Intel 2006 Annual Report Download - page 49

Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Gains (losses) on Equity Securities, Interest and Other, and Provision for Taxes
Gains (losses) on equity securities, net; interest and other, net; and provision for taxes for the three years ended December 30,
2006 were as follows:
During 2006, the gains on equity securities of $293 million included the gain of $103 million on the sale of a portion of our
investment in Micron, which was sold for $275 million. During 2005, impairment charges of $208 million included a $105
million impairment charge on our investment in Micron. The impairment was principally based on our assessment during the
second quarter of 2005 of Micron’s financial results and the fact that the market price of Micron’s stock had been below our
cost basis for an extended period of time, as well as the competitive pricing environment for DRAM products. During 2004,
the net losses on equity securities of $2 million included impairments of $117 million, primarily on non-marketable equity
securities.
Interest and other, net increased to $1.2 billion in 2006 compared to $565 million in 2005, reflecting net gains of $612 million
for three completed divestitures (see “Note 14: Acquisitions and Divestitures” in Part II, Item 8 of this Form 10-K) and higher
interest income as a result of higher interest rates, partially offset by lower cash balances. Interest and other, net increased to
$565 million in 2005 compared to $289 million in 2004, reflecting higher interest income as a result of higher interest rates.
Interest and other, net for 2004 also included approximately $60 million of gains associated with terminating financing
arrangements for manufacturing facilities and equipment in Ireland.
Our effective income tax rate was 28.6% in 2006 (31.3% in 2005 and 27.8% in 2004). The rate decreased in 2006 compared to
2005 primarily due to a higher percentage of our profits being derived from lower tax jurisdictions. In addition, the rate for
2005 included an increase to the tax provision of approximately $265 million as a result of the decision to repatriate
non-U.S. earnings under the American Jobs Creation Act of 2004. Partially offsetting the decrease in the effective tax rate was
the impact of share-based compensation. The phasing out of the tax benefit for export sales only slightly increased the
effective tax rate compared to the prior year, given the decrease in income before taxes. Our effective income tax rate was
higher in 2005 compared to 2004, due to the decision to repatriate non-U.S. earnings, which were partially offset by the
reversal of previously accrued items. The tax rate for 2004 included a $195 million reduction to the tax provision, primarily
from additional benefits for export sales along with state tax benefits for divestitures, as well as the reversal of previously
accrued taxes, primarily related to the closing of a state income tax audit.
Liquidity and Capital Resources
Our financial condition remains strong. Cash, short-term investments, fixed income debt instruments included in trading
assets, and debt at the end of each period were as follows:
39
(In Millions)
2006 2005 2004
Gains on equity securities
$
293
$
163
$
115
Impairment charges
(79
)
(208
)
(117
)
Gains (losses) on equity securities, net
$
214
$
(45
)
$
(2
)
Interest and other, net
$
1,202
$
565
$
289
Provision for taxes
$
(2,024
)
$
(3,946
)
$
(2,901
)
December 30,
December 31,
(Dollars In Millions)
2006
2005
Cash, short-term investments, and fixed-income debt instruments included in trading
assets
$
9,552
$
12,409
Short
-
term and long
-
term debt
$
2,028
$
2,419
Debt as % of stockholders
’
equity
5.5
%
6.7
%