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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 | April 2, 2022 |
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)
| | | | | | | | | | | | | | |
| 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 |
☑
| | ¨ | | ¨ | | ☐ | ☐ |
| | | | | | | |
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 April 2, 2022, the registrant had outstanding 4,089 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 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," "aim," "strive," "objective," "goals," "plans," "ambitions," "opportunity," "outlook," "predict," "future," "to be," "roadmap," "achieve," "grow," "committed," "believes," "seeks," "targets," "milestones," "estimated," "continues," "likely," "possible," "may," "might," "potentially," "will," "would," "should," "could," "on track," "positioned," 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 and its anticipated benefits, including updates to our reporting structure; Intel's process and packaging technology, roadmap, and schedules, including future node performance and other metrics; manufacturing expansion and financing plans; investment plans, and impacts of investment plans, including in the U.S. and abroad; future responses to and effects of COVID-19, including manufacturing, transportation, and operational restrictions or disruptions, such as the recent Shanghai port shutdown; future economic conditions; projections of our future financial performance; future business, social, and environmental performance, goals, measures and strategies; our anticipated growth and trends in our businesses and operations; projected growth and trends in markets relevant to our businesses; business plans; future products, services and technology, and the expected regulation, availability, production and benefits of such products, services and technology; projected costs and yield trends; product and manufacturing plans, goals, timelines, ramps, progress and future product and process leadership and performance; geopolitical conditions, including the impacts of Russia's war on Ukraine and the suspension of our operations; expected timing and impact of acquisitions, divestitures, and other significant transactions, including statements relating to the pending acquisitions of Tower Semiconductor Ltd. and Granulate Cloud Solutions Ltd, the sale of our NAND memory business, and the proposed initial public offering of Mobileye; expected completion of restructuring activities; availability, uses, sufficiency, and cost of capital and of capital resources, including expected returns to stockholders such as dividends and share repurchases, and the expected timing of future repurchases; our valuation; future production capacity and product supply; supply expectations, including regarding constraints, limitations, pricing and industry shortages; the future purchase, use, and availability of products, components and services supplied by third parties, including third-party IP and manufacturing services; tax- and accounting-related expectations; LIBOR-related expectations; our role in the Rapid Assured Microelectronics Prototypes - Commercial program; uncertain events or assumptions, including statements relating to TAM, product or customer demand or market opportunity; 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 and our 2021 Form 10-K, particularly in "Risk Factors" within Other Key Information. 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, and Intel Core 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 $18.4 billion was down $1.3 billion year over year as CCG decreased 13% and DCAI increased 22%. CCG was down on lower notebook and desktop volume, partially offset by higher notebook and desktop ASPs, and lower revenue due to the continued ramp down from the exit of our 5G smartphone modem business. DCAI revenue increased on higher server volume due to strength in hyperscale products and continued recovery from COVID-driven lows in Q1 2021, partially offset by lower server ASPs. NEX revenue increased on strong demand for cloud networking and edge products. Refer to Note 2: Operating Segments within Notes to Consolidated Condensed Financial Statements for further information about the recent changes to our operating segments.
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Revenue | | Gross Margin | | Diluted EPS | | Cash Flows |
■ GAAP $B ■ Non-GAAP $B | | ■ GAAP ■ Non-GAAP | | ■ GAAP ■ Non-GAAP | | ■ Operating Cash Flow $B ■ Adjusted Free Cash Flow $B |
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$18.4B | | 50.4% | | 53.1% | | $1.98 | | $0.87 | | $5.9B | | $5.5B |
GAAP | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 | | GAAP | | non-GAAP1 |
Revenue down $1.3B or 7% from Q1 2021 | | Gross margin down 4.8 ppts from Q1 2021 | | Gross margin down 5.7 ppt from Q1 2021 | | Diluted EPS up $1.15 or 141% from Q1 2021 | | Diluted EPS down $0.47 or 35% from Q1 2021 | | Operating cash flow up $543M or 10% from Q1 2021 | | Adjusted free cash flow up $4.2B or 303% from Q1 2021 |
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Lower revenue in CCG and lack of Corporate revenue from a prepaid customer supply agreement in Q1 2021; higher revenue in DCAI and NEX. Non-GAAP Q1 2021 revenue excludes historical results of the divested NAND business. | | Lower gross margin from higher unit cost and higher period charges from ramp of Intel 4, partially offset by changes in revenue. Non-GAAP gross margin excludes amortization of acquisition-related intangibles, share-based compensation, and historical results of the divested NAND business. | | Higher EPS from gains on the sale of McAfee and on the NAND divestiture, and the benefit from the EC fine reversal, partially offset by higher operating expenses from additional investment and a higher effective tax rate. Non-GAAP results incrementally exclude Restructuring and other charges, (Gains) losses from divestiture, (Gains) losses on equity investments, net, the tax reform adjustment, and the tax effects of non-GAAP adjustments. | | Higher operating cash flow driven by decrease in cash used in net working capital and benefit from the EC fine reversal, offset by lower income after adjusting for non-cash items, including the gain on the sale of McAfee and pre-tax gain from the divestiture of our NAND business. Adjusted free cash flow increased due to the proceeds on the sale of McAfee. |
Key Developments
▪We announced our plans to invest up to €80 billion in the European Union over the next decade across the semiconductor value chain – from R&D to manufacturing to state-of-the art packaging technologies. We plan to invest up to an initial €17 billion into a leading-edge semiconductor fab mega-site in Germany, to create a new R&D and design hub in France, and to invest in R&D, manufacturing and foundry services in Ireland, Italy, Poland and Spain.
