`
`(Exceeds 100 pages)
`
`Filed:
`
`7[19[2011
`
`Title: DECLARATION OF STEPHENIE H. BALD AND
`
`EXHIBITS.
`
`Part
`
`24 of
`
`81
`
`
`
`
`
`Table of Contents
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Available-for-sale:
`
`U.S. Treasury securities and govemment—related securities
`Corporate bonds and notes
`Mortgage- and asset-backed securities
`Auction rate securities
`
`.
`
`Non-investment-grade debt securities
`Equity securities
`Equity mutual funds and exchange-traded funds
`Debt mutual funds
`
`Current
`September 27,
`September 28,
`2009
`2008
`
`Noncurrent
`September 27,
`September 28,
`2009
`2008
`
`$
`
`$
`
`1,407
`3,988
`821
`—
`
`21
`140
`—
`1,975
`8,352
`
`$
`
`$
`
`514
`3,296
`499
`—
`
`23
`150
`—
`89
`4,571
`
`$
`
`— $
`1,204
`36
`174
`
`2,719
`1,377
`948
`215
`
`$
`
`6,673
`
`$
`
`—
`175
`—
`1 86
`
`2,030
`1,187
`1,280
`—
`
`4,858
`
`There were no marketable securities loaned under the Company’s securities lending program at September 27, 2009.
`Marketable securities in the amount of $169 million at September 28, 2008 were loaned under the Company’s securities
`lending program.
`
`As of September 27, 2009, the contractual maturities of available-for-sale debt securities were as follows (in millions):
`
`Less Than
`One Year
`
`$
`
`2,320
`
`Years to Maturity
`
`One to
`Five Years
`
`Five to
`Ten Years
`
`$
`
`4,665
`
`$
`
`956
`
`Greater Than
`Ten Years
`
`$
`
`477'
`
`No Single
`Maturity
`Date
`
`$
`
`4,142
`
`Total
`
`$
`
`12,560
`
`Securities with no single maturity date included mortgage- and asset-backed securities, auction rate securities, non-
`investment-grade debt securities and debt mutual fimds.
`
`The Company recorded realized gains and losses on sales of available-for-sale marketable securities as follows (in
`millions):
`
`Fiscal Year
`2009
`2008
`2007
`
`Available-for-sale securities were comprised as follows (in millions):
`
`Gross
`Realized
`Gains
`
`$215
`246
`244
`
`Gross
`Realized
`Losses
`
`$ (79)
`(1 19)
`(26)
`
`Cost
`
`Unrealized
`Gains
`
`Unrealized
`Losses
`
`Net
`Realized
`Gains
`$136
`127
`218
`
`Fair Value
`
`$ 2,465
`12,560
`$ 15,025
`
`September 27, 2009
`Equity securities
`Debt securities
`
`September 28, 2008
`Equity securities
`Debt securities
`
`$ 2,282
`12,069
`$14,351
`
`$ 2,810
`6,966
`$ 9,776
`
`$
`
`340
`530
`
`Lfl
`
`$
`
`90
`12
`
`LL)?
`
`$
`
`(157)
`g39)
`$;1fi)
`
`$
`
`$
`
`(283)
`£166)
`(449)
`
`$ 2,617
`6,812
`$ 9,429
`
`In April 2009, the FASB amended the existing guidance on determining whether an impairment for investments in debt
`securities is other-than-temporary. The new guidance was effective for the Company’s third quarter of fiscal 2009 and
`resulted in a net after-tax increase to retained earnings and a corresponding decrease to accumulated other
`
`F-16
`
`
`
`
`
`'.r3_blt‘_Qf_Cfl|L9_|1LS.
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`comprehensive income (loss) of $19 million primarily for the portion of other-than-temporary impainnents recorded in
`earnings in previous periods on securities in the Company’s portfolio at March 30, 2009 that were related to factors other
`than credit and would not have been required to be recognized in earnings had the new guidance been effective for those
`periods.
