Intel 2014 Annual Report Download

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2014 Annual Report

Table of contents

  • Page 1
    2014 Annual Report

  • Page 2
    ...servers, tablets, phones, and the Internet of Things. Our strategy for growth is playing out well. We are driving our core businesses in personal computing and the enterprise, building on those assets to move into new areas such as the Internet of Things and wearables, strengthening Intel's position...

  • Page 3
    ...Your Board of Directors has been listening to investor concerns and has taken a fresh look at its own responsibilities to stockholders. Our priorities in 2014 included strategic clarity, cash policy, and Board composition. The Board has actively engaged in discussions about the strategy behind Intel...

  • Page 4
    ... is a shell company (as defined in Rule 12b-2 of the Act). Yes ' No È Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 27, 2014, based upon the closing price of the common stock as reported by The NASDAQ Global Select Market on such...

  • Page 5
    INTEL CORPORATION FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 27, 2014 INDEX Page Item 1. Item 1A. Item 1B. Item 2. Item 3. Item 4. PART I Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Mine Safety Disclosures ...PART II Market for Registrant's Common ...

  • Page 6
    ...in 1 systems, desktops, servers, tablets, smartphones, and the Internet of Things (including wearables, transportation systems, and retail devices). We also develop and sell software and services primarily focused on security and technology integration. We were incorporated in California in 1968 and...

  • Page 7
    ... time to market, and scale new products more rapidly. We believe this competitive advantage will be extended in the future as the costs to build leading-edge fabrication facilities increase, and as fewer semiconductor companies will be able to combine platform design and manufacturing. Architecture...

  • Page 8
    ...which engaged, energized employees can thrive in their jobs and in their communities. • Our continued investment in developing our assets and execution in key objectives are intended to help strengthen our competitive position as we enter and expand into adjacent market segments, such as tablets...

  • Page 9
    ...enables smaller form factors. In 2014, we introduced our 5th generation Intel Core processor, code-named "Broadwell." We also offer features designed to improve our platform capabilities. For example, Intel® vPro™ technology is a solution for manageability, security, and business user experiences...

  • Page 10
    ... and enterprise performance on a platform that shares common characteristics of the rest of the data center McAfee, Inc. McAfee, Inc. (McAfee) offers software and hardware products that provide security solutions designed to protect systems in consumer, mobile, and corporate environments from...

  • Page 11
    ... of today's notebooks and tablets with enhanced graphics and improved user interfaces such as touch and voice in a thin, light form factor that is highly responsive and secure, and that can seamlessly connect to the Internet. In 2014, we introduced the Intel® Core™ M processor, our first...

  • Page 12
    ...segment offers platforms for customers to design products for the retail, transportation, industrial, and buildings and home market segments. In addition, the Internet of Things Group (IOTG) focuses on establishing an end-to-end secure and manageable architecture that captures actionable information...

  • Page 13
    ...and the Software and Services Group operating segment. The "all other" category consists primarily of revenue from the Non-Volatile Memory Solutions Group, the Netbook Group, and the New Devices Group operating segments. Percentage of Revenue by Major Operating Segment (Dollars in Millions) 2014 26...

  • Page 14
    ... components, and software to businesses that build and sell computing and communications devices to end users. Our competitors also include companies that sell goods and services to businesses that utilize them for their internal and/or customer-facing processes (e.g., businesses running large data...

  • Page 15
    ...90nm 130nm Arizona, Oregon Israel, Arizona, Oregon New Mexico New Mexico China China Massachusetts As of December 27, 2014, a substantial majority of our microprocessors were manufactured on 300mm wafers using our 14nm, 22nm, and 32nm process technology. As we move to each succeeding generation of...

  • Page 16
    ... Form 10-K. Research and Development We are committed to investing in world-class technology development, particularly in the design and manufacture of integrated circuits. R&D expenditures were $11.5 billion in 2014 ($10.6 billion in 2013 and $10.1 billion in 2012). Our R&D activities are directed...

