2017 Q3 Form 10-Q Financial Statement

#000005086317000048 Filed on October 26, 2017

View on sec.gov

Income Statement

Concept 2017 Q3 2016 Q4
Revenue $14.76B $15.78B
YoY Change 9.09% 5.79%
Cost Of Revenue $6.085B $5.795B
YoY Change 9.44% 8.85%
Gross Profit $10.06B $9.983B
YoY Change 26.23% 4.1%
Gross Profit Margin 68.17% 63.27%
Selling, General & Admin $1.661B $2.006B
YoY Change -17.24% -5.29%
% of Gross Profit 16.5% 20.09%
Research & Development $3.209B $3.069B
YoY Change 2.03% -1.6%
% of Gross Profit 31.89% 30.74%
Depreciation & Amortization $1.988B $1.928B
YoY Change 3.7% -10.16%
% of Gross Profit 19.75% 19.31%
Operating Expenses $4.923B $5.521B
YoY Change -26.03% 4.09%
Operating Profit $5.141B $4.462B
YoY Change 290.06% 4.11%
Interest Expense $191.0M $180.0M
YoY Change 2.14% -220.0%
% of Operating Profit 3.72% 4.03%
Other Income/Expense, Net -$57.00M -$132.0M
YoY Change -54.76% -185.71%
Pretax Income $5.930B $4.318B
YoY Change 255.09% 0.35%
Income Tax $1.414B $940.0M
% Of Pretax Income 23.84% 21.77%
Net Earnings $4.516B $3.378B
YoY Change 239.55% -6.5%
Net Earnings / Revenue 30.59% 21.41%
Basic Earnings Per Share $0.96 $0.71
Diluted Earnings Per Share $0.94 $0.69
COMMON SHARES
Basic Shares Outstanding 4.688B shares 4.734B shares
Diluted Shares Outstanding 4.821B shares 4.877B shares

Balance Sheet

Concept 2017 Q3 2016 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $10.52B $8.785B
YoY Change 28.52% -51.17%
Cash & Equivalents $9.075B $5.560B
Short-Term Investments $1.446B $3.225B
Other Short-Term Assets $2.767B $2.956B
YoY Change -15.46% -0.87%
Inventory $6.929B $5.553B
Prepaid Expenses
Receivables $5.954B $4.690B
Other Receivables $0.00 $0.00
Total Short-Term Assets $33.15B $35.51B
YoY Change 6.3% -7.34%
LONG-TERM ASSETS
Property, Plant & Equipment $39.47B $36.17B
YoY Change 16.77% 13.54%
Goodwill $24.39B $14.10B
YoY Change 43.53% 24.42%
Intangibles $13.06B $9.494B
YoY Change 20.67% 141.39%
Long-Term Investments $1.406B $1.328B
YoY Change -17.29% -16.48%
Other Assets $7.112B $7.159B
YoY Change -11.82% -12.32%
Total Long-Term Assets $93.93B $77.82B
YoY Change 19.44% 23.25%
TOTAL ASSETS
Total Short-Term Assets $33.15B $35.51B
Total Long-Term Assets $93.93B $77.82B
Total Assets $127.1B $113.3B
YoY Change 15.71% 11.7%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.554B $2.475B
YoY Change 3.92% 19.97%
Accrued Expenses $8.813B $9.366B
YoY Change 16.28% 9.56%
Deferred Revenue
YoY Change
Short-Term Debt $4.142B $4.634B
YoY Change 185.85% 14381.25%
Long-Term Debt Due $4.129B $4.609B
YoY Change 32.72% 77.13%
Total Short-Term Liabilities $20.69B $20.30B
YoY Change 10.57% 29.76%
LONG-TERM LIABILITIES
Long-Term Debt $27.50B $20.65B
YoY Change 14.32% 3.06%
Other Long-Term Liabilities $4.152B $3.538B
YoY Change 18.06% 24.53%
Total Long-Term Liabilities $31.65B $24.19B
YoY Change 14.8% 5.73%
TOTAL LIABILITIES
Total Short-Term Liabilities $20.69B $20.30B
Total Long-Term Liabilities $31.65B $24.19B
Total Liabilities $52.34B $44.49B
YoY Change 13.09% 15.49%
SHAREHOLDERS EQUITY
Retained Earnings $42.78B $40.75B
YoY Change 15.21% 8.33%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $70.94B $66.23B
YoY Change
Total Liabilities & Shareholders Equity $127.1B $113.3B
YoY Change 15.71% 11.7%

