2019 Q1 Form 10-Q Financial Statement

#000005086319000013 Filed on April 26, 2019

View on sec.gov

Income Statement

Concept 2019 Q1 2018 Q1
Revenue $16.06B $16.07B
YoY Change -0.03%
Cost Of Revenue $6.972B $6.335B
YoY Change 10.06%
Gross Profit $9.089B $9.731B
YoY Change -6.6%
Gross Profit Margin 56.59% 60.57%
Selling, General & Admin $1.583B $1.900B
YoY Change -16.68%
% of Gross Profit 17.42% 19.53%
Research & Development $3.332B $3.311B
YoY Change 0.63%
% of Gross Profit 36.66% 34.03%
Depreciation & Amortization $2.229B $1.806B
YoY Change 23.42%
% of Gross Profit 24.52% 18.56%
Operating Expenses $4.915B $5.261B
YoY Change -6.58%
Operating Profit $4.174B $4.470B
YoY Change -6.62%
Interest Expense $138.0M $112.0M
YoY Change 23.21%
% of Operating Profit 3.31% 2.51%
Other Income/Expense, Net -$61.00M -$102.0M
YoY Change -40.2%
Pretax Income $4.547B $5.011B
YoY Change -9.26%
Income Tax $573.0M $557.0M
% Of Pretax Income 12.6% 11.12%
Net Earnings $3.974B $4.454B
YoY Change -10.78%
Net Earnings / Revenue 24.74% 27.72%
Basic Earnings Per Share $0.88 $0.95
Diluted Earnings Per Share $0.87 $0.93
COMMON SHARES
Basic Shares Outstanding 4.492B shares 4.674B shares
Diluted Shares Outstanding 4.564B shares 4.790B shares

Balance Sheet

Concept 2019 Q1 2018 Q1
SHORT-TERM ASSETS
Cash & Short-Term Investments $5.852B $5.574B
YoY Change 4.99%
Cash & Equivalents $3.154B $3.554B
Short-Term Investments $2.698B $2.020B
Other Short-Term Assets $2.305B $3.408B
YoY Change -32.37%
Inventory $7.765B $7.146B
Prepaid Expenses
Receivables $6.957B $4.879B
Other Receivables $0.00 $0.00
Total Short-Term Assets $29.06B $31.63B
YoY Change -8.13%
LONG-TERM ASSETS
Property, Plant & Equipment $50.04B $43.74B
YoY Change 14.42%
Goodwill $24.52B $24.35B
YoY Change 0.72%
Intangibles $11.46B $12.36B
YoY Change -7.27%
Long-Term Investments $1.569B $2.005B
YoY Change -21.75%
Other Assets $5.661B $3.614B
YoY Change 56.64%
Total Long-Term Assets $100.4B $96.97B
YoY Change 3.54%
TOTAL ASSETS
Total Short-Term Assets $29.06B $31.63B
Total Long-Term Assets $100.4B $96.97B
Total Assets $129.5B $128.6B
YoY Change 0.67%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $4.059B $4.415B
YoY Change -8.06%
Accrued Expenses $11.57B $10.56B
YoY Change 9.61%
Deferred Revenue
YoY Change
Short-Term Debt $0.00 $0.00
YoY Change
Long-Term Debt Due $2.750B $3.842B
YoY Change -28.42%
Total Short-Term Liabilities $18.91B $19.96B
YoY Change -5.26%
LONG-TERM LIABILITIES
Long-Term Debt $25.74B $24.77B
YoY Change 3.9%
Other Long-Term Liabilities $2.797B $3.082B
YoY Change -9.25%
Total Long-Term Liabilities $28.53B $27.85B
YoY Change 2.45%
TOTAL LIABILITIES
Total Short-Term Liabilities $18.91B $19.96B
Total Long-Term Liabilities $28.53B $27.85B
Total Liabilities $47.45B $47.81B
YoY Change -0.77%
SHAREHOLDERS EQUITY
Retained Earnings $49.13B $44.42B
YoY Change 10.6%
Common Stock
YoY Change
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $73.66B $70.17B
YoY Change
Total Liabilities & Shareholders Equity $129.5B $128.6B
YoY Change 0.67%

