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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the quarterly period ended | June 26, 2021 |
Or
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | For the transition period from to |
Commission File Number 000-06217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
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| Delaware | | | 94-1672743 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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2200 Mission College Boulevard, | Santa Clara, | California | | 95054-1549 |
(Address of principal executive offices) | | (Zip Code) |
(408) 765-8080
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, $0.001 par value | INTC | Nasdaq Global Select Market |
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 ☑ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer | | Accelerated filer | | Non-accelerated filer | | Smaller reporting company | Emerging growth company |
☑
| | ¨ | | ¨ | | ☐ | ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of June 26, 2021, the registrant had outstanding 4,057 million shares of common stock.
Table of Contents
The Organization of Our Quarterly Report on Form 10-Q
The order and presentation of content in our Form 10-Q differs from the traditional SEC Form 10-Q format. Our format is designed to improve readability and better present how we organize and manage our business. See "Form 10-Q Cross-Reference Index" within Other Key Information for a cross-reference index to the traditional SEC Form 10-Q format.
We have defined certain terms and abbreviations used throughout our Form 10-Q in "Key Terms" within the Consolidated Condensed Financial Statements and Supplemental Details.
The preparation of our Consolidated Condensed Financial Statements is in conformity with U.S. GAAP. Our Form 10-Q includes key metrics that we use to measure our business, some of which are non-GAAP measures. See "Non-GAAP Financial Measures" within MD&A for an explanation of these measures and why management uses them and believes they provide investors with useful supplemental information.
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Forward-Looking Statements | |
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A Quarter in Review | |
Consolidated Condensed Financial Statements and Supplemental Details | |
| Consolidated Condensed Statements of Income | |
| Consolidated Condensed Statements of Comprehensive Income | |
| Consolidated Condensed Balance Sheets | |
| Consolidated Condensed Statements of Cash Flows | |
| Consolidated Condensed Statements of Stockholders' Equity | |
| Notes to Consolidated Condensed Financial Statements | |
| Key Terms | |
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Management's Discussion and Analysis | |
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| Segment Trends and Results | |
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| Consolidated Results of Operations | |
| Liquidity and Capital Resources | |
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| Non-GAAP Financial Measures | |
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Other Key Information | |
| Quantitative and Qualitative Disclosures about Market Risk | |
| Risk Factors | |
| Controls and Procedures | |
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| Issuer Purchases of Equity Securities | |
| Disclosure Pursuant to Section 13(r)(of the Securities Exchange Act of 1934 | |
| Exhibits | |
| Form 10-Q Cross-Reference Index | |
Forward-Looking Statements
This Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as "anticipate," "expect," "intend," "plan," "opportunity," "future," "pending," "to be," "believes," "estimated," "continue," "likely," "may," "might," "potentially," "will," "would," "should," "could," “accelerate,” "progress," “goal,” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to Intel’s strategy; manufacturing expansion and investment plans, including Intel’s anticipated New Mexico investment; future responses to and effects of COVID-19; projections of our future financial performance and demand; our anticipated growth and trends in our businesses or operations; projected growth and trends in markets relevant to our businesses; business plans; future products and technology and the expected availability and benefits of such products and technology; expected timing and impact of acquisitions, divestitures, and other significant transactions, including statements relating to the pending divestiture of our NAND memory business to SK hynix Inc. (SK hynix), NAND manufacturing and supply arrangements between Intel and SK hynix, and expected additions to held for sale NAND property, plant and equipment; expected completion of restructuring activities; availability, uses, sufficiency, and cost of capital, capital resources, and funding sources, including expected returns to stockholders such as dividends; accounting estimates and judgments regarding reported matters, events and contingencies and our intentions with respect to such matters, events and contingencies, and the actual results thereof; future production capacity and product supply; the future impact of industry component and substrate constraints; the future purchase, use, and availability of, and payment for, products, components and services supplied by third parties; tax-related expectations; plans and future impacts related to export licensing and trade policies; uncertain events or assumptions; and other characterizations of future events or circumstances are forward-looking statements. Such statements are based on management's expectations as of the date of this filing, unless an earlier date is specified, and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report, our 2020 Form 10-K, and our Form 10-Q for the quarter ended March 27, 2021, particularly the "Risk Factors" sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the SEC that disclose risks and uncertainties that may affect our business. Unless specifically indicated otherwise, the forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that have not been completed as of the date of this filing. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, unless an earlier date is specified, including expectations based on third-party information and projections that management believes to be reputable, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments, or otherwise, except to the extent that disclosure may be required by law.
