2018 Q3 Form 10-Q Financial Statement

#000005086318000029 Filed on October 26, 2018

View on sec.gov

Income Statement

Concept 2018 Q3 2017 Q3
Revenue $19.16B $14.76B
YoY Change 29.8% 9.09%
Cost Of Revenue $6.803B $6.085B
YoY Change 11.8% 9.44%
Gross Profit $12.36B $10.06B
YoY Change 22.81% 26.23%
Gross Profit Margin 64.5% 68.17%
Selling, General & Admin $1.605B $1.661B
YoY Change -3.37% -17.24%
% of Gross Profit 12.99% 16.5%
Research & Development $3.428B $3.209B
YoY Change 6.82% 2.03%
% of Gross Profit 27.73% 31.89%
Depreciation & Amortization $2.274B $1.988B
YoY Change 14.39% 3.7%
% of Gross Profit 18.4% 19.75%
Operating Expenses $5.011B $4.923B
YoY Change 1.79% -26.03%
Operating Profit $7.349B $5.141B
YoY Change 42.95% 290.06%
Interest Expense $109.0M $191.0M
YoY Change -42.93% 2.14%
% of Operating Profit 1.48% 3.72%
Other Income/Expense, Net -$132.0M -$57.00M
YoY Change 131.58% -54.76%
Pretax Income $7.142B $5.930B
YoY Change 20.44% 255.09%
Income Tax $744.0M $1.414B
% Of Pretax Income 10.42% 23.84%
Net Earnings $6.398B $4.516B
YoY Change 41.67% 239.55%
Net Earnings / Revenue 33.39% 30.59%
Basic Earnings Per Share $1.40 $0.96
Diluted Earnings Per Share $1.38 $0.94
COMMON SHARES
Basic Shares Outstanding 4.574B shares 4.688B shares
Diluted Shares Outstanding 4.648B shares 4.821B shares

Balance Sheet

Concept 2018 Q3 2017 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $6.048B $10.52B
YoY Change -42.51% 28.52%
Cash & Equivalents $3.407B $9.075B
Short-Term Investments $2.641B $1.446B
Other Short-Term Assets $3.546B $2.767B
YoY Change 28.15% -15.46%
Inventory $7.401B $6.929B
Prepaid Expenses
Receivables $5.457B $5.954B
Other Receivables $0.00 $0.00
Total Short-Term Assets $29.59B $33.15B
YoY Change -10.75% 6.3%
LONG-TERM ASSETS
Property, Plant & Equipment $47.07B $39.47B
YoY Change 19.25% 16.77%
Goodwill $24.51B $24.39B
YoY Change 0.48% 43.53%
Intangibles $12.01B $13.06B
YoY Change -8.05% 20.67%
Long-Term Investments $1.634B $1.406B
YoY Change 16.22% -17.29%
Other Assets $3.955B $7.112B
YoY Change -44.39% -11.82%
Total Long-Term Assets $98.65B $93.93B
YoY Change 5.02% 19.44%
TOTAL ASSETS
Total Short-Term Assets $29.59B $33.15B
Total Long-Term Assets $98.65B $93.93B
Total Assets $128.2B $127.1B
YoY Change 0.91% 15.71%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.593B $3.554B
YoY Change 1.1% 3.92%
Accrued Expenses $11.60B $8.813B
YoY Change 31.61% 16.28%
Deferred Revenue $0.00
YoY Change
Short-Term Debt $0.00 $4.142B
YoY Change -100.0% 185.85%
Long-Term Debt Due $3.051B $4.129B
YoY Change -26.11% 32.72%
Total Short-Term Liabilities $19.57B $20.69B
YoY Change -5.39% 10.57%
LONG-TERM LIABILITIES
Long-Term Debt $24.82B $27.50B
YoY Change -9.73% 14.32%
Other Long-Term Liabilities $3.263B $4.152B
YoY Change -21.41% 18.06%
Total Long-Term Liabilities $28.09B $31.65B
YoY Change -11.26% 14.8%
TOTAL LIABILITIES
Total Short-Term Liabilities $19.57B $20.69B
Total Long-Term Liabilities $28.09B $31.65B
Total Liabilities $47.66B $52.34B
YoY Change -8.94% 13.09%
SHAREHOLDERS EQUITY
Retained Earnings $47.09B $42.78B
YoY Change 10.09% 15.21%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $71.48B $70.94B
YoY Change
Total Liabilities & Shareholders Equity $128.2B $127.1B
YoY Change 0.91% 15.71%