Cashflow Statement

Concept 2017 Q3 2016 Q4
OPERATING ACTIVITIES
Net Income $4.516B $3.378B
YoY Change 239.55% -6.5%
Depreciation, Depletion And Amortization $1.988B $1.928B
YoY Change 3.7% -10.16%
Cash From Operating Activities $4.707B $5.758B
YoY Change 22.42% 6.1%
INVESTING ACTIVITIES
Capital Expenditures -$2.663B -$2.463B
YoY Change 16.49% 0.61%
Acquisitions
YoY Change
Other Investing Activities $1.225B -$220.0M
YoY Change -165.02% -104.25%
Cash From Investing Activities -$1.438B -$2.683B
YoY Change -65.52% -198.35%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 3.484B -2.208B
YoY Change 203.22% -2609.09%
NET CHANGE
Cash From Operating Activities 4.707B 5.758B
Cash From Investing Activities -1.438B -2.683B
Cash From Financing Activities 3.484B -2.208B
Net Change In Cash 6.753B 867.0M
YoY Change 719.54% -89.48%
FREE CASH FLOW
Cash From Operating Activities $4.707B $5.758B
Capital Expenditures -$2.663B -$2.463B
Free Cash Flow $7.370B $8.221B
YoY Change 20.21% 4.39%

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 18: Contingencies</font><font style="font-family:Arial;font-size:10pt;font-weight:bold;"> </font></div><div style="line-height:120%;padding-top:6px;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:18px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">European Commission Competition Matter</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 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 held oral argument in June 2016. In October 2016, Advocate General Wahl, an advisor to the Court of Justice, issued a non-binding advisory opinion which favored Intel on a number of grounds.</font><font style="font-family:inherit;font-size:10pt;"> </font><font style="font-family:Arial;font-size:10pt;">The Court of Justice issued its decision in September 2017, setting aside the judgment of the General Court and sending the case back to the General Court to examine whether the rebates at issue are capable of restricting competition. The General Court has appointed a panel of five judges to consider our appeal of the EC&#8217;s 2009 decision in light of the Court of Justice&#8217;s clarifications of the law. The parties are expected to file initial &#8220;Observations&#8221; about the Court of Justice&#8217;s decision and the appeal in November 2017. Pending the final decision in this matter, the fine paid by Intel has been placed by the EC in commercial bank accounts where it accrues interest. </font></div><div style="line-height:120%;padding-top:18px;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 former officers. 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. The appeal is fully briefed, and we are waiting on a hearing date from the appellate court.</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 former officers.&#160;The lawsuit makes allegations substantially similar to those in the California shareholder derivative litigation described above, but additionally alleges breach of the duty of disclosure with respect to </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 Intel's 2013 and 2014 proxy statements 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 PRSSL California shareholder derivative litigation. </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 of Directors, 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 </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;">. 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. In November 2016, the court granted Intel&#8217;s motion to dismiss the case, without leave to amend. In March 2017, plaintiff filed a motion for fees. The court denied plaintiff&#8217;s fee motion in May 2017, and entered final judgment in this matter in June 2017. In August 2017, Esposito appealed the final judgment. </font></div><div style="line-height:120%;padding-top:18px;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. The California Court of Appeal heard oral argument in October 2017, and the parties await the court&#8217;s decision. 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 style="line-height:120%;padding-top:18px;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Intel Corporation v. Future Link Systems, LLC&#160;</font></div><div style="line-height:120%;padding-top:6px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In March 2014, we filed a complaint against Future Link Systems, LLC (Future Link) in the United States District Court for the District of Delaware, requesting a declaratory judgment that Intel and our customers do not infringe any valid, enforceable claim of </font><font style="font-family:Arial;font-size:10pt;">nine</font><font style="font-family:Arial;font-size:10pt;"> patents owned by Future Link.&#160;In July 2015, Future Link filed counterclaims against Intel alleging infringement of </font><font style="font-family:Arial;font-size:10pt;">fifteen</font><font style="font-family:Arial;font-size:10pt;"> patents. In June 2017, the court denied both parties&#8217; </font><font style="font-family:Arial;font-size:10pt;font-style:italic;">Daubert</font><font style="font-family:Arial;font-size:10pt;"> motions to exclude opinions of the other parties&#8217; damages experts. In July 2017, the court ruled on numerous motions for summary judgment of certain claims filed by both Intel and Future Link. As of July 2017, Future Link alleged infringement of </font><font style="font-family:Arial;font-size:10pt;">fourteen</font><font style="font-family:Arial;font-size:10pt;"> patents, claimed past damages in the amount of approximately </font><font style="font-family:Arial;font-size:10pt;">$9.9 billion</font><font style="font-family:Arial;font-size:10pt;"> in its experts&#8217; reports, and sought additional damages accrued through trial and ongoing royalties after trial in an unspecified amount.&#160;The court scheduled a jury trial for September 2017 on Future Link&#8217;s infringement claims regarding </font><font style="font-family:Arial;font-size:10pt;">three</font><font style="font-family:Arial;font-size:10pt;"> patents with a past damages claim of approximately </font><font style="font-family:Arial;font-size:10pt;">$2.9 billion</font><font style="font-family:Arial;font-size:10pt;"> and ordered that other proceedings be stayed. In August 2017, the parties reached a confidential settlement agreement resolving all claims. The settlement did not have a material financial impact to Intel.</font></div></div>

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