presented on the condensed consolidated statement of cash flows.
Income Taxes: In October 2016, the FASB issued new accounting guidance that changes the accounting for the income tax effects of intra-entity transfers of assets other than inventory. Under the new accounting guidance, the selling (transferring) entity is required to recognize a current tax expense or benefit upon transfer of the asset. Similarly, the purchasing (receiving) entity is required to recognize a deferred tax asset or deferred tax liability, as well as the related

11


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

deferred tax benefit or expense, upon receipt of the asset. We adopted the new accounting guidance in the first quarter of fiscal 2019 using the modified retrospective transition method, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings of $2.6 billion, primarily as the result of establishing a deferred tax asset on the basis difference of certain intellectual property distributed from one of our foreign subsidiaries to a subsidiary in the United States in fiscal 2018. During the third quarter of fiscal 2019, the United States Treasury Department issued new temporary regulations that resulted in a change to the deductibility of dividend income received by a U.S. stockholder from a foreign corporation. As a result of this change, pursuant to an agreement with the Internal Revenue Service, we will forgo the federal tax basis step-up in such distributed intellectual property. Therefore, the related deferred tax asset was written-off, resulting in a $2.5 billion charge to income tax expense in the third quarter of fiscal 2019 (Note 3). The ongoing impact of this accounting guidance will be dependent on the facts and circumstances of any transactions within its scope.
Recent Accounting Pronouncements Not Yet Adopted.
Leases: In February 2016, the FASB issued new accounting guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease accounting guidance. The new accounting guidance requires lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet for leases with a lease term of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. We will adopt the new accounting guidance in the first quarter of fiscal 2020 using the modified retrospective approach as of the effective date, and we will elect certain practical expedients. We do not expect finance leases to be material at the time of adoption. We are in the process of determining the effects the adoption will have on our consolidated financial statements.
Financial Assets: In June 2016, the FASB issued new accounting guidance that changes the accounting for recognizing impairments of financial assets. Under the new accounting guidance, credit losses for financial assets held at amortized cost will be estimated based on expected losses rather than the current incurred loss impairment model. The new accounting guidance also modifies the impairment model for available-for-sale debt securities. The new accounting guidance generally requires the modified retrospective transition method, with the cumulative effect of applying the new accounting guidance recognized as an adjustment to opening retained earnings in the year of adoption, except for certain financial assets where the prospective transition method is required, such as available-for-sale debt securities for which an other-than-temporary impairment has been recorded. We will adopt the new accounting guidance in the first quarter of fiscal 2021, and the impact of this new accounting guidance will largely depend on the composition and credit quality of our investment portfolio, as well as economic conditions at the time of adoption.
Accounting Policy Update.
Revenue Recognition: As a result of the adoption of ASC 606, we revised our revenue recognition policy beginning in fiscal 2019 as follows.
We derive revenues principally from sales of integrated circuit products and licensing of our intellectual property. We also generate revenues by performing software hosting, software development and other services and from other product sales. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of our performance obligations.
Revenues from sales of our products are recognized upon transfer of control to the customer, which is generally at the time of shipment. Revenues from providing services are typically recognized over time as our performance obligation is satisfied. Revenues from providing services were less than 5% of total revenues for all periods presented.
We grant licenses or otherwise provide rights to use portions of our intellectual property portfolio, which, among other rights, includes certain patent rights essential to and/or useful in the manufacture, sale or use of certain wireless products. Licensees pay royalties based on their sales of products incorporating or using our licensed intellectual property and may also pay a fixed license fee in one or more installments. Sales-based royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of complete licensed products, net of certain permissible deductions (including transportation, insurance, packing costs and other items). We broadly provide per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which in general, effectively provide for a maximum royalty amount per device. We estimate and recognize sales-based royalties on such licensed products in the period in which the associated sales occur, subject to certain constraints on our ability to estimate such royalties. Our estimates of sales-based royalties are based largely on an assessment of the volume of devices supplied into the market that incorporate or use our licensed intellectual property. We estimate sales-based royalties taking into consideration the mix of such sales on a licensee-by-licensee basis, as well as the licensees’ average wholesale prices of such products, and consider all information