`
`The following table shows the gross unrealized losses and fair values of the Company’s investments in individual
`securities that have been in a continuous unrealized loss position deemed to be temporary for less than 12 months and for
`more than 12 months, aggregated by investment category (in millions):
`
`September 27, 2009
`Less than 12 months
`More than 12 months
`Unrealized
`Unrealized
`Losses
`Losses
`
`Fair Value
`
`Fair Value
`
`Corporate bonds and notes
`Mortgage- and asset-backed securities
`Auction rate securities
`Non-investment-grade debt securities
`Equity securities
`Equity mutual funds and exchange-traded funds
`
`$
`
`$
`
`462
`56
`23
`127
`155
`44
`867
`
`$
`
`$
`
`(1)
`(1)
`(1)
`(5)
`(11)
`(6)
`(25)
`
`‘ $
`
`$
`
`183
`20
`151
`263
`155
`730
`1,502
`
`$
`
`$
`
`(5)
`(1)
`(10)
`(15)
`(16)
`(124)
`(171)
`
`September 282 2008
`Less than 12 months
`More than 12 months
`Unrealized
`Unrealized
`Losses
`- Losses
`
`Fair Value
`
`Fair Value
`
`4
`
`U.S. Treasury securities and govemment-related securities
`Corporate bonds and notes
`Mortgage- and asset-backed securities
`Auction rate securities
`Non-investment-grade debt securities
`Equity securities
`Equity mutual funds and exchange-traded funds
`Debt mutual funds
`
`'
`
`$
`
`375
`1,524
`271
`186
`864
`784
`1,229
`86
`ifl
`
`$
`
`(2)
`(46)
`(10)
`(8)
`(78)
`(115)
`(167)
`(4)
`$__£i3_0)
`
`$
`
`—
`219
`8
`—~
`87
`6
`—
`—
`$_}_—?_°
`
`$
`
`35
`
`—
`(9)
`—
`-
`(9)
`(1)
`—
`——
`19)
`
`The unrealized losses on the Company’s investments in marketable securities at September 27, 2009 and September 28,
`2008 were caused primarily by a prolonged disruption in global financial markets that included a deterioration of confidence
`and a severe decline in the availability of capital and demand for debt and equity securities. The result has been depressed
`securities values in most types of securities, including investment— and non-investment—grade debt obligations, mortgage- and
`asset-backed securities, equity securities, equity mutual and exchanged-traded funds and debt mutual funds. At
`September 27, 2009, the Company concluded that the unrealized losses were temporary. Further, for equity securities, equity
`mutual and exchange-traded funds and debt mutual funds with unrealized losses, the Company has the ability and the intent
`to hold such securities until they recover, which is expected to be within a reasonable period of time. For debt securities with
`unrealized losses, the Company does not have the intent to sell, nor is it more likely than not that the Company will be
`required to sell, such securities before recovery or maturity.
`
`The following table shows the credit loss portion of other-than—temporary impairments on debt securities held by the
`Company as of the dates indicated and the corresponding changes in such amounts (in millions):
`
`F-17
`
`
`
`
`
`Table of Contents
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Beginning balance of credit losses
`Credit losses remaining in retained earnings upon adoption
`Additional credit losses recognized on securities previously impaired
`Credit losses recognized on securities previously not impaired
`Reductions in credit losses related to securities sold
`Reductions in credit losses related to previously impaired securities that the Company intends to sell
`Ending balance of credit losses
`'
`
`Note 4. Composition of Certain Financial Statement Captions
`Accounts Receivable.
`
`2009
`
`$ —
`186
`2
`17
`(21)
`1 14)
`170
`
`$
`
`'
`Trade, net of allowances for doubtful accounts of $4 and $38, respectively
`Long-term contracts
`Investment receivables
`Other
`
`September 27,
`2009
`
`September 28,
`2008
`
`$
`
`(In millions)
`639
`$
`38
`2
`21
`
`‘
`
`$
`
`700
`
`$
`
`3,732
`33
`412
`10
`
`4,187
`
`Trade accounts ‘receivable at September 28, 2008 included a $2.5 billion licensing receivable that was paid in
`October 2008. Investment receivables at September 28, 2008 primarily related to amounts due for redemptions of money
`market investments for which the Company received partial payment in fiscal 2009, and the remaining $48 million net
`receivable was recorded in other assets at September 27, 2009, substantially all of which was classified as noncurrent due to
`the uncertainty regarding the timing of distributions.
`Inventories.
`
`V
`
`Raw materials
`Work-in-process
`Finished goods
`
`September 27,
`2009
`
`September 28,
`2008
`
`$
`
`$
`
`(In millions)
`15
`$
`199
`239
`453
`
`$
`
`.
