Intel Corp 8-K 2015-01-15
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News Release
• |
Record full-year revenue and fourth-quarter revenue, with both up 6 percent year-over-year |
• |
Record full-year unit shipments of PCs, servers, tablets, phones and the Internet of Things; and exceeded the tablet goal by shipping 46 million units |
• |
Completed $4.0 billion share repurchase in the fourth-quarter, $10.8 billion for the full-year
|
• |
Announced increase in cash dividend to 96 cents-per-share on an annual basis |
• |
PC Client Group revenue of $34.7 billion, up 4 percent from 2013.
|
• |
Data Center Group revenue of $14.4 billion, up 18 percent from 2013.
|
• |
Internet of Things Group revenue of $2.1 billion, up 19 percent from 2013.
|
• |
Mobile and Communications Group revenue of $202 million, down 85 percent from 2013.
|
• |
Software and services operating segments revenue of $2.2 billion, up 1 percent from 2013.
|
• |
PC Client Group revenue of $8.9 billion, down 3 percent sequentially and up 3 percent year-over-year.
|
• |
Data Center Group revenue of $4.1 billion, up 11 percent sequentially and up 25 percent year-over-year.
|
• |
Internet of Things Group revenue of $591 million, up 12 percent sequentially and up 10 percent year-over-year.
|
• |
Mobile and Communications Group negative revenue of $6 million, consistent with expectations.
|
• |
Software and services operating segments revenue of $557 million, flat sequentially and down 6 percent year-over-year.
|
Financial Comparison | |||
Annual | |||
2014 |
2013 |
vs. 2013 |
|
Revenue |
$55.9 billion |
$52.7 billion |
up 6% |
Gross Margin |
63.7% |
59.8% |
up 3.9 points |
R&D and MG&A |
$19.7 billion |
$18.7 billion |
up 5% |
Operating Income |
$15.3 billion |
$12.3 billion |
up 25% |
Tax Rate |
25.9% |
23.7% |
up 2.2 points |
Net Income |
$11.7 billion |
$9.6 billion |
up 22% |
Earnings Per Share |
$2.31 |
$1.89 |
up 22% |
Financial Comparison | |||
Quarterly Year-Over-Year | |||
Q4 2014 |
Q4 2013 |
vs. Q4 2013 |
|
Revenue |
$14.7 billion |
$13.8 billion |
up 6% |
Gross Margin |
65.4% |
62.0% |
up 3.4 points |
R&D and MG&A |
$5.0 billion |
$4.8 billion |
up 4% |
Operating Income |
$4.5 billion |
$3.5 billion |
up 25% |
Tax Rate |
21.4% |
26.1% |
down 4.7 points |
Net Income |
$3.7 billion |
$2.6 billion |
up 39% |
Earnings Per Share |
74 cents |
51 cents |
up 45% |
Financial Comparison | |||
Quarterly Sequential | |||
Q4 2014 |
Q3 2014 |
vs. Q3 2014 |
|
Revenue |
$14.7 billion |
$14.6 billion |
up 1% |
Gross Margin |
65.4% |
65.0% |
up 0.4 point |
R&D and MG&A |
$5.0 billion |
$4.8 billion |
up 5% |
Operating Income |
$4.5 billion |
$4.5 billion |
down 2% |
Tax Rate |
21.4% |
27.1% |
down 5.7 points |
Net Income |
$3.7 billion |
$3.3 billion |
up 10% |
Earnings Per Share |
74 cents |
66 cents |
up 12% |
• |
Revenue: growth in the mid-single digit percentage points. |
• |
Gross margin percentage: 62 percent, plus or minus a couple of percentage points.
|
• |
R&D plus MG&A spending: approximately $20.0 billion, plus or minus $400 million.
|
• |
Amortization of acquisition-related intangibles: approximately $255 million.
|
• |
Depreciation: approximately $8.1 billion, plus or minus $100 million.