▪We entered into a definitive agreement to acquire Tower Semiconductor Ltd., a leading foundry for analog semiconductor solutions. The acquisition is expected to advance our IDM 2.0 strategy by accelerating our global end-to-end foundry business.
▪We announced an agreement to acquire Granulate Cloud Solutions Ltd, an Israel-based developer of real-time continuous optimization software. The acquisition of Granulate should help cloud and data center customers maximize compute workload performance and reduce infrastructure and cloud costs.
▪We continue to progress on our previously announced intention to take Mobileye public in the US via an IPO.
1 See "Non-GAAP Financial Measures" within MD&A.
2 See "Key Terms" within Consolidated Condensed Financial Statements and Supplemental Details.
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Consolidated Condensed Statements of Income | |
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| | Three Months Ended | | |
(In Millions, Except Per Share Amounts; Unaudited) | | Apr 2, 2022 | | Mar 27, 2021 | | | | |
Net revenue | | $ | 18,353 | | | $ | 19,673 | | | | | |
Cost of sales | | 9,109 | | | 8,819 | | | | | |
Gross margin | | 9,244 | | | 10,854 | | | | | |
Research and development | | 4,362 | | | 3,623 | | | | | |
Marketing, general and administrative | | 1,752 | | | 1,328 | | | | | |
Restructuring and other charges | | (1,211) | | | 2,209 | | | | | |
Operating expenses | | 4,903 | | | 7,160 | | | | | |
Operating income | | 4,341 | | | 3,694 | | | | | |
Gains (losses) on equity investments, net | | 4,323 | | | 368 | | | | | |
Interest and other, net | | 997 | | | (156) | | | | | |
Income before taxes | | 9,661 | | | 3,906 | | | | | |
Provision for taxes | | 1,548 | | | 545 | | | | | |
Net income | | $ | 8,113 | | | $ | 3,361 | | | | | |
Earnings per share—basic | | $ | 1.99 | | | $ | 0.83 | | | | | |
Earnings per share—diluted | | $ | 1.98 | | | $ | 0.82 | | | | | |
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Weighted average shares of common stock outstanding: | | | | | | | | |
Basic | | 4,079 | | | 4,056 | | | | | |
Diluted | | 4,107 | | | 4,096 | | | | | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Income | 3 |
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Consolidated Condensed Statements of Comprehensive Income | |
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| | Three Months Ended | | |
(In Millions; Unaudited) | | Apr 2, 2022 | | Mar 27, 2021 | | | | |
Net income | | $ | 8,113 | | | $ | 3,361 | | | | | |
Changes in other comprehensive income, net of tax: | | | | | | | | |
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Net unrealized holding gains (losses) on derivatives | | (115) | | | (350) | | | | | |
Actuarial valuation and other pension benefits (expenses), net | | 18 | | | 13 | | | | | |
Translation adjustments and other | | (25) | | | (15) | | | | | |
Other comprehensive income (loss) | | (122) | | | (352) | | | | | |
Total comprehensive income | | $ | 7,991 | | | $ | 3,009 | | | | | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Comprehensive Income | 4 |
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Consolidated Condensed Balance Sheets | |
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(In Millions) | | Apr 2, 2022 | | Dec 25, 2021 |
| | (unaudited) | | |
Assets | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 6,215 | | | $ | 4,827 | |
Short-term investments | | 32,481 | | | 24,426 | |
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Accounts receivable | | 7,074 | | | 9,457 | |
Inventories | | 11,935 | | | 10,776 | |
Assets held for sale | | 236 | | | 6,942 | |
Other current assets | | 4,627 | | | 2,130 | |
Total current assets | | 62,568 | | | 58,558 | |
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Property, plant and equipment, net of accumulated depreciation of $87,096 ($85,294 as of December 25, 2021) | | 66,718 | | | 63,245 | |
Equity investments | | 6,036 | | | 6,298 | |
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Goodwill | | 27,011 | | | 26,963 | |
Identified intangible assets, net | | 6,813 | | | 7,270 | |
Other long-term assets | | 7,210 | | | 6,072 | |
Total assets | | $ | 176,356 | | | $ | 168,406 | |
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Liabilities and stockholders’ equity | | | | |
Current liabilities: | | | | |
Short-term debt | | $ | 4,459 | | | $ | 4,591 | |
Accounts payable | | 7,210 | | | 5,747 | |
Accrued compensation and benefits | | 2,731 | | | 4,535 | |
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Other accrued liabilities | | 14,922 | | | 12,589 | |
Total current liabilities | | 29,322 | | | 27,462 | |
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Debt | | 32,788 | | | 33,510 | |
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Income taxes payable | | 4,372 | | | 4,305 | |
Deferred income taxes | | 1,547 | | | 2,667 | |
Other long-term liabilities | | 5,191 | | | 5,071 | |
Contingencies (Note 12) | | | | |
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Stockholders’ equity: | | | | |
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Common stock and capital in excess of par value, 4,089 issued and outstanding (4,070 issued and outstanding as of December 25, 2021) | | 29,244 | | | 28,006 | |
Accumulated other comprehensive income (loss) | | (1,002) | | | (880) | |
Retained earnings | | 74,894 | | | 68,265 | |
Total stockholders’ equity | | 103,136 | | | 95,391 | |
Total liabilities and stockholders’ equity | | $ | 176,356 | | | $ | 168,406 | |
See accompanying notes.
