Delaware | 000-06217 | 94-1672743 |
(State or other jurisdiction | (Commission | (IRS Employer |
of incorporation) | File Number) | Identification No.) |
2200 Mission College Blvd., Santa Clara, California | 95054-1549 | |
(Address of principal executive offices) | (Zip Code) | |
(408) 765-8080 | ||
(Registrant's telephone number, including area code) | ||
(Former Name or Former Address, if Changed Since Last Report) |
Item 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
INTEL CORPORATION | ||||
(Registrant) | ||||
Date: | July 15, 2014 | By: | /s/ Cary I. Klafter | |
Cary I. Klafter | ||||
Corporate Secretary |
• | PC Client Group revenue of $8.7 billion, up 9 percent sequentially and up 6 percent year-over-year. |
• | Data Center Group revenue of $3.5 billion, up 14 percent sequentially and up 19 percent year-over-year. |
• | Internet of Things Group revenue of $539 million, up 12 percent sequentially and up 24 percent year-over-year. |
• | Mobile and Communications Group revenue of $51 million, down 67 percent sequentially and down 83 percent year-over-year. |
• | Software and services operating segments revenue of $548 million, down 1 percent sequentially and up 3 percent year-over-year. |
Financial Comparison | |||
Quarterly | |||
Q2 2014 | Q1 2014 | vs. Q1 2014 | |
Revenue | $13.8 billion | $12.8 billion | up 8% |
Gross Margin | 64.5% | 59.6% | up 4.9 points |
R&D and MG&A | $4.9 billion | $4.9 billion | up 1% |
Operating Income | $3.8 billion | $2.5 billion | up 53% |
Tax Rate | 28.7% | 27.7% | up 1.0 point |
Net Income | $2.8 billion | $1.9 billion | up 45% |
Earnings Per Share | 55 cents | 38 cents | up 45% |
Financial Comparison | |||
Year-Over-Year | |||
Q2 2014 | Q2 2013 | vs. Q2 2013 | |
Revenue | $13.8 billion | $12.8 billion | up 8% |
Gross Margin | 64.5% | 58.3% | up 6.2 points |
R&D and MG&A | $4.9 billion | $4.7 billion | up 5% |
Operating Income | $3.8 billion | $2.7 billion | up 41% |
Tax Rate | 28.7% | 25.7% | up 3.0 points |
Net Income | $2.8 billion | $2.0 billion | up 40% |
Earnings Per Share | 55 cents | 39 cents | up 41% |
• | Revenue: $14.4 billion, plus or minus $500 million. |
• | Gross margin percentage: 66 percent, plus or minus a couple of percentage points. |
• | R&D plus MG&A spending: approximately $4.9 billion. |
• | Restructuring charges: approximately $20 million. |
• | Amortization of acquisition-related intangibles: approximately $65 million. |
• | Impact of equity investments and interest and other: approximately zero. |
• | Depreciation: approximately $1.9 billion. |
• | Tax rate: approximately 28 percent. |
• | Revenue: growth of approximately 5 percent, slightly higher than prior expectations. |
• | Gross margin percentage: 63 percent, plus or minus a couple percentage points, in line with prior expectations. |
• | R&D plus MG&A spending: $19.3 billion, plus or minus $200 million, slightly higher than prior expectations of $19.2 billion. |
• | Amortization of acquisition-related intangibles: approximately $300 million, unchanged from prior expectations. |
• | Depreciation: approximately $7.4 billion, unchanged from prior expectations. |
• | Tax rate: each of the remaining quarters of 2014 is still expected to be approximately 28 percent, unchanged from prior. |
• | Full-year capital spending: $11.0 billion, plus or minus $500 million, unchanged from prior expectations. |
• | Demand for Intel's products is highly variable and, in recent years, Intel has experienced declining orders in the traditional PC market segment. Demand could be different from Intel's expectations due to factors including changes in business and economic conditions; consumer confidence or income levels; customer acceptance of Intel’s and competitors’ products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. |
• | Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term. |