|
• |
Tax rate: approximately 27 percent.
|
• |
Full-year capital spending: $10.0 billion, plus or minus $500 million.
|
• |
Revenue: $13.7 billion, plus or minus $500 million.
|
• |
Gross margin percentage: 60 percent, plus or minus a couple of percentage points.
|
• |
R&D plus MG&A spending: approximately $4.9 billion.
|
• |
Restructuring charges: approximately $40 million.
|
• |
Amortization of acquisition-related intangibles: approximately $65 million.
|
• |
Impact of equity investments and interest and other: approximately zero.
|
• |
Depreciation: approximately $1.8 billion.
|
• |
Demand for Intel’s products is highly variable and could differ from expectations due to factors including changes in the business and economic conditions; consumer confidence or income levels; customer acceptance of Intel’s and competitors’ products; competitive and pricing pressures, including actions taken by competitors; supply constraints and other disruptions affecting customers; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. |
• |
Intel’s gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; and product manufacturing quality/yields. Variations in gross margin may also be caused by the timing of Intel product introductions and related expenses, including marketing expenses, and Intel’s ability to respond quickly to technological developments and to introduce new features into existing products, which may result in restructuring and asset impairment charges. |
• |
Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates. Results may also be affected by the formal or informal imposition by countries of new or revised export and/or import and doing-business regulations, which could be changed without prior notice.
|
• |
Intel operates in highly competitive industries and its operations have high costs that are either fixed or difficult to reduce in the short term.
|
• |
The amount, timing and execution of Intel’s stock repurchase program and dividend program could be affected by changes in Intel’s priorities for the use of cash, such as operational spending, capital spending, acquisitions, and as a result of changes to Intel’s cash flows and changes in tax laws.
|
• |
Intel’s expected tax rate is based on current tax law and current expected income and may be affected by the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various authorities, including payment of interest and penalties; and the ability to realize deferred tax assets. |
• |
Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, changes in the fair value or impairments of debt and equity investments, interest rates, cash balances and changes in the fair value of derivative instruments. |
• |
Product defects or errata (deviations from published specifications) may adversely impact our expenses, revenues and reputation. |
• |
Intel’s results could be affected by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, disclosure and other issues. An unfavorable ruling could include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property. |
• |
Intel’s results may be affected by the timing of closing of acquisitions, divestitures and other significant transactions.
|
Three Months Ended |
Twelve Months Ended |
|||||||||||||||