12


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(historical, current and forecasted) that is reasonably available to us. Our licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter, which is generally the following quarter. As a result of recognizing revenues in the period in which the licensees’ sales occur using estimates, adjustments to revenues are required in subsequent periods to reflect changes in estimates as new information becomes available, primarily resulting from actual amounts reported by our licensees.
License agreements that require payment of license fees contain a single performance obligation that represents ongoing access to a portfolio of intellectual property over the license term since such agreements provide the licensee the right to access a portfolio of intellectual property that exists at inception of the license agreement and to updates and new intellectual property that is added to the licensed portfolio during the term of the agreement that are highly interdependent or interrelated. Since we expect to expend efforts to develop and transfer updates to our licensed portfolio on an even basis, license fees are recognized as revenues on a straight-line basis over the estimated period of benefit of the license to the licensee.
We account for a contract with a customer/licensee when it is legally enforceable, the parties are committed to perform their respective obligations, the rights of the parties regarding the goods and/or services to be transferred are identified, payment terms are identified, the contract has commercial substance and collectability of substantially all of the consideration is probable.
From time to time, regulatory authorities investigate our business practices, particularly with respect to our licensing business, and institute proceedings against us. Depending on the matter, various remedies that could result from an unfavorable resolution include, among others, the loss of our ability to enforce one or more of our patents; injunctions; monetary damages or fines or other orders to pay money; the issuance of orders to cease certain conduct or modify our business practices, such as requiring us to reduce our royalty rates, reduce the base on which our royalties are calculated, grant patent licenses to chipset manufacturers, sell chipsets to unlicensed OEMs or modify or renegotiate some or all of our existing license agreements; and determinations that some or all of our license agreements are invalid or unenforceable. Additionally, from time to time, companies initiate various strategies in an attempt to negotiate, renegotiate, reduce and/or eliminate their need to pay royalties to us for the use of our intellectual property, which may include disputing, underreporting, underpaying, not reporting and/or not paying royalties owed to us under their license agreements with us, or reporting to us in a manner that is not in compliance with their contractual obligations. In such cases, we estimate and recognize licensing revenues only when we have a contract, as defined in ASC 606, and to the extent it is probable that a significant reversal of cumulative revenues recognized will not occur, both of which may require significant judgment. We analyze the risk of a significant revenue reversal considering both the likelihood and magnitude of the reversal and, if necessary, constrain the amount of estimated revenues recognized in order to mitigate this risk, which may result in recognizing revenues less than amounts contractually owed to us.
On May 21, 2019, in United States Federal Trade Commission (FTC) v. QUALCOMM Incorporated, the court issued an Order ruling against us and imposing certain injunctive relief (Note 6). While we believe that our business practices do not violate either antitrust law or our FRAND (fair, reasonable and non-discriminatory) licensing commitments, significant evaluation and judgment were required in determining the impact of such ruling on the amount of licensing revenues estimated and recognized in the third quarter of fiscal 2019. This included, among other items: (i) evaluating whether our license agreements remain valid and enforceable, (ii) evaluating licensees’ conduct and whether they remain committed to perform their respective obligations and (iii) determining the expected impact, if any, to the current period of any license agreements that may be renegotiated and/or are newly entered into as a result of the ruling while the stay and appeal are pending. Based on this evaluation, the impact of the ruling was not material to QTL licensing revenues in the third quarter of fiscal 2019 based on facts and factors currently known by us. As new information becomes available, we may be required to make adjustments to revenues in subsequent periods to reflect changes in estimates and/or this matter could have a material adverse effect on our ability to recognize future licensing revenues.
We measure revenues (including our estimates of sales-based royalties) based on the amount of consideration we expect to receive in exchange for products or services. We record reductions to revenues for customer incentive arrangements, including volume-related and other pricing rebates and cost reimbursements for marketing and other activities involving certain of our products and technologies, in the period that the related revenues are earned. The charges for such arrangements are recorded as a reduction to accounts receivable, net or as other current liabilities based on whether we have the intent and contractual right of offset. Certain of these charges are considered variable consideration and are included in the transaction price primarily based on estimating the most likely amount expected to be provided to the customer/licensee.