  • Page 17
    ... through distributor, reseller, retail, and OEM channels throughout the world. Our worldwide reseller sales channel consists of thousands of indirect customers-systems builders that purchase Intel® microprocessors and other products from our distributors. We have a program that allows distributors...

  • Page 18
    ... advertising through digital and social media and television, as well as press relations. We have also entered into joint marketing arrangements with certain customers. Intellectual Property Rights and Licensing Intel owns significant intellectual property (IP) and related IP rights around the world...

  • Page 19
    ..., and governments to find and promote ways that technology can be used as a tool to combat climate change. We have been purchasing renewable energy at some of our major sites for several years. We purchase renewable energy certificates under a multi-year contract. This purchase has placed Intel at...

  • Page 20
    ... and Enterprise Services Officer • Member of Intel Corporation Board of Directors • Member of Columbia Sportswear Company Board of Directors • Member of McKesson Corporation Board of Directors • Joined Intel in 1981 William M. Holt, age 62 • 2013 - present, Executive VP, GM, Technology and...

  • Page 21
    ... in market conditions, including changes in government borrowing, taxation, or spending policies; the credit market; or expected inflation, employment, and energy or other commodity prices; • the level of our customers' inventories; • competitive and pricing pressures, including actions taken...

  • Page 22
    ... in many countries, and some of our business activities may be concentrated in one or more geographic areas. Moreover, sales outside the U.S. accounted for approximately 82% of our revenue for the fiscal year ended December 27, 2014. As a result, our operations and our financial results, including...

  • Page 23
    ... of supply for all of those materials. However, for certain materials, we may rely on a single or a limited number of suppliers, or upon suppliers in a single location. In addition, consolidation among suppliers could impact the nature, quality, availability, and pricing of the products and services...

  • Page 24
    ...IP rights. We regard our patents, copyrights, trade secrets, and other IP rights as important to the success of our business. We rely on IP law as well as confidentiality and licensing agreements with our customers, employees, technology development partners, and others to protect our IP rights. Our...

  • Page 25
    ...-based and other performance-based incentive awards such as restricted stock units and cash bonuses. If our share-based or other compensation programs cease to be viewed as competitive and valuable benefits, our ability to attract, retain, and motivate employees could be weakened, which could harm...

  • Page 26
    ...a return on our investments. We make investments in public and private companies around the world to further our strategic objectives and support key business initiatives. Many of the securities in which we invest are non-marketable at the time of our initial investment. Companies in which we invest...

  • Page 27
    ... face risks related to business transactions with U.S. government entities. We receive proceeds from services and products we provide to the U.S. government. U.S. government demand and payment may be affected by public sector budgetary cycles and funding authorizations. U.S. government contracts are...

  • Page 28
    ...as dividend payments, and because of changes in cash flows and changes in tax laws. Workforce restructuring actions may be disruptive to our operations and adversely affect our financial results. In response to the business environment and to accomplish our strategic objectives, from time to time we...

  • Page 29
    ... facility in Ireland is currently transitioning to our 14nm process technology, with manufacturing expected to ramp in the second half of 2015. Our assembly and test facilities are located in Malaysia, China, and Vietnam. In addition, we have sales and marketing offices worldwide that are generally...

  • Page 30
    ... limit. Common stock repurchase activity under our stock repurchase plan during each quarter of 2014 was as follows: Total Number of Shares Purchased (In Millions) Dollar Value of Shares That May Yet Be Purchased (In Millions) Period Average Price Paid Per Share December 29, 2013 - March 29, 2014...

  • Page 31
    ... of Five-Year Cumulative Return for Intel, the Dow Jones U.S. Technology Index*, and the S&P 500* Index Intel Corporation Dow Jones U.S. Technology Index S&P 500 Index $250 $200 $150 $100 $50 2009 2010 2011 2012 2009 2010 2011 2013 2012 2013 2014 2014 Intel Corporation ...$ 100 $ 106...

  • Page 32
    ITEM 6. SELECTED FINANCIAL DATA 2014 2013 2012 2011 2010 (Dollars in Millions, Except Per Share Amounts) Net revenue ...Gross margin ...Gross margin percentage ...Research and development (R&D) ...Marketing, general and administrative (MG&A) ...R&D and MG&A as percentage of revenue ...Operating ...

