UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended July 1, 2000
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the transition period from to
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Commission file number 0-6217
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INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1672743
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Mission College Boulevard, Santa Clara, California 95052-8119
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 765-8080
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(Registrant's telephone number, including area code)
N/A
------------------------
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Shares outstanding of the Registrant's common stock:
Class Outstanding at July 1, 2000
Common stock, $0.001 par value 6,714 million
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(in millions, except per share amounts)
Three Months Ended Six Months Ended
------------------- -------------------
July 1, June 26, July 1, June 26,
2000 1999 2000 1999
------- ------- ------- -------
Net revenues $ 8,300 $ 6,746 $16,293 $13,849
Costs and expenses: ------- ------- ------- -------
Cost of sales 3,283 2,740 6,272 5,634
Research and development 971 731 1,922 1,394
Marketing, general and administrative 1,223 924 2,347 1,815
Amortization of goodwill and other acquisition-
related intangibles 394 31 707 49
Purchased in-process research and development 21 - 83 -
------- ------- ------- -------
Operating costs and expenses 5,892 4,426 11,331 8,892
------- ------- ------- -------
Operating income 2,408 2,320 4,962 4,957
Interest expense (9) (11) (21) (20)
Interest income and other, net 2,350 301 3,002 657
------- ------- ------- -------
Income before taxes 4,749 2,610 7,943 5,594
Provision for taxes 1,612 861 2,110 1,846
------- ------- ------- -------
Net income $3,137 $ 1,749 $5,833 $ 3,748
======= ======= ======= =======
Basic earnings per common share $ 0.47 $ 0.26 $ 0.87 $ 0.56
======= ======= ======= =======
Diluted earnings per common share $ 0.45 $ 0.25 $ 0.83 $ 0.54
======= ======= ======= =======
Cash dividends declared per
common share $0.020 $ - $0.050 $0.025
======= ======= ======= =======
Weighted average common shares outstanding 6,710 6,620 6,697 6,634
Weighted average common shares outstanding, ======= ======= ======= =======
assuming dilution 7,005 6,892 7,000 6,924
======= ======= ======= =======
See Notes to Consolidated Condensed Financial Statements.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions)
July 1, Dec. 25,
2000 1999
---- ----
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 7,308 $ 3,695
Short-term investments 5,902 7,705
Trading assets 434 388
Accounts receivable, net 4,333 3,700
Inventories:
Raw materials 232 183
Work in process 863 755
Finished goods 512 540
-------- --------
1,607 1,478
Deferred tax assets 721 673
Other current assets 245 180
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Total current assets 20,550 17,819
-------- --------
Property, plant and equipment 24,902 23,557
Less accumulated depreciation 12,578 11,842
-------- --------
Property, plant and equipment, net 12,324 11,715
Marketable strategic equity securities 6,201 7,121
Other long-term investments 1,574 790
Goodwill and other acquisition-related intangibles 6,240 4,934
Other assets 1,631 1,470
-------- --------
TOTAL ASSETS $ 48,520 $ 43,849
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 385 $ 230
Accounts payable 1,968 1,370
Accrued compensation and benefits 1,197 1,454
Deferred income on shipments to distributors 726 609
Accrued advertising 658 582
Other accrued liabilities 1,779 1,159
Income taxes payable 1,623 1,695
-------- --------
Total current liabilities 8,336 7,099
-------- --------
Long-term debt 870 955
Deferred tax liabilities 2,694 3,130
Put warrants - 130
Stockholders' equity:
Preferred stock - -
Common stock and capital in excess
of par value 7,941 7,316
Retained earnings 25,703 21,428
Accumulated other comprehensive income 2,976 3,791
-------- --------
Total stockholders' equity 36,620 32,535
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 48,520 $ 43,849
======== ========
See Notes to Consolidated Condensed Financial Statements.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Six Months Ended
----------------
July 1, June 26,
2000 1999
---- ----
Cash flows provided by (used for) operating activities:
Net income $ 5,833 $ 3,748
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,661 1,534
Amortization of goodwill and other acquisition-related intangibles 707 49
Purchased in-process research and development 83 -
Gains on investments (2,593) (360)
Net loss on retirements of property, plant and equipment 63 87
Deferred taxes (88) (139)
Changes in assets and liabilities:
Accounts receivable (607) 343
Inventories (109) (170)
Accounts payable 572 107
Accrued compensation and benefits (260) (333)
Income taxes payable (73) (316)
Tax benefit from employee stock plans 645 279
Other assets and liabilities 603 (319)
-------- --------
Total adjustments 604 762
-------- --------
Net cash provided by operating activities 6,437 4,510
-------- --------
Cash flows provided by (used for) investing activities:
Additions to property, plant and equipment (2,326) (1,441)
Acquisitions, net of cash acquired (1,923) (132)
Purchases of available-for-sale investments (5,808) (3,305)
Sales of available-for-sale investments 2,768 386
Maturities of available-for-sale investments 6,387 4,554
Other investing activities (333) (335)
-------- --------
Net cash used for investing activities (1,235) (273)
-------- --------
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term debt, net 155 (24)
Additions to long-term debt 11 27
Retirements of long-term debt (46) -
Proceeds from sales of shares through employee stock plans and other 492 286
Repurchase and retirement of common stock (2,001) (2,798)
Payment of dividends to stockholders (200) (167)
-------- --------
Net cash used for financing activities (1,589) (2,676)
-------- --------
Net increase in cash and cash equivalents $ 3,613 $ 1,561
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 24 $ 20
Income taxes $ 1,627 $ 2,009
See Notes to Consolidated Condensed Financial Statements.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED
BASIS OF PRESENTATION
The accompanying interim consolidated condensed financial statements of Intel
Corporation have been prepared in conformity with generally accepted
accounting principles, consistent in all material respects with those applied
in the company's Annual Report on Form 10-K for the year ended December 25,
1999. The interim financial information is unaudited, but reflects all normal
adjustments which are, in the opinion of management, necessary to provide a
fair statement of results for the interim periods presented. The interim
financial statements should be read in connection with the financial
statements in the company's Annual Report on Form 10-K for the year ended
December 25, 1999. Certain amounts for prior periods have been reclassified
to conform to the current presentation. All share, per share and warrant
amounts have been restated to reflect the two-for-one stock split, effected as
a special stock distribution on July 30, 2000.