13


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Revenues recognized from sales of our products and sales-based royalties are generally included in accounts receivable, net (including unbilled receivables) based on our unconditional right to payment for satisfied or partially satisfied performance obligations.
We disaggregate our revenues by segment (Note 7) and type of product and services (as presented on our consolidated statement of operations), as we believe this best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by economic factors. 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.
Revenues recognized from performance obligations satisfied (or partially satisfied) in previous periods were $4.8 billion and $4.1 billion for the three and nine months ended June 30, 2019, respectively, and primarily related to licensing revenues of $4.7 billion recognized in the third quarter of fiscal 2019 (a portion of which was attributable to the first and second quarters of fiscal 2019) resulting from the settlement with Apple and its contract manufacturers (Note 6), consisting of a payment from Apple and the release of certain of our obligations to pay Apple and the contract manufacturers customer-related liabilities.
Unearned revenues (which are considered contract liabilities) consist primarily of license fees for intellectual property with continuing performance obligations. In the nine months ended June 30, 2019, we recognized revenues of $371 million that were recorded as unearned revenues at October 1, 2018.
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 June 30, 2019, we had $1.8 billion of remaining performance obligations, of which $129 million, $516 million, $436 million, $429 million and $195 million was expected to be recognized as revenues for the remainder of fiscal 2019 and each of the subsequent four years from fiscal 2020 through 2023, respectively, and $77 million thereafter.
Marketable Securities and Non-Marketable Securities: Prior to the adoption of the new accounting guidance in the first quarter of fiscal 2019, investments in marketable equity securities were generally classified as available-for-sale equity investments, with net unrealized gains or losses recorded as a component of accumulated other comprehensive income, net of income taxes. Beginning in fiscal 2019, all gains and losses on investments in marketable equity securities, realized and unrealized, are recognized in investment and other income, net.
Prior to the adoption of the new accounting guidance in the first quarter of fiscal 2019, investments in non-marketable equity securities were recorded at cost less impairment, if any, with any losses resulting from an impairment recognized in investment and other income, net. Beginning in fiscal 2019, investments in non-marketable equity securities are recorded at cost, less impairments (if any), adjusted for observable price changes in orderly transactions for identical or similar securities (if any). All gains and losses on investments in non-marketable equity securities, realized and unrealized, are recognized in investment and other income, net.
In addition, prior to adoption, we recorded impairment losses in earnings on investments in non-marketable equity securities when an impairment was considered other than temporary. Beginning in fiscal 2019, we record impairment losses in earnings when we believe an investment has experienced a decline in value.
Note 2. Composition of Certain Financial Statement Items
Accounts Receivable (in millions)
 
 
 
 
June 30,
2019
 
September 30,
2018
Trade, net of allowances for doubtful accounts of $47 and $56, respectively
$
1,036

 
$
2,667

Unbilled receivables
1,332

 
201

Other
22

 
36

 
$
2,390

 
$
2,904



14


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The increase in unbilled receivables was primarily due to the adoption of ASC 606 (Note 1). Accounts receivable, trade at September 30, 2018 included approximately $960 million related to the short payment in the second quarter of fiscal 2017 of royalties reported by and deemed collectible from Apple’s contract manufacturers. This same amount was recorded in customer-related liabilities (in other current liabilities) for Apple, since we did not have the contractual right to offset these amounts. In the third quarter of fiscal 2019, we entered into settlement agreements with Apple and its contract manufacturers to dismiss all outstanding litigation between the parties, and as a result, these amounts, as well as others, were settled (Note 6).
Inventories (in millions)
 
 
 
 
June 30,
2019
 
September 30,
2018
Raw materials
$
81

 
$
72

Work-in-process
896

 
715

Finished goods
797

 
906

 
$
1,774

 
$
1,693


Equity Method and Non-marketable Equity Investments. The carrying values of our equity method and non-marketable equity investments are recorded in other noncurrent assets and were as follows (in millions):
 
June 30,
2019
 
September 30,
2018
Equity method investments
$
330

 
$
402

Non-marketable equity investments
800

 
650

 
$
1,130

 
$
1,052


In the second quarter of fiscal 2019, non-marketable debt and equity securities (non-cash consideration) with an aggregate fair value of $98 million were received related to a development contract with one of our equity method investees, which was recognized as revenues in the second quarter of fiscal 2019. In addition, in the second quarter of fiscal 2019, non-marketable equity securities (non-cash consideration) with a fair value of $53 million were received in connection with the sale of certain assets as part of the Cost Plan (Note 8).
Other Current Liabilities (in millions)
 