Cashflow Statement

Concept 2018 Q3 2017 Q3
OPERATING ACTIVITIES
Net Income $6.398B $4.516B
YoY Change 41.67% 239.55%
Depreciation, Depletion And Amortization $2.274B $1.988B
YoY Change 14.39% 3.7%
Cash From Operating Activities $8.835B $4.707B
YoY Change 87.7% 22.42%
INVESTING ACTIVITIES
Capital Expenditures -$3.851B -$2.663B
YoY Change 44.61% 16.49%
Acquisitions
YoY Change
Other Investing Activities $416.0M $1.225B
YoY Change -66.04% -165.02%
Cash From Investing Activities -$3.435B -$1.438B
YoY Change 138.87% -65.52%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -4.607B 3.484B
YoY Change -232.23% 203.22%
NET CHANGE
Cash From Operating Activities 8.835B 4.707B
Cash From Investing Activities -3.435B -1.438B
Cash From Financing Activities -4.607B 3.484B
Net Change In Cash 793.0M 6.753B
YoY Change -88.26% 719.54%
FREE CASH FLOW
Cash From Operating Activities $8.835B $4.707B
Capital Expenditures -$3.851B -$2.663B
Free Cash Flow $12.69B $7.370B
YoY Change 72.13% 20.21%

Facts In Submission

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us-gaap Earnings Per Share Basic
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us-gaap Equity Securities Fv Ni Gain Loss
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us-gaap Equity Securities Fv Ni Realized Gain Loss
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us-gaap Equity Securities Fv Ni Unrealized Gain Loss
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393000000 USD
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us-gaap Gross Profit
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328000000 USD
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5930000000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
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us-gaap Income Loss From Equity Method Investments
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2328000000 USD
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171000000 USD
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430000000 USD
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0 USD
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us-gaap Incremental Common Shares Attributable To Conversion Of Debt Securities
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us-gaap Incremental Common Shares Attributable To Conversion Of Debt Securities
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us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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52000000 shares
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us-gaap Marketable Securities Gain Loss Excluding Other Than Temporary Impairments
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us-gaap Other Comprehensive Income Loss Available For Sale Securities Adjustment Net Of Tax
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us-gaap Payments Related To Tax Withholding For Share Based Compensation
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us-gaap Payments To Acquire Trading Securities Heldforinvestment
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us-gaap Payments To Acquire Trading Securities Heldforinvestment
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CY2018Q3 us-gaap Preferred Stock Value
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us-gaap Proceeds From Sale And Maturity Of Other Investments
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us-gaap Proceeds From Sale And Maturity Of Trading Securities Heldforinvestment
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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;font-size:14pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">NOTE 16: 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;font-size:12pt;color:#003c71;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. Responses to other questions posed by the General Court were filed in May and June 2018. We are now awaiting notice whether the General Court will hold a management conference before it conducts oral argument, at some future date. 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;</font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">In re High Tech Employee Antitrust Litigation</font><font style="font-family:Arial;font-size:9pt;color:#333333;">&#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;</font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">In re Intel Corporation Shareholder Derivative Litigation</font><font style="font-family:Arial;font-size:9pt;color:#333333;">. 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 was withdrawn in September 2018, and the case is over.</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;</font><font style="font-family:Arial;font-size:9pt;color:#333333;font-style:italic;">In re High Tech Employee Antitrust Litigation</font><font style="font-family:Arial;font-size:9pt;color:#333333;">&#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 without prejudice.</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. At a June 2018 case management conference following remand, the Superior Court set an October hearing date for any additional summary judgment motions that may be filed, and set trial to begin in December 2018. In July 2018, plaintiffs filed a motion for leave to amend the complaint which the court denied in September 2018. Also in July 2018, McAfee and Intel filed a motion for summary judgment on the aiding and abetting claims asserted against them; in October 2018, the court granted the motion as to McAfee and denied the motion as to Intel. Because the resolution of pretrial motions may materially impact the scope and nature of the proceeding, and because of uncertainties regarding the disposition of theories that may be asserted at trial 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, as well as another variant of these vulnerabilities (&#8220;Foreshadow&#8221;) that has since been identified.