Dec 27, 2014 |
Dec 28, 2013 |
Dec 27, 2014 |
Dec 28, 2013 |
|||||||||||||
NET REVENUE |
$ |
14,721 |
$ |
13,834 |
$ |
55,870 |
$ |
52,708 |
||||||||
Cost of sales |
5,100 |
5,263 |
20,261 |
21,187 |
||||||||||||
GROSS MARGIN |
9,621 |
8,571 |
35,609 |
31,521 |
||||||||||||
Research and development |
2,990 |
2,826 |
11,537 |
10,611 |
||||||||||||
Marketing, general and administrative |
2,049 |
2,006 |
8,136 |
8,088 |
||||||||||||
R&D AND MG&A |
5,039 |
4,832 |
19,673 |
18,699 |
||||||||||||
Restructuring and asset impairment charges |
57 |
116 |
295 |
240 |
||||||||||||
Amortization of acquisition-related intangibles |
72 |
74 |
294 |
291 |
||||||||||||
OPERATING EXPENSES |
5,168 |
5,022 |
20,262 |
19,230 |
||||||||||||
OPERATING INCOME |
4,453 |
3,549 |
15,347 |
12,291 |
||||||||||||
Gains (losses) on equity investments, net |
233 |
34 |
411 |
471 |
||||||||||||
Interest and other, net |
(27 |
) |
(32 |
) |
43 |
(151 |
) |
|||||||||
INCOME BEFORE TAXES |
4,659 |
3,551 |
15,801 |
12,611 |
||||||||||||
Provision for taxes |
998 |
926 |
4,097 |
2,991 |
||||||||||||
NET INCOME |
$ |
3,661 |
$ |
2,625 |
$ |
11,704 |
$ |
9,620 |
||||||||
BASIC EARNINGS PER COMMON SHARE OF COMMON STOCK |
$ |
0.77 |
$ |
0.53 |
$ |
2.39 |
$ |
1.94 |
||||||||
DILUTED EARNINGS PER COMMON SHARE OF COMMON STOCK |
$ |
0.74 |
$ |
0.51 |
$ |
2.31 |
$ |
1.89 |
||||||||
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |
||||||||||||||||
BASIC |
4,769 |
4,971 |
4,901 |
4,970 |
||||||||||||
DILUTED |
4,940 |
5,103 |
5,056 |
5,097 |
||||||||||||
Dec 27, 2014 |
Sep 27, 2014 |
Dec 28, 2013 |
||||||||||
CURRENT ASSETS |
||||||||||||
Cash and cash equivalents |
$ |
2,561 |
$ |
3,143 |
$ |
5,674 |
||||||
Short-term investments |
2,430 |
3,451 |
5,972 |
|||||||||
Trading assets |
9,063 |
9,000 |
8,441 |
|||||||||
Accounts receivable, net |
4,427 |
3,647 |
3,582 |
|||||||||
Inventories |
||||||||||||
Raw materials |
462 |
496 |
458 |
|||||||||
Work in process |
2,375 |
2,292 |
1,998 |
|||||||||
Finished goods |
1,436 |
1,327 |
1,716 |
|||||||||
4,273 |
4,115 |
4,172 |
||||||||||
Deferred tax assets |
1,958 |
1,674 |
2,594 |
|||||||||
Other current assets |
3,018 |
2,479 |
1,649 |
|||||||||
TOTAL CURRENT ASSETS |
27,730 |
27,509 |
32,084 |
|||||||||
Property, plant and equipment, net |
33,238 |
33,135 |
31,428 |
|||||||||
Marketable equity securities |
7,097 |
6,514 |
6,221 |
|||||||||
Other long-term investments |
2,023 |
2,153 |
1,473 |
|||||||||
Goodwill |
10,861 |
10,556 |
10,513 |
|||||||||
Identified intangible assets, net |
4,446 |
4,379 |
5,150 |
|||||||||
Other long-term assets |
6,561 |
6,370 |
5,489 |
|||||||||
TOTAL ASSETS |
$ |
91,956 |
$ |
90,616 |
$ |
92,358 |
||||||
CURRENT LIABILITIES |
||||||||||||
Short-term debt |
$ |
1,604 |
$ |
1,164 |
$ |
281 |
||||||
Accounts payable |
2,748 |
2,597 |
2,969 |
|||||||||
Accrued compensation and benefits |
3,475 |
2,931 |
3,123 |
|||||||||
Accrued advertising |
1,092 |
1,100 |
1,021 |
|||||||||
Deferred income |
2,205 |
2,189 |
2,096 |
|||||||||
Other accrued liabilities |
4,895 |
4,923 |
4,078 |
|||||||||
TOTAL CURRENT LIABILITIES |
16,019 |
14,904 |
13,568 |
|||||||||
Long-term debt |
12,107 |
12,103 |
13,165 |
|||||||||
Long-term deferred tax liabilities |
3,775 |
3,551 |
4,397 |
