2018 Q1 Form 10-Q Financial Statement

#000005086318000013 Filed on April 27, 2018

View on sec.gov

Income Statement

Concept 2018 Q1 2017 Q2
Revenue $16.07B $14.80B
YoY Change 7.98%
Cost Of Revenue $6.335B $5.636B
YoY Change 1.15%
Gross Profit $9.731B $9.160B
YoY Change 12.67%
Gross Profit Margin 60.57% 61.91%
Selling, General & Admin $1.900B $2.099B
YoY Change -5.71%
% of Gross Profit 19.53% 22.91%
Research & Development $3.311B $3.311B
YoY Change 2.0%
% of Gross Profit 34.03% 36.15%
Depreciation & Amortization $1.806B $1.625B
YoY Change -19.35%
% of Gross Profit 18.56% 17.74%
Operating Expenses $5.261B $5.528B
YoY Change -0.61%
Operating Profit $4.470B $3.632B
YoY Change 41.43%
Interest Expense $112.0M $146.0M
YoY Change -250.52%
% of Operating Profit 2.51% 4.02%
Other Income/Expense, Net -$102.0M -$69.00M
YoY Change -286.49%
Pretax Income $5.011B $3.815B
YoY Change 52.11%
Income Tax $557.0M $851.0M
% Of Pretax Income 11.12% 22.31%
Net Earnings $4.454B $2.964B
YoY Change 44.87%
Net Earnings / Revenue 27.72% 20.03%
Basic Earnings Per Share $0.95 $0.63
Diluted Earnings Per Share $0.93 $0.61
COMMON SHARES
Basic Shares Outstanding 4.674B shares 4.723B shares
Diluted Shares Outstanding 4.790B shares 4.881B shares

Balance Sheet

Concept 2018 Q1 2017 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $5.574B $7.992B
YoY Change 33.47%
Cash & Equivalents $3.554B $4.934B
Short-Term Investments $2.020B $3.058B
Other Short-Term Assets $3.408B $2.903B
YoY Change 24.11%
Inventory $7.146B $5.801B
Prepaid Expenses
Receivables $4.879B $4.921B
Other Receivables $0.00 $0.00
Total Short-Term Assets $31.63B $36.06B
YoY Change 31.61%
LONG-TERM ASSETS
Property, Plant & Equipment $43.74B $36.91B
YoY Change 13.07%
Goodwill $24.35B $14.10B
YoY Change -16.78%
Intangibles $12.36B $9.157B
YoY Change -17.8%
Long-Term Investments $2.005B $1.315B
YoY Change -17.45%
Other Assets $3.614B $7.443B
YoY Change -5.43%
Total Long-Term Assets $96.97B $79.59B
YoY Change 1.95%
TOTAL ASSETS
Total Short-Term Assets $31.63B $36.06B
Total Long-Term Assets $96.97B $79.59B
Total Assets $128.6B $115.6B
YoY Change 9.65%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $4.415B $3.221B
YoY Change 1.83%
Accrued Expenses $10.56B $9.040B
YoY Change 15.7%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change -100.0%
Long-Term Debt Due $3.842B $5.073B
YoY Change 94.67%
Total Short-Term Liabilities $19.96B $21.31B
YoY Change 21.56%
LONG-TERM LIABILITIES
Long-Term Debt $24.77B $20.68B
YoY Change -5.04%
Other Long-Term Liabilities $3.082B $3.658B
YoY Change 28.31%
Total Long-Term Liabilities $27.85B $24.34B
YoY Change -1.18%
TOTAL LIABILITIES
Total Short-Term Liabilities $19.96B $21.31B
Total Long-Term Liabilities $27.85B $24.34B
Total Liabilities $47.81B $45.64B
YoY Change 8.28%
SHAREHOLDERS EQUITY
Retained Earnings $44.42B $40.09B
YoY Change 9.76%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $70.17B $66.84B
YoY Change
Total Liabilities & Shareholders Equity $128.6B $115.6B
YoY Change 9.65%