`
`27
`199
`295
`521
`
`'
`
`F-18
`
`
`
`Table of Contents
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Property, Plant and Equipment.
`
`Land
`
`Buildings and improvements
`Computer equipment and sofiware
`Machinery and equipment
`Fumiture and office equipment
`Leasehold improvements
`Construction in progress ’
`
`,
`
`,
`
`Less accumulated depreciation and amortization
`
`.
`
`September 27,
`2009
`
`September 28,
`2008
`
`$
`
`(In millions)
`187
`$
`
`1,364
`1,022
`1,535
`65
`219
`76
`4,468
`
`183
`
`1,262
`929
`1,063
`59
`155
`200
`3,851
`
`(2,081)
`2,387
`
`$
`
`(1,689)
`2,162
`
`$
`
`Depreciation and amortization expense related to property, plant and equipment for fiscal 2009, 2008 and 2007 was
`$428 million, $372 million and $317 million, respectively. The gross book values of property under capital leases included in
`buildings and improvements were $190 million and $140 million at September 27, 2009 and September 28, 2008,
`respectively. These capital leases principally related to base station towers and buildings. Amortization of assets recorded
`under capital leases is included in depreciation expense. Capital lease additions during fiscal 2009, 2008 and 2007 were
`$50 million, $51 million and $33 million, respectively.
`
`At September 27, 2009 and September 28, 2008, buildings and improvements and leasehold improvements with aggregate
`net book value of $56 million and $63 million, respectively, including accumulated depreciation and amortization of
`$9 million and $6 million, respectively, were leased to third parties or held for lease to third parties. Future minimum rental
`income on facilities leased to others in fiscal 2010 to 2014 is expected to be $8 million, $6 million, $6 million, $3 million and
`$1 million, respectively, and zero thereafter.
`
`Goodwill and Other Intangible Assets. The Company’s reportable segment assets do not include goodwill. The Company
`allocates goodwill to its reporting units for annual impairment testing purposes. Goodwill was allocable to reporting units
`included in the Company’s reportable segments at September 27, 2009 as follows: $434 million in Qualcomm CDMA
`Technologies, $675 million in Qualcomm Technology Licensing, $255 million in Qualcomm Wireless & lntemet, and
`$128 million in Qualcomm MEMS Technology (a nonreportable segment included in reconciling items in Note 10). The
`decrease in goodwill from September 28, 2008 to September 27, 2009 was the result of adjustments to acquired deferred tax
`assets and currency translation adjustments, partially offset by a business acquisition.
`
`The components of intangible assets were as follows (in millions):
`
`Wireless licenses
`Marketing-related
`Technology-based
`Customer-related
`Other
`
`.
`
`September 27, 2009
`Gross
`Carrying
`Amount
`
`Accumulated
`Amortization
`
`September 28, 2008
`Gross
`Carrying
`Amount
`
`Accumulated
`Amortization
`
`$
`
`766
`22
`2,598
`1 1
`9
`$ 3,406
`
`$
`
`$
`
`(1)
`(13)
`(317)
`(7)
`(3)
`i341)
`
`$
`
`849
`25
`2,406
`14
`9
`$ 3,303
`
`$
`
`$
`
`(3 8)
`' (14)
`(139)
`(6)
`(2)
`(199)
`
`All of the Company’s intangible assets, other than certain wireless licenses in the amount of $762 million and goodwill,
`are subject to amortization. Amortization expense related to these intangible assets for fiscal 2009, 2008 and 2007 was
`$207 million, $84 million and $68 million, respectively, and for fiscal 2010 to 2014 is expected to be $217 million,
`$214 million, $199 million, $179 million and $172 million, respectively, and $1.3 billion thereafter.
`
`F-19
`
`
`
`......::.
`
`
`
`
`'_l‘able of Contents_
`
`Other Current Liabilities
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Customer-related liabilities, including incentives, rebates and other reserves
`Current portion of payable to Broadcom (Note 9)
`Accrued liability to KFTC (Note 9)
`.
`Payable for unsettled securities trades
`Obligations under securities lending
`Other
`
`.
