2016 Q2 Form 10-Q Financial Statement

#000005086316000125 Filed on May 02, 2016

View on sec.gov

Income Statement

Concept 2016 Q2 2015 Q1
Revenue $13.70B $12.78B
YoY Change 3.84% 0.13%
Cost Of Revenue $5.572B $5.051B
YoY Change 12.63% -1.94%
Gross Profit $8.130B $7.730B
YoY Change -1.43% 1.54%
Gross Profit Margin 59.33% 60.48%
Selling, General & Admin $2.226B $1.953B
YoY Change 14.21% -4.59%
% of Gross Profit 27.38% 25.27%
Research & Development $3.246B $2.995B
YoY Change 5.15% 5.24%
% of Gross Profit 39.93% 38.75%
Depreciation & Amortization $2.015B $1.848B
YoY Change -8.03% 7.44%
% of Gross Profit 24.78% 23.91%
Operating Expenses $5.562B $5.115B
YoY Change 3.92% 0.24%
Operating Profit $2.568B $2.615B
YoY Change -11.33% 4.18%
Interest Expense -$97.00M $42.00M
YoY Change -283.02% 13.51%
% of Operating Profit -3.78% 1.61%
Other Income/Expense, Net $37.00M $36.00M
YoY Change -42.19% -68.42%
Pretax Income $2.508B $2.673B
YoY Change -15.92% 0.11%
Income Tax $462.0M $681.0M
% Of Pretax Income 18.42% 25.48%
Net Earnings $2.046B $1.992B
YoY Change -24.39% 3.21%
Net Earnings / Revenue 14.93% 15.59%
Basic Earnings Per Share $0.42
Diluted Earnings Per Share $419.7K $0.41
COMMON SHARES
Basic Shares Outstanding 4.722B shares 4.741B shares
Diluted Shares Outstanding 4.914B shares

Balance Sheet

Concept 2016 Q2 2015 Q1
SHORT-TERM ASSETS
Cash & Short-Term Investments $5.988B $6.108B
YoY Change -15.18% -38.99%
Cash & Equivalents $3.061B $4.244B
Short-Term Investments $2.927B $1.864B
Other Short-Term Assets $2.339B $2.636B
YoY Change 3.18% 52.11%
Inventory $5.751B $4.418B
Prepaid Expenses
Receivables $4.216B $3.246B
Other Receivables $0.00 $0.00
Total Short-Term Assets $27.40B $26.47B
YoY Change 2.57% -13.38%
LONG-TERM ASSETS
Property, Plant & Equipment $32.64B $33.30B
YoY Change -0.12% 2.44%
Goodwill $16.94B $10.77B
YoY Change 53.5% 1.4%
Intangibles $11.14B $4.211B
YoY Change 163.61% -15.15%
Long-Term Investments $1.593B $1.574B
YoY Change -1.36% 42.19%
Other Assets $7.870B $6.603B
YoY Change 14.04% 21.24%
Total Long-Term Assets $78.07B $63.10B
YoY Change 22.4% 2.81%
TOTAL ASSETS
Total Short-Term Assets $27.40B $26.47B
Total Long-Term Assets $78.07B $63.10B
Total Assets $105.5B $89.57B
YoY Change 16.55% -2.57%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.163B $2.775B
YoY Change 34.08% -7.81%
Accrued Expenses $7.813B $8.345B
YoY Change 3.26% 4.67%
Deferred Revenue
YoY Change
Short-Term Debt $988.0M $0.00
YoY Change 4195.65%
Long-Term Debt Due $2.606B $1.121B
YoY Change 137.99% 3013.89%
Total Short-Term Liabilities $17.53B $15.04B
YoY Change 29.54% 10.94%
LONG-TERM LIABILITIES
Long-Term Debt $21.78B $12.11B
YoY Change 79.72% -8.05%
Other Long-Term Liabilities $2.851B $3.125B
YoY Change -4.84% 8.96%
Total Long-Term Liabilities $24.63B $15.24B
YoY Change 62.96% -5.01%
TOTAL LIABILITIES
Total Short-Term Liabilities $17.53B $15.04B
Total Long-Term Liabilities $24.63B $15.24B
Total Liabilities $42.15B $30.27B
YoY Change 47.17% 2.3%
SHAREHOLDERS EQUITY
Retained Earnings $36.53B $32.46B
YoY Change 6.1% -6.5%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $61.17B $54.92B
YoY Change
Total Liabilities & Shareholders Equity $105.5B $89.57B
YoY Change 16.55% -2.57%