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| Financial Statements | Consolidated Condensed Balance Sheets | 5 |
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Consolidated Condensed Statements of Cash Flows | |
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| | Three Months Ended |
(In Millions; Unaudited) | | Apr 2, 2022 | | Mar 27, 2021 |
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Cash and cash equivalents, beginning of period | | $ | 4,827 | | | $ | 5,865 | |
Cash flows provided by (used for) operating activities: | | | | |
Net income | | 8,113 | | | 3,361 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation | | 2,847 | | | 2,454 | |
Share-based compensation | | 707 | | | 425 | |
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Restructuring and other charges | | 17 | | | 2,209 | |
Amortization of intangibles | | 501 | | | 448 | |
(Gains) losses on equity investments, net | | (4,325) | | | (299) | |
(Gains) losses on divestitures | | (1,121) | | | — | |
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Changes in assets and liabilities: | | | | |
Accounts receivable | | 2,384 | | | (426) | |
Inventories | | (1,147) | | | 180 | |
Accounts payable | | (128) | | | 303 | |
Accrued compensation and benefits | | (1,884) | | | (1,283) | |
Prepaid customer supply agreements | | (6) | | | (1,566) | |
Income taxes | | 1,219 | | | 383 | |
Other assets and liabilities | | (1,286) | | | (841) | |
Total adjustments | | (2,222) | | | 1,987 | |
Net cash provided by operating activities | | 5,891 | | | 5,348 | |
Cash flows provided by (used for) investing activities: | | | | |
Additions to property, plant and equipment | | (4,604) | | | (3,972) | |
Additions to held for sale NAND property, plant and equipment | | (193) | | | (416) | |
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Purchases of short-term investments | | (19,091) | | | (6,574) | |
Maturities and sales of short-term investments | | 10,490 | | | 8,009 | |
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Sales of equity investments | | 4,682 | | | 86 | |
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Proceeds from divestitures | | 6,544 | | | — | |
Other investing | | (468) | | | 866 | |
Net cash used for investing activities | | (2,640) | | | (2,001) | |
Cash flows provided by (used for) financing activities: | | | | |
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Payments on finance leases | | (299) | | | — | |
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Proceeds from sales of common stock through employee equity incentive plans | | 589 | | | 565 | |
Repurchase of common stock | | — | | | (2,301) | |
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Payment of dividends to stockholders | | (1,487) | | | (1,411) | |
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Other financing | | (666) | | | (873) | |
Net cash provided by (used for) financing activities | | (1,863) | | | (4,020) | |
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Net increase (decrease) in cash and cash equivalents | | 1,388 | | | (673) | |
Cash and cash equivalents, end of period | | $ | 6,215 | | | $ | 5,192 | |
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Supplemental disclosures: | | | | |
Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities | | $ | 2,949 | | | $ | 2,472 | |
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Cash paid during the period for: | | | | |
Interest, net of capitalized interest | | $ | 177 | | | $ | 161 | |
Income taxes, net of refunds | | $ | 335 | | | $ | 172 | |
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See accompanying notes.
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| Financial Statements | Consolidated Condensed Statements of Cash Flows | 6 |
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Consolidated Condensed Statements of Stockholders' Equity | |
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| | 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 | | | | | | | | | | |
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Balance as of December 25, 2021 | | 4,070 | | | $ | 28,006 | | | $ | (880) | | | $ | 68,265 | | | $ | 95,391 | |
Net income | | — | | | — | | | — | | | 8,113 | | | 8,113 | |
Other comprehensive income (loss) | | — | | | — | | | (122) | | | — | | | (122) | |
Employee equity incentive plans and other | | 20 | | | 589 | | | — | | | — | | | 589 | |
Share-based compensation | | — | | | 707 | | | — | | | — | | | 707 | |
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Repurchase of common stock | | — | | | — | | | — | | | — | | | — | |
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Restricted stock unit withholdings | | (1) | | | (58) | | | — | | | 3 | | | (55) | |
Cash dividends declared ($0.37 per share) | | — | | | — | | | — | | | (1,487) | | | (1,487) | |
Balance as of April 2, 2022 | | 4,089 | | | $ | 29,244 | | | $ | (1,002) | | | $ | 74,894 | | | $ | 103,136 | |
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Balance as of December 26, 2020 | | 4,062 | | | $ | 25,556 | | | $ | (751) | | | $ | 56,268 | | | $ | 81,073 | |
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Net income | | — | | | — | | | — | | | 3,361 | | | 3,361 | |
Other comprehensive income (loss) | | — | | | — | | | (352) | | | — | | | (352) | |
Employee equity incentive plans and other | | 17 | | | 565 | | | — | | | — | | | 565 | |
Share-based compensation | | — | | | 425 | | | — | | | — | | | 425 | |
Temporary equity reduction | | — | | | — | | | — | | | — | | | — | |
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Repurchase of common stock | | (40) | | | (249) | | | — | | | (2,166) | | | (2,415) | |
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Restricted stock unit withholdings | | (1) | | | (25) | | | — | | | (4) | | | (29) | |
Cash dividends declared ($0.70 per share) | | — | | | — | | | — | | | (2,821) | | | (2,821) | |
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Balance as of March 27, 2021 | | 4,038 | | | $ | 26,272 | | | $ | (1,103) | | | $ | 54,638 | | | $ | 79,807 | |
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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.