</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 </font><font style="font-family:Arial;font-size:9pt;color:#333333;">October&#160;24, 2018</font><font style="font-family:Arial;font-size:9pt;color:#333333;">, </font><font style="font-family:Arial;font-size:9pt;color:#333333;">47</font><font style="font-family:Arial;font-size:9pt;color:#333333;"> consumer 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 consumer 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 consumer class action lawsuits, </font><font style="font-family:Arial;font-size:9pt;color:#333333;">43</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;">two</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. consumer class action lawsuits consolidated for pretrial proceedings in the United States District Court for the District of Oregon. Intel filed a motion to dismiss that consolidated action in October 2018, and a hearing on that motion has been scheduled for February 2019. There has been no activity in the case pending in the Superior Court of Justice of Ontario, and in October 2018 the Superior Court of Justice of Quebec entered an order staying the case pending in that court for one year. In Israel, both consumer class action lawsuits were filed in the District Court of Haifa. The Supreme Court of Israel stayed the first case pending disposition of an appeal by one of Intel&#8217;s co-defendants of an order by the District Court of Haifa. Intel filed a motion to stay the second case, which is scheduled for hearing in November 2018. In the securities class action litigation, the lead securities class action plaintiffs, who purport to represent classes of acquirers of Intel stock between October 27, 2017 and January 9, 2018, generally allege that Intel and certain officers violated securities laws by making statements about Intel's products that were revealed to be false or misleading by the disclosure of the security vulnerabilities. The securities class actions have been consolidated and are pending in the United States District Court for the Northern District of California. Defendants moved to dismiss those actions on various grounds, and a hearing on that motion has been scheduled for November 2018. 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 since January 2018 against certain current and former members of our Board of Directors and certain current and former officers, 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. Three of the derivative actions were filed in the United States District Court for the Northern District of California and have been consolidated, and the other four were filed in the Superior Court of the State of California in San Mateo County and have been consolidated. In August 2018, the federal court granted defendants' motion to dismiss the consolidated complaint on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the Board. The federal court granted plaintiffs leave to amend their complaint, but in September 2018, plaintiffs instead requested that the action be voluntarily dismissed. Defendants and plaintiffs disagree whether the dismissal should be with or without prejudice, and are awaiting the court&#8217;s decision on that issue. In August 2018, the California Superior Court granted defendants' motion to dismiss the consolidated complaint in the action on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the Board. The state court granted plaintiffs leave to amend their complaint, and the parties have stipulated that plaintiffs must file any amended complaint by February 2019. The state court plaintiffs have also moved to intervene in the federal action to argue against the dismissal of the federal case with prejudice; defendants are opposing that motion.</font></div></div>
us-gaap Revenue Recognition Accounting Policy Gross And Net Revenue Disclosure
RevenueRecognitionAccountingPolicyGrossAndNetRevenueDisclosure
<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#0071c5;">Accounting Policy Updates: </font><font style="font-family:Arial;font-size:9pt;color:#333333;">We recognize net product revenue when we satisfy performance obligations as evidenced by the transfer of control of our products or services to customers. Substantially all of our revenue is derived from product sales. In accordance with contract terms, revenue for product sales is recognized at the time of product shipment from our facilities or delivery to the customer location, as determined by the agreed upon shipping terms. We include shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.</font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">We measure revenue based on the amount of consideration we expect to be entitled to in exchange for products or services. Any variable consideration is recognized as a reduction of net revenue at the time of revenue recognition. We determine variable consideration, which consists primarily of sales price concessions, by estimating the most likely amount of consideration we expect to receive from the customer based on historical analysis of customer purchase volumes. The impacts of distributor sales price reductions resulting from price protection agreements are also estimated based on historical analysis of such activity and are reflected as a reduction in net revenue. </font></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><font style="font-family:Arial;font-size:9pt;color:#333333;">We make payments to our customers through cooperative advertising programs, such as our Intel Inside</font><font style="font-family:Arial;font-size:9pt;color:#333333;"><sup style="vertical-align:top;line-height:120%;font-size:6pt">&#174;</sup></font><font style="font-family:Arial;font-size:9pt;color:#333333;"> program, for marketing activities for certain of our products. We generally record the payment as a reduction in revenue in the period that the revenue is earned, unless the payment is for a distinct service, which we record as expense when the marketing activities occur. </font></div></div>

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