Intel 1999 Annual Report Download

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INTEL CORP
FORM 10-K
(Annual Report)
Filed 03/23/00 for the Period Ending 12/25/99
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
    ... 12/25/99 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 Year http://www.edgar-online.com © Copyright 2008, EDGAR Online...

  • Page 2
    ...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) Registrant's telephone number, including area code (408) 765-8080 Securities...

  • Page 3
    DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of Annual Report to Stockholders for fiscal year ended December 25, 1999 - Parts I, II and IV. (2) Portions of the Registrant's Proxy Statement related to the 2000 Annual Meeting of Stockholders, to be filed subsequent to the date hereof Part III

  • Page 4
    ... Intel Architecture Business Group, the Wireless Communications and Computing Group (formed out of the former Computing Enhancement Group), the Network Communications Group, the Communications Products Group (formed during 1999) and the New Business Group. Each group has a vice president who reports...

  • Page 5
    ... to enhance the Internet experience and offers high performance and enhanced multimedia realism for Internet applications. The Pentium III processor includes Internet Streaming SIMD Extensions, 70 new instructions that enhance the performance of advanced imaging, 3D graphics, streaming audio, video...

  • Page 6
    ... in the flip-chip pin grid array (FC-PGA) package. The flip-chip package uses fewer purchased components and is an improved microprocessor package that is smaller than the previously available Single Edge Contact (SEC) cartridge. In March 2000, Intel introduced the Pentium III processor running at...

  • Page 7
    ... memory technology and enhance graphics performance through AGP 4x graphics support. The Intel 840 and 820 Chipsets do not have integrated graphics. Wireless Communications and Computing Group In December 1999, Intel announced the creation of the Wireless Communications and Computing Group (WCCG...

  • Page 8
    .... NCG also offers embedded microprocessors and microcontrollers for networking and communications as well as other applications. These embedded control products were previously offered by Intel's former Computing Enhancement Group. In 1999, Intel acquired several companies to help expand the company...

  • Page 9
    ...chip Fast Ethernet controller, the Intel(R) 82559. Featuring Intel(R) SingleDriver technology, these new adapters are designed to lower network support costs and complexity by providing a common set of software drivers for servers, desktops, network PCs and mobile clients. Ethernet refers to a local...

  • Page 10
    ... security access software. In 1999, the New Business Group launched Intel(R) Online Services, Inc., providing second-generation Web hosting and e-Commerce services to companies worldwide. The company opened two Internet service centers--an 85,000-square-foot, major production facility in Santa Clara...

  • Page 11
    ... of Intel Architecture Business Group products. No other customer accounted for more than 10% of total revenues. Sales to the company's five largest customers accounted for approximately 44% of total revenues. Reference is made to the information regarding revenues and operating profit by reportable...

  • Page 12
    ... The company plans to continue to work with the computing industry to expand Internet capabilities and product offerings, and develop compelling software applications that can take advantage of higher performance microprocessors and chipsets, thus driving demand toward Intel's newer products in each...

  • Page 13
    ... the second half of 2000. In addition to microprocessor and chipset research and development, Intel has research and development initiatives in wireless devices, networking and communications products and e-Business services as well as "enabling" software to enhance the functionality and acceptance...

  • Page 14
    ... certain trademarks and trade names for its products to distinguish genuine Intel products from those of its competitors and is currently engaged in a cooperative program with OEMs to identify certain personal computers that incorporate genuine Intel microprocessors with the Intel Inside logo. Intel...

  • Page 15
    .... Splinter was Vice President and Assistant General Manager, Technology and Manufacturing Group, from 1996 to 1998; and General Manager, Components Manufacturing, from 1992 to 1996. Albert Y. C. Yu (age 58) has been Senior Vice President and General Manager, Microprocessor Products Group, since 1993...

  • Page 16
    ... offices. Components assembly and testing and administrative offices. 8 Ireland 1,795,000 11 Malaysia (A) 1,721,000 11 Israel (B) 1,709,000 6 Philippines (C) 1,364,000 3 Costa Rica 735,000 5 Puerto Rico 426,000 1 People's Republic of China (D) United Kingdom Japan Germany...

  • Page 17
    ... situated customers with respect to confidential information and products supply. In March 2000, the District Court issued an order granting Intel summary judgment on Intergraph's antitrust claims. The company disputes Intergraph's remaining state law claims, and intends to defend the lawsuit...