• | Intel's gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; and product manufacturing quality/yields. Variations in gross margin may also be caused by the timing of Intel product introductions and related expenses, including marketing expenses, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, which may result in restructuring and asset impairment charges. |
• | The tax rate expectation is based on current tax law and current expected income. The tax rate may be affected by the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets. |
• | The amount, timing and other execution of Intel's stock buyback program could be affected by changes in Intel's priorities for the use of cash for other purposes, such as operational spending, capital spending, acquisitions, and because of changes in cash flows and changes in tax laws. |
• | Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, change in the fair value or impairments of debt and equity investments; interest rates; cash balances; and changes in fair value of derivative instruments. |
• | Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates. |
• | Intel’s results could be affected by the timing of closing of acquisitions, divestitures and other significant transactions. |
• | Intel's results could be affected by adverse effects associated with product defects and errata (deviations from published specifications), and by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, disclosure and other issues. An unfavorable ruling could include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property. |
Three Months Ended | Six Months Ended | |||||||||||||||
Jun 28, 2014 | Jun 29, 2013 | Jun 28, 2014 | Jun 29, 2013 | |||||||||||||
NET REVENUE | $ | 13,831 | $ | 12,811 | $ | 26,595 | $ | 25,391 | ||||||||
Cost of sales | 4,914 | 5,341 | 10,065 | 10,855 | ||||||||||||
GROSS MARGIN | 8,917 | 7,470 | 16,530 | 14,536 | ||||||||||||
Research and development | 2,859 | 2,516 | 5,705 | 5,043 | ||||||||||||
Marketing, general and administrative | 2,061 | 2,165 | 4,108 | 4,112 | ||||||||||||
R&D AND MG&A | 4,920 | 4,681 | 9,813 | 9,155 | ||||||||||||
Restructuring and asset impairment charges | 81 | — | 218 | — | ||||||||||||
Amortization of acquisition-related intangibles | 72 | 70 | 145 | 143 | ||||||||||||
OPERATING EXPENSES | 5,073 | 4,751 | 10,176 | 9,298 | ||||||||||||
OPERATING INCOME | 3,844 | 2,719 | 6,354 | 5,238 | ||||||||||||
Gains (losses) on equity investments, net | 95 | 11 | 143 | (15 | ) | |||||||||||
Interest and other, net | (17 | ) | (37 | ) | 95 | (87 | ) | |||||||||
INCOME BEFORE TAXES | 3,922 | 2,693 | 6,592 | 5,136 | ||||||||||||
Provision for taxes | 1,126 | 693 | 1,866 | 1,091 | ||||||||||||
NET INCOME | $ | 2,796 | $ | 2,000 | $ | 4,726 | $ | 4,045 | ||||||||
BASIC EARNINGS PER COMMON SHARE | $ | 0.56 | $ | 0.40 | $ | 0.95 | $ | 0.82 | ||||||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.55 | $ | 0.39 | $ | 0.92 | $ | 0.79 | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
BASIC | 4,981 | 4,978 | 4,977 | 4,963 | ||||||||||||
DILUTED | 5,123 | 5,106 | 5,120 | 5,093 |
Jun 28, 2014 | Mar 29, 2014 | Dec 28, 2013 | ||||||||||
CURRENT ASSETS | ||||||||||||
Cash and cash equivalents | $ | 3,049 | $ | 4,777 | $ | 5,674 | ||||||
Short-term investments | 4,491 | 5,234 | 5,972 | |||||||||
Trading assets | 9,771 | 9,035 | 8,441 | |||||||||
Accounts receivable, net | 3,489 | 3,505 | 3,582 | |||||||||
Inventories | ||||||||||||
Raw materials | 503 | 463 | 458 | |||||||||
Work in process | 2,071 | 1,803 | 1,998 | |||||||||
Finished goods | 1,369 | 1,497 | 1,716 | |||||||||
3,943 | 3,763 | 4,172 | ||||||||||
Deferred tax assets | 2,255 | 2,507 | 2,594 | |||||||||
Other current assets | 2,008 | 1,733 | 1,649 | |||||||||
TOTAL CURRENT ASSETS | 29,006 | 30,554 | 32,084 | |||||||||
