Intel 1997 Annual Report Download

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INTEL CORP
FORM 10-K
(Annual Report)
Filed 03/27/98 for the Period Ending 12/27/97
Address 2200 MISSION COLLEGE BLVD
RNB-4-151
SANTA CLARA, CA 95054
Telephone 4087658080
CIK 0000050863
Symbol INTC
SIC Code 3674 - Semiconductors and Related Devices
Industry Semiconductors
Sector Technology
Fiscal Year 12/31
http://www.edgar-online.com
© Copyright 2008, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    ... CORP FORM 10-K (Annual Report) Filed 03/27/98 for the Period Ending 12/27/97 Address 2200 MISSION COLLEGE BLVD RNB-4-151 SANTA CLARA, CA 95054 4087658080 0000050863 INTC 3674 - Semiconductors and Related Devices Semiconductors Technology 12/31 Telephone CIK Symbol SIC Code Industry Sector Fiscal...

  • Page 2
    ... (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 94-1672743 (I.R.S. Employer Identification No.) 2200 Mission College Boulevard, Santa Clara, California, 95052-8119 (Address of principal executive offices, Zip Code...

  • Page 3
    Part III.

  • Page 4
    ...Company's major products include microprocessors, chipsets, graphics products, embedded processors and microcontrollers, flash memory products, network and communications products, conferencing products and digital imaging products. Intel sells its products to original equipment manufacturers ("OEMs...

  • Page 5
    ... mobile applications consume less power and come in a smaller package than the desktop/server versions. Intel also expanded its OverDrive(R) processor family of upgrade microprocessors in 1997. In March, Intel introduced the Pentium Overdrive (R) processor with MMX technology at speeds of 166, 150...

  • Page 6
    ...Processors and Microcontrollers Intel provides embedded products such as microprocessors, microcontrollers and memory components to a wide range of manufacturers. Embedded products are used in products such as industrial PCs, point-of-sales terminals, telecommunications equipment, automobile engine...

  • Page 7
    ... & Share(TM) camera pack, a PC communications, photo and video editing package. The camera pack includes an Intel PC camera, hardware and an integrated suite of communications and image-editing software. Digital Imaging Products During 1997, Intel announced its 971 PC Camera Kit for manufacturers...

  • Page 8
    ... for many customers. Most of Intel's sales to distributors are made under agreements allowing for price protection and/or the right of return on unsold merchandise. Sales representatives generally do not offer directly competitive products, but may carry complementary items manufactured by others...

  • Page 9
    ... to develop higher performance microprocessors for each market segment, including servers, workstations, high-end business PCs, the basic PC and other product lines. Intel also is committed to the protection of its intellectual property rights against illegal use. There can be no assurance, however...

  • Page 10
    ... performed at Intel's facilities in California, Oregon, Arizona and Israel. Intellectual Property and Licensing Intellectual property rights that apply to various Intel products include patents, copyrights, trade secrets, trademarks and maskwork rights. Because of the rapidly changing technology and...

  • Page 11
    ... been Executive Vice President and General Manager, Small Business and Networking Group since 1997. Prior to that, Mr. Gill was Executive Vice President and General Manager, Internet and Communications Group from 1996 to 1997; and Senior Vice President and General Manager, Intel Products Group from...

  • Page 12
    ... 1996 to 1997; Vice President, Internet and Communications Group and General Manager ICG Product Development from 1995 to 1996; Vice President, Intel Products Group and General Manager, Personal Conferencing Division from 1993 to 1995; and Vice President, Intel Products Group and General Manager, PC...

  • Page 13
    ... offices. Sales and marketing and administrative offices. 9 Ireland 1,830,000 9 Malaysia (A) 1,071,000 7 Israel (B) 814,000 1 Philippines 431,000 5 Puerto Rico 426,000 1 England 184,000 1 China 170,000 3 Japan 167,000 1 Germany 86,000 At December 27, 1997, Intel...

  • Page 14
    .... (97-40080) Digital Equipment Corporation ("Digital") brought suit in Federal District Court in Massachusetts in May 1997, alleging that Intel is infringing ten patents in making and selling microprocessor products. Digital sought an injunction and monetary damages. If granted, the injunction would...

