Intel 2002 Annual Report Download - page 60

Acquisition-related intangible impairments of $127 million in 2002 represented write-offs of developed technology and other acquisition-
related intangibles related to prior-year acquisitions. The amount of the impairment was determined using a fair-value approach based on
discounted future cash flows. Other acquisition-related costs include the amortization of deferred cash payments that represent contingent
compensation to employees related to previous acquisitions. The compensation is being recognized over the period earned. All amortization of
acquisition-related intangibles and costs, including impairments, is included in "all other" for segment reporting purposes.
Amortization of intellectual property assets was $120 million in 2002 ($89 million in 2001 and $76 million in 2000). The amortization of an
intellectual property asset is generally included in either cost of sales or research and development.
Based on the carrying value of identified intangible assets recorded at December 28, 2002, and assuming no subsequent impairment of the
underlying assets, the annual amortization expense, excluding acquisition-related stock compensation and other acquisition-related costs, is
expected to be as follows:
Note 17: Acquisition-Related Unearned Stock Compensation
The company records acquisition-related purchase consideration as unearned stock-based compensation in accordance with FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation." During 2002, the company recorded no such
unearned stock-based compensation ($255 million
71
recorded in 2001). Acquisition-related unearned stock compensation includes the portion of the purchase consideration related to shares issued
contingent upon the continued employment of selected employee stockholders and/or the completion of specified milestones. The unearned
stock-based compensation also includes the intrinsic value of stock options assumed in connection with business combinations that is earned as
the employees provide future services. The compensation is being recognized over the period earned, and the expense is included in the
amortization of acquisition-related intangibles and costs. Amortization of unearned stock compensation was $90 million for 2002 ($174 million
for 2001 and $26 million for 2000). For 2002, unearned stock compensation was reduced by $13 million related to a net loss on sales of
businesses that was included in operating income, and by another $12 million related to other adjustments.
Note 18: Impairment of Long-Lived Assets
In June 2002, the company announced its intention to wind down its Intel®
Online Services Web hosting business over four quarters, due to
market trends and financial forecasts for the hosting services industry. As a result, the company recognized a related $106 million pre-tax charge
in cost of sales. Approximately $90 million of that charge related to the impairment of the web hosting business' assets, including leasehold
improvements and server equipment. The amount of the impairment was determined based on discounted future cash flows and comparable
market prices. The remaining $16 million represented the accrual of lease and other exit-related costs. The total charge was reflected in the "all
other" category for segment reporting purposes.
Note 19: Commitments
The company leases a portion of its capital equipment and certain of its facilities under operating leases that expire at various dates through
2026. Rental expense was $163 million in 2002, $182 million in 2001 and $123 million in 2000. Minimum rental commitments under all non-
cancelable leases with an initial term in excess of one year are payable as follows: 2003—$97 million; 2004—$74 million; 2005—$63 million;
2006—$40 million; 2007—$28 million; 2008 and beyond—$202 million. Commitments for construction or purchase of property, plant and
equipment approximated $2.0 billion at December 28, 2002. In addition, at the end of 2002, acquisition-related deferred cash compensation
obligations not included in the company's balance sheet totaled approximately $75 million (see "Note 13: Acquisitions").
Note 20: Contingencies
In November 1997, Intergraph Corporation filed suit in Federal District Court in Alabama, generally alleging that Intel attempted to coerce
Intergraph into relinquishing certain patent rights and that Intel infringed five Intergraph microprocessor-related patents. This suit included
alleged violations of antitrust laws and various state law claims.
In August 2001, Intergraph filed a second suit in the U.S. District Court for the Eastern District of Texas, alleging that the Intel® Itanium®
processor infringes two Intergraph microprocessor
-
related patents, and seeking an injunction and unspecified damages.
(In Millions)
2003 2004 2005 2006 2007
Acquisition
-
related intangibles
$
199
$
122
$
82
$
17
$
—
Intellectual property assets
$
112
$
86
$
68
$
54
$
23