  • Page 18
    ... exists the possibility of a material adverse impact on the net income of the period in which the ruling occurs. The estimate of the potential impact on the company's financial position or overall results of operations for the above legal proceedings could change in the future. ITEM 4. SUBMISSION...

  • Page 19
    ...the company's 1999 Annual Report to Stockholders, which information is hereby incorporated by reference. (b) As of February 25, 2000, there were approximately 254,000 registered holders of record of Intel's common stock. (c) Unregistered sales of equity securities. None in the quarter ended December...

  • Page 20
    ... networking and communications products that direct traffic across the Internet and corporate networks. This acquisition targets the market segment for networking chips enabling the build-out of the fiber-optic infrastructure necessary to support the growth of the Internet. Also in March 2000, Intel...

  • Page 21
    ... of Control Arrangements" on page 16, "Report of the Compensation Committee on Executive Compensation" on page 12, "Stock Price Performance Graph" on page 11, and "Executive Compensation," on pages 17 through 19 of the 2000 Proxy Statement, which information is hereby incorporated by reference. ITEM...

  • Page 22
    ... to exhibits are filed or incorporated by reference as part of this annual report. (b) Reports on Form 8-K On October 13, 1999, Intel filed a report on Form 8-K relating to financial information for Intel Corporation for the quarter ended September 25, 1999 and forward-looking statements relating...

  • Page 23
    ... FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) Reference Page 1999 Annual Form Report to 10-K Stockholders Consolidated Balance Sheets December 25, 1999 and December 26, 1998...15 Consolidated Statements of Income for the years ended December 25, 1999, December 26, 1998 and...

  • Page 24
    INTEL CORPORATION SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS December 27, 1997, December 26, 1998 and December 25, 1999 (In Millions) Additions Charged to Costs and Expenses (A Balance at Beginning of Year ---------1997 Allowance for Doubtful Receivables 1998 Allowance for Doubtful ...

  • Page 25
    ..., 1998). 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 16, 1995). Intel Corporation Sheltered Employee Retirement Plan Plus, as...

  • Page 26
    ...Accounting Officer March 23, 2000 /s/ Jane E. Shaw Jane E. Shaw Director March 23, 2000 /s/ Winston H. Chen Winston H. Chen Director March 23, 2000 /s/ Leslie L. Vadasz Leslie L. Vadasz Executive Vice President Director March 23, 2000 /s/ Andrew S. Grove Andrew S. Grove Chairman of the Board...

  • Page 27
    ... INTEL CORPORATION (In millions, except ratios) Years Ended Dec. 30, 1995 -------Income before taxes ...rental expense Total $ 29 46 $ 25 33 $ 27 9 $ 34 6 $ 36 5 9 -----$ 84 ====== 16 -----$ 74 ====== 16 ------$ 52 ======= 15 -----$ 55 ====== 27 ------$ 68 ======== Ratio of earnings before taxes...

  • Page 28
    ... $ .24 $ .20 Dividends declared per per share 110 $.050 $.058 $.048 $.038 $.029 $.025 $.013 --- Share and per share amounts shown have been adjusted for stock splits through 1999. /A/ Additions to property, plant and equipment in 1998 include $475 million for capital assets acquired from Digital...

  • Page 29
    ...Purchased in-process research and development Operating costs and expenses Operating income Interest expense Interest income and other, net Income before taxes Provision for taxes Net income Basic earnings per common share Diluted earnings per common share Weighted average common shares outstanding...

  • Page 30
    ... cash equivalents Short-term investments Trading assets Accounts receivable, net of allowance for doubtful accounts of $67 ($62 in 1998) Inventories Deferred tax assets Other current assets Total current assets Property, plant and equipment: Land and buildings Machinery and equipment Construction in...

  • Page 31
    ...marketable strategic equity securities Net loss on retirements of property, plant and equipment Deferred taxes Changes in assets and liabilities: Accounts receivable Inventories Accounts payable Accrued compensation and benefits Income taxes payable Tax benefit from employee stock plans Other assets...

  • Page 32
    Page 16

  • Page 33
    ...of tax Total comprehensive income Proceeds from sales of shares through employee stock plans, tax benefit of $224 and other Proceeds from sales of put warrants Reclassification of put warrant obligation, net Repurchase and retirement of common stock Cash dividends declared ($0.058 per share) Balance...