`
`Note 5. Investment (Loss) Income
`
`Investment (loss) income, net was comprised as follows (in millions):
`
`Interest and dividend income
`Interest expense
`Net realized gains on marketable securities
`Net realized gains on other investments
`Net impairment losses on marketable securities
`Net impairment losses on other investments
`Gains on derivative instruments
`Equity in (losses) earnings of investees
`
`September 27,
`2009
`
`September 28,
`2008
`
`$
`
`(In millions)
`461
`$
`170
`230
`101
`—
`294
`
`334
`—
`—
`209
`173
`354.
`
`$
`
`1,256
`
`$
`
`1,070
`
`.
`
`2009
`
`$
`
`516
`(24)
`136
`1
`(743)
`(20)
`1
`(17)
`$ (150)
`
`2008
`
`2007
`
`$
`
`$
`
`491
`(22)
`127
`28
`(502)
`(33)
`6
`1
`96
`
`$
`
`S
`
`558
`(1 1)
`218
`4
`(16)
`(11)
`2
`(1)
`743
`
`Net impairment losses on marketable securities for fiscal 2009 was comprised of total other-than-temporary impairment
`losses of $747 million less $4 million related to the noncredit portion of losses on debt securities recognized in other
`comprehensive income. The net other—than—temporary losses on marketable securities were generally related to depressed
`securities values caused by the major disruption in U.S. and foreign credit and financial markets.
`
`Note 6. Income Taxes
`
`The components of the income tax provision were as follows (in millions):
`
`Current provision:
`Federal
`State
`Foreign
`
`v
`
`Deferred provision:
`Federal
`State
`Foreign
`
`'
`
`2009
`
`2008
`
`2007
`
`$
`
`$
`
`130
`52
`291
`473
`
`(47)
`77
`(19)
`11
`484
`
`'
`
`$
`
`$
`
`394
`71
`245
`710
`
`(14)
`(22)
`(8)
`(44)
`666
`
`$
`
`$
`
`192
`37
`185
`414
`
`(75)
`(15)
`( 1)
`(91)
`323
`
`* The foreign component of the income tax provision consists primarily of foreign withholding taxes on royalty income
`included in United States earnings.
`
`F-20
`
`
`
`La.h.!s.9I...C..«)_n_tsuts
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`The components of income before income taxes by United States and foreign jurisdictions were as follows (in millions):
`
`United States
`Foreign
`
`2009
`
`$ 1,041
`1,035
`$ 2,076
`
`2008
`
`$ 1,564
`2,262
`$ 3,826
`
`2007
`
`$ 1,681
`1,945
`$ 3,626
`
`The following is a reconciliation of the expected statutory federal income tax provision to the Company’s actual income
`tax_ provision (in millions):
`
`Expected income tax provision at federal statutory tax rate
`State income tax provision, net of federal benefit
`Foreign income taxed at other than U.S. rates
`Tax audit settlements
`Tax credits
`Valuation allowance
`Revaluation of deferred taxes
`Other
`
`Income tax expense
`
`2009
`
`2008
`
`2007
`
`$
`
`727
`98
`(407)
`(155)
`(1 12)
`229
`74
`30
`
`$
`
`484
`
`$ 1,339
`168
`(858)
`—
`(47)
`48
`——
`16
`
`$
`
`666
`
`$ 1,269
`180
`(710)
`(331)
`(91)
`(7)
`—
`13
`
`$
`
`323
`
`The Company has not recorded a deferred tax liability of approximately $3.0 billion related to the United States federal
`and state income taxes and foreign withholding taxes on approximately $8.6 billion of undistributed earnings of certain non-
`United States subsidiaries indefinitely invested outside the United States. Should the Company decide to repatriate the
`foreign earnings, the Company would have to adjust the income tax provision in the period management determined that the
`earnings will no longer be indefinitely invested outside the United States.
`
`The Company files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions.
`The tax provision was reduced by $155 million during fiscal 2009 to adjust the Company’s prior year estimates of uncertain
`tax positions as a result of various federal, state and foreign tax audits. The Company is no longer subject to United States
`federal examinations by taxing authorities for years prior to fiscal 2008. The U.S. income tax return for fiscal 2008 is being
`examined by the IRS, which is expected to be completed no later than May 2010. The Company is participating in the IRS
`Compliance Assurance Program, whereby the IRS and the Company endeavor to agree on the treatment of all issues in the
`fiscal 2009 tax return prior to the return being filed. The Company is subject to examination by the California Franchise Tax
`Board for fiscal years after 2002 and is currently under examination for fiscal 2003, 2004 and 2005. The Company is also
`subject to income taxes in other taxing jurisdictions in the United States and around the world, many of which are open to tax
`examinations for periods after fiscal 2002.