Intel, the Intel logo, Intel Core, Intel Evo, Intel Optane, and Xeon are trademarks of Intel Corporation or its subsidiaries in the U.S. and/or other countries.
* Other names and brands may be claimed as the property of others.
Total revenue of $19.6 billion was down $97 million year over year as DCG declined 9% and CCG grew 6%. DCG revenue declined on lower ASPs and on lower platform volume compared to a strong, COVID-driven Q2 2020. DCG revenue was also impacted by lower adjacent revenue. CCG revenue was up, due to continued strength in notebook demand and recovery in desktop demand. NSG was down due to lower ASPs and lower volume. IOTG and Mobileye were both up on higher demand amid recovery from the economic impacts of COVID-19.
| | | | | | | | | | | | | | | | | | | | |
Revenue | | Operating Income | | Diluted EPS | | Cash Flows |
■ GAAP $B ■ Non-GAAP $B | | ■ GAAP $B ■ Non-GAAP $B | | ■ GAAP ■ Non-GAAP | | ■ Operating Cash Flow $B ■ Free Cash Flow $B |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | |
$19.6B | | $18.5B | | $5.5B | | $5.9B | | $1.24 | | $1.28 | | $14.3B | | $6.7B |
GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 |
Revenue down $97M or 0.5% from Q2 2020 | | Revenue up $349M or 2% from Q2 2020 | | Operating income down $151M or 3% from Q2 2020; Q2 2021 operating margin at 28% | | Operating income up $221M or 4% from Q2 2020; Q2 2021 operating margin at 32% | | Diluted EPS up $0.05 or 4% from Q2 2020 | | Diluted EPS up $0.14 or 12% from Q2 2020 | | Operating cash flow down $3.0B or 17% from Q2 2020 | | Free cash flow down $3.9B or 37% from Q2 2020 |
| | | | | | | | | | | | |
Declines in DCG and NSG, partially offset by growth in CCG, IOTG, and Mobileye. Non-GAAP revenue excludes NSG. | | Higher operating expenses from additional investments, higher corporate restructuring costs, and lower gross margin from lower platform2 revenue, partially offset by lower period charges driven by absence of reserves on non-qualified platform products taken in Q2 2020, and lower platform unit cost from 10nm cost improvements. Non-GAAP operating income excludes NSG, amortization of acquisition-related intangibles, and restructuring. | | Lower effective tax rate and lower shares, partially offset by lower operating income. Non-GAAP results incrementally exclude ongoing mark-to-market adjustments, and tax impacts of non-GAAP adjustments. | | Lower net income, net of non-cash adjustments including the Corporate VLSI charge, cash paid to settle a prepaid supply agreement in Q1 2021, and income taxes. Free cash flow decreased due to lower operating cash flow and higher capital spending. |
Key Developments
▪We announced a $3.5 billion investment to equip our Rio Rancho, New Mexico site for advanced packaging manufacturing, including our Foveros 3D packaging technology. Foveros technology enables us to build processors with compute tiles stacked vertically, rather than side-by-side, which can provide greater performance in a smaller footprint.
▪We launched the 3rd Gen Intel® Xeon® Scalable CPU (Ice Lake), which boasts up to 40 cores and delivers a significant increase in performance on average compared to the previous generation. The chips include a set of built-in security features, crypto acceleration, and artificial intelligence.
▪We launched the 11th Gen Intel® CoreTM H-series mobile processors (Tiger Lake-H), which deliver high end performance in laptops for gamers, content creators, and business professionals. We also saw broad availability of the first Intel® Evo™ platforms for the commercial segment, based on 11th Gen Intel Core mobile processors.