DIVIDEND POLICY
The company's dividend policy generally results in the Board of Directors
considering two dividend declarations in each of the first and third quarters
of the year, with dividend payments made quarterly. However, in conjunction
with the stock split announcement in the second quarter of 2000, the Board of
Directors declared a quarterly dividend payable on September 1, 2000. The
Board of Directors also approved an increase in the dividend from $0.015 to
$0.02 per share, beginning with the dividend payable on September 1, 2000.
RECENT ACCOUNTING GUIDANCE
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101), providing the staff's views in applying generally accepted accounting
principles to selected revenue recognition issues. For companies such as
Intel with fiscal years that begin between December 16, 1999 and March 15,
2000, portions of SAB 101 become effective for the fourth quarter of 2000.
The company believes that adopting these portions of SAB 101 will not have a
material effect on the company's financial position or overall trends in
results of operations.
EARNINGS PER SHARE
A reconciliation of the shares used in the computation of the company's basic
and diluted earnings per common share is as follows (in millions):
Three Months Ended Six Months Ended
------------------ ----------------
July 1, June 26, July 1, June 26,
2000 1999 2000 1999
---- ---- ---- ----
Weighted average common shares
outstanding 6,710 6,620 6,697 6,634
Dilutive effect of:
Employee stock options 288 272 296 290
Convertible notes 7 - 7 -
------ ------ ------ ------
Weighted average common shares
outstanding, assuming dilution 7,005 6,892 7,000 6,924
====== ====== ====== ======
Weighted average common shares outstanding, assuming dilution, includes the
incremental shares that would be issued upon the assumed exercise of stock
options and the assumed conversion of the convertible notes. Certain of the
company's stock options were excluded from the calculation of diluted earnings
per share because they were antidilutive, but these options could be dilutive
in the future. Net income for the purpose of computing diluted earnings per
common share is not materially affected by the assumed conversion of the
convertible notes.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
STOCK REPURCHASE PROGRAM
During the first half of 2000, the company repurchased 36.4 million shares of
common stock under the company's authorized repurchase program at a cost of
$2.0 billion. As of July 1, 2000, approximately 163.8 million shares remained
available for repurchase under the program.
PUT WARRANTS
In a series of private placements during the 1991-1999 period, the company
sold put warrants that entitled the holder of each warrant to sell to the
company, by physical delivery, one share of common stock at a specified price.
The four million put warrants that were outstanding at December 25, 1999
expired unexercised in the first quarter of 2000.
INTEREST INCOME AND OTHER
Interest income and other, net included (in millions):
Three Months Ended Six Months Ended
------------------- -----------------
July 1, June 26, July 1, June 26,
2000 1999 2000 1999
---- ---- ---- ----
Interest income $ 198 $ 148 $ 404 $ 304
Gains on investments 2,144 158 2,593 360
Foreign currency gains 5 1 5 3
Other, net 3 (6) - (10)
------- ------- ------- -------
Total $ 2,350 $ 301 $ 3,002 $ 657
======= ======= ======= =======
ACQUISITIONS
During the first half of 2000, the company completed several acquisitions, all
of which have been accounted for using the purchase method of accounting.
In March 2000, the company acquired Ambient Technologies, Inc. in a cash
transaction. Ambient develops integrated digital subscriber line silicon
solutions and analog modems designed to bring high-speed Internet access to
home users and small businesses.
Also in March 2000, the company acquired GIGA A/S in a cash transaction. GIGA
specializes in the design of advanced high-speed communications chips used in
optical networking and communications products that direct traffic across the
Internet and corporate networks.
In April 2000, the company acquired Picazo Communications, Inc. in a cash
transaction. Picazo specializes in CT Media-TM- server software which allows
third-party vendors to develop innovative new applications for
telecommunications.
In May 2000, the company acquired Basis Communications Corporation for cash
and options assumed. Basis designs and markets advanced semiconductors and
other products used in equipment that directs traffic across the Internet and
corporate networks.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
ACQUISITIONS (CONTINUED)
These purchase transactions are further described below (in millions):
Purchased Goodwill
Entity In-Process Research and Identified
Name Consideration and Development Intangibles Form of Consideration
- ------ ------------- ------------------- -------------- ---------------------
Ambient $ 148 $ 10 $ 135 Cash and options assumed
GIGA $ 1,247 $ 52 $ 1,184 Cash
Picazo $ 120 $ - $ 120 Cash and options assumed
Basis $ 453 $ 21 $ 472 Cash and options assumed
Consideration includes the cash paid, less any cash acquired, together with
the value of any stock issued and options assumed, but excludes any debt
assumed.
For the first half of 2000, $83 million was allocated to purchased in-process
research and development (IPR&D) and expensed upon acquisition of the above
companies. The fair value of the IPR&D was determined using the income
approach, which discounts expected future cash flows from projects under
development to their net present value. Each project was analyzed to
determine the technological innovations included; the utilization of core
technology; the complexity, cost and time to complete development; any
alternative future use or current technological feasibility; and the stage of
completion. Future cash flows were estimated, taking into account the
expected life cycles of the products and the underlying technology, relevant
market sizes and industry trends. Discount rates were derived from weighted
average cost of capital analysis, adjusted to reflect the relative risks
inherent in each entity's development process. The IPR&D charge includes the
fair value of IPR&D completed. The fair value assigned to developed
technology is included in identified intangible assets, and no value is
assigned to IPR&D to be completed or to future development. Intel believes
the amounts determined for IPR&D, as well as developed technology, are
representative of fair value and do not exceed the amounts an independent
party would pay for these projects.
In addition to the transactions described above, Intel also purchased other
businesses in smaller transactions. The charge for IPR&D related to the other
acquisitions was not significant. The total amount allocated to goodwill and
identified intangibles for these transactions was $102 million, which
represents a substantial majority of the consideration for these transactions.
The consolidated condensed financial statements include the operating results
of acquired businesses from the dates of acquisition. The operating results
of Ambient and GIGA since their acquisition have been included in the
operating results of the Network Communications Group operating segment. The
operating results of Picazo and Basis since their acquisition have been
included in the operating results of the Communications Product Group
operating segment. These groups have been included in the "all other"
category for segment reporting purposes.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
ACQUISITIONS (CONTINUED)
The pro forma information below assumes that companies acquired in 2000 and
1999 had been acquired at the beginning of 1999 and includes the effect of
amortization of goodwill and other identified intangibles from that date. The
impact of charges for IPR&D has been excluded. This is presented for
informational purposes only and is not necessarily indicative of the results
of future operations or results that would have been achieved had the
acquisitions taken place at the beginning of 1999.
Three Months Ended Six Months Ended
-------------------- ------------------
July 1, June 26, July 1, June 26,
(in millions, except per share amounts) 2000 1999 2000 1999
---- ---- ---- ----
Net revenues $ 8,312 $ 6,989 $16,337 $14,322
Net income $ 3,148 $ 1,438 $ 5,820 $ 3,110
Basic earnings per common share $ 0.47 $ 0.22 $ 0.87 $ 0.47
Diluted earnings per common share $ 0.45 $ 0.21 $ 0.83 $ 0.45
GOODWILL AND OTHER ACQUISITION-RELATED INTANGIBLES
Net goodwill and other acquisition-related intangibles at the end of each
period consisted of the following (in millions):
July 1, Dec. 25,
Life in Years 2000 1999
------------- ---- ----
Goodwill 2-6 $ 5,283 $ 4,124
Developed technology 3-6 757 612
Other intangibles 2-6 200 198
------- -------
Total $ 6,240 $ 4,934
======= =======
Other intangibles include items such as trademarks, workforce-in-place and
customer lists. The total balances presented above are net of total
accumulated amortization of $1,160 million and $471 million at July 1, 2000
and December 25, 1999, respectively.
Amortization of goodwill and other acquisition-related intangibles of $707
million for the first half of 2000 consisted of $594 million of amortization
of goodwill and $113 million of amortization of other acquisition-related
intangibles, a majority of which was related to developed technology.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
MTH RESERVE
In May 2000, the company announced that it would replace motherboards that
have a defective memory translator hub (MTH) component that enables SDRAM
memory to work with the Intel-R- 820 Chipset. The MTH component began
shipping in November 1999, with a substantial majority of Intel's shipments
occurring in the first quarter of 2000. The company estimates that fewer than
one million boards or systems with the MTH component were shipped to end
users. In the first quarter of 2000, the company recorded a revenue reserve
for chipsets and motherboards with the MTH component that remained in raw
materials inventories at Intel's customers and which could be returned to
Intel for credit. The company also recorded additional inventory reserves
related to these products. In the second quarter of 2000, the company was
able to estimate the cost of the motherboard replacement program and recorded
a $200 million reserve. For the six months ended July 1, 2000, the total
impact on gross margin of the revenue and inventory reserves and the estimated
cost of the motherboard replacement program was approximately $253 million.
As of July 1, 2000, the balance in the reserve was approximately $180 million.
INCOME TAX BENEFIT
In March of 2000, the Internal Revenue Service closed its examination of the
company's tax returns for years up to and including 1998. Resolution was
reached on a number of issues including adjustments related to the
intercompany allocation of profits. As part of this closure, the company
reversed previously accrued taxes, reducing the tax provision for the first
quarter of 2000 by $600 million, or approximately $0.09 per share.
COMPREHENSIVE INCOME
The components of comprehensive income, net of tax, were as follows (in
millions):
Three Months Ended Six Months Ended
------------------ ----------------
July 1, June 26, July 1, June 26,
2000 1999 2000 1999
---- ---- ---- ----
Net income $ 3,137 $ 1,749 $ 5,833 $ 3,748
Change in net unrealized gain on
available-for-sale investments (2,108) 260 (815) 527
------- ------- ------- -------
Total $ 1,029 $ 2,009 $ 5,018 $ 4,275
======= ======= ======= =======
Accumulated other comprehensive income presented in the accompanying
consolidated condensed balance sheets consists of the accumulated net
unrealized gain on available-for-sale investments.
COMMITMENTS
During May 2000, the company announced that it had entered into an agreement
to form a new company with Excalibur Technologies Corporation. Intel expects
to contribute its Interactive Media Services division to the new company and
invest approximately $155 million in cash. The new company is intended to
enable owners of branded content, such as sports and entertainment, to
produce and securely sell their audio and video content over the Internet.
The completion of this transaction is subject to regulatory review,
Excalibur stockholder approval and other normal closing conditions.
During August 2000, the company announced that it had entered into a
definitive agreement to acquire privately held Trillium Digital Systems, Inc.
for a total of approximately $300 million in cash and unregistered Intel
common stock. Trillium is a provider of communications software solutions
which are used by suppliers of wireless, Internet, broadband and telephony
products. The completion of this acquisition is subject to regulatory review
and normal closing conditions. This acquisition is expected to be accounted
for using the purchase method of accounting.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
CONTINGENCIES
In November 1997, Intergraph Corporation filed suit in Federal District Court
in Alabama for patent infringement and generally alleging that Intel attempted
to coerce Intergraph into relinquishing certain patent rights. The suit
alleges that Intel infringes five Intergraph microprocessor-related patents,
and includes alleged violations of antitrust laws and various state law
claims. The suit seeks injunctive relief, damages and prejudgment interest,
and further alleges that Intel's infringement is willful and that any damages
awarded should be trebled. Intergraph's expert witness has claimed that
Intergraph is entitled to damages of approximately $2.2 billion for Intel's
alleged patent infringement, $500 million for the alleged antitrust violations
and an undetermined amount for alleged state law violations. Intel has
counterclaimed that the Intergraph patents are invalid and further alleges
infringement of seven Intel patents, breach of contract and misappropriation
of trade secrets. In October 1999, the court reconsidered an earlier adverse
ruling and granted Intel's motion for summary judgment that the Intergraph
patents are licensed to Intel, and dismissed all of Intergraph's patent
infringement claims with prejudice. Intergraph has appealed this ruling. In
November 1999, the Court of Appeals for the Federal Circuit reversed the
District Court's April 1998 order requiring Intel to continue to deal with
Intergraph on the same terms as it treats allegedly similarly situated
customers with respect to confidential information and products supply. In
March 2000, the District Court issued an order granting Intel summary judgment
on Intergraph's antitrust claims. Intergraph has appealed this ruling. The
company disputes Intergraph's remaining state law claims, and intends to
defend the lawsuit vigorously.
The company is currently party to various legal proceedings, including that
noted above. While management, including internal counsel, currently believes
that the ultimate outcome of these proceedings, individually and in the
aggregate, will not have a material adverse effect on the company's financial
position or overall trends in results of operations, litigation is subject to
inherent uncertainties. Were an unfavorable ruling to occur, there exists the
possibility of a material adverse impact on the net income of the period in
which the ruling occurs.
OPERATING SEGMENT INFORMATION
Intel is organized into five product-line operating segments, the Intel
Architecture Group, the Wireless Communications and Computing Group, the
Network Communications Group, the Communications Products Group, and the New
Business Group.
Although the company has five operating segments, only the Intel Architecture
Group is a reportable segment. The Intel Architecture Group's products
include microprocessors, motherboards and other related board-level products,
including chipsets.
The "all other" category includes revenues and earnings or losses for all
operating segments other than the Intel Architecture Group. In addition, "all
other" includes certain corporate-level operating expenses (primarily the
amount by which total profit-dependent bonus expenses differ from a targeted
level allocated to all of the operating segments) and the impact of reserves
for deferred income on shipments to distributors not allocated to operating
segments. The income recognized by the divisions on shipments to distributors
is deferred and reserved at the corporate level until the products are sold by
the distributors.
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
INTEL CORPORATION, NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -
UNAUDITED (CONTINUED)
OPERATING SEGMENT INFORMATION (CONTINUED)
Segment information is summarized as follows (in millions):
Three Months Ended Six Months Ended
------------------ ----------------
July 1, June 26, July 1, June 26,
2000 1999 2000 1999
---- ---- ---- ----
Intel Architecture Group:
- -------------------------
Revenues $ 6,952 $ 5,559 $13,533 $11,988
Operating profit $ 3,257 $ 2,305 $ 6,267 $ 5,249
All other:
- ----------
Revenues $ 1,348 $ 1,187 $ 2,760 $ 1,861
Operating (loss) profit $ (849) $ 15 $(1,305) $ (292)
Total:
- ------
Revenues $ 8,300 $ 6,746 $16,293 $13,849
Operating profit $ 2,408 $ 2,320 $ 4,962 $ 4,957
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER OF 2000 COMPARED TO SECOND QUARTER OF
1999
Intel's net revenues in Q2 2000 increased by 23% compared to Q2 1999. The
increase in net revenues was primarily due to higher unit sales volume of
microprocessors within the Intel Architecture Group operating segment,
partially offset by lower prices. Net revenues for the Intel Architecture
Group increased 25% in Q2 2000 compared to Q2 1999. However, if the change in
the reserve for deferred income on shipments to distributors had been
allocated to the operating segments, net revenues for the Intel Architecture
Group would have increased approximately 16% in Q2 2000 compared to Q2 1999.
The impact of this reserve is not allocated to the operating segments and is
reflected in the "all other" category for segment reporting purposes.
Additionally within the "all other" category, revenues from sales of flash
memory grew significantly between these periods. Revenues from networking and
communications products also grew significantly, primarily due to the impact
of acquisitions made during the second half of 1999.
For Q2 2000, sales of microprocessors and related board-level products based
on the P6 microarchitecture, which are included in the Intel Architecture
Group's operations, comprised a substantial majority of Intel's consolidated
net revenues and gross margin. For Q2 1999, these products represented a
majority of the company's consolidated net revenues and a substantial majority
of gross margin.
Cost of sales increased 20% in Q2 2000 compared to Q2 1999. Within the Intel
Architecture Group operating segment, increased costs due to higher unit sales
volume of microprocessors were largely offset by lower unit costs in Q2 2000.
The lower unit costs in Q2 2000 were achieved primarily through redesigned
microprocessor products with lower-cost packaging, including packaging using
fewer purchased components, as well as factory efficiencies and lower purchase
prices on purchased components. In addition, the cost of sales recorded in Q2
2000 includes a $200 million charge for the estimated costs associated with
the memory translator hub (MTH) motherboard replacement program. The
company's gross margin percentage increased to 60% in Q2 2000 from 59% in Q2
1999. The improvement in gross margin was primarily a result of lower unit
costs of microprocessors in the Intel Architecture Group operating segment
partially offset by the impact of lower prices for microprocessors and the MTH
charge. In addition, improved demand and higher prices for flash memory in Q2
2000 also contributed to the improvement in gross margin. See "Outlook" for a
discussion of gross margin expectations.
Excluding charges of $21 million for purchased in-process research and
development (IPR&D) related to the acquisitions completed in Q2 2000, research
and development spending increased $240 million, or 33%, in Q2 2000 compared
to Q2 1999. This increase was primarily due to increased spending on product
development programs including product development of companies acquired in
the second half of 1999. Marketing, general and administrative expenses
increased $299 million, or 32%, in Q2 2000 compared to Q2 1999, primarily due
to increases for the Intel Inside-R- cooperative advertising program, profit-
dependent bonus expenses, and marketing, general and administrative expenses
from companies acquired in the second half of 1999. Excluding the charges for
IPR&D and the amortization of goodwill and other acquisition-related
intangibles, operating expenses were 26% of net revenues in Q2 2000 and 25% of
net revenues in Q2 1999.
In Q2 2000 the company recorded a charge of $21 million for IPR&D related to
the acquisition of Basis Communications Corporation. There was no charge for
IPR&D in Q2 1999. Amortization of goodwill and other acquisition-related
intangibles increased to $394 million in Q2 2000 compared to $31 million in Q2
1999, primarily due to the impact of the acquisitions made in the second half
of 1999.
Interest and other income increased to $2.4 billion in Q2 2000 compared to
$301 million in Q2 1999 primarily due to a realized gain on the sale of a
substantial majority of the company's holdings of Micron Technology, Inc.
shares. Gains on investments in Q2 2000 were $2.1 billion compared to $158
million in Q2 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - SECOND QUARTER OF 2000 COMPARED TO SECOND QUARTER OF
1999 (CONTINUED)
The company's effective income tax rate was approximately 33.9% in Q2 2000.
Excluding the impact of non-deductible charges for IPR&D and amortization of
goodwill, the company's effective income tax rate was approximately 31.9% for
Q2 2000 compared to 33% in Q2 1999. The decreased rate in Q2 2000 compared to
Q2 1999 reflects the impact of the resolution reached with the Internal
Revenue Service in Q1 2000 on a number of issues including adjustments related
to the intercompany allocation of profits.
RESULTS OF OPERATIONS - FIRST HALF OF 2000 COMPARED TO FIRST HALF OF 1999
Intel's net revenues for the first half of 2000 increased by 18% compared to
the first half of 1999. The increase in net revenues was primarily due to
higher unit sales volume of microprocessors within the Intel Architecture
Group operating segment, partially offset by lower prices. Net revenues for
the Intel Architecture Group increased 13% in the first half of 2000 compared
to the first half of 1999. However, if the change in the reserve for deferred
income on shipments to distributors had been allocated to the operating
segments, net revenues for the Intel Architecture Group would have increased
approximately 10% in the first half of 2000 compared to the first half of
1999. The impact of this reserve is not allocated to the operating segments
and is reflected in the "all other" category for segment reporting purposes.
Additionally within the "all other" category, revenues from sales of flash
memory grew significantly between these periods. Revenues from networking and
communications products also grew significantly, primarily due to the impact
of acquisitions made during the second half of 1999.
Sales of microprocessors and related board-level products based on the P6
microarchitecture comprised a substantial majority of Intel's consolidated net
revenues and gross margin for the first half of 2000. For the first half of
1999, these products represented a majority of the company's consolidated net
revenues and a substantial majority of gross margin.
Cost of sales increased 11% in the first half of 2000 compared to the first
half of 1999. Within the Intel Architecture Group operating segment,
increased costs due to higher unit sales volume of microprocessors were
largely offset by lower unit costs in the first half of 2000. The lower unit
costs in the first half of 2000 were achieved primarily through redesigned
microprocessor products with lower-cost packaging, including packaging using
fewer purchased components, as well as factory efficiencies and lower purchase
prices on purchased components. In addition, the cost of sales recorded in
the first half of 2000 includes the impact of inventory reserves related to
chipsets and motherboards with the defective MTH component and the charge for
the motherboard replacement program. The company's gross margin percentage
increased to 62% in the first half of 2000, up from 59% in first half of 1999.
The improvement in gross margin was primarily a result of lower unit costs of
microprocessors in the Intel Architecture Group operating segment partially
offset by the impact of lower prices for microprocessors and the impact of the
MTH issue. In addition, improved demand and higher prices for flash memory in
the first half of 2000 also contributed to the improvement in gross margin.
See "Outlook" for a discussion of gross margin expectations.
Excluding charges of $83 million for IPR&D related to the acquisitions
completed in the first half of 2000, research and development spending
increased $528 million, or 38%, in the first half of 2000 compared to the
first half of 1999. This increase was primarily due to increased spending on
product development programs including product development of companies
acquired in the second half of 1999. Marketing, general and administrative
expenses increased $532 million, or 29%, in the first half of 2000 compared to
the first half of 1999, primarily due to increases for the Intel Inside
cooperative advertising program, profit-dependent bonus expenses, and
marketing, general and administrative expenses from companies acquired in the
second half of 1999. Excluding the charges for IPR&D and the amortization of
goodwill and other acquisition-related intangibles, operating expenses were
26% of net revenues in the first half of 2000 and 23% of net revenues in the
first half of 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - FIRST HALF OF 2000 COMPARED TO FIRST HALF OF 1999
(CONTINUED)
In the first half of 2000, the company recorded $83 million in charges for
IPR&D related to the acquisition of GIGA A/S, Basis and Ambient Technologies,
Inc. The total charge for IPR&D for GIGA was approximately $52 million. GIGA
specializes in the design of advanced high-speed communications chips used in
optical networking and communications products that direct traffic across the
Internet and corporate networks. One project, in the 10 gigabits-per-second
(Gbps) product group, accounted for 73% of the IPR&D value, with four
remaining projects each contributing from 5% to 9% of the total IPR&D value.
The in-process projects include the development of next generation integrated
circuit devices featuring improved speed, efficiency and functionality for
communications equipment. These projects ranged from 7% to 78% complete, with
the 10 Gbps project approximately 61% complete. Expected completion dates for
the projects range from Q2 2000 to Q2 2001, with total remaining costs to
complete of approximately $12 million. The average discount rates used for
GIGA were 20% for IPR&D projects, and 11% for developed technology. GIGA's
weighted average cost of capital was 15%.
The estimated completion dates of certain IPR&D projects from companies
acquired in 1999 were revised in the first half of 2000. For the Dialogic
Corporation acquisition, the computer telephony (CT) server project,
accounting for 35% of the value assigned to IPR&D, is now expected to be
completed in Q4 2000. This project was originally scheduled to be completed
in Q1 2000. For the Level One Communications, Inc. acquisition, one project
related to high-end switches and accounting for 17% of the value assigned to
IPR&D is now expected to be completed in Q4 2000. This project was originally
scheduled to be completed in Q1 2000. For the DSP Communications acquisition,
development efforts for one project based on CDMA (code division multiple
access) frequency standards, which represented 30% of the value assigned to
IPR&D, have been discontinued, with development efforts refocused on new and
emerging market technologies built on the CDMA base. All other significant
projects are substantially on schedule.
Failure to deliver new products to the market on a timely basis, or to achieve
expected market acceptance or revenue and expense forecasts, could have a
significant impact on the financial results and operations of the acquired
businesses.
Amortization of goodwill and other acquisition-related intangibles increased
to $707 million in the first half of 2000 compared to $49 million in the first
half of 1999, primarily due to the impact of the acquisitions made in second
half of 1999.
Interest and other income increased to $3.0 billion in the first half of 2000
compared to $657 million in the first half of 1999, primarily due to a
realized gain on the sale of a substantial majority of the company's holdings
of Micron Technology, Inc. shares. Gains on investments in the first half of
2000 were $2.6 billion compared to $360 million in the first half of 1999.
The company's effective income tax rate was approximately 26.6% in the first
half of 2000. Excluding the one-time benefit for the reversal in Q1 2000 of
previously accrued taxes, and the impact of non-deductible charges for IPR&D
and amortization of goodwill, the company's effective income tax rate was
approximately 31.8% for the first half of 2000 compared to 33% in the first
half of 1999. The decreased rate in the first half of 2000 compared to the
first half of 1999 reflects the impact of the resolution reached with the
Internal Revenue Service in Q1 2000 on a number of issues including
adjustments related to the intercompany allocation of profits.
FINANCIAL CONDITION
The company's financial condition remains very strong. At July 1, 2000, total
cash, trading assets, and short- and long-term investments, excluding
marketable strategic equity securities, totaled $15.2 billion, up from $12.6
billion at December 25, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION (CONTINUED)
The major sources of cash during the first half of 2000 were cash provided by
operating activities of $6.4 billion and proceeds of $2.8 billion from sales
of strategic equity securities. Major uses of cash during the period included
$2.0 billion to repurchase 36.4 million shares of common stock and capital
spending of $2.3 billion for property, plant and equipment, primarily for
microprocessor manufacturing capacity. The company also paid $1.9 billion in
net cash for acquisitions, including the purchases of GIGA, Basis, Ambient and
Picazo Communications, Inc. See "Outlook" for a discussion of capital
expenditure expectations in 2000.
The company's five largest customers accounted for approximately 39% of net
revenues for the first half of 2000. At July 1, 2000, the five largest
customers accounted for approximately 39% of net accounts receivable.
At July 1, 2000, marketable strategic equity securities totaled $6.2 billion
with approximately $4.6 billion in unrealized appreciation, a decrease in
total value of $920 million compared to December 25, 1999 and a decrease in
unrealized appreciation of approximately $1.3 billion. The decrease in value
is primarily due to sales of appreciated equity securities partially offset by
net appreciation and additional investments.
During May 2000, the company announced that it had entered into an agreement
to form a new company with Excalibur Technologies Corporation. Intel expects
to contribute its Interactive Media Services division to the new company and
invest approximately $155 million in cash. The new company is intended to
enable owners of branded content, such as sports and entertainment, to
produce and securely sell their audio and video content over the Internet.
The completion of this transaction is subject to regulatory review,
Excalibur stockholder approval and other normal closing conditions.
During August 2000, the company announced that it had entered into a
definitive agreement to acquire privately held Trillium Digital Systems, Inc.
for a total of approximately $300 million in cash and unregistered Intel
common stock. Trillium is a provider of communications software solutions
which are used by suppliers of wireless, Internet, broadband and telephony
products. The completion of this acquisition is subject to regulatory review
and normal closing conditions.
The company believes that it has the financial resources needed to meet
business requirements for the next twelve months, including potential future
acquisitions or strategic investments, capital expenditures for the expansion
or upgrading of worldwide manufacturing capacity, working capital requirements
and the dividend program.
OUTLOOK
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ
materially. These statements do not reflect the potential impact of any
mergers or acquisitions that had not closed as of the end of the second
quarter of 2000.
Intel's goal is to be the preeminent building block supplier to the worldwide
Internet economy. The company's primary focus areas are the client platform,
the server platform, networking and communications, and solutions and
services. The company's five product-line operating segments support these
initiatives.
The Intel Architecture Group operating segment supports the client and server
platform initiatives. Intel's strategy for client and server platforms is to
introduce ever higher performance microprocessors and chipsets, tailored for
the different market segments of the worldwide computing market, using a
tiered branding approach. In line with this strategy, during the second
quarter of 2000, the company introduced higher performance microprocessors
based on the P6 microarchitecture specifically for each computing segment:
desktop and mobile versions of the Intel-R- Celeron-TM- processor for
the value segment; desktop and mobile versions of the Pentium-R- III processor
for home and business
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
applications, and for entry-level servers and workstations; and Pentium-R- III
Xeon-TM- processors for mid-range and high-end servers and workstations.
In the second half of 2000, the company expects to introduce a new generation
of desktop microprocessors under the Pentium-R- 4 brand name. The Pentium 4
processor is designed for consumers who want to take advantage of the latest
Web technologies like broadband, interactive 3-D and streaming audio and
video. Also in the second half of 2000, the company expects to ship
processors based on the IA-64 architecture, under the Itanium-TM- brand, for
systems used by information technology end-users in pilot installations, and
expects to begin recording revenue during the fourth quarter of 2000. Pilot
systems will be followed by the release of generally available system
hardware, operating systems environments, and application solutions, following
industry practice for enterprise computing systems.
Intel plans to cultivate new businesses as well as continue to work with the
computing industry to expand Internet capabilities and product offerings, and
develop compelling software applications that can take advantage of higher
performance microprocessors and chipsets, thus driving demand toward Intel's
newer products in each computing market segment. The company may continue to
take various steps, including reducing microprocessor prices at such times as
it deems appropriate, in order to increase acceptance of its latest technology
and to remain competitive within each relevant market segment.
The client platform strategy also includes providing low-power processors and
flash memory for handheld wireless devices. The Wireless Communications and
Computing Group supports the handheld wireless device initiatives.
In the network and communications infrastructure area, Intel's strategy is to
deliver both the system-level communications products and solutions, and
component-level silicon building blocks for networking and communications
systems. The Communications Products Group operating segment supports
initiatives to deliver the system-level communications products and solutions
directed at service providers running e-Business data centers. The
Communications Products Group also provides component-level products for
converged voice and data communications systems for the telecommunications
industry. The Network Communications Group operating segment supports
initiatives to deliver component-level networking products for home and small-
and medium-sized businesses. Intel has made acquisitions and expects to make
additional acquisitions to grow new networking and communications areas.
Intel also intends to build new service businesses around the Internet.
Intel-R- Online Services, which provides Web hosting and e-Commerce services
for customers, is part of this initiative. Intel intends to deliver a
consistent worldwide platform for developing and delivering e-Business
solutions. The New Business Group operating segment supports these service
business initiatives.
Intel expects to grow revenues in the networking, communications and wireless
businesses by 50% or more in 2000. Intel's expectations for growth in these
areas, as well as in new service businesses, are subject to the company's
ability to acquire businesses as well as integrate and operate them
successfully, and to grow new businesses internally.
The company expects revenue for the third quarter of 2000 to be up from the
second quarter revenue of $8.3 billion. The company's financial results are
substantially dependent on sales of microprocessors and related components by
the Intel Architecture Group. Revenue is partly a function of the mix of
microprocessor types and speeds sold as well as the mix of related
motherboards, purchased components and other semiconductor products, all of
which are difficult to forecast. Because of the wide price difference among
types of microprocessors, this mix affects the average price Intel will
realize and has a large impact on Intel's revenues. Revenue is also subject
to the impact of economic conditions in various geographic regions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
The company expects the gross margin percentage in the third quarter of 2000
to be 63% to 64%. Based on first half results and current expectations,
Intel's gross margin expectation for 2000 is 63%, plus or minus a few points,
including the impact of all costs associated with the MTH motherboard
replacement program. The company's gross margin percentage in any period
varies depending on the mix of types and speeds of processors sold as well as
the mix of microprocessors and related motherboards and purchased components.
The company has been implementing new packaging formats that have reduced
costs on certain microprocessor products and are expected to continue to have
a positive impact on product unit costs as the transition continues. Over the
remainder of 2000, the company also expects to have reduced costs due to
continued productivity improvement on its existing manufacturing processes,
including the 0.18-micron manufacturing process. In the second half of 2000,
these unit cost reductions are expected to be partially offset by increases in
start-up costs. Various other factors (including unit volumes, yield issues
associated with production at factories, ramp of new technologies, the
reusability of factory equipment, the estimate of the MTH motherboard
replacement rate, insufficient or excess inventory, inventory obsolescence,
variations in inventory valuation and mix of shipments of other semiconductor
and non-semiconductor products) will also continue to affect the amount of
cost of sales and the variability of gross margin percentages.
Intel's primary goal is to get its advanced technology to the marketplace, and
at the same time increase gross margin dollars. The company's plans to grow
in non-microprocessor areas, particularly those areas that have the potential
to expand networking and communications capabilities, are intended to increase
gross margin dollars but may lower the gross margin percentage.
The company has expanded its semiconductor manufacturing and assembly and test
capacity over the last few years, and continues to plan capacity based on the
assumed continued success of its strategy and the acceptance of its products
in specific market segments. The company currently expects that capital
spending will be approximately $6.0 billion in 2000. This capital spending
includes expected spending related to the next-generation 0.13-micron process
technology, spending on new fabrication facility construction and equipment
purchases to add 0.18-micron process capacity. This spending plan is
dependent upon expectations regarding production efficiencies and delivery
times of various machinery and equipment, and construction schedules for new
facilities. Depreciation for the third quarter of 2000 is expected to be
approximately $790 million. Depreciation for the full year 2000 is expected
to be $3.4 billion, down from previous guidance of $3.5 billion. Amortization
of goodwill and other acquisition-related intangibles is expected to be
approximately $400 million in the third quarter and $1.5 billion for the full
year 2000, up from previous guidance of $1.4 billion.
Spending on research and development, excluding IPR&D, and marketing, general
and administrative expenses in the third quarter of 2000 is expected to be
approximately 7% to 9% higher than second quarter expenses of $2.2 billion.
Expense projections for the third quarter incorporate expected higher spending
on marketing programs and research and development initiatives in new business
areas. Expenses are dependent in part on the level of revenue.
Research and development spending, excluding IPR&D, for all of 2000 is
expected to be approximately $4.0 billion, up from previous guidance of $3.9
billion.
The company expects interest and other income for the third quarter of 2000 to
be approximately $800 million depending on interest rates, cash balances,
equity market levels and volatility, the realization of expected gains on
investments, including gains on investments acquired by third parties, and
assuming no unanticipated items.
The company currently expects the tax rate for 2000 to be approximately 31.8%,
excluding the one-time tax benefit related to the closure of the Internal
Revenue Service audit of tax returns for years up to and including 1998,
and the impact of any IPR&D and amortization of goodwill from both prior and
potential future mergers or acquisitions. The tax rate is up slightly from
previous guidance of 31.7%. This estimate is based on current tax law, the
current estimate of earnings and the expected distribution of income among
various tax jurisdictions.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
OUTLOOK (CONTINUED)
The company is currently party to various legal proceedings. Although
litigation is subject to inherent uncertainties, management, including
internal counsel, does not believe that the ultimate outcome of these legal
proceedings will have a material adverse effect on the company's financial
position or overall trends in results of operations. However, were an
unfavorable ruling to occur in any specific period, there exists the
possibility of a material adverse impact on the results of operations of that
period. Management believes, given the company's current liquidity and cash
and investments balances, that even an adverse judgment would not have a
material impact on cash and investments or liquidity.
The company's future results of operations and the other forward-looking
statements contained in this outlook-in particular the statements regarding
Intel's goals and strategies, statements regarding expected product
introductions, expectations regarding additional acquisitions, intentions
regarding building new service businesses around the Internet, revenues,
pricing, gross margin, costs and continued productivity improvements, capital
spending, depreciation and amortization, research and development expenses,
marketing and general and administrative expenses, interest and other income,
the tax rate, and pending legal proceedings-involve a number of risks and
uncertainties. In addition to the factors discussed above, among the other
factors that could cause actual results to differ materially are the
following: business and economic conditions and growth in the computing
industry in various geographic regions; changes in customer order patterns;
competitive factors such as rival chip architectures and manufacturing
technologies, competing software-compatible microprocessors and acceptance of
new products in specific market segments; development and timing of the
introduction of compelling software applications; pricing pressures; continued
success in technological advances, including development and implementation of
new processes and strategic products for specific market segments; execution
of the manufacturing ramp, including the transition to the 0.18-micron process
technology; shortage of manufacturing capacity; unanticipated costs or other
adverse effects associated with processors and other products containing
errata (deviations from published specifications); and litigation involving
antitrust, intellectual property, consumer and other issues.