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| Financial Statements | Consolidated Condensed Statements of Stockholders' Equity | 7 |
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Notes to Consolidated Condensed Financial Statements | |
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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 2021 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 2021 Form 10-K where we include additional information about our policies and the methods and assumptions used in our estimates.
In the first quarter of 2022, we reclassified the presentation of cash paid and received under our credit support annex agreements with derivative counterparties within our Consolidated Condensed Statement of Cash Flows. These reclassifications better reflect the economic intent of the credit support annex agreements, and result in changes to amounts previously reported for net cash provided by (used for) operating, investing, and financing activities.
In the first quarter of 2022, we reclassified the presentation of certain marketable debt investments within our Consolidated Condensed Balance Sheets, combining all marketable debt investments with original contractual maturities of three months or more into Short-term investments as they represent the investment of cash available for current operations. These reclassifications simplify our Consolidated Condensed Balance Sheets and result in changes to amounts previously reported as Short-term investments, Trading assets and Other long-term investments.
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Note 2 : | Operating Segments |
We previously announced several organizational changes that would accelerate the execution and innovation of our Company by allowing us to capture growth in both large traditional markets and high-growth emerging markets. This includes reorganization of our business units to capture this growth and to provide increased transparency, focus and accountability. As a result, we modified our segment reporting in Q1 2021 to align to the previously announced business reorganization. All prior-period segment data has been retrospectively adjusted to reflect the way we internally manage and monitor operating segment performance starting in fiscal year 2022.
We now manage our business through the following operating segments:
▪Client Computing (CCG)
▪Datacenter and AI (DCAI)
▪Network and Edge (NEX)
▪Accelerated Computing Systems and Graphics (AXG)
▪Mobileye
▪Intel Foundry Services (IFS)
We derive a substantial majority of our revenue from our principal products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package, which is based on Intel® architecture.
CCG, DCAI and NEX are our reportable operating segments. AXG, Mobileye, and IFS 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. AXG revenue includes integrated graphics royalties from our CCG and NEX operating segments and are recorded as if the sales or transfers were to third parties at prices that approximate market-based selling prices. When we enter into federal contracts, they are aligned to the sponsoring operating segment.
We have sales and marketing, manufacturing, engineering, finance, and administration groups. Expenses for these groups are generally allocated to the operating segments.
We have an "all other" category that includes revenue, expenses, and charges such as:
▪historical results of operations from divested businesses;
▪results of operations of start-up businesses that support our initiatives;
▪amounts included within restructuring and other charges;
▪employee benefits, compensation, and other expenses not allocated to the operating segments (beginning the first quarter of 2022, this includes all of our stock-based compensation); and
▪acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
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| Financial Statements | Notes to Financial Statements | 8 |
The CODM, who is our CEO, allocates resources to and assesses the performance of each operating segment using information about the operating segment's revenue and operating income (loss). The CODM does not evaluate operating segments using discrete asset information and we do not identify or allocate assets by operating segments. Based on the interchangeable nature of our manufacturing and assembly and test assets, most of the related depreciation expense is not directly identifiable within our operating segments, as it is included in overhead cost pools and subsequently absorbed into inventory as each product passes through our manufacturing process. Because our products are then sold across multiple operating segments, it is impracticable to determine the total depreciation expense included as a component of each operating segment's operating income (loss) results. We do not allocate gains and losses from equity investments, interest and other income, share-based compensation, 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. There have been no changes to our segment accounting policies disclosed in our 2021 Form 10-K except for the organizational changes and the change in allocation of stock-based compensation expense described above.