|||||||||
Other long-term liabilities |
3,278 |
3,070 |
2,972 |
|||||||||
TEMPORARY EQUITY |
912 |
915 |
— |
|||||||||
Stockholders' equity |
||||||||||||
Preferred Stock |
— |
— |
— |
|||||||||
Common stock and capital in excess of par value |
21,781 |
21,894 |
21,536 |
|||||||||
Accumulated other comprehensive income (loss) |
666 |
946 |
1,243 |
|||||||||
Retained Earnings |
33,418 |
33,233 |
35,477 |
|||||||||
TOTAL STOCKHOLDERS' EQUITY |
55,865 |
56,073 |
58,256 |
|||||||||
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY |
$ |
91,956 |
$ |
90,616 |
$ |
92,358 |
||||||
Q4 2014 |
Q3 2014 |
Q4 2013 |
||||||||||
CASH INVESTMENTS: |
||||||||||||
Cash and short-term investments |
$ |
4,991 |
$ |
6,594 |
$ |
11,646 |
||||||
Trading assets |
9,063 |
9,000 |
8,441 |
|||||||||
Total cash investments |
$ |
14,054 |
$ |
15,594 |
$ |
20,087 |
||||||
CURRENT DEFERRED INCOME: |
||||||||||||
Deferred income on shipments of components to distributors |
$ |
944 |
$ |
992 |
$ |
852 |
||||||
Deferred income from software and services group |
1,261 |
1,197 |
1,244 |
|||||||||
Total current deferred income |
$ |
2,205 |
$ |
2,189 |
$ |
2,096 |
||||||
SELECTED CASH FLOW INFORMATION: |
||||||||||||
Depreciation |
$ |
1,889 |
$ |
1,891 |
$ |
1,667 |
||||||
Share-based compensation |
$ |
281 |
$ |
281 |
$ |
263 |
||||||
Amortization of intangibles |
$ |
279 |
$ |
307 |
$ |
289 |
||||||
Capital spending* |
$ |
(2,143 |
) |
$ |
(2,445 |
) |
$ |
(2,948 |
) |
|||
Net cash (used)/received for acquisitions/divestitures |
$ |
(741 |
) |
$ |
(56 |
) |
$ |
(43 |
) |
|||
Investments in non-marketable equity instruments |
$ |
(47 |
) |
$ |
(215 |
) |
$ |
(182 |
) |
|||
Stock repurchase program |
$ |
(4,000 |
) |
$ |
(4,166 |
) |
$ |
(528 |
) |
|||
Proceeds from sales of shares to employees & excess tax benefit |
$ |
107 |
$ |
605 |
$ |
287 |
||||||
Dividends paid |
$ |
(1,069 |
) |
$ |
(1,095 |
) |
$ |
(1,121 |
) |
|||
EARNINGS PER COMMON SHARE INFORMATION: |
||||||||||||
Weighted average common shares outstanding - basic |
4,769 |
4,880 |
4,971 |
|||||||||
Dilutive effect of employee equity incentive plans |
81 |
76 |
69 |
|||||||||
Dilutive effect of convertible debt |
90 |
89 |
63 |
|||||||||
Weighted average common shares outstanding - diluted |
4,940 |
5,045 |
5,103 |
|||||||||
STOCK BUYBACK: |
||||||||||||
Shares repurchased |
115 |
119 |
22 |
|||||||||
Cumulative shares repurchased (in billions) |
4.7 |
4.6 |
4.4 |
|||||||||
Remaining dollars authorized for buyback (in billions) |
$ |
12.4 |
$ |
16.4 |
$ |
3.2 |
||||||
OTHER INFORMATION: |
||||||||||||
Employees (in thousands) |
106.7 |
105.6 |
107.6 |
|||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||||||
Dec 27, 2014 |
Dec 28, 2013 |
Dec 27, 2014 |
Dec 28, 2013 |
|||||||||||||
Net Revenue |
||||||||||||||||
PC Client Group |
$ |
8,871 |
$ |
8,616 |
$ |
34,669 |
$ |
33,270 |
||||||||
Data Center Group |
4,091 |
3,262 |
14,387 |
12,161 |
||||||||||||
Internet of Things Group |
591 |
538 |
2,142 |
1,801 |
||||||||||||
Mobile and Communications Group |
(6 |
) |
326 |
202 |
1,375 |
|||||||||||
Software and services operating segments |
557 |
591 |
2,216 |
2,190 |
||||||||||||
All other |
617 |
501 |
2,254 |
1,911 |
||||||||||||
TOTAL NET REVENUE |
$ |