  • Page 34
    ... investments are classified as available-for-sale as of the balance sheet date and are reported at fair value, with unrealized gains and losses, net of tax, recorded in stockholders' equity. The cost of securities sold is based on the specific identification method. Realized gains or losses and...

  • Page 35
    ...Life in (In millions) Years 1999 1998 Goodwill 2-6 $4,124 $ 52 Developed technology 3-6 612 33 Other intangibles 2-6 198 26 --------$4,934 $111 ====== ==== Other intangibles include items such as trademarks, workforce-in-place and customer lists. The total balances presented above are net of total...

  • Page 36
    ...1997. All share, per share, common stock, stock option and warrant amounts herein have been restated to reflect the effects of these splits. Reclassifications. Certain amounts reported in previous years have been reclassified to conform to the 1999 presentation. Recent accounting pronouncements. The...

  • Page 37
    ... under lines of credit $ -$ 10 Drafts payable 230 149 ------Total $230 $159 ==== ==== The company also borrows under commercial paper programs. Maximum borrowings under commercial paper programs reached $200 million during 1999 and $325 million during 1998. This debt is rated A-1+ by Standard and...

  • Page 38
    ...convertible into common stock of the company at a conversion price of $31.01 per share. After September 2000, the notes are redeemable at the option of the company. The Irish punt borrowings were made in connection with the financing of manufacturing facilities in Ireland, and Intel has invested the...

  • Page 39
    ... counterparties. Available-for-sale investments at December 25, 1999 were as follows: Gross Gross Estimated unrealized unrealized fair (In millions) Cost gains losses value U.S. government securities $ 2,746 $ -$ (5) $ 2,741 Commercial paper 2,971 -(2) 2,969 Floating rate notes 2,152 -(4) 2,148...

  • Page 40
    ... -------12,487 (1,850) -------$10,637 ======== Available-for-sale securities with a fair value at the date of sale of $1 billion, $227 million and $153 million were sold in 1999, 1998 and 1997, respectively. The gross realized gains on these sales totaled $883 million, $185 million and $106 million...

  • Page 41
    ... controls credit risk through credit approvals, limits and monitoring procedures. Credit rating criteria for derivative financial instruments are similar to those for investments. Swap agreements. The company utilizes swap agreements to exchange the foreign currency, equity and interest rate returns...

  • Page 42
    ... 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 approximately 44% of net revenues for 1999. At December 25, 1999, these customers accounted for...

  • Page 43
    ...384 351 394 Deferred (57) (68) (24 327 283 370 Total provision for taxes $ 3,914 $3,069 $ 3,714 Effective tax rate 34.9% 33.6% 34.8 The tax benefit associated with dispositions from employee stock plans reduced taxes currently payable for 1999 by $506 million ($415 million and $224 million for...

  • Page 44
    ... financial reporting purposes and the amounts used for income tax purposes. Significant components of the company's deferred tax assets and liabilities at fiscal year-ends were as follows: (In millions) 1999 1998 DEFERRED TAX ASSETS Accrued compensation and benefits $ 111 $ 117 Accrued advertising...

  • Page 45
    Employee benefit plans Stock option plans. Intel has a 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. The company also has a stock option plan under which stock options ...

  • Page 46
    ...if not exercised at specific dates through December 2009. Option exercise prices for options exercised during the three-year period ended December 25, 1999 ranged from $0.15 to $61.41. Stock Participation Plan. Under this plan, eligible employees may purchase shares of Intel's common stock at 85% of...

  • Page 47
    ... 1997 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 1999 1998 1997 Expected life (in years) 6.5 6.5 6.5 Risk-free interest rate 5.2% 5.3% 6.6% Volatility .38 .36 .36 Dividend...

  • Page 48
    In February 1999, the company acquired Shiva Corporation in a cash transaction. Shiva's products include remote access and virtual private networking solutions for the small to medium enterprise market segment and the remote access needs of campuses and branch offices. Page 25

  • Page 49
    ... communications products, including chipsets, reference designs, software and other key technologies for lightweight wireless handsets. In January 1998, the company acquired Chips and Technologies, Inc. in a cash transaction. Chips and Technologies was a supplier of graphics accelerator chips...