Net revenue and operating income (loss) for each period were as follows:
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| | Three Months Ended | | |
(In Millions) | | Apr 2, 2022 | | Mar 27, 2021 | | | | |
Operating segment revenue: | | | | | | | | |
Client Computing | | | | | | | | |
Desktop | | $ | 2,641 | | | $ | 2,770 | | | | | |
Notebook | | 5,959 | | | 6,956 | | | | | |
Other | | 694 | | | 997 | | | | | |
| | 9,294 | | | 10,723 | | | | | |
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Datacenter and AI | | 6,034 | | | 4,940 | | | | | |
Network and Edge | | 2,213 | | | 1,799 | | | | | |
Accelerated Computing Systems and Graphics | | 219 | | 181 | | | | | |
Mobileye | | 394 | | | 377 | | | | | |
Intel Foundry Services | | 283 | | | 103 | | | | | |
All other | | 67 | | | 1,724 | | | | | |
Total operating segment revenue | | $ | 18,504 | | | $ | 19,847 | | | | | |
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Operating income (loss): | | | | | | | | |
Client Computing | | $ | 2,827 | | | $ | 4,288 | | | | | |
Datacenter and AI | | 1,686 | | | 1,706 | | | | | |
Network and Edge | | 366 | | | 243 | | | | | |
Accelerated Computing Systems and Graphics | | (390) | | | (176) | | | | | |
Mobileye | | 148 | | | 171 | | | | | |
Intel Foundry Services | | (31) | | | (34) | | | | | |
All other | | (265) | | | (2,504) | | | | | |
Total operating income | | $ | 4,341 | | | $ | 3,694 | | | | | |
The following table presents intersegment revenue before eliminations:
| | | | | | | | | | | | | | |
Total operating segment revenue | | $ | 18,504 | | | $ | 19,847 | |
| | | | |
Less: Accelerated Computing Systems and Graphics intersegment revenue | | (151) | | | (174) | |
Total net revenue | | $ | 18,353 | | | $ | 19,673 | |
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 9 |
| | | | | |
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.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
(In Millions, Except Per Share Amounts) | | Apr 2, 2022 | | Mar 27, 2021 | | | | |
Net income available to common stockholders | | $ | 8,113 | | | $ | 3,361 | | | | | |
Weighted average shares of common stock outstanding—basic | | 4,079 | | | 4,056 | | | | | |
Dilutive effect of employee equity incentive plans | | 28 | | | 40 | | | | | |
| | | | | | | | |
Weighted average shares of common stock outstanding—diluted | | 4,107 | | | 4,096 | | | | | |
Earnings per share—basic
| | $ | 1.99 | | | $ | 0.83 | | | | | |
Earnings per share—diluted
| | $ | 1.98 | | | $ | 0.82 | | | | | |
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.
| | | | | |
Note 4 : | Other Financial Statement Details |
Inventories
| | | | | | | | | | | | | | |
(In Millions) | | Apr 2, 2022 | | Dec 25, 2021 |
Raw materials | | $ | 1,596 | | | $ | 1,441 | |
Work in process | | 6,928 | | | 6,656 | |
Finished goods | | 3,411 | | | 2,679 | |
Total inventories | | $ | 11,935 | | | $ | 10,776 | |
Interest and Other, Net
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | |
(In Millions) | | Apr 2, 2022 | | Mar 27, 2021 | | | | |
Interest income | | $ | 47 | | | $ | 37 | | | | | |
Interest expense | | (124) | | | (190) | | | | | |
Other, net | | 1,074 | | | (3) | | | | | |
Total interest and other, net | | $ | 997 | | | $ | (156) | | | | | |
Interest expense in the preceding table is net of $142 million of interest capitalized in the first three months of 2022 ($97 million in the first three months of 2021). Other, net in the first three months of 2022, includes a gain of $1.1 billion resulting from the first closing of the divestiture of our NAND memory business.
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 10 |
| | | | | |
Note 5 : | Restructuring and Other Charges |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | |
(In Millions) | | Apr 2, 2022 | | Mar 27, 2021 | | | | | |
Employee severance and benefit arrangements | | $ | 5 | | | $ | 6 | | | | | | |
| | | | | | | | | |
Litigation charges and other | | (1,216) | | | 2,203 | | | | | | |
| | | | | | | | | |
Total restructuring and other charges | | $ | (1,211) | | | $ | 2,209 | | | | | | |
Litigation charges and other includes $1.2 billion in the first quarter of 2022 from the annulled penalty related to an EC fine that was recorded and paid in 2009, and a charge of $2.2 billion in the first quarter of 2021 related to the VLSI litigation. These are recorded as a Corporate benefit and charge, respectively, in the "all other" category presented in "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements. Refer to "Note 12: Contingencies" within Notes to Consolidated Condensed Financial Statements for further information on legal proceedings related to the EC fine and the VLSI litigation.
Short-term Investments
Short-term investments include marketable debt investments in 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 April 2, 2022 and December 25, 2021, substantially all time deposits were issued by institutions outside the U.S.
For certain of our marketable debt investments, we economically hedge market risks at inception with a related derivative instrument or the marketable debt investment itself is used to economically hedge currency exchange rate risk from remeasurement. These hedged investments are reported at fair value with gains or losses from the investments and the related derivative instruments recorded in interest and other, net. The fair value of our hedged investments was $26.8 billion as of April 2, 2022 and $21.5 billion as of December 25, 2021. For hedged investments still held at the reporting date, we recorded net losses of $411 million in the first three months of 2022 ($372 million of net losses in the first three months of 2021). Net gains on the related derivatives were $377 million in the first three months of 2022 ($366 million of net gains in the first three months of 2021).