`4
`
`During fiscal 2007, the lntemal Revenue Service completed audits of the Company’s tax returns for fiscal 2003 and 2004,
`resulting in adjustments to the Company’s net operating loss and credit carryover amounts for those years. The tax provision
`was reduced by $331 million during fiscal 2007 to reflect the known and expected impacts of the audits on the reviewed and
`open tax years.
`
`The Company had deferred tax assets and deferred tax liabilities as follows (in millions):
`
`F-21
`
`
`
`Table of C0l’lt9_l1_t_S_
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Accrued liabilities, reserves and other
`Share—based compensation
`Capitalized start-up and organizational costs
`Uneamed revenues
`Unrealized losses on marketable securities
`Unrealized losses on other investments
`Capital loss carryover
`Tax credits
`Unused net operating losses
`Other basis differences
`Total gross deferred assets
`Valuation allowance
`Total net deferred assets
`
`'
`
`.
`
`Purchased intangible assets
`Deferred contract costs
`Unrealized gains on marketable securities
`Property, plant and equipment
`Total deferred liabilities
`Net deferred assets
`
`Reported as:
`Current deferred tax assets
`Non-current deferred tax assets
`Non-current deferred tax liabilities“)
`
`'
`
`‘
`
`-
`
`September 27,
`2009
`
`September 28,
`2008
`
`$
`
`$
`
`$
`
`$
`
`278
`500
`103
`56
`396
`31
`83
`5
`69
`7
`1,528
`(72)
`1,456
`
`(95)
`(7)
`(255)
`(110)
`(467)
`989
`
`149
`843
`(3)
`989
`
`$
`
`$
`
`$
`
`$
`
`278
`383
`118
`51
`380
`37
`13
`96
`66
`14
`1,436
`g 149)
`1,287
`
`(85)
`(5)
`(20)
`(59)
`g 169)
`1,118
`
`289
`830
`(1)
`1,118
`
`(1)
`
`Included in other liabilities in the consolidated balance sheets.
`
`At September 27, 2009, the Company had unused federal net operating loss carryforwards of $131 million expiring from
`2015 through 2028, unused state net operating loss carryforwards of $202 million expiring from 2012 through 2029, and
`unused foreign net operating loss carryforwards of $47 million, with $46 million expiring from 2012 through 2015. At
`September 27, 2009, the Company had unused state income tax credits of $5 million, which do not expire. The Company
`does not expect its federal net operating loss carryforwards and its state income tax credits to expire unused.
`
`The Company believes, more likely than not, that it will have sufficient taxable income afier stock option related
`deductions to utilize the majority of its deferred tax assets. As of September 27, 2009, the Company has provided a valuation
`allowance on foreign and state net operating losses and net capital losses of $17 million and $55 million, respectively, of
`which $278 million was recorded as an increase in other comprehensive income in fiscal 2009. The valuation allowances
`reflect the uncertainty surrounding the Company’s ability to generate sufficient future taxable income in certain foreign and
`state tax jurisdictions to utilize its net operating losses and the Company’s ability to generate sufficient capital gains to utilize
`all capital losses.
`
`A summary of the changes in the amount of unrecognized tax benefits for fiscal 2009 and 2008 is shown below (in
`millions):
`
`Beginning balance of unrecognized tax benefits
`Additions based on prior year tax positions
`Reductions for prior year tax positions
`Additions for current year tax positions
`Ending balance of unrecognized tax benefits
`
`F-22
`
`2009
`
`2008
`
`$
`
`$
`
`244
`39
`(202)
`3
`84
`
`$
`
`$
`
`224
`6
`(38)
`52
`244
`
`
`
`
`
`
`
`Iflile of Contents
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`Unrecognized tax benefits at September 27, 2009 include $44 million for tax positions that, if recognized, would impact
`the effective tax rate. The reduction in unrecognized tax benefits in fiscal 2009 related primarily to the impacts of various
`federal, state and foreign tax audits. Due to the anticipated resolution of additional tax audits during fiscal 2010, it is likely
`that the Company’s unrecognized tax benefits will decrease within the next twelve months and result in adjustments to the
`Company’s deferred tax assets, income taxes payable and income tax provision. Interest expense related to uncertain tax
`positions was negligible in fiscal 2009, 2008 and 2007. The amount of accrued interest and penalties was negligible at
`September 27, 2009 and September 28, 2008.