 
 
 
June 30,
2019
 
September 30,
2018
Customer incentives and other customer-related liabilities
$
1,105

 
$
3,500

Accrual for EC fines (Note 6)
1,430

 
1,167

Income taxes payable
668

 
453

RF360 Holdings put and call option
1,149

 
1,137

Other
373

 
721

 
$
4,725

 
$
6,978


Beginning on August 4, 2019, for a period of 60 days, we have the option to acquire (and the minority owner has the option to sell) the minority ownership interest in the RF360 Holdings joint venture for $1.15 billion, and we expect one of such options to be exercised during this period. At June 30, 2019 and September 30, 2018, the accreted value of such amount was included in other current liabilities.

15


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Accumulated Other Comprehensive Income. Changes in the components of accumulated other comprehensive income, net of income taxes, in stockholders’ equity in the nine months ended June 30, 2019 were as follows (in millions):
 
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 (Loss) Gain on Derivative Instruments
 
Other Gains
 
Total Accumulated Other Comprehensive Income
Balance at September 30, 2018
$
11

 
$
23

 
$
243

 
$
(13
)
 
$
1

 
$
265

Other comprehensive (loss) income before reclassifications
(27
)
 

 
(6
)
 
23

 
(5
)
 
(15
)
Reclassifications from accumulated other comprehensive income
1

 

 
(51
)
 
(5
)
 

 
(55
)
Other comprehensive (loss) income
(26
)
 

 
(57
)
 
18

 
(5
)
 
(70
)
Balance at June 30, 2019
$
(15
)
 
$
23

 
$
186

 
$
5

 
$
(4
)
 
$
195


Reclassifications from accumulated other comprehensive income included adjustments of $51 million to the opening retained earnings balance as a result of the adoption of new accounting guidance in the first quarter of fiscal 2019 related to financial instruments and hedge instruments (Note 1). Reclassifications from accumulated other comprehensive income (excluding adjustments to opening retained earnings) related to available-for-sale securities were negligible in the three and nine months ended June 30, 2019 and June 24, 2018 and were recorded in investment and other income, net.
Other Income, Costs and Expenses. Other expenses in the three months ended June 30, 2019 consisted of a $275 million charge related to the fine imposed by the European Commission (EC) related to the Icera complaint (2019 EC fine) (Note 6) and negligible net charges related to our Cost Plan. Other expenses in the nine months ended June 30, 2019 included $275 million related to the 2019 EC fine, $207 million in net restructuring and restructuring-related charges related to our Cost Plan, partially offset by a $43 million gain due to the partial recovery of a fine we previously paid to the Korea Fair Trade Commission (KFTC) and a $31 million gain related to a favorable legal settlement.
Other expenses in the three and nine months ended June 24, 2018 consisted of $112 million and $422 million, respectively, in restructuring and restructuring-related charges related to our Cost Plan. Other expenses in the nine months ended June 24, 2018 also included a $1.2 billion charge related to an EC fine (2018 EC fine) (Note 6).
Investment and Other Income, Net (in millions)
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
June 30,
2019
 
June 24,
2018
 
June 30,
2019
 
June 24,
2018
Interest and dividend income
$
81

 
$
182

 
$
237

 
$
461

Net gains on marketable securities
326

 
10

 
293

 
24

Net gains on other investments
6

 
16

 
47

 
77

Impairment losses on marketable securities and other investments
(42
)
 
(19
)
 
(111
)
 
(40
)
Net losses on derivative investments

 
(30
)
 
(10
)
 
(21
)
Equity in net losses of investees
(22
)
 
(28
)
 
(79
)
 
(67
)
Net (losses) gains on foreign currency transactions
(5
)
 
112

 