Our remaining unhedged marketable debt investments are reported at fair value, with unrealized gains or losses, net of tax, recorded in accumulated other comprehensive income (loss). The adjusted cost of these investments was $9.8 billion as of April 2, 2022 and $5.0 billion as of December 25, 2021, which approximated the fair value for these periods.
The fair value of marketable debt investments, by contractual maturity, as of April 2, 2022, was as follows:
| | | | | | | | |
(In Millions) | | Fair Value |
Due in 1 year or less | | $ | 26,683 | |
Due in 1–2 years | | 4,103 | |
Due in 2–5 years | | 4,275 | |
Due after 5 years | | 613 | |
Instruments not due at a single maturity date | | 859 | |
Total | | $ | 36,533 | |
Equity Investments
| | | | | | | | | | | | | | |
(In Millions) | | Apr 2, 2022 | | Dec 25, 2021 |
Marketable equity securities | | $ | 1,764 | | | $ | 2,171 | |
Non-marketable equity securities | | 4,258 | | | 4,111 | |
Equity method investments | | 14 | | | 16 | |
Total | | $ | 6,036 | | | $ | 6,298 | |
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 11 |
The components of gains (losses) on equity investments, net for each period were as follows:
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | |
(In Millions) | | Apr 2, 2022 | | Mar 27, 2021 | | | | | | | | |
Ongoing mark-to-market adjustments on marketable equity securities | | $ | (430) | | | $ | (291) | | | | | | | | | |
Observable price adjustments on non-marketable equity securities | | 71 | | | 551 | | | | | | | | | |
Impairment charges | | (23) | | | (38) | | | | | | | | | |
Sale of equity investments and other¹ | | 4,705 | | | 146 | | | | | | | | | |
Total gains (losses) on equity investments, net | | $ | 4,323 | | | $ | 368 | | | | | | | | | |
1 Sale of equity investments and other includes realized gains (losses) on sales of non-marketable equity investments, our share of equity method investees' gains (losses) and distributions, and initial fair value adjustments recorded upon a security becoming marketable.
Gains and losses for our marketable and non-marketable equity securities for each period were as follows:
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | |
(In Millions) | | Apr 2, 2022 | | Mar 27, 2021 | | | | | |
Net gains (losses) recognized during the period on equity securities | | $ | (244) | | | $ | 311 | | | | | | |
Less: Net (gains) losses recognized during the period on equity securities sold during the period | | (17) | | | (85) | | | | | | |
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date | | $ | (261) | | | $ | 226 | | | | | | |
McAfee Corp.
McAfee Corp. (McAfee) completed its initial public offering in October 2020. Due to our 41% ownership and significant influence as of December 25, 2021, we accounted for it as an equity method investment. We had no accounting carrying value as of December 25, 2021.
In Q1 2022, the sale of McAfee to an investor group was completed. We received $4.6 billion in cash for the sale of our remaining share of McAfee and recognized $4.6 billion of gains in Sale of equity investments and other.
Beijing Unisoc Technology Ltd.
We account for our interest in Beijing Unisoc Technology Ltd. (Unisoc) as a non-marketable equity security. In the first quarter of 2021, we recognized $471 million in observable price adjustments in our investment in Unisoc. As of April 2, 2022 the net book value of the investment is $1.1 billion ($1.1 billion as of December 25, 2021).
| | | | | |
Note 7 : | Acquisitions and Divestitures |
Acquisitions
Pending acquisition of Tower Semiconductor
During the first quarter of 2022, we entered into a definitive agreement to acquire Tower Semiconductor Ltd. (Tower) in a cash for stock transaction expected to close in twelve months from the date of the agreement. Tower is a leading foundry for analog semiconductor solutions. The acquisition is expected to advance Intel's IDM 2.0 strategy by accelerating our global end-to-end foundry business. Tower will be included in our IFS operating segment. Upon completion of the acquisition, each issued and outstanding ordinary share of Tower will be converted into the right to receive $53.00 per share in cash, representing a total enterprise value of approximately $5.4 billion as of the agreement date. This transaction is subject to certain regulatory approvals and customary closing conditions. If the agreement is terminated under certain circumstances involving the failure to obtain required regulatory approvals, we will be obligated to pay Tower a termination fee of $353 million.
Divestitures
NAND Memory Business
In October 2020, we signed an agreement with SK hynix Inc. (SK hynix) to divest our NAND memory business for $9.0 billion in cash. The NAND memory business includes our NAND memory fabrication facility in Dalian, China and certain related equipment and tangible assets (the Fab Assets), our NAND SSD business (the NAND SSD Business), and our NAND memory technology and manufacturing business (the NAND OpCo Business). The transaction will be completed in two closings.
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 12 |
The first closing was completed on December 29, 2021. At first closing, SK hynix paid $7.0 billion of consideration, with the remaining $2.0 billion to be received by the second closing of the transaction, expected to be no earlier than March 2025. In connection with the first closing, we recognized a pre-tax gain of $1.1 billion within interest and other, net, and tax expense of $545 million. Based on our ongoing obligation under the NAND wafer manufacturing and sale agreement, $583 million of the first closing consideration was deferred and will be recognized between the first and second closing within interest and other, net.
