Intel 1999 Annual Report Download - page 35

basis (which approximates actual cost on a current average or first-in, first- out basis). Inventories at fiscal year-ends were as follows:
Property, plant and equipment. Property, plant and equipment are stated at cost. Depreciation is computed for financial reporting purposes
principally using the straight-line method over the following estimated useful lives:
machinery and equipment, 2-4 years; buildings, 4-40 years.
Goodwill and other acquisition-related intangibles. Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of
net tangible and intangible assets acquired. Goodwill and other acquisition-related intangibles are amortized on a straight-line basis over the
periods indicated below. Reviews are regularly performed to determine whether facts or circumstances exist which indicate that the carrying
values of assets are impaired. The company assesses the recoverability of its assets by comparing the projected undiscounted net cash flows
associated with those assets against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over
the fair value of those assets. No impairment has been indicated to date.
Net goodwill and other acquisition
-related intangibles at fiscal year-ends were as follows:
Other intangibles include items such as trademarks, workforce-in-place and customer lists. The total balances presented above are net of total
accumulated amortization of $471 million and $60 million at December 25, 1999 and December 26, 1998, respectively.
Amortization of goodwill and other acquisition-related intangibles of $411 million for 1999 consisted of $307 million of amortization of
goodwill and $104 million of amortization of other acquisition-related intangibles, a majority of which was related to developed technology.
Revenue recognition. The company generally recognizes net revenues upon the transfer of title. However, certain of the company's sales are
made to distributors under agreements allowing price protection and/or right of return on merchandise unsold by the distributors. Because of
frequent sales price reductions and rapid technological obsolescence in the industry, Intel defers recognition of revenues on shipments to
distributors until the merchandise is sold by the distributors.
Advertising. Cooperative advertising obligations are accrued and the costs expensed at the same time the related revenues are recognized. All
other advertising costs are expensed as incurred. Advertising expense was $1.7 billion, $1.3 billion and $1.2 billion in 1999, 1998 and 1997,
respectively.
Interest. Interest as well as gains and losses related to contractual agreements to hedge certain investment positions and debt (see "Derivative
financial instruments") are recorded as net interest income or expense. Interest expense capitalized as a component of construction costs was $5
million, $6 million and $9 million for 1999, 1998 and 1997, respectively.
Earnings per share. The shares used in the computation of the company's basic and diluted earnings per common share are reconciled as
follows:
(In millions) 1999 1998
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Raw materials $ 183 $ 206
Work in process 755 795
Finished goods 540 581
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Total $1,478 $1,582
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Life in
(In millions) Years 1999 1998
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Goodwill 2-6 $4,124 $ 52
Developed technology 3-6 612 33
Other intangibles 2-6 198 26
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$4,934 $111
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(In millions) 1999 1998 1997
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Weighted average common shares outstanding 3,324 3,336 3,271
Dilutive effect of:
Employee stock options 145 159 204
Convertible notes 1 -- --
1998 step-up warrants -- 22 115
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Weighted average common shares
outstanding, assuming dilution 3,470 3,517 3,590
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