  • Page 15
    ... an action in Federal District Court in Oregon in September 1996 alleging that Intel's products infringe a patent issued to the plaintiff and that Intel wrongfully terminated his employment. On January 21, 1998, the Court granted Intel's motions for summary judgment on all claims. The plaintiff has...

  • Page 16
    ...'s 1997 Annual Report to Stockholders which information is hereby incorporated by reference. (b) As of February 28, 1998, there were approximately 179,000 registered holders of record of the Registrant's Common Stock. (c) Unregistered sales of equity securities. For the fiscal quarter ended December...

  • Page 17
    ... to repurchase 14.8 million shares of Common Stock at an aggregate price of $1.2 billion under outstanding put warrants. These put warrants expire on various dates between May 1998 and August 1998 and have exercise prices ranging from $69 to $95 per share, with an average exercise price of $80. On...

  • Page 18
    ... hereby incorporated by reference, and to the information under the heading "Executive Officers" in Part I hereof. ITEM 11. EXECUTIVE COMPENSATION Reference is made to the information appearing under the headings "Directors' Compensation," "Compensation Committee Interlocks and Insider Participation...

  • Page 19
    ... to exhibits are filed or incorporated by reference as part of this annual report. (b) Reports on Form 8-K On October 15, 1997, Intel filed a report on Form 8-K relating to financial information for Intel Corporation for the quarter ended September 27, 1997 and forward-looking statements relating...

  • Page 20
    ...1996 and December 30, 1995 ...6 Consolidated Statements of Stockholders' Equity for the years ended December 27, 1997, December 28, 1996 and December 30, 1995 ...7 Notes to Consolidated Financial StatementsDecember 27, 1997, December 28, 1996 and December 30, 1995 ...8-18 Report of Ernst & Young LLP...

  • Page 21
    ...1995 Allowance for Doubtful Receivables 1996 Allowance for Doubtful Receivables 1997 Allowance for Doubtful Receivables $68 --$57 --$32 --- Deductions (A Balance at End of Year ------- $28 --- $ 3 --- $57 --- $25 --- $14 --- $68 --- $ 2 --- $ 5 --- $65 --- (A) Uncollectible accounts...

  • Page 22
    ... 28, 1997). Intel Corporation Executive Officer Bonus Plan as amended and restated effective January 1, 1995 (incorporated by reference to Exhibit 10.7 of Registrant's Form 10-Q for the quarter ended April 5, 1995 as filed on May 15, 1995). Intel Corporation Sheltered Employee Retirement Plan Plus...

  • Page 23
    ...F. Thomas Dunlap, Jr. Vice President and Secretary March 25, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Craig R. Barrett Craig...

  • Page 24
    ... the original name of the corporation was Intel Delaware Corporation. THIRD: Pursuant to Section 245 of the General Corporation Law of the State of Delaware, the provisions of the Certificate of Incorporation as heretofore amended and supplemented are hereby restated and integrated into the single...

  • Page 25
    ...be transacted, promoted or carried on by it are as follows: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. 4. The total number of shares of all classes of stock that the Corporation is authorized to issue is...

  • Page 26
    ... approved by the affirmative vote of the holders of at least 66 2/3 percent of the combined voting power of the outstanding shares of stock of all classes and series of the Corporation entitled to vote generally in the election of directors ("Capital Stock"): (A) any merger or consolidation of the...

  • Page 27
    ...), which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of stock or series thereof of the Corporation or of any Subsidiary directly orindirectly Beneficially Owned (as hereinafter defined) by any Interested Stockholder or...

  • Page 28
    ... the number of shares of Capital Stock outstanding and the market price per share of outstanding shares of Capital Stock which has occurred after the date as of which such price is determined; and (ii) unless otherwise specifically required by law, the holders of shares of Capital Stock shall...

  • Page 29
    ...), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Capital Stock, unless the failure to increase such annual rate is approved by a majority of the Disinterested Directors; and (d) such Interested Stockholder shall...

  • Page 30
    ... Own," any Capital Stock over which such person or any of its Affiliates or Associates, directly or indirectly, through any contract, arrangement, understanding or relationship, has or shares or, upon the exercise of any conversion right, exchange right, warrant, option or similar interest...

  • Page 31
    ... its authority as a committee of the Board to the extent permissible by law. (H) "Fair Market Value" as of any particular date shall mean (i) in the case of stock, the average of the closing sale price during the 90 trading days immediately preceding the date in question of a share of such stock on...