At the first closing, we sold to SK hynix the Fab Assets and the NAND SSD Business and transferred certain employees, IP, and other assets related to the NAND OpCo Business to separately created wholly owned subsidiaries of Intel. The equity interest of the NAND OpCo Business will transfer to SK hynix at the second closing. In connection with the first closing, we and certain affiliates of SK hynix also entered into a NAND wafer manufacturing and sale agreement, pursuant to which we will manufacture and sell to SK hynix NAND memory wafers to be manufactured using the Fab Assets in Dalian, China until the second closing. We have concluded based on the terms of the transaction agreements that the subsidiaries are variable interest entities for which we are not the primary beneficiary, because the governance structure of these entities does not allow us to direct the activities that would most significantly impact their economic performance. In line with this conclusion, we fully deconsolidated our ongoing interests in the NAND OpCo Business, and recorded receivables for the remaining proceeds of $1.9 billion, a portion of which is short-term and will be paid related to the transfer of inventory for processing under the NAND wafer manufacturing and sale agreement.
The carrying amounts of the major classes of NAND assets as of the first closing date included the following:
| | | | | | | | | | | | | | |
(In Millions) | | | | Dec 29, 2021 |
Inventories | | | | $ | 941 | |
Property, plant and equipment, net | | | | 6,018 | |
Total sold | | | | $ | 6,959 | |
The wafer manufacturing and sale agreement includes incentives and penalties that are contingent on the cost of operation and output of the NAND OpCo Business. These incentives and penalties present a maximum exposure of up to $500 million annually, and $1.5 billion in the aggregate. We are currently in negotiations with SK hynix to update the operating plan of the NAND OpCo Business in light of the current business environment and projections, which may impact the metrics associated with the incentives and penalties and our expectations of the performance of the NAND OpCo Business against those metrics.
Our transactions with the NAND OpCo Business between the first and second closings are considered related party transactions due to our equity interests and the wafer manufacturing and sales agreement. Related party transactions include certain assets that transferred at first closing between Intel and the NAND OpCo Business, or costs that we incurred on behalf of the NAND OpCo Business, for which we are entitled to be reimbursed. As of April 2, 2022, we have a receivable due to Intel of $787 million recorded within Other current assets on our Consolidated Condensed Balance Sheets. We will be reimbursed for costs of approximately $35 million per quarter for 2022 for corporate function services, which include human resources, information technology, finance, supply chain, and other compliance requirements associated with being wholly owned subsidiaries.
In March 2022, we amended our $5.0 billion variable-rate revolving credit facility agreement, extending the maturity date by one year to March 2027 and transitioning the interest terms from LIBOR to term SOFR. The revolving credit facility had no borrowings outstanding as of April 2, 2022.
We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program.
Our senior floating rate note pays interest quarterly and our senior fixed rate notes pay interest semiannually. We may redeem the fixed rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under our notes rank equally in the right of payment with all of our other existing and future senior unsecured indebtedness and effectively rank junior to all liabilities of our subsidiaries.
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 13 |
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Apr 2, 2022 | | Dec 25, 2021 | | |
| | Fair Value Measured and Recorded at Reporting Date Using | | | | Fair Value Measured and Recorded at Reporting Date Using | | | | |
(In Millions) | | Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | | |
Assets | | | | | | | | | | | | | | | | | | |
Cash equivalents: | | | | | | | | | | | | | | | | | | |
Corporate debt | | $ | — | | | $ | 1,671 | | | $ | — | | | $ | 1,671 | | | $ | — | | | $ | 65 | | | $ | — | | | $ | 65 | | | |
Financial institution instruments¹ | | 745 | | | 1,436 | | | — | | | 2,181 | | | 1,216 | | | 763 | | | — | | | 1,979 | | | |
Government debt² | | 200 | | | — | | | — | | | 200 | | | — | | | — | | | — | | | — | | | |
Reverse repurchase agreements | | — | | | 1,695 | | | — | | | 1,695 | | | — | | | 1,595 | | | — | | | 1,595 | | | |
Short-term investments: | | | | | | | | | | | | | | | | | | |
Corporate debt | | — | | | 7,878 | | | — | | | 7,878 | | | — | | | 6,367 | | | — | | | 6,367 | | | |
Financial institution instruments¹ | | 114 | | | 7,003 | | | — | | | 7,117 | | | 154 | | | 5,162 | | | — | | | 5,316 | | | |
Government debt² | | 648 | | | 16,838 | | | — | | | 17,486 | | | 50 | | | 12,693 | | | — | | | 12,743 | | | |
Other current assets: | | | | | | | | | | | | | | | | | | |
Derivative assets | | 88 | | | 892 | | | — | | | 980 | | | 80 | | | 576 | | | — | | | 656 | | | |
Loans receivable³ | | — | | | — | | | — | | | — | | | — | | | 152 | | | — | | | 152 | | | |