`
`Cash amounts paid for income taxes, net of refunds received, were $516 million, $360 million and $233 million for fiscal
`2009, 2008 and 2007, respectively. The income taxes paid are primarily related to foreign withholding taxes.
`
`On October 3, 2008, the Emergency Economic Stabilization Act of 2008 was enacted. The bill extends the research and
`development tax credit for calendar year 2008 and 2009 and increases the Alternative Simplified Credit rate from 12% to
`14% in calendar 2009. The Company recorded an additional research and development tax credit related to fiscal 2008 of
`approximately $38 million in the first quarter of fiscal 2009, the period in which the research and development tax credit
`extension was enacted.
`
`Note 7. Capital Stock
`
`Preferred Stock. The Company has 8,000,000 shares of preferred stock authorized for issuance in one or more series, at a
`par value of $0.000] per share. In conjunction with the distribution of preferred share purchase rights, 4,000,000 shares of
`preferred stock are designated as Series A Junior Participating Preferred Stock, and such shares are reserved for issuance
`upon exercise of the preferred share purchase rights. At September 27, 2009 and September 28, 2008, no shares of preferred
`stock were outstanding.
`
`Preferred Share Purchase Rights Agreement. The Company has a Preferred Share Purchase Rights Agreement (Rights
`Agreement) to protect stockholders’ interests in the event of a proposed takeover of the Company. Under the original Rights
`Agreement, adopted on September 26, 1995, the Company declared a dividend of one preferred share purchase right (a
`Right) for each share of the Company’s common stock outstanding. Pursuant to the Rights Agreement, as amended and
`restated on December 7, 2006, each Right entitles the registered holder to purchase from the Company a one one-thousandth
`share of Series A Junior Participating Preferred Stock, $0.000] par value per share, subject to adjustment for subsequent
`stock splits, at a purchase price of $180. The Rights are exercisable only if a person or group (an Acquiring Person) acquires
`beneficial ownership of 20% or more of the Company’s outstanding shares of common stock without approval of the Board
`of Directors. Upon exercise, holders, other than an Acquiring Person, will have the right, subject to termination, to receive
`the Company’s common stock or other securities, cash or other assets having a market value, as defined, equal to twice such
`purchase price. The Rights, which expire on September 25, 2015, are redeemable in whole, but not in part, at the Company’s
`option prior to the time such Rights are triggered for a price of $0.001 per Right.
`
`Stock Repurchase Program. On March 11, 2008, the Company announced that it had been authorized to repurchase up to
`$2.0 billion of the Company’s common stock. The stock repurchase program has no expiration date. When stock is
`repurchased and retired, the amount paid in excess of par value is recorded to paid-in capital. During fiscal 2009, 2008 and
`2007, the Company repurchased and retired 8,920,000, 42,616,000 and 37,263,000 shares of common stock, respectively, for
`$284 million, $1.7 billion and $1.5 billion, respectively, before commissions and excluding $14 million and $9 million of
`premiums received related to put options that were exercised in fiscal 2008 and 2007, respectively. At September 27, 2009,
`approximately $1.7 billion remained authorized for repurchase under the Company’s stock repurchase program.-
`
`In connection with the Company’s stock repurchase program, the Company sold put options on its own stock during fiscal
`2007. At September 27, 2009 and September 28, 2008, no put options remained outstanding. During fiscal 2008, the
`Company recognized gains of $6 million in investment income due to decreases in the fair values of put options, including
`premiums received of $14 million. During fiscal 2007, the Company recognized $3 million in investment losses due to net
`increases in the fair values of put options, net of premiums received of $17 million.