Cashflow Statement

Concept 2019 Q1 2018 Q1
OPERATING ACTIVITIES
Net Income $3.974B $4.454B
YoY Change -10.78%
Depreciation, Depletion And Amortization $2.229B $1.806B
YoY Change 23.42%
Cash From Operating Activities $4.959B $6.284B
YoY Change -21.09%
INVESTING ACTIVITIES
Capital Expenditures $3.321B $2.910B
YoY Change 14.12%
Acquisitions
YoY Change
Other Investing Activities $239.0M $440.0M
YoY Change -45.68%
Cash From Investing Activities -$2.722B -$4.791B
YoY Change -43.19%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net $2.530B $1.914B
YoY Change 32.18%
Debt Paid & Issued, Net $861.0M $327.0M
YoY Change 163.3%
Cash From Financing Activities -$2.102B -1.372B
YoY Change 53.21%
NET CHANGE
Cash From Operating Activities $4.959B 6.284B
Cash From Investing Activities -$2.722B -4.791B
Cash From Financing Activities -$2.102B -1.372B
Net Change In Cash $135.0M 121.0M
YoY Change 11.57%
FREE CASH FLOW
Cash From Operating Activities $4.959B $6.284B
Capital Expenditures $3.321B $2.910B
Free Cash Flow $1.638B $3.374B
YoY Change -51.45%

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CY2018Q1 intc Net Change In Unrealized Gain Loss Recognized In Income Statement On Fair Value Hedging Instruments And On Hedged Item In Fair Value Hedge
NetChangeInUnrealizedGainLossRecognizedInIncomeStatementOnFairValueHedgingInstrumentsAndOnHedgedItemInFairValueHedge
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CY2019Q1 us-gaap Loss Contingency Disclosures
LossContingencyDisclosures
<div style="padding-left:0px;text-indent:0px;line-height:normal;padding-top:10px;"><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman;font-size:10pt;width:100%;border-collapse:collapse;text-align:left;"><tr><td colspan="2"/></tr><tr><td style="width:13%;"/><td style="width:87%;"/></tr><tr><td style="vertical-align:bottom;border-bottom:1px solid #0071c5;background-color:#0071c5;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;"><div style="text-align:left;font-size:14pt;"><span style="font-family:Arial;font-size:14pt;background-color:#0071c5;color:#ffffff;font-style:normal;font-weight:bold;text-decoration:none;">NOTE 10 : </span></div></td><td style="vertical-align:bottom;border-bottom:1px solid #0071c5;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;"><div style="text-align:left;font-size:14pt;"><span style="font-family:Arial;font-size:14pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">CONTINGENCIES</span></div></td></tr></table></div><span style="font-family:Arial;font-size:9pt;color:#333333;font-weight:bold;"> </span><div style="line-height:120%;padding-bottom:12px;font-size:12pt;"><span style="font-family:Arial;font-size:12pt;color:#0071c5;font-style:normal;font-weight:bold;text-decoration:none;">LEGAL PROCEEDINGS</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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.</span></div><div style="line-height:120%;padding-bottom:8px;font-size:10pt;"><span style="font-family:Arial;font-size:10pt;color:#333333;font-style:normal;font-weight:bold;text-decoration:none;">European Commission Competition Matter</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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 </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>€1.1 billion</span></span><span style="font-family:Arial;font-size:9pt;color:#333333;"> (</span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>$1.4 billion</span></span><span 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.</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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.</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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’s grounds of appeal. 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. 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’s 2009 decision in light of the Court of Justice’s clarifications of the law. In November 2017, the parties filed initial “Observations” about the Court of Justice’s decision and the appeal, and were invited by the General Court to offer supplemental comments to each other’s “Observations,” 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 as to 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.</span></div><div style="line-height:120%;padding-bottom:8px;font-size:10pt;"><span style="font-family:Arial;font-size:10pt;color:#333333;font-style:normal;font-weight:bold;text-decoration:none;">McAfee, Inc. Shareholder Litigation</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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 </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>$48.00</span></span><span 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’ damages expert asserted that the value of a McAfee share for the purposes of assessing damages should be </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>$62.08</span></span><span style="font-family:Arial;font-size:9pt;color:#333333;">.</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span 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’ 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’ 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. </span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span style="font-family:Arial;font-size:9pt;color:#333333;">The parties agreed in principle to settle the case in late October 2018, and finalized the settlement agreement in March 2019. The settlement agreement calls for an aggregate payment by defendants of </span><span style="font-family:Arial;font-size:9pt;color:#333333;">$11.7 million</span><span style="font-family:Arial;font-size:9pt;color:#333333;">. Intel’s contribution to the settlement will be immaterial to its financial statements. Plaintiffs filed a motion for preliminary approval of the settlement in March 2019, which is scheduled for hearing in May 2019.</span></div><div style="line-height:120%;padding-bottom:8px;font-size:10pt;"><span style="font-family:Arial;font-size:10pt;color:#333333;font-style:normal;font-weight:bold;text-decoration:none;">Litigation Related to Security Vulnerabilities</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span style="font-family:Arial;font-size:9pt;color:#333333;">In June 2017, a Google research team notified us and other companies that it had identified security vulnerabilities (now commonly referred to as “Spectre” and “Meltdown”) 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 (“Foreshadow”) that has since been identified.</span></div><div style="line-height:120%;padding-bottom:12px;font-size:9pt;"><span style="font-family:Arial;font-size:9pt;color:#333333;">As of </span><span style="font-family:Arial;font-size:9pt;color:#333333;">April 24, 2019</span><span style="font-family:Arial;font-size:9pt;color:#333333;">, </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>48</span></span><span style="font-family:Arial;font-size:9pt;color:#333333;"> consumer class action lawsuits and </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>three</span></span><span 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, </span><span style="font-family:Arial;font-size:9pt;color:#333333;">44</span><span style="font-family:Arial;font-size:9pt;color:#333333;"> have been filed in the U.S., </span><span style="font-family:Arial;font-size:9pt;color:#333333;">two</span><span style="font-family:Arial;font-size:9pt;color:#333333;"> of which have been dismissed;</span><span style="font-family:Arial;font-size:9pt;color:#333333;"> </span><span style="font-family:Arial;font-size:9pt;color:#333333;">two</span><span style="font-family:Arial;font-size:9pt;color:#333333;"> have been filed in Canada; and </span><span style="font-family:Arial;font-size:9pt;color:#333333;">two</span><span style="font-family:Arial;font-size:9pt;color:#333333;"> have been filed in Israel. </span><span style="font-family:Arial;font-size:9pt;color:#333333;">In April 2018, the U.S. Judicial Panel on Multidistrict Litigation ordered the U.S. consumer class action lawsuits consolidated for pretrial proceedings in the U.S. 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 was held in February 2019. In the case pending in the Superior Court of Justice of Ontario, an initial status conference has not yet been scheduled. In the case pending in the Superior Court of Justice of Quebec, the court entered an order in October 2018, staying that case for one year. In Israel, both consumer class action lawsuits were filed in the District Court of Haifa. The District Court denied the parties' joint request for a stay in the first case. Intel filed a motion to stay the second case, and a hearing on that motion has been scheduled for July 2019. 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 U.S. District Court for the Northern District of California. Defendants filed a motion to dismiss those actions in August 2018, which the court granted in March 2019. The court's order granted plaintiffs leave to amend their complaint, but in April 2019 plaintiffs notified the court that they would not re-plead or appeal. Defendants subsequently filed a motion for entry of final judgment, which is set for hearing in May 2019. 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.</span></div><span style="font-family:Arial;font-size:9pt;color:#333333;">In addition to these lawsuits, Intel stockholders have filed </span><span style="font-family:Arial;font-size:9pt;color:#333333;"><span>seven</span></span><span 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. </span>The complaints seek to recover damages from the defendants on behalf of Intel. Three of the derivative actions were filed in the U.S. District Court for the Northern District of California and were consolidated, and the other four were filed in the Superior Court of the State of California in San Mateo County and were 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 dismissed. The federal court ordered the case dismissed without prejudice in January 2019. 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 stipulated that plaintiffs must file any amended complaint by February 2019, which the court subsequently extended to the end of April 2019.

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