Cashflow Statement

Concept 2018 Q1 2017 Q2
OPERATING ACTIVITIES
Net Income $4.454B $2.964B
YoY Change 44.87%
Depreciation, Depletion And Amortization $1.806B $1.625B
YoY Change -19.35%
Cash From Operating Activities $6.284B $3.898B
YoY Change -3.87%
INVESTING ACTIVITIES
Capital Expenditures $2.910B $1.952B
YoY Change -245.02%
Acquisitions $0.00
YoY Change
Other Investing Activities $440.0M -$54.00M
YoY Change -99.62%
Cash From Investing Activities -$4.791B -$2.778B
YoY Change -82.1%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net $1.914B $1.242B
YoY Change
Debt Paid & Issued, Net $327.0M $0.00
YoY Change
Cash From Financing Activities -1.372B -1.746B
YoY Change 123.27%
NET CHANGE
Cash From Operating Activities 6.284B 3.898B
Cash From Investing Activities -4.791B -2.778B
Cash From Financing Activities -1.372B -1.746B
Net Change In Cash 121.0M -626.0M
YoY Change -94.89%
FREE CASH FLOW
Cash From Operating Activities $6.284B $3.898B
Capital Expenditures $2.910B $1.952B
Free Cash Flow $3.374B $1.946B
YoY Change -63.97%