14,721 |
$ |
13,834 |
$ |
55,870 |
$ |
52,708 |
||||||||
Operating income (loss) |
||||||||||||||||
PC Client Group |
$ |
3,979 |
$ |
3,374 |
$ |
14,635 |
$ |
11,751 |
||||||||
Data Center Group |
2,230 |
1,603 |
7,279 |
5,569 |
||||||||||||
Internet of Things Group |
185 |
208 |
616 |
550 |
||||||||||||
Mobile and Communications Group |
(1,110 |
) |
(874 |
) |
(4,206 |
) |
(3,148 |
) |
||||||||
Software and services operating segments |
25 |
30 |
55 |
24 |
||||||||||||
All other |
(856 |
) |
(792 |
) |
(3,032 |
) |
(2,455 |
) |
||||||||
TOTAL OPERATING INCOME |
$ |
4,453 |
$ |
3,549 |
$ |
15,347 |
$ |
12,291 |
||||||||
• |
PC Client Group: Delivering platforms designed for the notebook (including Ultrabook™ devices and 2 in 1 systems), the desktop (including all-in-ones and high-end enthusiast PCs), and tablets; wireless and wired connectivity products; as well as home gateway and set-top box components.
|
• |
Data Center Group: Delivering platforms designed for the server, workstation, networking and storage computing market segments.
|
• |
Internet of Things Group: Delivering platforms designed for embedded market segments including retail, transportation, industrial, and buildings and home, along with a broad range of other market segments.
|
• |
Mobile and Communications Group: Delivering platforms designed for the tablet and smartphone market segments; and mobile communications components such as baseband processors, radio frequency transceivers, Wi-Fi, Bluetooth*, global navigation satellite systems, and power management chips.
|
• |
Software and services operating segments consists of the following: |
◦ |
McAfee: A wholly owned subsidiary delivering software products for endpoint security, network and content security, risk and compliance, and consumer and mobile security. |
◦ |
Software and Services Group: Delivering software products and services that promote Intel architecture as the platform of choice for software development. |
• |
All other category includes revenue, expenses, and charges such as: |
◦ |
Results of operations from our Non-Volatile Memory Solutions Group, Netbook Group, and New Devices Group; |
◦ |
Amounts included within restructuring and asset impairment charges; |
◦ |
A portion of profit-dependent compensation and other expenses not allocated to the operating segments; |
◦ |
Divested businesses for which discrete operating results are not regularly reviewed by our CODM; |
◦ |
Results of operations of startup businesses that support our initiatives, including our foundry business; |
◦ |
Acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill. |
Q4 2014 |
Q4 2014 |
2014 |
||||
compared to Q3 2014 |
compared to Q4 2013 |
compared to 2013 |
||||
PC Client Group Platform |
||||||
Unit Volumes |
(5)% |
6% |
8% |
|||
Average Selling Prices |
3% |
(2)% |
(4)% |
|||
Data Center Group Platform |
||||||
Unit Volumes |
5% |
15% |
8% |
|||
Average Selling Prices |
7% |
10% |
10% |
|||
Dec 27, 2014 |
Sep 27, 2014 |
Dec 28, 2013 |
Dec 25, 2010 |
|||||||||||||
GAAP CASH AND CASH EQUIVALENTS |
$ |
2,561 |
$ |
3,143 |
$ |
5,674 |
$ |
5,498 |
||||||||
Short-term investments |
2,430 |
3,451 |
5,972 |
11,294 |
||||||||||||
Trading assets |
9,063 |
9,000 |
8,441 |
5,093 |
||||||||||||
Total cash investments |
$ |
14,054 |
$ |
15,594 |
$ |
20,087 |
$ |
21,885 |
||||||||
GAAP OTHER LONG-TERM INVESTMENTS |
$ |
2,023 |
$ |
2,153 |
$ |
1,473 |
$ |
3,026 |
||||||||
Loans receivable and other |
1,285 |
1,355 |
1,226 |
1,016 |
||||||||||||
Reverse repurchase agreements with original maturities greater than approximately three months |
450 |
450 |
400 |
— |
||||||||||||
NON-GAAP OTHER LONGER TERM INVESTMENTS |
$ |
3,758 |
$ |
3,958 |
$ |
3,099 |
$ |
4,042 |
||||||||
NON-GAAP GROSS CASH |
$ |
17,812 |
$ |
19,552 |
$ |
23,186 |
$ |
25,927 |
||||||||
Dec 27, 2014 |
Sep 27, 2014 |
Dec 28, 2013 |
Dec 25, 2010 |
|||||||||||||
GAAP CASH AND CASH EQUIVALENTS |
$ |
2,561 |
$ |
3,143 |
$ |
5,674 |
$ |
5,498 |
||||||||
Short-term investments |
2,430 |
3,451 |
5,972 |
11,294 |
||||||||||||
Trading assets |
9,063 |
9,000 |
8,441 |
5,093 |
||||||||||||
Total cash investments |
$ |
14,054 |
$ |
15,594 |
$ |
20,087 |
$ |
21,885 |
||||||||
Short-term debt |
(1,604 |
) |
(1,164 |
) |
(281 |
) |
(38 |
) |
||||||||
Long-term debt |
(12,107 |
) |
(12,103 |
) |
(13,165 |
) |
(2,077 |
) |
||||||||
NON-GAAP NET CASH (excluding other longer term investments) |
$ |
343 |
$ |
2,327 |
$ |
6,641 |
$ |
19,770 |
||||||||
GAAP OTHER LONG-TERM INVESTMENTS |
$ |
2,023 |
$ |
2,153 |
$ |
1,473 |
$ |
3,026 |
||||||||
Loans receivable and other |
1,285 |
1,355 |
1,226 |
1,016 |
||||||||||||
Reverse repurchase agreements with original maturities greater than approximately three months |
450 |
450 |
400 |
— |
||||||||||||
NON-GAAP OTHER LONGER TERM INVESTMENTS |
$ |
3,758 |
$ |
3,958 |
$ |
3,099 |
$ |
4,042 |
||||||||
NON-GAAP NET CASH (including other longer term investments) |
$ |
4,101 |
$ |
6,285 |
$ |
9,740 |
$ |
23,812 |
||||||||
Intel returned $4B cash to shareholders in the form of buybacks, but income investors who have languished from stagnant yield rate, finally saw some respite in the first dividend increase after a while. Intel lost its streak of dividend growth and now has had to start the streak again.
Data Centers and the Internet of Things continue to be Intel's key growth catalysts. Revenue grew 18% in data centers and 19% in the Internet of Things, but just 4% in personal computers. Slowing shipments of personal computers continues to drag on Intel, which is an ongoing problem since PC's still make up 62% of Intel's revenue.
Q4 sales grew 6%, in line with year-over-year sales growth -- also 6%. Operating profits growth was likewise equal for both the quarter and the year -- up 25%. Q4 gross margin improvement in contrast, although strong, was not as strong as Intel showed earlier in the year -- 390 basis points' improvement for the full year, versus just 340 b.p. for Q4. This could be an early indication that margin expansion is slowing.
Intel's gross margin is expected to decline from 63.7% in 2014 to 62% in 2015, thanks to the leading edge process node of the company. 14nm process technology costs more than lagging nodes. Beyond 28nm, double patterning increases the manufacturing costs. Anyhow, Intel will continue to dominate the high-end market share amid its process technology. Margins won't be hurt too much because of Intel's almost monopolistic position and premium pricing in the PC market.