`
`Dividends. The Company announced increases in its quarterly dividend per share of common stock from $0.12 to $0.14
`on March 13, 2007, from $0.14 to $0.16 on March 11, 2008, and from $0.16 to $0.17 on March 3, 2009. Cash dividends
`announced in fiscal 2009, 2008 and 2007 were as follows (in millions, except per share data):
`
`F-23
`
`
`
`.'1T.r<i_t.1_l.¢:.__<2_f...Qs.>_t.I..t_t‘..i.I..t:.s.
`
`First quarter
`Second quarter
`Third quarter
`Fourth quarter
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`2009
`
`Per Share
`
`. $
`
`$
`
`0.16
`0.16
`0.17
`0.17
`0.66
`
`Total
`
`$
`
`264
`264
`282
`283
`$ 1,093
`
`2008
`
`2007
`
`Per Share
`
`Total
`
`Per Share
`
`Total
`
`$
`
`$
`
`0.14
`0.14
`0.16
`0.16
`0.60
`
`$
`
`$
`
`228
`227
`261
`266
`982
`
`$
`
`$
`
`0.12
`0.12
`0.14
`0.14
`0.52
`
`$
`
`$
`
`198
`200
`234
`230
`862
`
`On October 2, 2009, the Company announced a cash dividend of $0.17 per share on the Company’s common stock,
`payable on December 23, 2009 to stockholders of record as of November 25, 2009, which will be reflected in the
`consolidated financial statements in the first quarter of fiscal 2010.
`
`Note 8. Employee Benefit Plans
`
`Employee Savings and Retirement Plan. The Company has a 401(k) plan that allows eligible employees to contribute up
`to 100% of their eligible compensation, subject to annual limits. The Company matches a portion of the employee
`contributions and may, at its discretion, make additional contributions based upon earnings. The Company’s contribution 4
`expense for fiscal 2009, 2008 and 2007 was $46 million, $45 million and $39 million, respectively.
`
`Equity Compensation Plans. The Board of Directors may grant options to selected employees, directors and consultants
`to the Company to purchase shares of the Company’s common stock at a price not less than the fair market value of the stock
`at the date of grant. The 2006 Long-Term Incentive Plan (the 2006 Plan) was adopted during the second quarter of fiscal
`2006 and replaced the 2001 Stock Option Plan and the 2001 Non-Employee Directors’ Stock Option Plan and their
`predecessor plans (the Prior Plans). The 2006 Plan provides for the grant of incentive and nonstatutory stock options as well
`as stock appreciation rights, restricted stock, restricted stock units, performance units and shares and other stock-based
`awards and is the source of shares issued under the Executive Retirement Matching Contribution Plan (ERMCP). The share‘
`reserve under the 2006 Plan was 405,284,000 at September 27, 2009. Shares subject to any outstanding option under a Prior
`Plan that is terminated or cancelled (but not an option under a Prior Plan that expires) following the date that the 2006 Plan
`was approved by stockholders, and shares that are subject to an award under the ERMCP and are returned to the Company
`because they fail to vest, will again become available for grant under the 2006 Plan. The Board of Directors of the Company
`may amend or terminate the 2006 Plan at any time. Certain amendments, including an increase in the share reserve, require
`stockholder approval. Generally, options and restricted stock units outstanding vest over periods not exceeding five years.
`Options are exercisable for up to ten years from the grant date.
`
`During fiscal 2008, the Company assumed a total of approximately 1,462,000 outstanding stock options under various
`stock-based incentive plans that were assumed (the Assumed Plans) as a result of acquisitions. The Assumed Plans were
`suspended on the dates of acquisition, and no additional shares may be granted under those plans. The Assumed Plans
`provided for the grant of both incentive stock options and non-qualified stock options. Generally, options outstanding vest
`over periods not exceeding five years and are exercisable for up to ten years from the grant date.
`
`A summary of stock option transactions for all stock option plans follows:
`
`Outstanding at September 28, 2008
`Options granted
`'
`Options cancelled/forfeited/expired
`Options exercised
`Options outstanding at September 27, 2_009
`Exercisable at September 27, 2009
`
`Number of
`Shares
`(In thousands)
`202,326
`41,135
`(5,365)
`(18,585)
`219,511
`123,534
`
`Weighted
`Average
`Exercise
`Price
`$37.42
`38.16
`41.85
`28.76
`$38.18
`$36.36
`
`Average
`Remaining
`Contractual
`Term
`(Years!
`
`Aggregate
`Intrinsic
`Value
`(In billions!