Cashflow Statement

Concept 2016 Q2 2015 Q1
OPERATING ACTIVITIES
Net Income $2.046B $1.992B
YoY Change -24.39% 3.21%
Depreciation, Depletion And Amortization $2.015B $1.848B
YoY Change -8.03% 7.44%
Cash From Operating Activities $4.055B $4.415B
YoY Change 17.88% 26.11%
INVESTING ACTIVITIES
Capital Expenditures -$1.346B $2.025B
YoY Change -23.83% -24.69%
Acquisitions $57.00M
YoY Change -47.22%
Other Investing Activities -$14.17B -$5.000M
YoY Change -3102.97% -96.58%
Cash From Investing Activities -$15.52B -$449.0M
YoY Change 1098.46% -83.67%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net $750.0M
YoY Change 37.61%
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -782.0M -2.274B
YoY Change -59.79% 37.82%
NET CHANGE
Cash From Operating Activities 4.055B 4.415B
Cash From Investing Activities -15.52B -449.0M
Cash From Financing Activities -782.0M -2.274B
Net Change In Cash -12.25B 1.692B
YoY Change -6223.5% -288.42%
FREE CASH FLOW
Cash From Operating Activities $4.055B $4.415B
Capital Expenditures -$1.346B $2.025B
Free Cash Flow $5.401B $2.390B
YoY Change 3.73% 194.33%