  • Page 50
    ... included in the Wireless Communications and Computing Group operating segment. All of these groups are part of the "all other" category for segment reporting purposes. The operating results of Chips and Technologies have been included in the Intel Architecture Business Group operating segment. Page...

  • Page 51
    ...during 1999), the Network Communications Group and the New Business Group. Each group has a vice president who reports directly to the Chief Executive Officer (CEO). The CEO allocates resources to each group using information on their revenues and operating profits before interest and taxes. The CEO...

  • Page 52
    ..., software and support services for e- Business data centers and communications access solutions. The Network Communications Group's products include communications silicon components and embedded control chips (formerly included in the Computing Enhancement Group) for networking and communications...

  • Page 53
    Supplemental information (unaudited) Quarterly information for the two years ended December 25, 1999 is presented on page 37. Page 28

  • Page 54
    ..., independent auditors The Board of Directors and Stockholders, Intel Corporation We have audited the accompanying consolidated balance sheets of Intel Corporation as of December 25, 1999 and December 26, 1998, and the related consolidated statements of income, stockholders' equity, and cash flows...

  • Page 55
    ... of microprocessor products. Marketing, general and administrative expenses increased $796 million, or 26%, from 1998 to 1999, primarily due to increases for the Intel Inside cooperative advertising program, merchandising spending relating to new product launches and profit-dependent bonus expenses...

  • Page 56
    ... project completion dates ranged from the third quarter of 1999 through the third quarter of 2000, and projects expected to complete during 1999 completed on schedule. The discount rates used were 30% for IPR&D projects and 20% for developed technology. Level One Communications' weighted average...

  • Page 57
    ... have compatible 3D technologies, and further development of the Chips and Technologies 3D technology was stopped. During 1999, Intel realigned its discrete graphics resources to focus on integrated graphics chipsets utilizing the core technology acquired from Chips and Technologies. Amortization of...

  • Page 58
    ... expansion or upgrading of worldwide manufacturing capacity, working capital requirements and the dividend program. Financial market risks The company is exposed to financial market risks, including changes in interest rates, foreign currency exchange rates and marketable equity security prices. To...

  • Page 59
    segments support these initiatives. Page 33

  • Page 60
    ... Communications and Computing Group supports the handheld wireless device initiatives for the client platform. Intel plans to cultivate new businesses as well as continue to work with the computing industry to expand Internet capabilities and product offerings, and develop compelling software...

  • Page 61
    ...'s internal systems or non-performance of suppliers. Intel also established a program to assess the year 2000 capability of its products. The definition of "Year 2000 Capable" is available on Intel's Web site. To assist customers in evaluating their year 2000 issues, the company developed a Web...

  • Page 62
    ...service businesses around the Internet, the number of computers using Intel processors, gross margin and cost savings, capital spending, depreciation and amortization, research and development, marketing and general and administrative expenses, the tax rate, the conversion to the Euro, the year 2000...

  • Page 63
    ...declaration schedule which results in the Board of Directors considering two dividend declarations in the first and third quarters of the year and no declarations in the second and fourth quarters. A dividend was paid in each quarter of 1999 and 1998. /C/ Intel's common stock (symbol INTC) trades on...

  • Page 64
    GRAPHICS APPENDIX LIST* FOR PAGES 30 AND 31 * In this Appendix, the following descriptions of graphs on pages 30 and 31 of the Company's 1999 Annual Report...) Cost of sales R&D Marketing and G&A Acquisition-related costs (Total) 1997 ---40% 9% 12% 0% 61% 1998 ---46% 9% 12% 1% 68% 1999 ---40% 11...

  • Page 65
    ... Intel Products (M) Sdn. Bhd. Intel Puerto Rico, Inc Intel Semiconductor Limited Intel Technology Phils, Inc. Intel Technology Sdn. Berhad IPivot, Inc. Level One Communications, Inc. Mission College Investments Limited State or other Jurisdiction of Incorporation Costa Rica Delaware, USA New Jersey...

  • Page 66
    ...incorporation by reference in this Annual Report (Form 10-K) of Intel Corporation of our report dated January 11, 2000, included in the 1999 Annual report to Stockholders of Intel... forth therein. We also consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-10392,...

  • Page 67
    ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM INTEL CORPORATION'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MULTIPLIER: 1,000,000 PERIOD TYPE FISCAL YEAR END PERIOD END CASH ...