 
20

 
$
344

 
$
243

 
$
377

 
$
454



16


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 3. Income Taxes
The 2017 Tax Cuts and Jobs Act (the Tax Legislation), which was enacted during the first quarter of fiscal 2018, significantly revised the United States corporate income tax by, among other things, lowering the corporate income tax rate to 21% and imposing a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries (the Toll Charge). The Tax Legislation fundamentally changed the taxation of multinational entities, including a shift from a system of worldwide taxation with deferral to a hybrid territorial system, featuring a participation exemption regime with current taxation of certain foreign income, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion and promote U.S. production. As a fiscal-year taxpayer, certain provisions of the Tax Legislation became effective starting at the beginning of fiscal 2019, including GILTI (global intangible low-taxed income), a new tax on income of foreign corporations, BEAT (base-erosion and anti-abuse tax) and FDII (foreign-derived intangible income). In response to the Tax Legislation and to better align our profits with activities, we implemented certain tax restructuring in fiscal 2018 and 2019. As a result, beginning in fiscal 2019, substantially all of our income is in the U.S., of which a significant portion qualifies for preferential treatment as FDII at a 13% effective tax rate. The impact of GILTI and BEAT is negligible. Accordingly, our estimated annual effective tax rate for fiscal 2019 reflects the effects of these components of the Tax Legislation. Our annual effective tax rate for fiscal 2018 reflected a blended federal statutory rate of approximately 25%.
As a result of the Tax Legislation, in fiscal 2019, several of our foreign subsidiaries made tax elections to be treated as U.S. branches for federal income tax purposes (commonly referred to as “check-the-box” elections) effective beginning in fiscal 2018 and 2019. Although beginning in fiscal 2019 the income of these entities will be included in our consolidated U.S. tax return, we believe that by treating these foreign subsidiaries as U.S. branches for federal income taxes, rather than controlled foreign corporations, we will significantly reduce the risk of being subject to GILTI and BEAT taxes. As a result of making these check-the-box elections, we recorded a tax benefit of $570 million in the first quarter of fiscal 2019 due to establishing new U.S. net deferred tax assets resulting from the difference between the GAAP basis and the U.S. federal tax carryover basis of the existing assets and liabilities of those foreign subsidiaries, primarily related to customer incentive liabilities that have not been deducted for tax purposes. Additionally, during fiscal 2018, one of our foreign subsidiaries distributed certain intellectual property to a U.S. subsidiary resulting in a difference between the GAAP basis and the U.S. federal tax basis of the distributed intellectual property. Upon adoption of new accounting guidance in the first quarter of fiscal 2019, we recorded a deferred tax asset of approximately $2.6 billion, primarily related to the distributed intellectual property, with an adjustment to opening retained earnings (Note 1). During the third quarter of fiscal 2019, the United States Treasury Department issued new temporary regulations that resulted in a change to the deductibility of dividend income received by a U.S. stockholder from a foreign corporation. As a result of this change, pursuant to an agreement with the Internal Revenue Service, we will forgo the federal tax basis step-up in such distributed intellectual property. Therefore, the related deferred tax asset was written-off, resulting in a $2.5 billion charge to income tax expense in the third quarter of fiscal 2019.
We estimate our annual effective income tax rate to be 41% for fiscal 2019, which included the impact of the $2.5 billion charge recorded discretely in the third quarter to income tax expense resulting from the write-off of the deferred tax asset related to the distributed intellectual property and the impact of the tax benefit of $570 million recorded discretely in the first quarter due to establishing new U.S. net deferred tax assets from making certain check-the-box elections. The estimated annual effective tax rate for fiscal 2019 was also impacted by the 2019 EC fine recorded in the third quarter of fiscal 2019, which is not deductible for tax purposes, and also reflected benefits from our FDII deduction and research and development tax credits. The annual effective tax rate for fiscal 2018 was impacted by the combined effect of the Toll Charge, the remeasurement of deferred tax assets and liabilities and our decision to no longer indefinitely reinvest certain foreign earnings, all of which resulted from the Tax Legislation. The annual effective tax rate for fiscal 2018 was also impacted by the termination fee paid to NXP Semiconductors N.V. (NXP), the 2018 EC fine, settlement with the Taiwan Fair Trade Commission (TFTC), allocation of expenses to our U.S. operations and new Singapore tax incentives.
The effective tax rate of 61% for the third quarter of fiscal 2019 was higher than the estimated annual effective tax rate of 41% primarily due to the $2.5 billion charge to income tax expense recorded discretely in the third quarter of fiscal 2019 resulting from the write-off of the deferred tax asset related to the distributed intellectual property. The estimated annual effective tax rate for fiscal 2019 was also impacted by the tax benefit of $570 million recorded discretely in the first quarter of fiscal 2019 due to establishing new U.S. net deferred tax assets from making certain check-the-box elections.
Unrecognized tax benefits were $230 million and $217 million at June 30, 2019 and September 30, 2018, respectively. We believe that it is reasonably possible that the total amounts of unrecognized tax benefits at June 30, 2019 may increase or decrease in the next 12 months.