Facts In Submission

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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-top:18px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;font-weight:bold;text-decoration:none;">Note 21: Contingencies</font><font style="font-family:Arial;font-size:10pt;font-weight:bold;"> </font></div><div style="line-height:120%;padding-top:18px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;">Legal Proceedings</font></div><div style="line-height:120%;padding-top:6px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">We are a party to various legal proceedings, including those noted in this section. Although management at present believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse impact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one or more such matters is in the best interests of our stockholders, employees and customers, and any such settlement could include substantial payments. Except as specifically described below, we have not concluded that settlement of any of the legal proceedings noted in this section is appropriate at this time.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Government Competition Matters and Consumer Class&#160;Actions</font></div><div style="line-height:120%;padding-top:6px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">A number of proceedings generally have challenged and continue to challenge certain of our competitive practices. The allegations in these proceedings vary and are described in more detail in the following paragraphs. In general, they contend that we improperly conditioned price rebates and other discounts on our microprocessors on exclusive or near-exclusive dealing by some of our customers; and they allege that our software compiler business unfairly preferred Intel</font><font style="font-family:Arial;font-size:10pt;"><sup style="vertical-align:top;line-height:120%;font-size:6pt">&#174;</sup></font><font style="font-family:Arial;font-size:10pt;"> microprocessors over competing microprocessors and that, through the use of our compilers and other means, we have caused the dissemination of inaccurate and misleading benchmark results concerning our microprocessors. Based on the procedural posture of the various remaining competition matters, which we describe in the following paragraphs, our investment of resources to explain and defend our position has declined as compared to the period 2005-2011. Nonetheless, certain of the matters remain active, and these challenges could continue for a number of years, potentially requiring us to invest additional resources. We believe that we compete lawfully and that our marketing, business, intellectual property, and other challenged practices benefit our customers and our stockholders, and we will continue to conduct a vigorous defense in the remaining proceedings.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In 2001, the European Commission (EC) commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that we used unfair business practices to persuade customers to buy our microprocessors. We received numerous requests for information and documents from the EC and we responded to each of those requests. The EC issued a Statement of Objections in July 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July 2008. In May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the European Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty) by offering alleged "conditional rebates and payments" that required our customers to purchase all or most of their x86 microprocessors from us. The EC also found that we violated Article 82 by making alleged "payments to prevent sales of specific rival products." The EC imposed a fine in the amount of&#160;</font><font style="font-family:Arial;font-size:10pt;">&#8364;1.1 billion</font><font style="font-family:Arial;font-size:10pt;"> (</font><font style="font-family:Arial;font-size:10pt;">$1.4 billion</font><font style="font-family:Arial;font-size:10pt;"> as of May 2009), which we subsequently paid during the third quarter of 2009, and ordered us to "immediately bring to an end the infringement referred to in" the EC decision. </font></div><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The EC decision contained no specific direction on whether or how we should modify our business practices. Instead, the decision stated that we should "cease and desist" from further conduct that, in the EC's opinion, would violate applicable law. We took steps, which are subject to the EC's ongoing review, to comply with that decision pending appeal. We had discussions with the EC to better understand the decision and to explain changes to our business practices. </font></div><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">We appealed the EC decision to the Court of First Instance (which has been renamed the General Court) in July 2009. The hearing of our appeal took place in July 2012. In June 2014, the General Court rejected our appeal in its entirety. In August 2014, we filed an appeal with the European Court of Justice. In November 2014, Intervener Association for Competitive Technologies filed comments in support of Intel&#8217;s grounds of appeal.&#160;The EC and interveners filed briefs in November 2014, we filed a reply in February 2015, and the EC filed a rejoinder in April 2015.&#160;The Court of Justice is likely to hold oral argument and issue its decision in 2016.</font></div><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">At least 82 separate class-action lawsuits were filed in the U.S. District Courts for the Northern District of California, Southern District of California, District of Idaho, District of Nebraska, District of New Mexico, District of Maine, and District of Delaware, as well as in various California, Kansas, and Tennessee state courts. These actions generally repeat the allegations made in a now-settled lawsuit filed against us by AMD in June 2005 in the U.S. District Court for the District of Delaware (AMD litigation). Like the AMD litigation, these class-action lawsuits allege that we engaged in various actions in violation of the Sherman Act and other laws by, among other things: providing discounts and rebates to our manufacturer and distributor customers conditioned on exclusive or near-exclusive dealing that allegedly unfairly interfered with AMD's ability to sell its microprocessors; interfering with certain AMD product launches; and interfering with AMD's participation in certain industry standards-setting groups. The class actions allege various consumer injuries, including that consumers in various states have been injured by paying higher prices for computers containing our microprocessors.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">All of the federal and state class actions other than the California class actions were transferred by the Multidistrict Litigation Panel to the U.S. District Court in Delaware for all pre-trial proceedings and discovery (MDL proceedings). The Delaware district court appointed a Special Master to address issues in the MDL proceedings, as assigned by the court. In July 2010, the Special Master denied the MDL plaintiffs' motion to certify a class of members who purchased certain personal computers containing products sold by us. In July 2014, the district court affirmed the Special Master's ruling and issued an order denying the MDL plaintiffs' motion for class certification. In August 2014, plaintiffs filed a petition for interlocutory appeal of the district court's decision with the U.S. Court of Appeals for the Third Circuit, which the Third Circuit denied in October 2014. In December 2014, we filed a motion for summary judgment on the claims of the remaining individual plaintiffs. We subsequently negotiated a settlement of the claims and the case was dismissed in September 2015.