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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:12px;font-size:14pt;"><font style="font-family:Arial Narrow;font-size:14pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">NOTE 15: CONTINGENCIES</font><font style="font-family:Arial;font-size:9pt;color:#333333;font-weight:bold;"> </font></div><div style="line-height:120%;padding-bottom:12px;font-size:12pt;"><font style="font-family:Arial Narrow;font-size:12pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">LEGAL PROCEEDINGS</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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-bottom:8px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">European Commission Competition Matter</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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:9pt;color:#333333;">&#8364;1.1 billion</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> (</font><font style="font-family:Arial;font-size:9pt;color:#333333;">$1.4 billion</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> 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-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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 that favored Intel on a number of grounds. 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 were 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. In November 2017, the parties filed initial &#8220;Observations&#8221; about the Court of Justice&#8217;s decision and the appeal, and were invited by the General Court to offer supplemental comments to each other&#8217;s &#8220;Observations,&#8221; which the parties submitted in March 2018. 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-bottom:8px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">Shareholder Derivative Litigation regarding In re High Tech Employee Antitrust Litigation</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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 that were alleged in a now-settled antitrust class action lawsuit captioned&#160;In re High Tech Employee Antitrust Litigation&#160;claiming that&#160;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&#160;In re Intel Corporation Shareholder Derivative Litigation. 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-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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&#160;In re High Tech Employee Antitrust Litigation&#160;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-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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 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. 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-bottom:8px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">McAfee, Inc. Shareholder Litigation</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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:9pt;color:#333333;">$48.00</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> 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:9pt;color:#333333;">$62.08</font><font style="font-family:Arial;font-size:9pt;color:#333333;">.</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">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 in November 2017, affirmed the judgment as to McAfee's nine outside directors, reversed the judgment as to former McAfee director and chief executive officer David DeWalt, Intel, and McAfee, and affirmed the trial court's ruling that the plaintiffs are not entitled to a jury trial. No bench trial date has been set. Because the resolution of pretrial motions may materially impact the scope and nature of the proceeding, and because of uncertainties regarding theories that may be asserted at trial following the appellate court's remand of only certain claims in the proceeding and the extent of Intel's responsibility, if any, with respect to such claims, 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-bottom:8px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">Litigation related to Security Vulnerabilities</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">In June 2017, a Google research team notified us and other companies&#160;that it had identified security vulnerabilities (now commonly referred to as &#8220;Spectre&#8221; and &#8220;Meltdown&#8221;) that affect many types of microprocessors, including our products. As is standard when findings like these are presented, we worked together with other companies in the industry to verify the research and develop and validate software and firmware updates for impacted technologies. On January 3, 2018, information on the security vulnerabilities was publicly reported, before software and firmware updates to address the vulnerabilities were made widely available. Numerous lawsuits have been filed against Intel and, in certain cases, our executives and directors, in U.S. federal and state courts and in certain courts in other countries relating to the Spectre and Meltdown security vulnerabilities.</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">As of April 25, 2018, </font><font style="font-family:Arial;font-size:9pt;color:#333333;">42</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> customer class action lawsuits and </font><font style="font-family:Arial;font-size:9pt;color:#333333;">three</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> securities class action lawsuits have been filed. The customer class action plaintiffs, who purport to represent various classes of end users of our products, generally claim to have been harmed by Intel's actions and/or omissions in connection with the security vulnerabilities and assert a variety of common law and statutory claims seeking monetary damages and equitable relief. Of the customer class action lawsuits, </font><font style="font-family:Arial;font-size:9pt;color:#333333;">39</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> have been filed in the United States, </font><font style="font-family:Arial;font-size:9pt;color:#333333;">two</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> in Canada, and </font><font style="font-family:Arial;font-size:9pt;color:#333333;">one</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> in Israel. In April 2018, the United States Judicial Panel on Multidistrict Litigation ordered the U.S. customer lawsuits consolidated for pretrial proceedings in the United States District Court for the District of Oregon. The securities class action plaintiffs, who purport to represent classes of acquirers of Intel stock between July 27, 2017 and January 4, 2018, generally allege that Intel and certain officers violated securities laws by making statements about Intel's products and internal controls that were revealed to be false or misleading by the disclosure of the security vulnerabilities. Additional lawsuits and claims may be asserted on behalf of customers and shareholders seeking monetary damages or other related relief. We dispute the claims described above and intend to defend the lawsuits vigorously. Given the procedural posture and the nature of these cases, including that the proceedings are in the early stages, that alleged damages have not been specified, that uncertainty exists as to the likelihood of a class or classes being certified or the ultimate size of any class or classes if certified, and that there are significant factual and legal issues to be resolved, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from these matters.</font></div><div style="line-height:120%;padding-bottom:20px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">In addition to these lawsuits, Intel stockholders have filed </font><font style="font-family:Arial;font-size:9pt;color:#333333;">seven</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> shareholder derivative lawsuits against certain members of our Board of Directors and certain officers. In January and April 2018, Joseph Tola, Joanne Bicknese, Michael Kellogg, and Jeffrey Lockwood each filed a shareholder derivative action in the Superior Court of the State of California in San Mateo County alleging that the defendants breached their duties to Intel in connection with the disclosure of the security vulnerabilities and the failure to take action in relation to alleged insider trading. The complaints seek to recover damages from the defendants on behalf of Intel. In March and April 2018, Joseph Lipovich, Martin Salsberg, and Margaret Birch, et al. each filed substantially similar shareholder derivative actions in the United States District Court for the Northern District of California, and all were assigned to the same judge. The </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Lipovich</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> and </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Salsberg</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> actions were consolidated, and defendants moved to dismiss those actions on the ground that plaintiffs&#8217; failure to make a pre-lawsuit demand on the Board was not excused. The hearing on that motion is scheduled for May 2018. Defendants also filed a motion to consolidate, stay, or dismiss the </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Birch</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> action on the grounds that plaintiffs&#8217; failure to make a pre-lawsuit demand on the Board was not excused, and that the lawsuit is redundant of the </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Lipovich</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> and </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Salsberg</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> actions. The hearing on that motion is scheduled for June 2018. Defendants have not yet responded to the </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Tola</font><font style="font-family:Arial;font-size:9pt;color:#333333;">, </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Bicknese</font><font style="font-family:Arial;font-size:9pt;color:#333333;">, </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Kellogg</font><font style="font-family:Arial;font-size:9pt;color:#333333;">, or </font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">Lockwood </font><font style="font-family:Arial;font-size:9pt;color:#333333;">complaints.</font></div></div>

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