1 See "Non-GAAP Financial Measures" within MD&A.
2 See "Key Terms" within Consolidated Condensed Financial Statements and Supplemental Details.
| | | | | |
Consolidated Condensed Statements of Income | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
(In Millions, Except Per Share Amounts; Unaudited) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Net revenue | | $ | 19,631 | | | $ | 19,728 | | | $ | 39,304 | | | $ | 39,556 | |
Cost of sales | | 8,425 | | | 9,221 | | | 17,244 | | | 17,033 | |
Gross margin | | 11,206 | | | 10,507 | | | 22,060 | | | 22,523 | |
Research and development | | 3,715 | | | 3,354 | | | 7,338 | | | 6,629 | |
Marketing, general and administrative | | 1,599 | | | 1,447 | | | 2,927 | | | 2,988 | |
Restructuring and other charges | | 346 | | | 9 | | | 2,555 | | | 171 | |
Operating expenses | | 5,660 | | | 4,810 | | | 12,820 | | | 9,788 | |
Operating income | | 5,546 | | | 5,697 | | | 9,240 | | | 12,735 | |
Gains (losses) on equity investments, net | | 295 | | | 267 | | | 663 | | | 156 | |
Interest and other, net | | (96) | | | (29) | | | (252) | | | (342) | |
Income before taxes | | 5,745 | | | 5,935 | | | 9,651 | | | 12,549 | |
Provision for taxes | | 684 | | | 830 | | | 1,229 | | | 1,783 | |
Net income | | $ | 5,061 | | | $ | 5,105 | | | $ | 8,422 | | | $ | 10,766 | |
Earnings per share—basic | | $ | 1.25 | | | $ | 1.20 | | | $ | 2.08 | | | $ | 2.53 | |
Earnings per share—diluted | | $ | 1.24 | | | $ | 1.19 | | | $ | 2.06 | | | $ | 2.50 | |
| | | | | | | | |
Weighted average shares of common stock outstanding: | | | | | | | | |
Basic | | 4,049 | | | 4,246 | | | 4,053 | | | 4,256 | |
Diluted | | 4,084 | | | 4,284 | | | 4,090 | | | 4,298 | |
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Condensed Statements of Income | 3 |
| | | | | |
Consolidated Condensed Statements of Comprehensive Income | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
(In Millions; Unaudited) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Net income | | $ | 5,061 | | | $ | 5,105 | | | $ | 8,422 | | | $ | 10,766 | |
Changes in other comprehensive income, net of tax: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Net unrealized holding gains (losses) on derivatives | | 6 | | | 319 | | | (344) | | | 51 | |
Actuarial valuation and other pension benefits (expenses), net | | 12 | | | 11 | | | 25 | | | 23 | |
Translation adjustments and other | | (10) | | | 59 | | | (25) | | | 54 | |
Other comprehensive income (loss) | | 8 | | | 389 | | | (344) | | | 128 | |
Total comprehensive income | | $ | 5,069 | | | $ | 5,494 | | | $ | 8,078 | | | $ | 10,894 | |
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Condensed Statements of Comprehensive Income | 4 |
| | | | | |
Consolidated Condensed Balance Sheets | |
| |
| | | | | | | | | | | | | | |
(In Millions) | | Jun 26, 2021 | | Dec 26, 2020 |
| | (unaudited) | | |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 4,746 | | | $ | 5,865 | |
Short-term investments | | 3,014 | | | 2,292 | |
Trading assets | | 17,097 | | | 15,738 | |
Accounts receivable | | 7,460 | | | 6,782 | |
Inventories | | 8,817 | | | 8,427 | |
Assets held for sale | | 5,817 | | | 5,400 | |
Other current assets | | 2,421 | | | 2,745 | |
Total current assets | | 49,372 | | | 47,249 | |
| | | | |
Property, plant and equipment, net of accumulated depreciation of $81,558 ($77,645 as of December 26, 2020) | | 58,166 | | | 56,584 | |
Equity investments | | 5,655 | | | 5,152 | |
Other long-term investments | | 1,262 | | | 2,192 | |
Goodwill | | 26,768 | | | 26,971 | |
Identified intangible assets, net | | 8,018 | | | 9,026 | |
Other long-term assets | | 5,356 | | | 5,917 | |
Total assets | | $ | 154,597 | | | $ | 153,091 | |
| | | | |
Liabilities and stockholders’ equity | | | | |
Current liabilities: | | | | |
Short-term debt | | $ | 3,695 | | | $ | 2,504 | |
Accounts payable | | 5,917 | | | 5,581 | |
Accrued compensation and benefits | | 3,176 | | | 3,999 | |
| | | | |
| | | | |
Other accrued liabilities | | 12,048 | | | 12,670 | |