  • Page 32
    ... or any employee benefit plan of the Corporation or any Subsidiary, who or which (i) is the Beneficial Owner, directly or indirectly, of shares of Capital Stock which are entitled to cast five percent or more of the total votes which all of the then outstanding shares of Capital Stock are entitled...

  • Page 33
    ...the date of determining the stockholders entitled to vote on such Business Combination, the laws of the State of Delaware do not permit the corporation to require the affirmative vote of the holders of at least 66 2/3 percent of the combined voting power of the outstanding shares of Capital Stock to...

  • Page 34
    ... Article 12 or Articles 10 or 11 hereof. IN WITNESS WHEREOF, Intel Corporation has caused this certificate to be signed by its Vice President, General Counsel and Secretary and attested by its Assistant Secretary this 7th day of May, 1993. By: /s/F. Thomas Dunlap, Jr Vice President, General Counsel...

  • Page 35
    .... Accordingly, the first sentence of paragraph 4 of the Restated Certificate of Incorporation of the Company shall read in its entirety as follows: 4. The total number of shares of all classes of stock that the Corporation is authorized to issue is four billion five hundred fifty million (4,550,000...

  • Page 36
    ...of Amendment of the Certificate of Incorporation shall be effective on the date of filing with the Secretary of the State of Delaware. IN WITNESS WHEREOF, said Intel Corporation has caused this Certificate to be signed by F. Thomas Dunlap, Jr., its Vice President , General Counsel and Secretary, and...

  • Page 37
    ...RATIOS OF EARNINGS TO FIXED CHARGES FOR INTEL CORPORATION (In millions, except ratios) Years Ended Dec. 25, Dec. 31, Dec. 30, Dec. 28, Dec. 27, 1993 1994 1995 1996 1997 3,530 $3,603 $5,638 $7,934 $10,659 Income before taxes Add - Fixed charges net of capitalized interest 58 ------ 66 ------ 38...

  • Page 38
    EXHIBIT 13

  • Page 39
    ... for taxes 3,714 2,777 2,072 Net income $ 6,945 $ 5,157 $ 3,566 Basic earnings per common share $ 4.25 $ 3.13 $ 2.16 Diluted earnings per common share $ 3.87 $ 2.90 $ 2.02 Weighted average common shares outstanding Dilutive effect of: Employee stock options 1998 Step-Up Warrants Weighted...

  • Page 40
    ... Property, plant and equipment, net Long-term investments Other assets Total assets Liabilities and stockholders' equity Current liabilities: Short-term debt Long-term debt redeemable within one year Accounts payable Accrued compensation and benefits Deferred income on shipments to distributors...

  • Page 41
    ...(607) (1,138) Inventories (404) 711 (835) Accounts payable 438 105 289 Accrued compensation and benefits 140 370 170 Income taxes payable 179 185 372 Tax benefit from employee stock plans 224 196 116 Other assets and liabilities (127) 439 (324 Total adjustments 3,063 3,586 450 Net cash provided by...

  • Page 42
    ... during the year for: Interest Income taxes $ $ 37 3,305 $ 51 $ 2,217 $ $ 182 1,209 Cash paid for interest in 1995 includes approximately $108 million of accumulated interest on Zero Coupon Notes that matured in 1995. Certain 1996 and 1995 amounts have been reclassified to conform to the 1997...

  • Page 43
    ...' equity Common Stock and capital in excess of par value Three years ended December 27, 1997 Number Retained (In millions) of shares Amount earnings Total Balance at December 31, 1994 1,654 $ 2,306 $ 6,961 $ 9,267 Proceeds from sales of shares through employee stock plans, tax benefit of...

  • Page 44
    ... year, trading assets, non-marketable instruments, swaps, currency forward contracts, currency options and options hedging marketable instruments are based on quoted market prices or pricing models using current market rates. No consideration is given to liquidity issues in valuing debt. Derivative...

  • Page 45
    Raw materials Work in process Finished goods Total $ 255 928 514 -----$1,697 ====== $ 280 672 341 -----$1,293 ======

  • Page 46
    ... in Common Stock and capital in excess of par value, representing net proceeds from the offering. The Warrants became exercisable in May 1993 at an effective price of $17.875 per share of Common Stock, subject to annual increases to a maximum price of $20.875 per share effective in March 1997. As of...