  • Page 33
    ... our reported financial results and forecasts. • Results of Operations. Analysis of our financial results comparing 2014 to 2013 and comparing 2013 to 2012. • Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and...

  • Page 34
    ... Investor Relations website, www.intc.com. This Business Outlook is not incorporated by reference in this Form 10-K. We expect that our corporate representatives will, from time to time, meet publicly or privately with investors and others, and may reiterate the forward-looking statements contained...

  • Page 35
    ... financial market volatility could negatively affect our ability to realize value in our investments through liquidity events such as initial public offerings, mergers, and private sales. For further information about our investment portfolio risks, see "Risk Factors" in Part I, Item 1A of this Form...

  • Page 36
    ... the rate of depreciation over the assets' new, shorter useful lives. Based on our analysis, impairments and accelerated depreciation of our property, plant and equipment was $115 million in 2014 ($172 million in 2013 and $73 million in 2012). Goodwill Goodwill is recorded when the purchase price of...

  • Page 37
    ...short-term business planning and forecasting. We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available comparable market data. The market method is based on financial multiples of comparable companies and applies a control premium. A reporting unit...

  • Page 38
    ... confidence, customer acceptance of our products, and an assessment of selling price in relation to product cost. If the estimated market value of the inventory is less than the carrying value, we write down the inventory and record the difference as a charge to cost of sales. Inventory reserves...

  • Page 39
    ...: 2014 (Dollars in Millions, Except Per Share Amounts) Dollars % of Net Revenue Dollars 2013 % of Net Revenue Dollars 2012 % of Net Revenue Net revenue ...$ 55,870 Cost of sales ...20,261 Gross margin ...Research and development ...Marketing, general and administrative ...Restructuring and asset...

  • Page 40
    ...%, in 2014 compared to 2013. DCG platform average selling prices and unit sales were up 10% and 8%, respectively. Our server platform revenue continued to benefit from growth in the Internet cloud computing and high-performance computing market segments with continued strengthening of the enterprise...

  • Page 41
    ...for our next-generation 14nm process technology, and approximately $205 million of higher DCG platform unit costs. Internet of Things Group The revenue and operating income for the IOTG operating segment for each period were as follows: (In Millions) 2014 2013 2012 Net revenue ...$ Operating income...

  • Page 42
    ... assembly and test facility in Costa Rica, which ceased production in Q4 2014. These targeted reductions will enable the company to better align our resources in areas providing the greatest benefit in the current business environment. We expect these actions to be substantially complete by the end...

  • Page 43
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Restructuring and asset impairment charges for each period were as follows: (In Millions) 2014 2013 2012 Employee severance and benefit arrangements ...$ Asset impairments and other restructuring ...

  • Page 44
    ... tax credit in Q1 2013. This was partially offset by a lower percentage of our profits generated in lower tax jurisdictions in 2013 compared to 2012. Liquidity and Capital Resources (Dollars in Millions) Dec 27, 2014 Dec 28, 2013 Cash and cash equivalents, short-term investments, and trading assets...

  • Page 45
    ...-for-sale investments $3,223 Licensed technology and patents $815 Acquisitions Long-term debt $681 Sales of shares through employee equity incentive plans $3,164 $36 Acquisitions $638 Trading assets, net $1,588 $6,124 $925 Trading assets, net $1,106 Investments in non-marketable equity...

  • Page 46
    ...of equity securities in ASML in Q3 2012. Financing Activities Financing cash flows consist primarily of repurchases of common stock, payment of dividends to stockholders, issuance and repayment of long-term debt, and proceeds from the sale of common stock through employee equity incentive plans. The...

  • Page 47
    ...27, 2014. Our commercial paper was rated A-1+ by Standard & Poor's and P-1 by Moody's as of December 27, 2014. We also have an automatic shelf registration statement on file with the SEC, pursuant to which we may offer an unspecified amount of debt, equity, and other securities. In 2012, we utilized...

  • Page 48
    ...assessment of an active market for our marketable equity securities generally takes into consideration the number of days that each individual equity security trades over a specified period. Contractual Obligations Significant contractual obligations as of December 27, 2014 were as follows: Payments...

  • Page 49
    ... the market price of our common stock when the awards vest. During 2014, we entered into a series of agreements with Tsinghua Unigroup Ltd. (Tsinghua Unigroup), an operating subsidiary of Tsinghua Holdings Co. Ltd., to, among other things, jointly develop Intel architecture- and communications-based...

  • Page 50
    ... with a long-term patent cross-license agreement with NVIDIA Corporation. The primary objective of our investments in debt instruments is to preserve principal while maximizing yields, which generally track the U.S. dollar three-month LIBOR. A hypothetical decrease in interest rates of up to...

  • Page 51
    ... directly. Financial markets are volatile, which could negatively affect the prospects of the companies we invest in, their ability to raise additional capital, and the likelihood of our ability to realize value in our investments through liquidity events such as initial public offerings, mergers...

  • Page 52
    ... FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm ...Consolidated Statements of Income ...Consolidated Statements of Comprehensive Income ...Consolidated Balance Sheets ...Consolidated Statements of Cash Flows ...Consolidated Statements of Stockholders' Equity...

  • Page 53
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of Intel Corporation We have audited the accompanying consolidated balance sheets of Intel Corporation as of December 27, 2014 and December 28, 2013, and the related consolidated statements of income, ...

  • Page 54
    ... with the standards of the Public Company Accounting Oversight Board (United States), the 2014 consolidated financial statements of Intel Corporation and our report dated February 13, 2015 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP San Jose, California February 13, 2015 49

  • Page 55
    INTEL CORPORATION CONSOLIDATED STATEMENTS OF INCOME Three Years Ended December 27, 2014 (In Millions, Except Per Share Amounts) 2014 2013 2012 Net revenue ...$ 55,870 $ 52,708 $ 53,341 Cost of sales ...20,261 21,187 20,190 Gross margin ...Research and development ...Marketing, general and ...

  • Page 56
    INTEL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Years Ended December 27, 2014 (In Millions) 2014 2013 2012 Net income ...$ 11,704 $ Other comprehensive income, net of tax: Change in net unrealized holding gains (losses) on available-for-sale investments ...Change in ...

  • Page 57
    INTEL CORPORATION CONSOLIDATED BALANCE SHEETS December 27, 2014, and December 28, 2013 (In Millions, Except Par Value) 2014 2013 Assets Current assets: Cash and cash equivalents ...$ Short-term investments ...Trading assets ...Accounts receivable, net of allowance for doubtful accounts of $38 ($...

  • Page 58
    ...assets ...Purchases of licensed technology and patents ...Other investing ...Net cash used for investing activities ...Cash flows provided by (used for) financing activities: Increase (decrease) in short-term debt, net ...Proceeds from government grants ...Excess tax benefit from share-based payment...

  • Page 59
    INTEL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock and Capital in Excess of Par Value Three Years Ended December 27, 2014 (In Millions, Except Per Share Amounts) Number of Shares Amount Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Balance as of...

  • Page 60
    ...years 2014, 2013, and 2012 were all 52-week years. The next 53-week year will end on December 31, 2016. Our consolidated financial statements include the accounts of Intel Corporation and our subsidiaries. We have eliminated intercompany accounts and transactions. We use the equity method to account...

  • Page 61
    ... credit market volatility, largely offset by losses or gains on the related derivative instruments and balance sheet remeasurement, are recorded in interest and other, net. We also designate certain floating-rate securitized financial instruments, primarily asset-backed securities, as trading assets...

  • Page 62
    ... consider specific adverse conditions related to the financial health of, and the business outlook for, the investee, which may include industry and sector performance, changes in technology, operational and financing cash flow factors, and changes in the investee's credit rating. We record other...

  • Page 63
    ... financial institutions, generally to facilitate hedging and certain investment and financing transactions. Selected securities may be loaned, secured by collateral in the form of cash or securities. The loaned securities continue to be carried as investment assets on our consolidated balance sheets...

  • Page 64
    .... Capitalized interest is added to the cost of qualified assets and amortized over the estimated useful lives of the assets. We record capital-related government grants earned as a reduction to property, plant and equipment. Goodwill We record goodwill when the purchase price of an acquisition...

  • Page 65
    .... The right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified purchases made by the distributor. Under the price protection program, we give distributors credits for the difference between...

  • Page 66
    ...cash paid to customers over the fair value of the advertising benefit we receive as a reduction in revenue. Advertising costs, including direct marketing costs, recorded within MG&A expenses were $1.8 billion in 2014 ($1.9 billion in 2013 and $2.0 billion in 2012). Employee Equity Incentive Plans We...

  • Page 67
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 3: Recent Accounting Standards In May 2014, the Financial Accounting Standards Board issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to ...

  • Page 68
    ... institution instruments ...321 1,119 Government debt ...- - Reverse repurchase agreements ...- 268 Short-term investments: Corporate debt ...363 412 Financial institution instruments ...149 1,050 Government debt ...252 173 Trading assets: Asset-backed securities ...- 766 Corporate debt ...2,625 339...

  • Page 69
    ...agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms, such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. For the year ended December 27, 2014 we transferred corporate...

  • Page 70
    ... 27, 2014 Carrying Amount Fair Value Measured Using Level 1 Level 2 Level 3 Fair Value (In Millions) Grants receivable ...Loans receivable ...Non-marketable cost method investments ...Reverse repurchase agreements ...Short-term debt ...Long-term debt ...NVIDIA Corporation cross-license agreement...

  • Page 71
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 27, 2014, and December 28, 2013, the unrealized loss position of our non-marketable cost method investments was insignificant. Our non-marketable cost method investments are valued using a qualitative and ...

  • Page 72
    ...financial institutions in various forms, such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. Time deposits were primarily issued by institutions outside the U.S. as of December 27, 2014 and December 28, 2013. During 2014, we sold available-for-sale...

  • Page 73
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Equity Method Investments Equity method investments, classified within other long-term assets, at the end of each period were as follows: December 27, 2014 (Dollars In Millions) Carrying Value Ownership Percentage December 28, ...

  • Page 74
    ... equally owned joint venture in the healthcare industry, that focuses on independent living and delivery of health-related services by means of telecommunications. The company was formed by combining assets of GE Healthcare's Home Health division and Intel's Digital Health Group. Care Innovations is...

  • Page 75
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 6: Derivative Financial Instruments Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk, and, to a lesser extent, equity market risk, commodity...

  • Page 76
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Equity Market Risk Our investments include marketable equity securities and equity derivative instruments. We typically do not attempt to reduce or eliminate our equity market exposure through hedging activities at the ...

  • Page 77
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The gross notional amounts for currency forwards and currency interest rate swaps, by currency, at the end of each period were as follows: (In Millions) Dec 27, 2014 Dec 28, 2013 Dec 29, 2012 British pound sterling ...$ ...

  • Page 78
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair Value of Derivative Instruments in the Consolidated Balance Sheets The fair value of our derivative instruments at the end of each period were as follows: December 27, 2014 Other Current Assets Other Long-Term Assets Other...

  • Page 79
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Amounts Offset in the Consolidated Balance Sheets The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with various counterparties, and cash and non-cash ...

  • Page 80
    ... on the consolidated statements of income for each period were as follows: (In Millions) Location of Gains (Losses) Recognized in Income on Derivatives 2014 2013 2012 Currency forwards Currency interest rate swaps Equity options Interest rate swaps Total return swaps Other Other Interest...

  • Page 81
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) We generally place investments with high-credit-quality counterparties and, by policy, we limit the amount of credit exposure to any one counterparty based on our analysis of that counterparty's relative credit standing. Most ...

  • Page 82
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 9: Divestitures During the first quarter of 2014, we completed the divestiture of the assets of Intel Media, a business division dedicated to the development of cloud TV products and services, to Verizon Communications Inc...

  • Page 83
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 11: Identified Intangible Assets Identified intangible assets at the end of each period were as follows: December 27, 2014 (In Millions) Gross Assets Accumulated Amortization Net Acquisition-related developed technology ...

  • Page 84
    ...$135 million of equipment from other long-term assets to property, plant and equipment. A substantial majority of the equipment was prepaid in 2010 and 2011. We recognized the pre-payments within operating activities in the consolidated statement of cash flows when we paid for the equipment, and the...

  • Page 85
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restructuring and asset impairment charges for each period were as follows: (In Millions) 2014 2013 2012 Employee severance and benefit arrangements ...$ Asset impairments and other restructuring charges ...Total restructuring...

  • Page 86
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 15: Borrowings Short-Term Debt Our short-term debt at the end of each period was as follows: (In Millions) Dec 27, 2014 Dec 28, 2013 Drafts payable ...$ Notes payable ...Commercial paper ...Current portion of long-term ...

  • Page 87
    ..., 2014 ($10 million as of December 28, 2013). The 2009 debentures are convertible, subject to certain conditions. Holders can surrender the 2009 debentures for conversion if the closing price of Intel common stock has been at least 130% of the conversion price then in effect for at least 20 trading...

  • Page 88
    ... with certain share exchanges, mergers, or consolidations involving Intel. During the fourth quarter of 2014, the closing stock price conversion right condition of the 2009 debentures was met and the debentures will be convertible at the option of the holders during the first quarter of 2015. As...

  • Page 89
    ... the plan. Starting in 2016, the impacted employees will receive discretionary employer contributions in the Intel 401(k) Savings Plan, instead of the Retirement Contribution plan. This change was contingent on receiving a favorable private letter ruling (PLR) from the U.S. Internal Revenue Service...

  • Page 90
    ... 34 509 U.S. Pension Benefits (In Millions) 2014 2013 Non-U.S. Pension Benefits 2014 2013 U.S. Postretirement Medical Benefits 2014 2013 Beginning fair value of plan assets ...$ Actual return on plan assets ...Employer contributions ...Currency exchange rate changes ...Other ...Ending fair value...

  • Page 91
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The amounts recognized on the consolidated balance sheets at the end of each period were as follows: U.S. Pension Benefits (In Millions) Dec 27, 2014 Dec 28, 2013 Non-U.S. Pension Benefits Dec 27, 2014 Dec 28, 2013 U.S. ...

  • Page 92
    ... asset class will fluctuate with market conditions, such as volatility and liquidity concerns, and will typically be rebalanced when outside the target ranges, which are 55% for equity investments and 45% for fixed-income investments in 2014. The expected long-term rate of return for the U.S. Intel...

  • Page 93
    ...securities to reduce market risk and to ensure that the pension assets are available to pay benefits as they come due. The target allocation of the non-U.S. plan assets that we have control over is 80% equity investments and 20% fixed-income investments. The average expected long-term rate of return...

  • Page 94
    ...and emerging markets throughout the world. The expected long-term rate of return for the U.S. postretirement medical benefits plan assets is 7.4%. As of December 27, 2014, substantially all of the U.S. postretirement medical benefits plan assets were invested in exchange-traded equity securities and...

  • Page 95
    ... a market condition and a service condition (market-based restricted stock units), referred to in our 2014 Proxy Statement as outperformance stock units, to a small group of senior officers and non-employee directors. For market-based restricted stock units issued in 2014, the number of shares of...

  • Page 96
    ... TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Equity awards granted to employees in 2014 under our equity incentive plans generally vest over four years from the date of grant, and options expire seven years from the date of grant, with the exception of market-based restricted stock units, an...

  • Page 97
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Restricted Stock Unit Awards Restricted stock unit activity for each period was as follows: Number of RSUs (In Millions) Weighted Average Grant-Date Fair Value December 31, 2011 ...Granted ...Vested ...Forfeited ...December 29...

  • Page 98
    ... CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock option activity for each period was as follows: Number of Options (In Millions) Weighted Average Exercise Price December 31, 2011 ...Granted ...Exercised ...Cancelled and forfeited ...Expired ...December 29, 2012 ...Granted...

  • Page 99
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Purchase Plan Approximately 76% of our employees were participating in our 2006 Stock Purchase Plan as of December 27, 2014 (76% in 2013 and 72% in 2012). Employees purchased 19.4 million shares of common stock in 2014 ...

  • Page 100
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 20: Gains (Losses) on Equity Investments, Net The components of gains (losses) on equity investments, net for each period were as follows: (In Millions) 2014 2013 2012 Share of equity method investee losses, net ...$ ...

  • Page 101
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 22: Earnings Per Share We computed our basic and diluted earnings per share of common stock for each period as follows: (In Millions, Except Per Share Amounts) 2014 2013 2012 Net income available to common stockholders ...

  • Page 102
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 23: Income Taxes Income Tax Provision Income before taxes and the provision for taxes consisted of the following: (Dollars in Millions) 2014 2013 2012 Income before taxes: U.S...$ 11,565 Non-U.S...4,236 Total income ...

  • Page 103
    ... and other benefits ...$ Share-based compensation ...Deferred income ...Inventory ...State credits and net operating losses ...Other, net ...Gross deferred tax assets ...Valuation allowance ...Total deferred tax assets ...Deferred tax liabilities: Property, plant and equipment ...Licenses and...

  • Page 104
    ... rate. During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for taxes on the consolidated statements of income. Interest and penalties related to unrecognized tax benefits were $21 million in 2014 (insignificant in 2013 and 2012...

  • Page 105
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 24: Other Comprehensive Income (Loss) The components of other comprehensive income (loss) and related tax effects for each period were as follows: 2014 (In Millions) Before Tax Tax Net of Tax Before Tax 2013 Tax Net of Tax...

  • Page 106
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The changes in accumulated other comprehensive income (loss) by component and related tax effects for each period were as follows: Unrealized Holding Gains (Losses) on Availablefor-Sale Investments (In Millions) Deferred Tax ...

  • Page 107
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The amounts reclassified out of accumulated other comprehensive income (loss) into the consolidated statements of income, with presentation location, for each period were as follows: Income Before Taxes Impact (In Millions) ...

  • Page 108
    ... 2009. The hearing of our appeal took place in July 2012. In June 2014, the General Court rejected our appeal in its entirety. In August 2014, we filed an appeal with the European Court of Justice. On November 11, 2014, Intervener Association for Competitive Technologies filed comments in support...

  • Page 109
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) All of the federal and state class actions other than the California class actions were transferred by the Multidistrict Litigation Panel to the U.S. District Court in Delaware for all pre-trial proceedings and discovery (MDL ...

  • Page 110
    ... FINANCIAL STATEMENTS (Continued) In re Intel Corporation Shareholder Derivative Litigation In March 2014, the Police Retirement System of St. Louis filed a shareholder derivative action in the Superior Court of California in Santa Clara County against the members of our Board of Directors...

  • Page 111
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In January 2012, the court certified the action as a class action, appointed the Central Pension Laborers' Fund to act as the class representative, and scheduled trial to begin in January 2013. In March 2012, defendants filed a...

  • Page 112
    ... software products for endpoint security, network and content security, risk and compliance, and consumer and mobile security from our McAfee business, and software products and services that promote Intel architecture as the platform of choice for software development. We have sales and marketing...

  • Page 113
    ...DCG operating segments is generated from the sale of platforms. Net revenue by country for the three years ended December 27, 2014 is based on the billing location of the customer. Revenue from unaffiliated customers for each period was as follows: (In Millions) 2014 2013 2012 Singapore ...$ 11,573...

  • Page 114
    INTEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net property, plant and equipment by country at the end of each period was as follows: (In Millions) Dec 27, 2014 Dec 28, 2013 Dec 29, 2012 United States ...$ 24,020 $ 23,624 $ 20,542 Ireland ...5,433 2,986 1,523 Israel ...1,...

  • Page 115
    INTEL CORPORATION FINANCIAL INFORMATION BY QUARTER (UNAUDITED) 2014 for Quarter Ended (In Millions, Except Per Share Amounts) December 27 September 27 June 28 March 29 Net revenue ...Gross margin ...Net income ...Basic earnings per share of common stock ...Diluted earnings per share of common stock...

  • Page 116
    ... of consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. We reviewed the results of management's assessment with the Audit Committee of our Board of Directors. Our independent registered public accounting firm, Ernst...

  • Page 117
    ...the Code) is our code of ethics document applicable to all employees, including all officers, and including our independent directors, who are not employees of the company, with regard to their Intel-related activities. The Code incorporates our guidelines designed to deter wrongdoing and to promote...

  • Page 118
    ... Inside logo, Iris, Intel RealSense, Intel vPro, Xeon, Intel Xeon Phi, Celeron, Itanium, Pentium, Quark and Ultrabook are trademarks of Intel Corporation in the U.S. and/or other countries. * Other names and brands may be claimed as the property of others. ** Management contracts or compensation...

  • Page 119
    INTEL CORPORATION SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Additions Charged to Expenses/Other Accounts Three Years Ended December 27, 2014 (In Millions) Balance at Beginning of Year Net (Deductions) Recoveries Balance at End of Year Allowance for doubtful receivables 2014 ...2013 ...2012 ...

  • Page 120
    ... Plan Standard Terms and Conditions Relating to NonQualified Stock Options granted to U.S. employees on and after May 19, 2004 under the 2004 Equity Incentive Plan Standard International Non-Qualified Stock Option Agreement under the 2004 Equity Incentive Plan Intel Corporation Non-Employee Director...

  • Page 121
    ..., 2006 and before January 19, 2008 under the ELTSOP RSU program) 10.4.4** Form of Notice of Grant-Restricted Stock Units 10.4.5** Intel Corporation 2006 Equity Incentive Plan Standard Terms and Conditions relating to NonQualified Stock Options granted on and after May 17, 2006 and before January 19...

  • Page 122
    ...OSU program) 10.4.14** Form of Terms and Conditions Relating to Nonqualified Options Granted to Paul Otellini under the 2006 Equity Incentive Plan 10.4.15** Intel Corporation 2006 Equity Incentive Plan, as amended and restated, effective May 20, 2009 10.4.16** Intel Corporation Non-Employee Director...

  • Page 123
    ...26** Intel Corporation 2006 Equity Incentive Plan Standard Terms and Conditions Relating to Restricted Stock Units Granted on and after January 20, 2011 under the 2006 Equity Incentive Plan (standard Management Committee Member -Restricted Stock Unit program) 10.4.27** Intel Corporation 2006 Equity...

  • Page 124
    ... 16, 2013 Intel Corporation 2006 Equity Incentive Plan Standard Terms and Conditions Relating to Restricted Stock Units Granted on and after January 23, 2014 under the 2006 Equity Incentive Plan (standard OSU program) Intel Corporation Non-Employee Director Restricted Stock Unit Agreement under the...

  • Page 125
    ...Description Form File Number Exhibit Filing Date Filed or Furnished Herewith 21.1 23.1 Intel Corporation Subsidiaries Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm 31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act...

  • Page 126
    ... thereunto duly authorized. INTEL CORPORATION Registrant By: /S/ STACY J. SMITH Stacy J. Smith Executive Vice President, Chief Financial Officer, and Principal Accounting Officer February 13, 2015 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below...

  • Page 127
    ..., General Manager, Sales and Marketing Group Stacy J. Smith Executive Vice President, Chief Financial Officer For additional listing of Intel senior management, please visit: www.intel.com/newsroom/bios 1 2 Member of Audit Committee Member of Compensation Committee 3 Member of Corporate Governance...

  • Page 128
    ... workplace practices, community engagement, and supply chain responsibility. The report and supporting materials are available at www.intel.com/responsibility. Caring for our people At the heart of our business success are our employees. One of the six Intel Values is "Great Place to Work," which...

  • Page 129
    www.intel.com News and information about Intel® products and technologies, customer support, careers, worldwide locations, and more. www.intc.com Stock information, earnings and conference webcasts, annual reports, and corporate governance and historical financial information.