`
`6.45
`5.01
`
`$1.6
`$1.1
`
`Net stock options, after forfeitures and cancellations, granted during fiscal 2009, 2008 and 2007 represented 2.2%, 2.7%
`and 2.0% of outstanding shares as of the beginning of each fiscal year, respectively. Total stock options granted during fiscal
`2009, 2008 and 2007 represented 2.5%, 3.2% and 2.4%, respectively, of outstanding shares as of the end of each fiscal year.
`
`
`
`F-24
`
`.2--—r
`
`.—~.£
`
`
`
`flu e of Contents
`
`QUALCOMM Incorporated
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`
`The Company’s determination of the fair value of stock option awards on the date of grant using an option-pricing model
`is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. At
`September 27, 2009, total unrecognized estimated compensation cost related to non-vested stock options granted prior to that
`date was $1.4 billion, which is expected to be recognized over a weighted-average period of 3.3 years. The total intrinsic
`value of stock options exercised during fiscal 2009, 2008 and 2007 was $272 million, $1.3 billion and $708 million,
`respectively. The Company recorded cash received from the exercise of stock options of $534 million, $1.] billion and
`$479 million and related tax benefits of $106 million, $492 million and $272 million during fiscal 2009, 2008 and 2007,
`respectively. Upon option exercise, the Company issues new shares of stock.
`
`During fiscal 2008, the Company granted 55,000 restricted stock units to certain employees, all of which remain unvested
`at September 27, 2009. The weighted-average fair value per share of the restricted stock units awarded in fiscal 2008 was
`$54.42 calculated based on the fair value of the Company’s common stock on the date of grant of each award. At
`September 27, 2009, the total unrecognized estimated compensation cost related to non-vested restricted stock units granted
`prior to that date was negligible.
`
`Employee Stock Purchase Plans. The Company has one employee stock purchase plan for eligible employees to purchase
`shares of common stock at 85% of the lower of the fair market value on the first or the last day of each six-month offering
`period. Employees may authorize the Company to withhold up to 15% of their compensation during any offering period,
`subject to certain limitations. In fiscal 2008, the Company amended the employee stock purchase plan to include a non-423
`(b) plan. The employee stock purchase plan authorizes up to approximately 24,709,000 shares to be granted. During fiscal
`2009, 2008 and 2007, approximately 3,654,000, 2,951,000 and 2,650,000 shares, respectively, were issued under the plans at
`an average price of $29.72, $35.96 and $32.08 per share, respectively. At September 27, 2009, approximately 3,971,000
`shares were reserved for future issuance.
`
`At September 27, 2009, total unrecognized estimated compensation cost related to non-vested purchase rights granted
`prior to that date was $12 million. The Company recorded cash received from the exercise of purchase rights of $109 million,
`$106 million and $85 million during fiscal 2009, 2008, and 2007, respectively.
`
`Executive Retirement Plans. The Company has voluntary retirement plans that allow eligible executives to defer up to
`100% of their income on a pre-tax basis. On a quarterly basis, the Company matches up to 10% of the participants’ deferral
`in Company common stock under the ERMCP based on the then-current market price, to be distributed to the participant
`upon eligible retirement. The income deferred and the Company match held in trust are unsecured and subject to the claims
`of general creditors of the Company. Company contributions vest based on certain minimum participation or service
`requirements and are fully vested at age 65. Participants who terminate employment forfeit their unvested shares. During
`fiscal 2009, 2008 and 2007, approximately 153,000, 96,000 and 126,000 shares, respectively, were allocated under the plans,
`and the Company recorded $6 million, $6 million and $5 million in compensation expense, respectively, related to its net
`matching contributions to the plans.
`
`Note 9. Commitments and Contingencies
`
`Litigation. European Commission Complaint: On October 28, 2005, it was reported that six companies (Broadcom,
`Nokia, Texas Instruments, NEC, Panasonic and Ericsson) filed complaints with the European Commission, alleging that the
`Company violated European Union competition law in its WCDMA licensing practices. The Company has received the
`complaints and has submitted replies to the allegations, as well as documents and other information requested by the
`European Commission. On October 1, 2007, the European Commission announced that it had initiated a proceeding. To date,
`the European Commission has not announced whether it would issue a Statement of Objections or whether it has made any
`conclusions as to