Total current liabilities | | 24,836 | | | 24,754 | |
| | | | |
Debt | | 31,714 | | | 33,897 | |
Contract liabilities | | 68 | | | 1,367 | |
Income taxes payable | | 4,172 | | | 4,578 | |
Deferred income taxes | | 3,271 | | | 3,843 | |
Other long-term liabilities | | 5,329 | | | 3,614 | |
Contingencies (Note 13) | | | | |
| | | | |
Stockholders’ equity: | | | | |
| | | | |
Common stock and capital in excess of par value, 4,057 issued and outstanding (4,062 issued and outstanding as of December 26, 2020) | | 26,655 | | | 25,556 | |
Accumulated other comprehensive income (loss) | | (1,095) | | | (751) | |
Retained earnings | | 59,647 | | | 56,233 | |
Total stockholders’ equity | | 85,207 | | | 81,038 | |
Total liabilities and stockholders’ equity | | $ | 154,597 | | | $ | 153,091 | |
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Condensed Balance Sheets | 5 |
| | | | | |
Consolidated Condensed Statements of Cash Flows | |
| |
| | | | | | | | | | | | | | |
| | Six Months Ended |
(In Millions; Unaudited) | | Jun 26, 2021 | | Jun 27, 2020 |
| | | | |
Cash and cash equivalents, beginning of period | | $ | 5,865 | | | $ | 4,194 | |
Cash flows provided by (used for) operating activities: | | | | |
Net income | | 8,422 | | | 10,766 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation | | 4,862 | | | 5,248 | |
Share-based compensation | | 1,044 | | | 941 | |
| | | | |
Restructuring and other charges | | 2,555 | | | 171 | |
Amortization of intangibles | | 897 | | | 865 | |
(Gains) losses on equity investments, net | | (555) | | | (92) | |
| | | | |
| | | | |
| | | | |
Changes in assets and liabilities: | | | | |
Accounts receivable | | (678) | | | 224 | |
Inventories | | (126) | | | (271) | |
Accounts payable | | 425 | | | 208 | |
Accrued compensation and benefits | | (836) | | | (1,025) | |
Prepaid supply agreements | | (1,571) | | | (161) | |
Income taxes | | 114 | | | 1,203 | |
Other assets and liabilities | | (259) | | | (762) | |
Total adjustments | | 5,872 | | | 6,549 | |
Net cash provided by operating activities | | 14,294 | | | 17,315 | |
Cash flows provided by (used for) investing activities: | | | | |
Additions to property, plant and equipment | | (7,574) | | | (6,676) | |
Additions to held for sale NAND property, plant and equipment | | (682) | | | — | |
| | | | |
Purchases of available-for-sale debt investments | | (2,000) | | | (4,558) | |
| | | | |
Maturities and sales of available-for-sale debt investments | | 2,126 | | | 1,303 | |
Purchases of trading assets | | (14,637) | | | (11,429) | |
Maturities and sales of trading assets | | 12,936 | | | 7,430 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Other investing | | 380 | | | (416) | |
Net cash used for investing activities | | (9,451) | | | (14,346) | |
Cash flows provided by (used for) financing activities: | | | | |
| | | | |
| | | | |
| | | | |
Issuance of long-term debt, net of issuance costs | | — | | | 10,247 | |
Repayment of debt and debt conversion | | (500) | | | (2,775) | |
Proceeds from sales of common stock through employee equity incentive plans | | 589 | | | 512 | |
Repurchase of common stock | | (2,415) | | | (4,229) | |
| | | | |
| | | | |
Payment of dividends to stockholders | | (2,821) | | | (2,811) | |
| | | | |
| | | | |
| | | | |
Other financing | | (815) | | | 629 | |
Net cash provided by (used for) financing activities | | (5,962) | | | 1,573 | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | (1,119) | | | 4,542 | |
Cash and cash equivalents, end of period | | $ | 4,746 | | | $ | 8,736 | |
| | | | |
Supplemental disclosures of noncash investing activities and cash flow information: | | | | |
Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities | | $ | 2,426 | | | $ | 2,836 | |
| | | | |
| | | | |
Cash paid during the period for: | | | | |
Interest, net of capitalized interest | | $ | 283 | | | $ | 252 | |
Income taxes, net of refunds | | $ | 1,110 | | | $ | 574 | |
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Condensed Statements of Cash Flows | 6 |