Intel believes that it has the product offerings, facilities, personnel, and
competitive and financial resources for continued business success, but future
net revenues, costs, margins and profits are all influenced by a number of
factors, including those discussed above, all of which are inherently
difficult to forecast.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For financial market risks related to changes in foreign currency exchange
rates, reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in the Registrant's Annual Report on Form 10-K
for the year ended December 25, 1999 and to the subheading "Financial Market
Risks" under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on page 33 of the Registrant's 1999
Annual Report to Stockholders.
The primary objective of the company's investments in debt securities is to
preserve principal while maximizing yields, without significantly increasing
risk. To achieve this objective, the returns on a substantial majority of the
company's marketable investments in long-term fixed rate debt securities are
swapped to U.S. dollar LIBOR-based returns. The company considered the
historical volatility of the three-month LIBOR rate experienced in the most
recent twelve months and determined that it was reasonably possible that an
adverse change of 80 basis points, or approximately 12% of the rate at the end
of the quarter, could be experienced in the near term. A hypothetical 80-
basis-point increase in interest rates would result in an approximate $15
million decrease in the fair value of the company's investments in debt
securities as of July 1, 2000.
The company is exposed to equity price risk on the marketable portion of its
portfolio of strategic equity securities. The company typically does not
attempt to reduce or eliminate its market exposure on these securities. These
investments are generally in companies in the high-technology industry, and a
substantial majority of the market value of the portfolio is in three sectors:
Internet, semiconductor and networking. As of July 1, 2000, five equity
positions constituted approximately 30% of the market value of the portfolio
and no individual holding constituted 10% of the value. As of July 1, 2000,
the company's investment in Micron Technology, Inc. was no longer significant
and was not one of the five largest portfolio positions.
The company analyzed the historical movements over the past several years of
high-technology stock indices that the company considered appropriate. Based
on the analysis, the company estimated that it was reasonably possible that
the prices of the stocks in the company's portfolio could experience a 30%
adverse change in the near term. Assuming a 30% adverse change, the company's
marketable strategic equity securities would decrease in value by
approximately $1.9 billion, based on the value of the portfolio as of July 1,
2000. The portfolio's concentrations in specific companies or sectors may
vary over time and may be different from the compositions of the indices
analyzed, and these factors may affect the portfolio's price volatility. This
estimate is not necessarily indicative of future performance and actual
results may differ materially.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3, Legal Proceedings in the Registrant's Annual
Report on Form 10-K for the year ended December 25, 1999 and Part II, Item 1,
Legal Proceedings in the Registrant's Form 10-Q for the quarter ended April 1,
2000 for descriptions of legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Intel Corporation's Annual Meeting of Stockholders held on May 17, 2000 the
following proposals were adopted by the margins indicated. Due to the fact
that the vote was held prior to the effective date of the two-for-one stock
split, the following results are presented on a pre-split basis.
Number of Shares
Voted For Withheld
--------- --------
1. To elect a Board of Directors to hold office until
the next Annual Meeting of Stockholders or until
their respective successors have been elected or
appointed.
C. Barrett 2,843,066,607 12,692,671
J. Browne 2,842,433,616 13,325,662
W. Chen 2,843,218,130 12,541,148
A. Grove 2,843,395,123 12,364,155
J. Guzy 2,843,047,044 12,712,234
G. Moore 2,842,212,182 13,547,096
D. Pottruck 2,842,948,796 12,810,482
J. Shaw 2,843,100,346 12,658,932
L. Vadasz 2,842,254,338 13,504,940
D. Yoffie 2,842,571,191 13,188,087
C. Young 2,842,051,274 13,708,004
Number of Shares
Voted
Voted For Against Withheld No Vote
---------- -------- -------- --------
2. To approve the amendment of the
company's Restated Certificate of
Incorporation to increase the number
of authorized shares of common stock
from 4.5 billion to 10 billion. 2,620,099,902 223,948,934 11,518,601 191,841
Number of Shares
Voted
Voted For Against Withheld No Vote
--------- ------- -------- -------
3. To ratify the amendment and extension
of the Executive Officer Bonus Plan 2,727,071,474 107,215,029 21,307,119 165,656
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (CONTINUED)
Number of Shares
Voted
Voted For Against Withheld No Vote
--------- ------- -------- -------
4. To ratify the appointment of the
accounting firm of Ernst & Young LLP
as independent auditors for the company
for the current year. 2,841,156,062 4,001,735 10,601,481 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Amendment to the Restated Certificate of
Incorporation of Intel Corporation dated May 18, 2000.
12.1 Statement setting forth the computation of ratios of earnings
to fixed charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K
1) On April 21, 2000, Intel filed a report on Form 8-K relating to
financial information for Intel Corporation for the quarter ended
April 1, 2000 and forward-looking statements relating to 2000, the
second quarter of 2000 and the second half of 2000 as presented in
a press release of April 18, 2000.
2) On May 11, 2000, Intel filed a report on Form 8-K relating to an
announcement regarding replacement of motherboards with a defective
memory translator hub component as presented in a press release of
May 10, 2000.
3) On June 22, 2000, Intel filed a report on Form 8-K relating to an
announcement regarding an update to Q2 2000 interest and other
income and the estimated remaining charge for the replacement of
motherboards with a defective memory translator hub component as
presented in a press release of June 20, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEL CORPORATION
(Registrant)
Date: August 11, 2000 By: /s/ ANDY D. BRYANT
-------------------
Andy D. Bryant
Senior Vice President,
Chief Financial Officer and
Principal Accounting Officer