</font></div><div style="line-height:120%;padding-bottom:12px;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">All California class actions were consolidated in the Superior Court of California in Santa Clara County. In March 2008, the plaintiffs in the California actions moved for class certification, which we opposed. In February 2015, the court granted plaintiffs' request for leave to retain a new expert and to amend their previous motion for class certification.&#160;In March 2016, the court denied plaintiffs&#8217; amended class certification motion, and plaintiffs filed a motion for reconsideration, which is scheduled for hearing in May 2016. Given the procedural posture and the nature of these cases, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Shareholder Derivative Litigation regarding In re High Tech Employee Antitrust Litigation</font></div><div style="line-height:120%;padding-top:6px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In March 2014, the Police Retirement System of St. Louis (PRSSL) filed a shareholder derivative action in the Superior Court of California in Santa Clara County against Intel, certain current and former members of our Board of Directors, and a current officer. The complaint alleges that the defendants breached their duties to the company by participating in, or allowing, purported antitrust violations, which were alleged in a now-settled antitrust class action lawsuit captioned </font><font style="font-family:Arial;font-size:10pt;font-style:italic;">In re High Tech Employee Antitrust Litigation </font><font style="font-family:Arial;font-size:10pt;">claiming that</font><font style="font-family:Arial;font-size:10pt;font-weight:bold;"> </font><font style="font-family:Arial;font-size:10pt;">Intel, Adobe Systems Incorporated, Apple Inc., Google Inc., Intuit Inc., Lucasfilm Ltd., and Pixar conspired to suppress their employees&#8217; compensation. In March 2014, a second plaintiff, Barbara Templeton, filed a substantially similar derivative suit in the same court. In May 2014, a third shareholder, Robert Achermann, filed a substantially similar derivative action in the same court. The court consolidated the three actions into one, which is captioned </font><font style="font-family:Arial;font-size:10pt;font-style:italic;">In re Intel Corporation Shareholder Derivative Litigation</font><font style="font-family:Arial;font-size:10pt;">. Plaintiffs filed a consolidated complaint in July 2014. In August 2015, the court granted our motion to dismiss the consolidated complaint. The plaintiffs thereafter filed a motion for reconsideration and a motion for new trial, both of which the court denied in October 2015. In November 2015, plaintiffs PRSSL and Templeton appealed the court's decision.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In June 2015, the International Brotherhood of Electrical Workers (IBEW) filed a shareholder derivative action in the Chancery Court in Delaware against Intel, certain current and former members of our Board of Directors, and a current officer.&#160;The lawsuit makes allegations that are substantially similar to those in the California shareholder derivative litigation described above, but contain additional allegations regarding breach of the duty of disclosure surrounding the </font><font style="font-family:Arial;font-size:10pt;font-style:italic;">In re High Tech Employee Antitrust Litigation</font><font style="font-family:Arial;font-size:10pt;"> and that the Intel 2013 and 2014 proxy statements were false and misleading in that they misrepresented the effectiveness of the Board&#8217;s oversight of compliance issues at Intel and the Board&#8217;s compliance with Intel&#8217;s Code of Conduct and Board of Director Guidelines on Significant Corporate Governance Issues. In October 2015, the court stayed the IBEW lawsuit for six months pending further developments in the California case. In March 2016, Intel and IBEW entered into a stipulated dismissal pursuant to which IBEW dismissed its complaint but may re-file upon the withdrawal or final resolution of the appeal in the California shareholder derivative litigation.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In April 2016, John Esposito filed a shareholder derivative action in the Superior Court of California in Santa Clara County against Intel, current members of our Board, and certain former officers and employees. Esposito made a demand on our Board in 2013 to investigate whether our officers or directors should be sued for their participation in the events described in In re High Tech Employee Antitrust Litigation. In November 2015, our Board decided not to take further action on Esposito&#8217;s demand based on the recommendation of the Audit Committee of the Board after its investigation of relevant facts and circumstances. Esposito seeks to set aside such decision, and alleges that the Board was not disinterested in making that decision and that the investigation was inadequate.</font></div><div style="line-height:120%;padding-top:12px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">McAfee, Inc. Shareholder Litigation</font></div><div style="line-height:120%;padding-top:6px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">On August 19, 2010, we announced that we had agreed to acquire all of the common stock of McAfee, Inc. (McAfee) for </font><font style="font-family:Arial;font-size:10pt;">$48.00</font><font style="font-family:Arial;font-size:10pt;"> per share. Four McAfee shareholders filed putative class-action lawsuits in Santa Clara County, California Superior Court challenging the proposed transaction. The cases were ordered consolidated in September 2010. Plaintiffs filed an amended complaint that named former McAfee board members, McAfee and Intel as defendants, and alleged that the McAfee board members breached their fiduciary duties and that McAfee and Intel aided and abetted those breaches of duty. The complaint requested rescission of the merger agreement, such other equitable relief as the court may deem proper, and an award of damages in an unspecified amount. In June 2012, the plaintiffs&#8217; damages expert asserted that the value of a McAfee share for the purposes of assessing damages should be </font><font style="font-family:Arial;font-size:10pt;">$62.08</font><font style="font-family:Arial;font-size:10pt;">.</font></div><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In January 2012, the court certified the action as a class action, appointed the Central Pension Laborers&#8217; Fund to act as the class representative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a petition with the California Court of Appeal for a writ of mandate to reverse the class certification order; the petition was denied in June 2012. In March 2012, at defendants&#8217; request, the court held that plaintiffs were not entitled to a jury trial, and ordered a bench trial. In April 2012, plaintiffs filed a petition with the California Court of Appeal for a writ of mandate to reverse that order, which the court of appeal denied in July 2012. In August 2012, defendants filed a motion for summary judgment. The trial court granted that motion in November 2012, and entered final judgment in the case in February 2013. In April 2013, plaintiffs appealed the final judgment. Intel, McAfee, and McAfee&#8217;s board of directors filed an opposition to plaintiff&#8217;s appeal in December 2014. Because the resolution of the appeal may materially impact the scope and nature of the proceeding, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from this matter. We dispute the class-action claims and intend to continue to defend the lawsuit vigorously.</font></div></div>

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