| | | | | |
Consolidated Condensed Statements of Stockholders' Equity | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock and Capital in Excess of Par Value | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings1 | | Total |
(In Millions, Except Per Share Amounts; Unaudited) | | Shares | | Amount | | | |
Three Months Ended | | | | | | | | | | |
| | | | | | | | | | |
Balance as of March 27, 2021 | | 4,038 | | | $ | 26,272 | | | $ | (1,103) | | | $ | 54,638 | | | $ | 79,807 | |
Net income | | — | | | — | | | — | | | 5,061 | | | 5,061 | |
Other comprehensive income (loss) | | — | | | — | | | 8 | | | — | | | 8 | |
Employee equity incentive plans and other | | 24 | | | 23 | | | — | | | — | | | 23 | |
Share-based compensation | | — | | | 619 | | | — | | | — | | | 619 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Restricted stock unit withholdings | | (5) | | | (259) | | | — | | | (52) | | | (311) | |
| | | | | | | | | | |
Balance as of June 26, 2021 | | 4,057 | | | $ | 26,655 | | | $ | (1,095) | | | $ | 59,647 | | | $ | 85,207 | |
| | | | | | | | | | |
Balance as of March 28, 2020 | | 4,234 | | | $ | 25,251 | | | $ | (1,541) | | | $ | 52,644 | | | $ | 76,354 | |
| | | | | | | | | | |
| | | | | | | | | | |
Net income | | — | | | — | | | — | | | 5,105 | | | 5,105 | |
Other comprehensive income (loss) | | — | | | — | | | 389 | | | — | | | 389 | |
Employee equity incentive plans and other | | 25 | | | 9 | | | — | | | — | | | 9 | |
Share-based compensation | | — | | | 492 | | | — | | | — | | | 492 | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Restricted stock unit withholdings | | (6) | | | (236) | | | — | | | (103) | | | (339) | |
| | | | | | | | | | |
| | | | | | | | | | |
Balance as of June 27, 2020 | | 4,253 | | | $ | 25,516 | | | $ | (1,152) | | | $ | 57,646 | | | $ | 82,010 | |
| | | | | | | | | | |
Six Months Ended | | | | | | | | | | |
| | | | | | | | | | |
Balance as of December 26, 2020 | | 4,062 | | | $ | 25,556 | | | $ | (751) | | | $ | 56,268 | | | $ | 81,073 | |
Net income | | — | | | — | | | — | | | 8,422 | | | 8,422 | |
Other comprehensive income (loss) | | — | | | — | | | (344) | | | — | | | (344) | |
Employee equity incentive plans and other | | 41 | | | 588 | | | — | | | — | | | 588 | |
Share-based compensation | | — | | | 1,044 | | | — | | | — | | | 1,044 | |
Temporary equity reduction | | — | | | — | | | — | | | — | | | — | |
Convertible debt | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | |
Repurchase of common stock | | (40) | | | (249) | | | — | | | (2,166) | | | (2,415) | |
| | | | | | | | | | |
Restricted stock unit withholdings | | (6) | | | (284) | | | — | | | (56) | | | (340) | |
Cash dividends declared ($0.695 per share) | | — | | | — | | | — | | | (2,821) | | | (2,821) | |
Balance as of June 26, 2021 | | 4,057 | | | $ | 26,655 | | | $ | (1,095) | | | $ | 59,647 | | | $ | 85,207 | |
| | | | | | | | | | |
Balance as of December 28, 2019 | | 4,290 | | | $ | 25,261 | | | $ | (1,280) | | | $ | 53,523 | | | $ | 77,504 | |
Net income | | — | | | — | | | — | | | 10,766 | | | 10,766 | |
Other comprehensive income (loss) | | — | | | — | | | 128 | | | — | | | 128 | |
Employee equity incentive plans and other | | 42 | | | 629 | | | — | | | — | | | 629 | |
Share-based compensation | | — | | | 941 | | | — | | | — | | | 941 | |
Temporary equity reduction | | — | | | 155 | | | — | | | — | | | 155 | |
Convertible debt | | — | | | (750) | | | — | | | — | | | (750) | |
Repurchase of common stock | | (71) | | | (420) | | | — | | | (3,689) | | | (4,109) | |
Restricted stock unit withholdings | | (8) | | | (300) | | | — | | | (135) | | | (435) | |
Cash dividends declared ($0.66 per share) | | — | | | — | | | — | | | (2,819) | | | (2,819) | |
Balance as of June 27, 2020 | | 4,253 | | | $ | 25,516 | | | $ | (1,152) | | | $ | 57,646 | | | $ | 82,010 | |
1The retained earnings balance as of December 26, 2020 includes an opening balance adjustment made as a result of the adoption of a new accounting standard in 2021.