Marketable equity securities4 | | 1,694 | | | 70 | | | — | | | 1,764 | | | 1,854 | | | 317 | | | — | | | 2,171 | | | |
Other long-term assets: | | | | | | | | | | | | | | | | | | |
Derivative assets | | — | | | 194 | | | — | | | 194 | | | — | | 772 | | | 7 | | | 779 | | | |
Loans receivable³ | | — | | | 73 | | | — | | | 73 | | | — | | 57 | | | — | | 57 | | | |
Total assets measured and recorded at fair value | | $ | 3,489 | | | $ | 37,750 | | | $ | — | | | $ | 41,239 | | | $ | 3,354 | | | $ | 28,519 | | | $ | 7 | | | $ | 31,880 | | | |
Liabilities | | | | | | | | | | | | | | | | | | |
Other accrued liabilities: | | | | | | | | | | | | | | | | | | |
Derivative liabilities | | $ | 17 | | | $ | 608 | | | $ | — | | | $ | 625 | | | $ | 4 | | | $ | 516 | | | $ | — | | | $ | 520 | | | |
| | | | | | | | | | | | | | | | | | |
Other long-term liabilities: | | | | | | | | | | | | | | | | | | |
Derivative liabilities | | — | | | 104 | | | 22 | | | 126 | | | — | | | 9 | | | — | | | 9 | | | |
Total liabilities measured and recorded at fair value | | $ | 17 | | | $ | 712 | | | $ | 22 | | | $ | 751 | | | $ | 4 | | | $ | 525 | | | $ | — | | | $ | 529 | | | |
1Level 1 investments consist of money market funds. Level 2 investments consist primarily of commercial paper, certificates of deposit, time deposits, and notes and bonds issued by financial institutions.
2Level 1 investments consist primarily of U.S. Treasury securities. Level 2 investments consist primarily of U.S. agency notes and non-U.S. government debt.
3The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance.
4 Level 2 investments consist of marketable equity securities subject to security-specific restrictions.
Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
Our non-marketable equity securities, equity method investments, and certain non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment or observable price adjustment is recognized in the current period. If an observable price adjustment or impairment is recognized on our non-marketable equity securities during the period, we classify these assets as Level 3.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not been remeasured or impaired in the current period, grants receivable, reverse repurchase agreements with original maturities greater than three months, and issued debt.
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 14 |
We classify the fair value of grants receivable and reverse repurchase agreements with original maturities greater than three months as Level 2. The estimated fair value of these financial instruments approximates their carrying value. The aggregate carrying value of grants receivable as of April 2, 2022 was $335 million (the aggregate carrying value as of December 25, 2021 was $317 million). The aggregate carrying value of reverse repurchase agreements with original maturities greater than three months as of April 2, 2022 was $400 million (the aggregate carrying value as of December 25, 2021 was $0).
We classify the fair value of issued debt (excluding commercial paper, drafts payable, and finance leases) as Level 2. The fair value of our issued debt was $38.1 billion as of April 2, 2022 ($41.5 billion as of December 25, 2021).
| | | | | |
Note 10 : | Other Comprehensive Income (Loss) |
The changes in accumulated other comprehensive income (loss) by component and related tax effects in the first three months of 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In Millions) | | | | | | Unrealized Holding Gains (Losses) on Derivatives | | Actuarial Valuation and Other Pension Expenses | | Translation Adjustments and Other | | Total |
Balance as of December 25, 2021 | | | | | | $ | 211 | | | $ | (1,114) | | | $ | 23 | | | $ | (880) | |
Other comprehensive income (loss) before reclassifications | | | | | | (115) | | | 3 | | | (32) | | | (144) | |
Amounts reclassified out of accumulated other comprehensive income (loss) | | | | | | (15) | | | 11 | | | — | | | (4) | |
Tax effects | | | | | | 15 | | | 4 | | | 7 | | | 26 | |
Other comprehensive income (loss) | | | | | | (115) | | | 18 | | | (25) | | | (122) | |
Balance as of April 2, 2022 | | | | | | $ | 96 | | | $ | (1,096) | | | $ | (2) | | | $ | (1,002) | |
We estimate that we will reclassify approximately $73 million (before taxes) of net derivative losses included in accumulated other comprehensive income (loss) into earnings within the next 12 months.
| | | | | |
Note 11 : | Derivative Financial Instruments |
Volume of Derivative Activity
Total gross notional amounts for outstanding derivatives at the end of each period were as follows:
| | | | | | | | | | | | | | | | |
(In Millions) | | Apr 2, 2022 | | Dec 25, 2021 | | |
Foreign currency contracts | | $ | 43,494 | | | $ | 38,024 | | | |
Interest rate contracts | | 15,785 | | | 15,209 | | | |
Other | | 2,317 | | | 2,517 | | | |
Total | | $ | 61,596 | | | $ | 55,750 | | | |
| | | | | | | | | | | |
| Financial Statements | Notes to Financial Statements | 15 |
Fair Value of Derivative Instruments
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Apr 2, 2022 | | Dec 25, 2021 |
(In Millions) | | Assets1 | | Liabilities2 | | Assets1 | | Liabilities2 |
Derivatives designated as hedging instruments: | | | | | | | | |
Foreign currency contracts3 | | $ | 87 | | | $ | 218 | | | $ | |