Property, plant and equipment, net | 33,115 | 32,502 | 31,428 | |||||||||
Marketable equity securities | 6,044 | 6,085 | 6,221 | |||||||||
Other long-term investments | 2,184 | 1,765 | 1,473 | |||||||||
Goodwill | 10,621 | 10,617 | 10,513 | |||||||||
Identified intangible assets, net | 4,697 | 4,963 | 5,150 | |||||||||
Other long-term assets | 6,126 | 5,446 | 5,489 | |||||||||
TOTAL ASSETS | $ | 91,793 | $ | 91,932 | $ | 92,358 | ||||||
CURRENT LIABILITIES | ||||||||||||
Short-term debt | $ | 14 | $ | 36 | $ | 281 | ||||||
Accounts payable | 2,960 | 3,010 | 2,969 | |||||||||
Accrued compensation and benefits | 2,409 | 1,979 | 3,123 | |||||||||
Accrued advertising | 1,067 | 1,019 | 1,021 | |||||||||
Deferred income | 2,171 | 2,171 | 2,096 | |||||||||
Other accrued liabilities | 3,630 | 5,337 | 4,078 | |||||||||
TOTAL CURRENT LIABILITIES | 12,251 | 13,552 | 13,568 | |||||||||
Long-term debt | 13,180 | 13,172 | 13,165 | |||||||||
Long-term deferred tax liabilities | 4,187 | 4,302 | 4,397 | |||||||||
Other long-term liabilities | 2,928 | 2,868 | 2,972 | |||||||||
Stockholders' equity | ||||||||||||
Preferred Stock | — | — | — | |||||||||
Common stock and capital in excess of par value | 22,475 | 22,166 | 21,536 | |||||||||
Accumulated other comprehensive income (loss) | 1,120 | 1,156 | 1,243 | |||||||||
Retained Earnings | 35,652 | 34,716 | 35,477 | |||||||||
TOTAL STOCKHOLDERS' EQUITY | 59,247 | 58,038 | 58,256 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 91,793 | $ | 91,932 | $ | 92,358 |
Q2 2014 | Q1 2014 | Q2 2013 | ||||||||||
CASH INVESTMENTS: | ||||||||||||
Cash and short-term investments | $ | 7,540 | $ | 10,011 | $ | 9,992 | ||||||
Trading assets | 9,771 | 9,035 | 7,358 | |||||||||
Total cash investments | $ | 17,311 | $ | 19,046 | $ | 17,350 | ||||||
CURRENT DEFERRED INCOME: | ||||||||||||
Deferred income on shipments of components to distributors | $ | 951 | $ | 928 | $ | 770 | ||||||
Deferred income from software and services group | 1,220 | 1,243 | 1,201 | |||||||||
Total current deferred income | $ | 2,171 | $ | 2,171 | $ | 1,971 | ||||||
SELECTED CASH FLOW INFORMATION: | ||||||||||||
Depreciation | $ | 1,880 | $ | 1,720 | $ | 1,712 | ||||||
Share-based compensation | $ | 303 | $ | 283 | $ | 292 | ||||||
Amortization of intangibles | $ | 290 | $ | 287 | $ | 279 | ||||||
Capital spending* | $ | (2,828 | ) | $ | (2,689 | ) | $ | (2,723 | ) | |||
Net cash (used)/received for acquisitions/divestitures | $ | (29 | ) | $ | 42 | $ | (286 | ) | ||||
Investments in non-marketable equity instruments | $ | (971 | ) | $ | (144 | ) | $ | (90 | ) | |||
Stock repurchase program | $ | (2,081 | ) | $ | (545 | ) | $ | (550 | ) | |||
Proceeds from sales of shares to employees & excess tax benefit | $ | 584 | $ | 486 | $ | 612 | ||||||
Dividends paid | $ | (1,126 | ) | $ | (1,119 | ) | $ | (1,123 | ) | |||
EARNINGS PER COMMON SHARE INFORMATION: | ||||||||||||
Weighted average common shares outstanding - basic | 4,981 | 4,974 | 4,978 | |||||||||
Dilutive effect of employee equity incentive plans | 68 | 76 | 67 | |||||||||
Dilutive effect of convertible debt | 74 | 67 | 61 | |||||||||
Weighted average common shares outstanding - diluted | 5,123 | 5,117 | 5,106 | |||||||||
STOCK BUYBACK: | ||||||||||||
Shares repurchased | 76 | 22 | 23 | |||||||||
Cumulative shares repurchased (in billions) | 4.5 | 4.4 | 4.3 | |||||||||
Remaining dollars authorized for buyback (in billions) | $ | 0.5 | $ | 2.6 | $ | 4.2 | ||||||
OTHER INFORMATION: | ||||||||||||
Employees (in thousands) | 104.9 | 106.3 | 106.0 |
Three Months Ended | Six Months Ended | |||||||||||||||
Jun 28, 2014 | Jun 29, 2013 | Jun 28, 2014 | Jun 29, 2013 | |||||||||||||
Net Revenue | ||||||||||||||||
PC Client Group | $ | 8,667 | $ | 8,160 | $ | 16,608 | $ | 16,214 | ||||||||
Data Center Group | 3,509 | 2,944 | 6,596 | 5,721 | ||||||||||||
Internet of Things Group | 539 | 434 | 1,021 | 799 | ||||||||||||
Mobile and Communications Group | 51 | 292 | 207 | 696 | ||||||||||||
Software and services operating segments | 548 | 534 | 1,101 | 1,054 | ||||||||||||
All other | 517 | 447 | 1,062 | 907 | ||||||||||||
TOTAL NET REVENUE | $ | 13,831 | $ | 12,811 | $ | 26,595 | $ | 25,391 | ||||||||
Operating income (loss) | ||||||||||||||||
PC Client Group | $ | 3,734 | $ | 2,646 | $ | 6,536 | $ | 5,134 | ||||||||
Data Center Group | 1,817 | 1,302 | 3,134 | 2,446 | ||||||||||||
Internet of Things Group | 155 | 123 | 278 | 190 | ||||||||||||
Mobile and Communications Group | (1,124 | ) | (761 | ) | (2,053 | ) | (1,464 | ) | ||||||||
Software and services operating segments | 8 | (1 | ) | 1 | (7 | ) | ||||||||||
All other | (746 | ) | (590 | ) | (1,542 | ) | (1,061 | ) | ||||||||
TOTAL OPERATING INCOME | $ | 3,844 | $ | 2,719 | $ | 6,354 | $ | 5,238 |
• | PC Client Group: Delivering platforms designed for the notebook (including Ultrabook™ devices and 2 in 1 systems) and the desktop (including all-in-ones and high-end enthusiast PCs); wireless and wired connectivity products; as well as home gateway and set-top box components. |
• | Data Center Group: Delivering platforms designed for the server, workstation, networking and storage computing market segments. |
• | Internet of Things Group: Delivering platforms designed for embedded market segments including retail, transportation, industrial, and buildings and homes, along with a broad range of other market segments. |
• | Mobile and Communications Group: Delivering platforms designed for the tablet and smartphone market segments; and mobile communications components such as baseband processors, radio frequency transceivers, Wi-Fi, Bluetooth*, global navigation satellite systems, and power management chips. |
• | Software and services operating segments consists of the following: |
◦ | McAfee: A wholly owned subsidiary delivering software products for endpoint security, network and content security, risk and compliance, and consumer and mobile security. |
◦ | Software and Services Group: Delivering software products and services that promote Intel architecture as the platform of choice for software development. |
• | All other category includes revenue, expenses, and charges such as: |
◦ | Results of operations from our Non-Volatile Memory Solutions Group, Netbook Group, and New Devices Group; |
◦ | Amounts included within restructuring and asset impairment charges; |
◦ | A portion of profit-dependent compensation and other expenses not allocated to the operating segments; |
◦ | Divested businesses for which discrete operating results are not regularly reviewed by our CODM; |
◦ | Results of operations of startup businesses that support our initiatives, including our foundry business; |
◦ | Acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill. |
Q2 2014 | Q2 2014 | Q2 YTD 2014 | ||||
compared to Q1 2014 | compared to Q2 2013 | compared to Q2 YTD 2013 | ||||
PC Client Group Platform | ||||||
Unit Volumes | 12% | 9% | 5% | |||
Average Selling Prices | (3)% | (4)% | (3)% | |||
Data Center Group Platform | ||||||
Unit Volumes | 12% | 9% | 6% | |||
Average Selling Prices | 3% | 11% | 10% |
Intel Corporation 2200 Mission College Blvd. Santa Clara, CA 95054-1549 | ![]() |
• | Revenue of $13.8B was up 8%, from $12.8B |
• | Gross margin of 64.5% was up 6.2 points from 58.3% |
• | Operating income of $3.8B was up 41% from $2.7B |
• | Net income of $2.8B was up 40% from $2.0B |
• | Earnings per share of 55 cents was up 41% from 39 cents |
• | PC Client Group had revenue of $8.7B, up 6% year over year. PC Client Group platform volumes were up 9% and platform average selling prices were down 4% from a year ago. On a year-on-year basis, desktop platform volumes were up 8% and desktop platform average selling prices were up 2%. On a year-on-year basis, notebook platform volumes were up 9% and notebook platform average selling prices were down 7%. Relative to the first quarter, PC Client Group revenue was up 9% with platform volumes up 12% and platform average selling prices down 3%. |