17


QUALCOMM Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The United States Treasury Department has issued proposed regulations on several provisions of the Tax Legislation, including foreign tax credits, FDII, BEAT and interest expense deduction limitations, which are expected to be finalized in the next several months. When finalized, these proposed regulations may adversely affect our provision for income taxes, results of operations and/or cash flows.
We are subject to income taxes in the United States and numerous foreign jurisdictions and are currently under examination by various tax authorities worldwide, most notably in countries where we earn a routine return and tax authorities believe substantial value-add activities are performed. These examinations are at various stages with respect to assessments, claims, deficiencies and refunds, many of which are open for periods after fiscal 2000. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, income taxes payable and deferred taxes in the period in which the facts giving rise to a revision become known. As of June 30, 2019, we believe that adequate amounts have been reserved for based on facts known. However, the final determination of tax audits and any related legal proceedings could materially differ from amounts reflected in our income tax provision and the related accruals.
Note 4. Capital Stock
Stock Repurchase Program. On July 26, 2018, we announced a stock repurchase program authorizing us to repurchase up to $30 billion of our common stock. The stock repurchase program has no expiration date.
In September 2018, we entered into three accelerated share repurchase agreements (ASR Agreements) with three financial institutions under which we paid an aggregate of $16.0 billion upfront and received an initial delivery of 178.4 million shares of our common stock, which were retired. The final number of shares to be repurchased will be based on the volume-weighted average stock price of our common stock during the terms of the transactions, less a discount and subject to adjustments pursuant to the terms and conditions of the ASR Agreements and will also be retired upon delivery to us. The ASR Agreements are scheduled to terminate in early September 2019, but may terminate earlier in certain circumstances. At settlement, one or more of the financial institutions may be required to deliver additional shares of common stock to us, or under certain circumstances, we may be required to deliver shares of common stock or make a cash payment to one or more of the financial institutions, with the method of settlement at our election.
In the nine months ended June 30, 2019 and June 24, 2018, we repurchased and retired 17.7 million and 24.2 million shares for $1.1 billion and $1.4 billion, respectively, before commissions. To reflect share repurchases in the consolidated balance sheet, we (i) reduce common stock for the par value of the shares, (ii) reduce paid-in capital for the amount in excess of par to zero during the quarter in which the shares are repurchased and (iii) record the residual amount to retained earnings, if any. At June 30, 2019, $7.8 billion remained authorized for repurchase under our stock repurchase program.
Dividends. On July 24, 2019, we announced a cash dividend of $0.62 per share on our common stock, payable on September 26, 2019 to stockholders of record as of the close of business on September 12, 2019.
Note 5. Debt
Revolving Credit Facility. We have an Amended and Restated Revolving Credit Facility (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 Revolving Credit Facility, if drawn, are expected to be used for general corporate purposes. Loans under the Revolving Credit Facility will bear interest, at our option, at either the reserve-adjusted Eurocurrency Rate (determined in accordance with the Revolving Credit Facility) or the Base Rate (determined in accordance with the Revolving Credit Facility), in each case plus an applicable margin based on our long-term unsecured senior, non-credit enhanced debt ratings. The margins over the reserve-adjusted Eurocurrency Rate and the Base Rate will be 0.805% and 0.00%, respectively. The Revolving Credit Facility has a facility fee, which accrues at a rate of 0.07% per annum. At June 30, 2019 and September 30, 2018, we had not borrowed any funds under the Revolving Credit Facility.
Commercial Paper Program. We have 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 30, 2019 and September 30, 2018, we had $998 million and $1.0 billion, respectively, of outstanding commercial paper included in short-term debt with a weighted-average interest rate of 2.57% and 2.35%, respectively, which included fees paid to the commercial paper dealers, and weighted-average remaining days to maturity of 28