  • Page 47
    ...$ 194 50.0 $ 744 Sales 85 35.0 925 Repurchases -(11.0) (201) Expirations -(50.0) (743 December 30, 1995 279 24.0 725 Sales 56 18.0 603 Exercises -(3.6) (108) Expirations -(29.4) (945 December 28, 1996 335 9.0 275 Sales 288 46.3 3,525 Expirations -(29.0) (1,759 December 27, 1997 $ 623 26.3 $ 2,041

  • Page 48
    ... and $306 million during 1996. This debt is rated A-1+ by Standard and Poor's and P-1 by Moody's. Proceeds are used to fund short-term working capital needs. Long-term debt. Long-term debt at fiscal year-ends was as follows: (In millions) 1997 1996 Payable in U.S. dollars: AFICA Bonds due 2013 at...

  • Page 49
    2002-$15 million; and thereafter-$365 million. Investments The returns on a majority of the Company's marketable investments in long-term fixed rate debt and equity securities are swapped to U.S. dollar LIBOR-based returns. The currency risks of investments denominated in foreign currencies are ...

  • Page 50
    ...515 --515 Securities of foreign governments 75 -(6) 69 Fixed rate notes 32 --32 Other debt securities 294 -(1) 293 Total debt securities 10,231 14 (93) 10,152 Hedged equity 504 9 (17) 496 Preferred stock and other equity 620 131 (41) 710 Total equity securities 1,124 140 (58) 1,206 Swaps hedging...

  • Page 51
    ... at the date of sale of $153 million, $225 million and $114 million were sold in 1997, 1996 and 1995, respectively. The gross realized gains on these sales totaled $106 million, $7 million and $60 million, respectively. The amortized cost and estimated fair value of investments in debt securities at...

  • Page 52
    ...years 0-3 years Swaps hedging investments in equity securities N/A 5.7% .6 years 0-2 years Swaps hedging debt 5.9% 5.2% 1.6 years 0-4 years Note: Pay and receive rates are based on the reset rates that were in effect at December 27, 1997. Other foreign currency instruments. Intel transacts business...

  • Page 53
    ... based on Intel's analysis of that counterparty's relative credit standing. A majority of the Company's trade receivables are derived from sales to manufacturers of computer systems, with the remainder spread across various other industries. The Company's five largest customers accounted for...

  • Page 54
    ...370 437 393 Total provision for taxes $ 3,714 $ 2,777 $ 2,072 Effective tax rate 34.8% 35.0% 36.8 The tax benefit associated with dispositions from employee stock plans reduced taxes currently payable for 1997 by $224 million ($196 million and $116 million for 1996 and 1995, respectively). The...

  • Page 55
    ...Employee benefit plans Stock option plans. Intel has a 1984 Stock Option Plan under which officers, key employees and non-employee directors may be granted options to purchase shares of the Company's authorized but unissued Common Stock. In 1997, the Board of Directors approved the 1997 Stock Option...

  • Page 56
    ...'s stock over the period when the grants were made. The following tables summarize information about options outstanding at December 27, 1997: Outstanding options Weighted average Weighted Number of contractaverage shares (in ual life exercise Range of exercise prices millions) (in years) price...

  • Page 57
    ... fair value of options granted in 1997, 1996 and 1995 reported below has been estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: Employee stock options 1997 1996 1995 Expected life (in years) 6.5 6.5 6.5 Risk-free interest rate...

  • Page 58
    ... on the employee's years of service. Vesting begins after three years of service in 20% annual increments until the employee is 100% vested after seven years. The Company provides tax-qualified defined-benefit pension plans for the benefit of eligible employees in the U.S. and Puerto Rico. Each plan...

  • Page 59
    At fiscal year-ends, significant assumptions used were as follows: 1997 1996 1995 Discount rate 7.0% 7.0% 7.0% Rate of compensation increase 5.0% 5.0% 5.0% Expected long-term return on assets 8.5% 8.5% 8.5% Plan assets of the U.S. and Puerto Rico plans consist primarily of listed stocks and bonds,...