• | Data Center Group had revenue of $3.5B, up 19% on a year-on-year basis. Platform volumes were up 9% and platform average selling prices were up 11% over this same horizon. Data Center Group revenue was up 14% from the first quarter with platform volumes up 12% and platform average selling prices up 3%. |
• | Internet of Things Group had revenue of $539M, up 24% on a year-over-year basis, and up 12% from the first quarter. |
• | Mobile and Communications Group had revenue of $51M, down 83% on a year-over-year basis, and down 67% from the first quarter. |
• | The software and services operating segments had revenue of $548M, up 3% on a year-over-year basis, and down 1% from the first quarter. |
• | All other operating segments had revenue of $517M, up 16% on a year-over-year basis, and down 5% from the first quarter. |
• | + 2.5 points: Lower other cost of sales (primarily on 14nm factory start-up) |
• | + 2.0 points: Higher platform* volumes |
• | + 1.0 point: Lower platform* unit costs |
• | + 1.0 point: Lower platform* inventory write-offs (pre-qualification products costs) primarily |
• | - 1.0 point: Tablet impact |
• | + 1.0 point: Higher platform* volumes |
• | + 1.0 point: Lower platform* unit costs |
• | - 0.5 point: Tablet impact |
• | + 1.5 points: Lower platform* unit costs |
• | + 0.5 point: Higher platform* volume |
• | - 0.5 point: Lower platform* average selling prices |
• | Demand for Intel's products is highly variable and, in recent years, Intel has experienced declining orders in the traditional PC market segment. Demand could be different from Intel's expectations due to factors including changes in business and economic conditions; consumer confidence or income levels; customer acceptance of Intel’s and competitors’ products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. |
• | Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term. |
• | Intel's gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; and product manufacturing quality/yields. Variations in gross margin may also be caused by the timing of Intel product introductions and related expenses, including marketing expenses, and Intel's ability to respond quickly to technological developments and to introduce new products or incorporate new features into existing products, which may result in restructuring and asset impairment charges. |
• | The tax rate expectation is based on current tax law and current expected income. The tax rate may be affected by the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets. |
• | The amount, timing and other execution of Intel's stock buyback program could be affected by changes in Intel's priorities for the use of cash for other purposes, such as operational spending, capital spending, acquisitions, and because of changes in cash flows and changes in tax laws. |
• | Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, change in the fair value or impairments of debt and equity investments; interest rates; cash balances; and changes in fair value of derivative instruments. |
• | Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates. |
• | Intel’s results could be affected by the timing of closing of acquisitions, divestitures and other significant transactions. |
• | Intel's results could be affected by adverse effects associated with product defects and errata (deviations from published specifications), and by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, disclosure and other issues. An unfavorable ruling could include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property. |