See accompanying notes.
| | | | | | | | | | | |
| Financial Statements | Consolidated Condensed Statements of Stockholders' Equity | 7 |
| | | | | |
Notes to Consolidated Condensed Financial Statements | |
| |
| | | | | |
Note 1 : | Basis of Presentation |
We prepared our interim Consolidated Condensed Financial Statements that accompany these notes in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2020 Form 10-K.
We have made estimates and judgments affecting the amounts reported in our Consolidated Condensed Financial Statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with the Consolidated Financial Statements in our 2020 Form 10-K where we include additional information about our policies and the methods and assumptions used in our estimates.
| | | | | |
Note 2 : | Operating Segments |
We manage our business through the following operating segments:
▪CCG
▪DCG
▪IOTG
▪Mobileye
▪NSG
▪PSG
We derive a substantial majority of our revenue from platform products, which are our principal products and considered as one product class. We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package. Platform products are used in various form factors across our CCG, DCG, and IOTG operating segments. Our non-platform, or adjacent products, can be combined with platform products to form comprehensive platform solutions to meet customer needs.
CCG and DCG are our reportable operating segments. IOTG, Mobileye, NSG, and PSG do not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments. Our Internet of Things portfolio, presented as Internet of Things, is comprised of IOTG and Mobileye operating segments. In 2021, our DCG operating segment includes the results of our Intel® OptaneTM memory business, and our NSG operating segment is composed of our NAND memory business. Refer to "Note 8: Acquisitions and Divestitures" within Notes to Consolidated Condensed Financial Statements for further information on the pending divestiture of our NAND memory business.
We have an “all other” category that includes revenue, expenses, and charges such as:
▪results of operations from non-reportable segments not otherwise presented;
▪historical results of operations from divested businesses;
▪results of operations of start-up businesses that support our initiatives, including our foundry business;
▪amounts included within restructuring and other charges;
▪a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
▪acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The CODM, who is our CEO, does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. The accounting policies for segment reporting are the same as for Intel as a whole.
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 8 |
Net revenue and operating income (loss) for each period were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
(In Millions) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Net revenue: | | | | | | | | |
Client Computing Group | | | | | | | | |
Platform | | $ | 9,397 | | | $ | 8,229 | | | $ | 19,014 | | | $ | 16,941 | |
Adjacent | | 712 | | | 1,267 | | | 1,700 | | | 2,330 | |
| | 10,109 | | | 9,496 | | | 20,714 | | | 19,271 | |
Data Center Group | | | | | | | | |
Platform | | 5,703 | | | 6,181 | | | 10,514 | | | 12,608 | |
Adjacent | | 752 | | | 936 | | | 1,505 | | | 1,502 | |
| | 6,455 | | | 7,117 | | | 12,019 | | | 14,110 | |
Internet of Things | | | | | | | | |
IOTG | | 984 | | | 670 | | | 1,898 | | | 1,553 | |
Mobileye | | 327 | | | 146 | | | 704 | | | 400 | |
| | 1,311 | | | 816 | | | 2,602 | | | 1,953 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Non-Volatile Memory Solutions Group | | 1,098 | | | 1,659 | | | 2,205 | | | 2,997 | |
Programmable Solutions Group | | 486 | | | 501 | | | 972 | | | 1,020 | |
| | | | | | | | |
All other | | 172 | | | 139 | | | 792 | | | 205 | |
Total net revenue | | $ | 19,631 | | | $ | 19,728 | | | $ | 39,304 | | | $ | 39,556 | |
| | | | | | | | |
Operating income (loss): | | | | | | | | |
Client Computing Group | | $ | 3,760 | | | $ | 2,842 | | | $ | 7,880 | | | $ | 7,067 | |
Data Center Group | | 1,941 | | | 3,099 | | | 3,214 | | | 6,591 | |
| | | | | | | | |
Internet of Things | | | | | | | | |
IOTG | | 287 | | | 70 | | | 499 | | | 313 | |
Mobileye | | 109 | | | (4) | | | 256 | | | 84 | |
| | 396 | | | 66 | | | 755 | | | 397 | |
| | | | | | | | |
| | | | | | | | |
Non-Volatile Memory Solutions Group | | 402 | | | 322 | | | 573 | | | 256 | |
Programmable Solutions Group | | 82 | | | 80 | | | 170 | | | 177 | |
All other | | (1,035) | | | (712) | | | (3,352) | | | (1,753) | |
Total operating income | | $ | 5,546 | | | $ | 5,697 | | | $ | 9,240 | | | $ | 12,735 | |
Disaggregated net revenue for each period was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
(In Millions) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Platform revenue | | | | | | | | |
CCG desktop platform | | $ | 2,635 | | | $ | 2,368 | | | $ | 5,279 | | | $ | 5,208 | |
CCG notebook platform | | 6,743 | | | 5,844 | | | 13,702 | | | 11,701 | |
CCG other platform1 | | 19 | | | 16 | | | 33 | | | 31 | |
DCG platform | | 5,703 | | | 6,181 | | | 10,514 | | | 12,608 | |
IOTG platform | | 891 | | | 619 | | | 1,731 | | | 1,414 | |
| | 15,991 | | | 15,028 | | | 31,259 | | | 30,962 | |
| | | | | | | | |
Adjacent revenue2 | | 3,640 | | | 4,700 | | | 8,045 | | | 8,594 | |
Total revenue | | $ | 19,631 | | | $ | 19,728 | | | $ | 39,304 | | | $ | 39,556 | |
1 Includes our tablet and service provider revenue.
2 Includes all of our non-platform products for CCG, DCG, and IOTG such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products, as well as revenue included in our "all other" category.
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| Financial Statements | Notes to Financial Statements | 9 |
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Note 3 : | Earnings Per Share |
We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.
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| | Three Months Ended | | Six Months Ended |
(In Millions, Except Per Share Amounts) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Net income available to common stockholders | | $ | 5,061 | | | $ | 5,105 | | | $ | 8,422 | | | $ | 10,766 | |
Weighted average shares of common stock outstanding—basic | | 4,049 | | | 4,246 | | | 4,053 | | | 4,256 | |
Dilutive effect of employee equity incentive plans | | 35 | | | 38 | | | 37 | | | 42 | |
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Weighted average shares of common stock outstanding—diluted | | 4,084 | | | 4,284 | | | 4,090 | | | 4,298 | |
Earnings per share—basic
| | $ | 1.25 | | | $ | 1.20 | | | $ | 2.08 | | | $ | 2.53 | |
Earnings per share—diluted
| | $ | 1.24 | | | $ | 1.19 | | | $ | 2.06 | | | $ | 2.50 | |
Potentially dilutive shares of common stock from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the stock purchase plan.
Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.
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Note 4 : | Contract Liabilities |
Contract liabilities consist of prepayments received from customers on long-term prepaid supply agreements toward future product delivery and other revenue deferrals from regular ongoing business activity. Contract liabilities were $349 million as of June 26, 2021 ($1.9 billion as of December 26, 2020).
The following table shows the changes in contract liability balances relating to long-term prepaid supply agreements during the first six months of 2021:
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(In Millions) | | |
Prepaid supply agreements balance as of December 26, 2020 | | $ | 1,625 | |
| | |
Concession payment | | (950) | |
Prepaids utilized | | (621) | |
Prepaid supply agreements balance as of June 26, 2021 | | $ | 54 | |
During the first quarter of 2021, we settled an agreement with our largest prepaid customer whose prepayment balance made up $1.6 billion of our contract liability balance as of December 26, 2020. We returned $950 million to the customer and recognized $584 million in revenue for having completed performance of the prepaid supply agreement. The prepaid supply agreement is excluded from the NAND memory business and is recorded as Corporate revenue in the first six months of 2021 in the "all other" category presented in "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements.
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Note 5 : | Other Financial Statement Details |
Inventories
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(In Millions) | | Jun 26, 2021 | | Dec 26, 2020 |
Raw materials | | $ | 1,010 | | | $ | 908 | |
Work in process | | 5,968 | | | 5,693 | |
Finished goods | | 1,839 | | | 1,826 | |
Total inventories | | $ | 8,817 | | | $ | 8,427 | |
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| Financial Statements | Notes to Financial Statements | 10 |
Interest and Other, Net
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| | Three Months Ended | | Six Months Ended |
(In Millions) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 |
Interest income | | $ | 37 | | | $ | 83 | | | $ | 74 | | | $ | 176 | |
Interest expense | | (129) | | | (186) | | | (319) | | | (321) | |
Other, net | | (4) | | | 74 | | | (7) | | | (197) | |
Total interest and other, net | | $ | (96) | | | $ | (29) | | | $ | (252) | | | $ | (342) | |
Interest expense in the preceding table is net of $96 million of interest capitalized in the second quarter of 2021 and $193 million in the first six months of 2021 ($87 million in the second quarter of 2020 and $170 million in the first six months of 2020).
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Note 6 : | Restructuring and Other Charges |
A restructuring program, which is ongoing, was approved in the first quarter of 2020 to further align our workforce with our continuing investments in the business and to execute the planned divestiture of Home Gateway Platform, a division of CCG. These actions are expected to be substantially completed in 2021.
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| | Three Months Ended | | Six Months Ended | |
(In Millions) | | Jun 26, 2021 | | Jun 27, 2020 | | Jun 26, 2021 | | Jun 27, 2020 | |
Employee severance and benefit arrangements | | $ | 15 | | | $ | 1 | | | $ | 22 | | | $ | 106 | | |
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Litigation charges and other | | 49 | | | — | | | 2,251 | | | 57 | | |
Asset impairment charges | | 282 | | | 8 | | | 282 | | | 8 | | |
Total restructuring and other charges | | $ | 346 | | | $ | 9 | | | $ | 2,555 | | | $ | 171 | | |
Litigation charges and other includes a charge of $2.2 billion in the first quarter of 2021 related to the VLSI litigation, which is recorded as a Corporate charge in the "all other" category presented in "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements. Refer to "Note 13: Contingencies" within Notes to Consolidated Condensed Financial Statements for further information on legal proceedings related to the VLSI litigation.
Asset impairment charges includes impairments related to the shutdown in the second quarter of 2021 of two of our non-strategic businesses, the results of which are included in the “all other” category presented in “Note 2: Operating Segments” within Notes to Consolidated Condensed Financial Statements. The goodwill related to these businesses was impaired, resulting in a charge of $237 million recognized in the “all other” category along with other impairment charges related to these businesses.
Debt Investments
Trading Assets
For trading assets still held at the reporting date we recorded net gains of $2 million in the second quarter of 2021 and net losses of $226 million in the first six months of 2021 ($347 million of net gains in the second quarter of 2020 and $183 million of net gains in the first six months of 2020). Net gains on the related derivatives were $23 million in the second quarter of 2021 and net gains of $245 million in the first six months of 2021 ($251 million of net losses in the second quarter of 2020 and $204 million of net losses in the first six months of 2020).
Available-for-Sale Debt Investments
Available-for-sale investments include corporate debt, government debt, and financial institution instruments. Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms, such as commercial paper, fixed- and floating-rate bonds, money market fund deposits, and time deposits. As of June 26, 2021 and December 26, 2020, substantially all time deposits were issued by institutions outside the U.S. The adjusted cost of our available-for-sale investments was $6.8 billion as of June 26, 2021 and $7.8 billion as of December 26, 2020. The adjusted cost of our available-for-sale investments approximated the fair value for these periods.
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| Financial Statements | Notes to Financial Statements | 11 |
The fair value of available-for-sale debt investments, by contractual maturity, as of June 26, 2021, was as follows:
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(In Millions) | | Fair Value |
Due in 1 year or less | | $ | 4,826 | |
Due in 1–2 years | | |