  • Page 60
    ... return on assets 5.5%-14% 5.5%-14% 5.5%-14% Plan assets of the foreign plans consist primarily of listed stocks, bonds and cash surrender value life insurance policies. Other postemployment benefits. The Company accounts for other postemployment benefits in accordance with SFAS No. 106, "Employers...

  • Page 61
    ... 1998, the Company acquired the outstanding shares of Chips and Technologies, Inc. of San Jose, California, for approximately $430 million as a result of a tender offer commenced in August 1997. The transaction will be accounted for as a purchase. Contingencies In March 1995, EMI Group, N.A. ("EMI...

  • Page 62
    ... revenues. No customer exceeded 10% of revenues in 1996 and 1995. Summary balance sheet information for operations outside the United States at fiscal year-ends is as follows: (In millions) 1997 1996 Assets $ 5,332 $ 4,784 Total liabilities $ 2,127 $ 1,694 Net property, plant and equipment $ 2,644...

  • Page 63
    ...Geographic information for the three years ended December 27, 1997 is presented in the following tables. Transfers between geographic areas are accounted for at amounts that are generally above cost and consistent with rules and regulations of governing tax authorities. Such transfers are eliminated...

  • Page 64
    ... at December 27, 1997 and December 28, 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 27, 1997, in conformity with generally accepted accounting principles. /S/Ernst & Young LLP San Jose, California January 12, 1998

  • Page 65
    ... Ten years ended December 27, 1997 Net investment Additions in property, Long-term Stockto property, plant & Total debt & put holders' plant & (In millions) equipment assets warrants equity equipment 1997 $ 10,666 $ 28,880 $ 2,489 $ 19,295 $ 4,501 1996 $ 8,487 $ 23,735 $ 1,003 $ 16,872 $ 3,024 1995...

  • Page 66
    ...strategic programs, particularly for the internal development of microprocessor products and related manufacturing technology. Increased spending for marketing programs (including media merchandising and the Company's Intel Inside(R) cooperative advertising program), other revenue-dependent expenses...

  • Page 67
    ... the outstanding shares of Chips and Technologies, Inc. of San Jose, California, for approximately $430 million. On October 27, 1997, the Company and Digital Equipment Corporation ("Digital") announced that they have agreed to establish a broad-based business relationship. Under the agreement, Intel...

  • Page 68
    ... in order to bring its technology to market within each relevant market segment. The Company's gross margin varies depending on the mix of types and speeds of processors sold and the mix of microprocessors and related purchased components within a product family. The Company's most advanced...

  • Page 69
    ... The Company will also continue spending to promote its products and to increase the value of its product brands. Based on current forecasts, spending for marketing, general and administrative expenses is also expected to increase in 1998. The Company currently expects its tax rate to decrease to 34...

  • Page 70
    ... the statements regarding growth in the computing industry, gross margin, capital spending, depreciation, research and development, marketing and general and administrative expenses, the FTC investigation and the year 2000 issue - involve a number of risks and uncertainties. In addition to the...

  • Page 71
    ... that is additional to that otherwise provided in the 1997 Annual Report to Stockholders. REVENUES AND INCOME (Dollars in billions) Net revenues Net income COSTS AND EXPENSES (Percent of revenues) Cost of sales R&D Marketing and G&A (Total) OTHER INCOME AND EXPENSE (Dollars in millions) Interest...

  • Page 72
    Exhibit 21 INTEL CORPORATION SUBSIDIARIES (All 100% Owned) Intel International (Incorporated in California) Intel Overseas Corp. (Incorporated in California) Synchroquartz (U.S.) Corp. (Incorporated in California) Intel Malaysia SDN. BHD. (Incorporated in Malaysia)

  • Page 73
    ..., with respect to the financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of Intel Corporation. /s/Ernst & Young LLP San Jose, California March 25, 1998

  • Page 74
    ...1,000,000 PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS...

  • Page 75
    ...1,000,000 PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS...

  • Page 76
    ...1,000,000 PERIOD TYPE FISCAL YEAR END PERIOD END CASH SECURITIES RECEIVABLES ALLOWANCES INVENTORY CURRENT ASSETS PP&E DEPRECIATION TOTAL ASSETS CURRENT LIABILITIES BONDS PREFERRED MANDATORY PREFERRED COMMON OTHER SE TOTAL LIABILITY AND EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS...