UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
__X__ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 28, 1997
OR
_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_______________to_______________
Commission File Number 0-6217
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INTEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-1672743
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Mission College Boulevard, Santa Clara, California 95052-8119
- ------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(408) 765-8080
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No _____
Shares outstanding of the Registrant's common stock:
Class Outstanding at June 28, 1997
Common Stock, $.001 par value 1,633 million
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Intel Corporation
Consolidated Condensed Statements of Income (unaudited)
(in millions, except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
------------------ -----------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues $ 5,960 $ 4,621 $12,408 $ 9,265
Costs and expenses:
Cost of sales 2,343 2,150 4,650 4,571
Research and
development 575 438 1,156 839
Marketing, general and
administrative 704 518 1,397 1,035
------- ------- ------- -------
Operating costs and
expenses 3,622 3,106 7,203 6,445
------- ------- ------- -------
Operating income 2,338 1,515 5,205 2,820
Interest expense (7) (3) (14) (8)
Interest income and
other, net 219 89 434 165
------- ------- ------- -------
Income before taxes 2,550 1,601 5,625 2,977
Provision for taxes 905 560 1,997 1,042
------- ------- ------- -------
Net income $ 1,645 $ 1,041 $ 3,628 $ 1,935
======= ======= ======= =======
Earnings per common and
common equivalent share $ 0.92 $ 0.59 $ 2.02 $ 1.09
======= ======= ======= =======
Cash dividends declared
per common share $ 0.030 $ 0.025 $ 0.055 $ 0.045
======= ======= ======= =======
Weighted average common
and common equivalent
shares outstanding 1,797 1,776 1,798 1,768
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
Item 1. Financial Statements (continued)
Intel Corporation
Consolidated Condensed Balance Sheets Jun. 28, Dec. 28,
(in millions) 1997 1996
---- ----
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,002 $ 4,165
Short-term investments 3,885 3,742
Trading assets 170 87
Accounts receivable, net 3,950 3,723
Inventories:
Raw materials 260 280
Work in process 703 672
Finished goods 480 341
------- -------
1,443 1,293
------- -------
Deferred tax assets 591 570
Other current assets 148 104
------- -------
Total current assets 14,189 13,684
------- -------
Property, plant and equipment 15,833 14,262
Less accumulated depreciation 6,661 5,775
------- -------
Property, plant and equipment, net 9,172 8,487
Long-term investments 1,455 1,353
Other assets 331 211
------- -------
TOTAL ASSETS $25,147 $23,735
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 181 $ 389
Accounts payable 1,022 969
Deferred income on shipments to distributors 550 474
Accrued compensation and benefits 937 1,128
Accrued advertising 485 410
Other accrued liabilities 918 507
Income taxes payable 542 986
------- -------
Total current liabilities 4,635 4,863
------- -------
Long-term debt 468 728
Deferred tax liabilities 1,072 997
Put warrants 1,566 275
Stockholders' equity:
Preferred stock -- --
Common stock and capital in excess
of par value 3,001 2,897
Retained earnings 14,405 13,975
------- -------
Total stockholders' equity 17,406 16,872
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,147 $23,735
======= =======
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 4
Item 1. Financial Statements (continued)
Intel Corporation
Consolidated Condensed Statements of Cash Flows (unaudited)
(in millions)
<TABLE>
Six Months Ended
----------------
Jun. 28, Jun. 29,
1997 1996
---- ----
<S> <C> <C>
Cash flows provided by (used for) operating
activities:
Net income $ 3,628 $ 1,935
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,050 873
Net loss on retirements of property, plant
and equipment 23 60
Deferred taxes 81 103
Changes in assets and liabilities:
Accounts receivable (227) 216
Inventories (150) 525
Trading assets (83) (79)
Accounts payable 53 (108)
Accrued compensation and benefits (191) (129)
Income taxes payable (444) 14
Tax benefit from employee stock plans 117 62
Other assets and liabilities 276 350
------- -------
Total adjustments 505 1,887
------- -------
Net cash provided by operating activities 4,133 3,822
------- -------
Cash flows provided by (used for) investing
activities:
Additions to property, plant and equipment (1,758) (1,604)
Purchases of available-for-sale investments (3,380) (1,189)
Sales of available-for-sale investments 93 --
Maturities and other changes in available-for-
sale investments 3,047 687
------- -------
Net cash (used for) investing activities (1,998) (2,106)
Cash flows provided by (used for) financing
activities:
(Decrease) in short-term debt, net (208) (105)
Additions to long-term debt 68 --
Retirement of long-term debt (300) --
Proceeds from sales of shares through employee
stock plans and other 178 132
Proceeds from exercise of 1998 Step-Up 26 2
Warrants
Proceeds from sales of put warrants 141 36
Repurchase and retirement of common stock (2,121) (369)
Payment of dividends to stockholders (82) (66)
------- -------
Net cash (used for) financing activities (2,298) (370)
------- -------
Net increase (decrease) in cash and cash $ (163) $ 1,346
equivalents ======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 21 $ 24
Income taxes $ 2,243 $ 819
</TABLE>
Certain 1996 amounts have been reclassified to conform to the 1997 presentation.
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 5
Item 1. Financial Statements (continued)
Intel Corporation, Notes to Consolidated Condensed Financial Statements
1. The accompanying interim consolidated condensed financial statements of
Intel Corporation ("Intel," the "Company" or the "Registrant") have been
prepared in conformity with generally accepted accounting principles,
consistent in all material respects with those applied in the Annual
Report on Form 10-K for the year ended December 28, 1996. The interim
financial information is unaudited, but reflects all normal adjustments
which are, in the opinion of management, necessary to provide a fair
statement of results for the interim periods presented. The interim
financial statements should be read in connection with the financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 28, 1996.
2. In May 1997, the stockholders approved an increase in the Company's
authorized shares of Common Stock to 4.5 billion. On July 13, 1997, the
Company effected a two-for-one stock split in the form of a special stock
distribution to stockholders of record as of June 10, 1997. All share, per
share, Common Stock, capital in excess of par value and warrant amounts
here-in have been restated to reflect the effect of this split.
3. Interest and other income includes (in millions):
<TABLE>
Three Months Ended Six Months Ended
------------------ ----------------
<S> <C> <C> <C> <C>
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1997 1996 1997 1996
---- ---- ---- ----
Interest income $ 142 $ 78 $ 269 $ 158
Foreign currency gains 12 7 25 14
Other income (expense),
net 65 4 140 (7)
----- ----- ----- -----
Total $ 219 $ 89 $ 434 $ 165
===== ===== ===== =====
</TABLE>
Other income for the six months ended June 28, 1997 consists primarily of
gains on sales of equity investments.
4. Earnings per common and common equivalent share as presented on the face of
the statements of income represent primary earnings per share. Dual
presentation of primary and fully diluted earnings per share has not been
made because the differences are insignificant.
Effective December 27, 1997, the Company will adopt Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." At that time,
the Company will be required to change the method currently used to
calculate earnings per share and to restate all prior periods. The new
requirements will include a calculation of basic earnings per share, from
which the dilutive effect of stock options and warrants will be excluded.
The basic earnings per share are expected to reflect an increase of $.09 and
$.04 per share for the quarters ended June 28, 1997 and June 29, 1996,
respectively, over the primary earnings per share reported for these
quarters. For the six month periods then ended, the increases are expected
to be $.20 and $.09 per share, respectively. A calculation of diluted
earnings per share will also be required; however, this is not expected to
differ materially from the Company's reported primary earnings per share.
<PAGE> 6
Item 1. Financial Statements (continued)
Intel Corporation, Notes to Consolidated Condensed Financial Statements
(continued)
5. As more fully described in the Company's Annual Report, Intel enters into
derivative financial instruments to reduce financial market risks. These
instruments are used to hedge foreign currency, equity and interest rate
market exposures of underlying assets, liabilities and other obligations.
The Company does not use derivative financial instruments for speculative
or trading purposes. The Company's accounting policies for these
instruments are based on the Company's designation of such instruments as
hedging transactions. The criteria the Company uses for designating an
instrument as a hedge include the instrument's effectiveness in risk
reduction and one-to-one matching of derivative instruments to underlying
transactions. Gains and losses on currency forward contracts, and options
that are designated and effective as hedges of anticipated transactions,
for which a firm commitment has been attained, are deferred and recognized
in income in the same period that the underlying transactions are settled.
Gains and losses on currency forward contracts, options and swaps that are
designated and effective as hedges of existing transactions are recognized
in income in the same period as losses and gains on the underlying
transactions are recognized and generally offset. Gains and losses on any
instruments not meeting the above criteria would be recognized in income
in the current period. If an underlying hedged transaction is terminated
earlier than initially anticipated, the offsetting gain or loss on the
related derivative instrument is recognized in income in the same period.
Subsequent gains or losses on the related derivative instrument are
recognized in income in each period until the instrument matures, is
terminated or is sold. Income or expense on swaps is accrued as an
adjustment to the yield of the related investments or debt they hedge.
Cash flows associated with derivative transactions are reported as
arising from operating activities in the consolidated statement of cash
flows.
6. A $300 million reverse repurchase arrangement originally payable in 2001
was reclassified from long-term debt to short-term during the first quarter
of 1997. During the second quarter of 1997 the debt was repaid by the
Company. During the first quarter of 1997, the Company borrowed a total of
44 million Irish punts (approximate U.S. dollar equivalent of $68 million)
due 2000-2017 at interest rates ranging from 5% to 7%. The borrowings were
made in connection with the financing of a factory in Ireland, and Intel
has invested the proceeds in Irish punt denominated instruments of similar
maturity to hedge foreign currency and interest rate exposures.
7. During the first half of 1997, the Company repurchased 28.4 million shares
of Common Stock under the Company's authorized repurchase program at a
cost of $2.1 billion. During the first quarter of 1997, the Company's
Board of Directors approved an increase in the repurchase program of up
to 60 million additional shares, bringing the total authorization to 280
million shares. As of June 28, 1997, after allowing for the outstanding
put warrants, approximately 60.8 million shares remained available under
the repurchase program. (See Item 2. Management's Discussion and Analysis
for subsequent activity.)
8. In a series of private placements during the 1991-1997 period, the Company
sold put warrants that entitle the holder of each warrant to sell to the
Company, by physical delivery, one share of Common Stock at a specified
price. Activity during the first half of 1997 is summarized as follows:
<TABLE>
Put Warrants Outstanding
------------------------
Cumulative Proceeds Number Potential
(in millions) Received Of Warrants Obligation
------------- -------- ----------- ----------
<S> <C> <C> <C>
December 28, 1996 $ 335 9 $ 275
Sales 88 12 916
Expirations -- (6) (174)
------ ------ ------
March 29, 1997 $ 423 15 $1,017
Sales 53 9 649
Expirations -- (3) (100)
------ ------ ------
June 28, 1997 $ 476 21 $1,566
====== ====== ======
</TABLE>
<PAGE> 7
Item 1. Financial Statements (continued)
Intel Corporation, Notes to Consolidated Condensed Financial Statements
(continued)
A total of 9 million warrants were sold to banks and investment banks
during April and May of 1997. They expire on various dates between August
1997 and May 1998 and have exercise prices ranging from $71 to $73 per
share, with an average exercise price of $72. The 21 million put warrants
outstanding on June 28, 1997 expire on various dates between August 1997
and May 1998 and have exercise prices ranging from $71 to $81 per share,
with an average exercise price of $75. The amount related to the Company's
potential buyback obligation has been reclassified from Stockholders' Equity
and recorded as put warrants. There is no material dilutive effect on
earnings per share for the periods presented. (See Item 2. Management's
Discussion and Analysis for subsequent activity.)
9. The Company intends to adopt SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in fiscal 1998. Both Standards will require
additional disclosure, but will not have a material effect on the
Company's financial position or results of operations. SFAS No. 130
establishes standards for the reporting and display of comprehensive income
and is expected to first be reflected in the Company's first quarter of
1998 interim financial statements. Components of comprehensive income
include items such as net income and changes in value of available-for-
sale securities. SFAS No. 131 changes the way companies report segment
information and requires segments to be determined based on how
management measures performance and makes decisions about allocating
resources. SFAS No. 131 will first be reflected in the Company's
1998 Annual Report.
10. Digital Equipment Corporation (DEC) brought suit in Federal District Court
in Massachusetts on May 13, 1997, alleging that Intel has infringed ten
patents in making, using, selling and offering to sell microprocessor
products, including Pentium(R) and Pentium(R) Pro (including Pentium(R)
II) microprocessor families. DEC is seeking both an injunction and
monetary damages, including triple damages for Intel's alleged willful
infringement of the patents. The injunction, if granted, would prohibit
Intel from using DEC's patented technology in its microprocessor
products. The Company believes that its products do not infringe the DEC
patents and intends to defend the lawsuit vigorously. Although the
ultimate outcome of this lawsuit cannot be determined at this time,
management, including internal counsel, does not believe that the outcome
of this litigation will have a material adverse effect on the Company's
financial position or overall trends in results of operations.
Cyrix Corporation brought suit in Federal District Court in Texas on May
13, 1997, alleging that Intel has infringed two patents relating to
Pentium, Pentium Pro and Pentium II microprocessors. The suit seeks
preliminary and permanent injunctive relief along with unspecified damages.
The Company believes that its products do not infringe the Cyrix patents
and intends to defend the lawsuit vigorously. Although the ultimate outcome
of this lawsuit cannot be determined at this time, management, including
internal counsel, does not believe that the outcome of this litigation
will have a material adverse effect on the Company's financial position
or overall trends in results of operations.
A former employee of the Company filed an action on September 9, 1996,
alleging that Intel's products infringe a patent issued to the plaintiff and
that Intel wrongfully terminated his employment with Intel. The suit seeks
both monetary damages and injunctive relief. Expert witness discovery
closed on July 1, 1997. The plaintiff's expert witness has opined that the
plaintiff is entitled to $1.2 billion in damages for Intel's alleged
patent infringement. Intel's expert witnesses have opined that, should
the plaintiff prevail in the case, he would be entitled to nominal
damages only. The Company believes that its products do not infringe
the plaintiff's patent and intends to continue to defend this lawsuit
vigorously. Although the ultimate outcome of this lawsuit cannot be
determined at this time, management, including internal counsel, does not
believe that the outcome of this litigation will have a material adverse
effect on the Company's financial position or overall trends in results of
operations.
<PAGE> 8
Item 1. Financial Statements (continued)
Intel Corporation, Notes to Consolidated Condensed Financial Statements
(continued)
11. On July 27, 1997 the Company announced it had entered into a definitive
agreement to acquire Chips and Technologies, Inc. and on August 1, 1997 the
Company commenced a tender offer for all outstanding shares of Chips and
Technologies at a price of $17.50 per share. The tender offer will expire on
August 28, 1997. The Company expects that the funds required to complete the
transaction will be approximately $416 million. This acquisition is
subject to the successful completion of the tender offer and the receipt of
certain governmental and regulatory approvals. Subsequent to the Company's
announcement, certain shareholders of Chips and Technologies filed several
separate lawsuits, each claiming class action status, in state and federal
courts against Chips and Technologies, Inc. and its board of directors. The
suits challenge and seek to enjoin the pending tender offer by the Company.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Second Quarter of 1997 Compared to Second Quarter
of 1996
Revenues for Q2 1997 increased by 29% compared to Q2 1996. Higher volumes of
Pentium(R) processors, including processors with MMX(TM) media enhancement
technology (collectively the "Pentium processor family"), and Pentium(R) Pro and
Pentium(R) II processors, as well as a shift in mix toward higher performance
processors, drove the overall growth in revenues. Chipsets also showed
significant revenue growth between these periods. Royalty revenues were down in
Q2 1997 from a higher than normal level in Q2 1996.
Cost of sales rose by 9% from Q2 1996 to Q2 1997. The percentage increase in
costs was less than the increase in revenues as a result of shifts in product
mix and factory efficiencies due to increased volumes. However, start-up costs
were higher in Q2 1997 than in Q2 1996 due to the start-up of the .25 micron
microprocessor manufacturing process in Q2 1997. Gross margin increased to 61%
in Q2 1997 from 53% in Q2 1996 primarily due to the changes in mix and to a
lesser extent due to the volume efficiencies. Gross margin in Q2 1996 included
the effect of the higher than normal royalty revenues.
For Q2 1997 and Q2 1996, a majority of the Company's revenues, and a
substantial majority of its gross margin, were derived from sales of Pentium
processor family products, including related board-level products. Sales of
Pentium Pro and Pentium II processors and related board-level products
represented a significant portion of the Company's revenues and gross margin
for the second quarter of 1997.
Research and development expenses and marketing, general and administrative
expenses rose by a total of $323 million, or 34%, from Q2 1996 to Q2 1997,
primarily due to higher levels of research and development spending on process
and product technology, and higher merchandising, Intel Inside(R) program and
profit dependent expenses. Expenses were 21% of revenues in Q2 of 1997, the
same as Q2 1996.
Interest and other income for Q2 1997 increased by $130 million over the prior
year due primarily to the higher average investment balance in Q2 1997 and
gains on sales of equity investments.
The provision for taxes for Q2 1997 increased by $345 million over the prior
year primarily as a result of higher pretax earnings. The effective tax rate
increased slightly from 35% for Q2 1996 to 35.5% for Q2 1997.
Results of Operations - First Half of 1997 Compared to First Half of 1996
Revenues for the first half of 1997 increased by 34% compared to the first half
of 1996. Higher volumes of Pentium processor family processors, and Pentium Pro
and Pentium II processors, as well as a shift in mix toward higher performance
processors, drove the overall growth in revenues. Chipsets also showed
significant revenue growth between these periods. Sales of board-level products
and royalty revenues were down in the first half of 1997 from the first half
of 1996.
Cost of sales rose by 2% from the first half of 1996 to the first half of 1997.
The percentage increase in costs was less than the increase in revenues as a
result of shifts in product mix and factory efficiencies due to increased
volumes. However, start-up costs were higher in the first half of 1997 than
in the prior year due to the start-up of the .25 micron microprocessor
manufacturing process in the first half of 1997. Gross margin increased to 63%
in the first half of 1997 from 51% in the first half of 1996 primarily due to
the changes in mix and to a lesser extent due to the volume efficiencies. Gross
margin in the first half of 1996 included the effect of the higher than normal
royalty revenues.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations - First Half of 1997 Compared to First Half of 1996
(continued)
For the first half of 1997 and 1996, a majority of the Company's revenues,
and a substantial majority of its gross margin, were derived from sales of
Pentium processor family products, including related board-level products.
Sales of Pentium Pro and Pentium II processors and related board-level products
represented a significant portion of the Company's revenues and gross margin
for the first half of 1997.
Research and development expenses and marketing, general and administrative
expenses rose by a total of $679 million, or 36%, from the first half of 1996
to the first half of 1997, primarily due to higher levels of research and
development spending on process and product technology, and higher
merchandising, Intel Inside(R) program and profit dependent expenses. Expenses
were 21% of revenues in the first half of 1997 versus 20% in the first half of
1996.
Interest and other income for the first half of 1997 increased by $269 million
over the prior year due primarily to the higher average investment balance in
the first half of 1997 and gains on sales of equity investments.
The provision for taxes for the first half of 1997 increased by $955 million
over the prior year primarily as a result of higher pretax earnings. The
effective tax rate increased slightly from 35% for the first half of 1996 to
35.5% for the first half of 1997.
Financial Condition
The Company's financial condition remains very strong. As of June 28, 1997,
cash, trading assets and short- and long-term investments totaled $9.5 billion,
up from $9.3 billion at December 28, 1996. The Company's other sources of
liquidity include credit lines, which are generally uncommitted, and authorized
commercial paper borrowings together totaling approximately $1.8 billion. The
Company also maintains the authority to issue an aggregate of approximately
$1.4 billion in debt, equity and other securities under Securities and Exchange
Commission shelf registration statements.
The Company funded most of its investment needs during the first half of 1997
with cash generated from operations, which totaled $4.1 billion. Major uses of
cash during the first half of 1997 included capital spending of $1.8 billion
for property, plant and equipment, primarily for microprocessor manufacturing
capacity, and $2.1 billion to buy back 28.4 million shares of Common Stock. In
addition, there were net debt repayments of $440 million in the first half of
1997.
The Company's five largest customers accounted for approximately 37% of net
revenues for the six month period ended June 28, 1997. At June 28, 1997, these
customers accounted for approximately 33% of net accounts receivable.
Key financing activities in the first half of 1997 included the repurchase of
28.4 million shares of Common Stock for $2.1 billion as part of the Company's
authorized stock repurchase program. The Company also sold 21 million put
warrants, receiving proceeds of $141 million, while 9 million previously
outstanding put warrants expired unexercised. From June 28, 1997 through
August 7, 1997, the Company repurchased 2.0 million shares of its Common
Stock at a cost of $197 million. In addition, 16 million put warrants expired
upon the Company's stock price reaching certain levels above the exercise price
for such warrants. As of August 7, 1997, Intel had the potential obligation to
repurchase 5 million shares of Common Stock at an aggregate cost of $370
million under outstanding put warrants. The exercise price of these outstanding
warrants ranged from $72 to $81 per share, with an average exercise price of
$74 per share. During the first half of 1997, the Company's Board of Directors
approved an increase of up to 60 million additional shares in the Company's
repurchase program. This increase brings the total authorization to 280 million
shares. As of August 7, 1997, 74.8 million shares remained available for
repurchase under the repurchase authorization, after allowing for the
outstanding put warrants.
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Financial Condition (continued)
On July 27, 1997 the Company announced it had entered into a definitive
agreement to acquire Chips and Technologies, Inc. and on August 1, 1997 the
Company commenced a tender offer for all outstanding shares of Chips and
Technologies at a price of $17.50 per share. The tender offer will expire on
August 28, 1997. The Company expects that the funds required to complete the
transaction will be approximately $416 million. This acquisition is subject to
the successful completion of the tender offer and the receipt of certain
governmental and regulatory approvals. Subsequent to the Company's
announcement, certain shareholders of Chips and Technologies filed several
separate lawsuits, each claiming class action status, in state and federal
courts against Chips and Technologies, Inc. and its board of directors. The
suits challenge and seek to enjoin the pending tender offer by the Company.
Management considers cash flow from operations and available sources of
liquidity to be adequate to meet business requirements in the foreseeable
future, including the acquisition described above and planned capital
expenditure programs, working capital requirements, the put warrant obligation
and the dividend program.
Outlook
The outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.
The Company expects revenue for the third quarter of 1997 to be flat to
slightly up from the second quarter revenue of $6.0 billion. Revenue is partly
a function of the mix of microprocessors and related motherboards and the mix
of microprocessor types and speeds, all of which are difficult to forecast.
Because of the large price difference between types of microprocessors, this
mix affects the average price Intel will realize and has a large impact on
Intel's revenues. In addition, the Company expects to continue to reduce
microprocessor prices systematically, focused on moving higher performance
products into the mainstream.
Intel's strategy has been, and continues to be, to introduce ever-higher
performance microprocessors. To implement this strategy, the Company plans
to cultivate new businesses and continue to work with the software industry
to develop compelling applications that can take advantage of this higher
performance, thus driving demand toward the newer products. In line with this
strategy, the Company introduced the Pentium II processor in May 1997. This
processor combines the advanced technologies of the Pentium Pro processor with
MMX media enhancement technology. During the second quarter, the Company also
introduced a 233-MHz Pentium processor with MMX technology and expanded its
line of mobile processors with MMX technology. The Company has expanded
manufacturing capacity over the last few years and continues to expand capacity
based on the assumed continued success of this strategy.
The Company expects the gross margin percentage in the third quarter of 1997 to
be flat to slightly down from 61% in the second quarter. Intel's gross margin
expectation for 1997 is 60 percent plus or minus a few points. Based on the
first half results and current expectations, the gross margin percentage for
1997 is expected to be at the mid to high part of that range. In the short-term
Intel's gross margin percentage varies primarily with revenue levels and
product mix. The Company's goal continues to be to grow gross margin dollars,
and the Company still believes that over the long-term, the gross margin
percentage will be 50 percent plus or minus a few points. Intel's long-term
gross margin percentage will vary depending on product mix.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Outlook (continued)
The gross margin percentage varies depending on the mix of types and speeds
of processors sold and the mix of microprocessors and related motherboards
within a product family. Motherboards generally have lower margins than
microprocessors, with the percentage of motherboards sold typically being
higher early in the product cycle and decreasing as the product matures. In
addition, the Company's newest product, the Pentium II, is packaged with
purchased components in a Single Edge Contact cartridge, and the inclusion of
purchased components tends to increase absolute dollar margins but to lower
the gross margin percentage. Various other factors, including unit volumes and
costs, yield issues associated with production at factories, and mix of
shipments of other semiconductors, will also continue to affect the amount of
cost of sales and the variability of gross margin percentages.
To implement its strategy, Intel continues to build capacity to produce
high-performance microprocessors and other products. The Company currently
expects capital expenditures for 1997 to be approximately $4.5 billion. This
spending plan is dependent upon expectations regarding manufacturing
efficiencies, delivery times of various machines and construction schedules
for new facilities. Depreciation for 1997 is now expected to be approximately
$2.2 billion, down from previous guidance of approximately $2.5 billion.
Spending on research and development and marketing, general and administrative
expenses in the third quarter of 1997 is expected to be approximately 4 to 6
percent higher than the $1.3 billion in the second quarter of 1997. Expense
projections for the third quarter of 1997 incorporate expected higher spending
for research and development and merchandising and are subject in part to
changes in revenue and profit dependent expenses and the impact of any
potential acquisition.
The Company expects interest and other income for the third quarter of 1997 to
be approximately $140 million, assuming no significant changes in cash balances
or interest rates and no unanticipated items.
All microprocessors have errata. (Errata are design defects or errors which
may cause a product to deviate from published specifications.) Intel's standard
practice since 1995 has been that when a new erratum is identified, the Company
works with computer makers and software vendors to understand the issue and
evaluate potential fixes, e.g., workarounds. After the erratum is understood,
the Company publishes the erratum so that consumers can make their purchasing
decisions based upon available information.
The Company's future results of operations and the other forward-looking
statements contained in this outlook, in particular the statements regarding
revenues, pricing, gross margin, capital spending, depreciation, research and
development expenses, marketing and general and administrative expenses and
interest and other income involve a number of risks and uncertainties. In
addition to the factors discussed above, among the other factors that could
cause actual results to differ materially are the following: business
conditions and growth in the computing industry and in the general economy;
changes in customer order patterns, including timing of delivery and changes
in seasonal fluctuations in PC buying patterns; competitive factors, such
as rival chip architectures, competing software-compatible microprocessors,
acceptance of new products and response to price pressures; unanticipated
costs or other adverse effects associated with processors and other products
containing errata; risk of inventory obsolescence due to shifts in market
demand; variations in inventory valuation; excess or shortage of purchased
components; timing of software industry product introductions; continued
success in technological advances and their implementation, including the
manufacturing ramp; excess or shortage of manufacturing capacity; development,
implementation and initial production of new strategic products and processes;
acquisition strategy and the ability to successfully integrate acquired
businesses, enter new market segments and manage the growth of such businesses;
risks associated with foreign operations; and litigation involving intellectual
property and consumer issues.
Intel believes that it has the product offerings, facilities, personnel, and
competitive and financial resources for continued business success, but future
revenues, costs, margins and profits are all influenced by a number of factors,
as discussed above, all of which are inherently difficult to forecast.
<PAGE> 13
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
A. Litigation
Digital Equipment Corporation vs. Intel,
U.S. District Court, District of Mass. (97-40080)
Digital Equipment Corporation (DEC) brought suit in Federal District Court in
Massachusetts on May 13, 1997, alleging that Intel has infringed ten patents
in making, using, selling and offering to sell microprocessor products,
including Pentium(R) and Pentium(R) Pro (including Pentium(R) II) microprocessor
families. DEC is seeking both an injunction and monetary damages, including
triple damages for Intel's alleged willful infringement of the patents. The
injunction, if granted, would prohibit Intel from using DEC's patented
technology in its microprocessor products. The Company believes that its
products do not infringe the DEC patents and intends to defend the lawsuit
vigorously. Although the ultimate outcome of this lawsuit cannot be determined
at this time, management, including internal counsel, does not believe that the
outcome of this litigation will have a material adverse effect on the Company's
financial position or overall trends in results of operations.
Cyrix Corporation v. Intel
U.S. District Court, E.D. Texas (4-97cv164)
Cyrix Corporation brought suit in Federal District Court in Texas on May 13,
1997, alleging that Intel has infringed two patents relating to Pentium,
Pentium Pro and Pentium II microprocessors. The suit seeks preliminary and
permanent injunctive relief along with unspecified damages. The Company
believes that its products do not infringe the Cyrix patents and intends to
defend the lawsuit vigorously. Although the ultimate outcome of this lawsuit
cannot be determined at this time, management, including internal counsel,
does not believe that the outcome of this litigation will have a material
adverse effect on the Company's financial position or overall trends in
results of operations.
Michael W. Scriber v. Intel Corporation
U.S. District Court for the District of Oregon (CV-1262-AS)
Michael W. Scriber, a former employee of the Company, filed an action on
September 9, 1996, alleging that Intel's products infringe a patent issued
to the plaintiff and that Intel wrongfully terminated his employment with
Intel. The suit seeks both monetary damages and injunctive relief. Expert
witness discovery closed on July 1, 1997. The plaintiff's expert witness
has opined that the plaintiff is entitled to $1.2 billion in damages for
Intel's alleged patent infringement. Intel's expert witnesses have opined
that, should the plaintiff prevail in the case, he would be entitled to nominal
damages only. The Company believes that its products do not infringe the
plaintiff's patent and intends to continue to defend this lawsuit vigorously.
Although the ultimate outcome of this lawsuit cannot be determined at this
time, management, including internal counsel, does not believe that the outcome
of this litigation will have a material adverse effect on the Company's
financial position or overall trends in results of operations.
<PAGE> 14
Item 2. Changes in Securities
(a) Modification of rights of security holders.
In May 1997, the stockholders approved an increase in the Company's authorized
shares of Common Stock to 4.5 billion. On July 13, 1997, the Company effected a
two-for-one stock split in the form of a special stock distribution to
stockholders of record as of June 10, 1997. As a result of this stock split,
each holder of the 1998 Step-Up Warrants to Purchase Common Stock received one
additional warrant for each warrant held. The Warrant Agreement was amended to
reflect an exercise price of one half of the former amount and an aggregate
number of shares issuable under the warrants of twice the former aggregate
number. Reference is made to Exhibit 4.2 of this document, "Fourth Amendment
to Warrant Agreement dated as of May 21, 1997."
(c) Unregistered sales of equity securities.
Reference is made to the information on sales of put warrants appearing in
Note 8 under the heading "Intel Corporation, Notes to Consolidated Condensed
Financial Statements" in Part I, Item 1 hereof. All such transactions are
exempt from registration under Section 4 (2) of the Securities Act of 1933.
Each transaction was privately negotiated and each offeree and purchaser was
an accredited investor/qualified institutional buyer. No public offering or
public solicitation was used by the registrant in the placement of these
securities.
<PAGE> 15
Item 4. Submission of Matters to a Vote of Security Holders
At Intel Corporation's Annual Meeting of Stockholders held on May 21, 1997,
the following proposals were adopted by the margins indicated. Due to the fact
that the vote was held prior to the effective date of the two-for-one stock
split, the following results are presented on a pre-split basis.
<TABLE>
Number of Shares
Voted for Withheld
--------- --------
<S> <C> <C>
1. To elect a board of directors
to hold office until the next
annual meeting of stockholders or
until their respective successors
have been elected or appointed.
C. Barrett 715,666,865 2,556,521
J. Browne 715,574,280 2,649,107
W. Chen 715,653,736 2,569,651
A. Grove 715,697,015 2,526,372
J. Guzy 715,629,920 2,593,467
G. Moore 715,683,463 2,539,924
A. Rock 715,628,844 2,594,543
J. Shaw 715,637,642 2,585,745
L. Vadasz 715,629,973 2,593,414
D. Yoffie 715,661,069 2,562,318
C. Young 715,654,754 2,577,633
</TABLE>
<TABLE>
Number of Shares
Voted For Voted Withheld
--------- ----- --------
Against
-------
<S> <C> <C> <C>
2. To ratify the appointment 714,501,995 798,481 2,922,911
of the accounting firm of
Ernst & Young LLP as
independent auditors for the
Company for the current year.
</TABLE>
<TABLE>
Number of Shares
Voted For Voted Withheld No Vote
--------- ----- -------- -------
Against
-------
<S> <C> <C> <C> <C>
3. To approve the amendment 695,905,181 18,423,027 3,408,176 487,002
of the Company's Restated
Certificate of Incorporation
to increase the number of
authorized shares of Common
Stock.
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.2 Fourth Amendment to Warrant Agreement dated as of May 21, 1997.
11.1 Statement re: computation of earnings per share.
12.1 Statement setting forth the computation of ratios of earnings to fixed
charges.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 28, 1997.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTEL CORPORATION
(Registrant)
Date: August 8, 1997 By: /s/Andy D. Bryant
--------------------------
Andy D. Bryant
Vice President, Chief Financial
Officer and Principal Accounting
and Financial Officer
Exhibit 4.2
FOURTH AMENDMENT TO WARRANT AGREEMENT
This Fourth Amendment to Warrant Agreement (this "Amendment") is made and
entered into as of May 21, 1997, by and between Intel Corporation, a Delaware
corporation (the "Company"), and Harris Trust and Savings Bank, an Illinois
banking corporation ("Harris"), as Warrant Agent, for purposes of amending that
certain Warrant Agreement -- 1998 Step-Up Warrants to Purchase Common Stock,
dated March 1, 1993, as amended by that certain First Amendment to Warrant
Agreement, dated October 18, 1993, that certain Second Amendment to Warrant
Agreement, dated January 17, 1994, and that certain Third Amendment to Warrant
Agreement, dated May 1, 1995 (collectively, the "Warrant Agreement").
RECITALS
- --------
(a) The Company issued 1998 Step-Up Warrants (the "Warrants") entitling
holders to purchase 40,000,000 shares of the Company's Common Stock, $.001 par
value (the "Common Stock") (as adjusted for previous stock splits);
(b) The Company's Board of Directors has declared a two for one stock split
to be effected as a special stock distribution of one share of Common Stock for
each share of Common Stock outstanding (the "Split");
(c) The Split is payable on July 13, 1997 (the "Payment Date") to
stockholders of record on June 10, 1997 (the "Record Date"); and
(d) Pursuant to Sections 14(a), (h) and (k) of the Agreement, the Warrants
will be adjusted, as of the Payment Date, by reducing the per share exercise
price of each Warrant to one-half of the per share exercise price in effect
immediately prior to the Payment Date, and by issuing to each Warrant holder of
record on the Record Date for the Split, one additional Warrant at the adjusted
per share exercise price for each Warrant held as of such Record Date.
AGREEMENT
- ---------
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Harris agree as follows:
1. Effective as of July 13, 1997, Section 2 of the Warrant Agreement is
hereby amended to read in its entirety as follows:
"SECTION 2. Amount Issued. Subject to the provisions of this
Agreement, Warrants to purchase no more than eighty million (80,000,000)
Shares may be issued and delivered by the Company hereunder."
2. Effective as of July 13, 1997, the second paragraph of Section 7 of the
Warrant Agreement is hereby amended to read in its entirety as follows:
"Subject to the provisions of this Agreement, including Section 14,
each Warrant shall entitle the holder thereof to purchase from the Company
(and the Company shall issue and sell to such holder of a Warrant) one fully
paid and nonassessable Share at the price set forth in the following table
(such price, as it may be adjusted from time to time as provided in Section
14, being the "Exercise Price"):
Exercise Date
-------------
After On or Before Exercise Price
----- ------------ --------------
Per Share
May 13, 1993 March 14, 1994 $17.875**
March 14, 1994 March 14, 1995 $18.625**
March 14, 1995 March 14, 1996 $19.375**
March 14, 1996 March 14, 1997 $20.125**
March 14, 1997 March 14, 1998 $20.875
**(expired prior to, but adjusted to reflect, stock distribution on
July 13, 1997)"
3. Effective as of July 13, 1997, Exhibit A is replaced with the attached
Exhibit A-4.
4. Except as expressly modified herein, the Warrant Agreement remains in
full force and effect.
The parties hereto have caused this Amendment to be executed and delivered as
of the date first set forth above.
Attest: INTEL CORPORATION
/s/ By: /s/
- ---------------------- ---------------------------------------
Patrice C. Scatena Name/Title: Arvind Sodhani
Vice President and Treasurer
Attest: HARRIS TRUST AND SAVINGS BANK
/s/ By: /s/
- --------------------- ---------------------------------------
Bruce T. Thomson Name/Title: Richard C. Carlson
Vice President
Exhibit A-4 (REVISED 5/97)
[Form of Face of Warrant Certificate]
Void After March 14, 1998
No. C- Warrant to Purchase ________
Shares of Common Stock
INTEL CORPORATION
1998 Step-Up Warrant to Purchase Common Stock
This Warrant Certificate certifies that ______________________________
or registered assigns, is the registered holder of a 1998 Step-Up Warrant (the
"Warrant") of Intel Corporation, a Delaware corporation (the "Company"), to
purchase the number of shares (the "Shares") of Common Stock, $0.001 par value
(the "Common Stock"), of the Company set forth above. This Warrant expires at
5:00 p.m. New York City time (the "Close of Business") on March 14, 1998 (the
"Expiration Date"), unless such date is extended at the option of the Company,
and entitles the holder to purchase from the Company the number of fully paid
and nonassessable Shares set forth above at the exercise price (the "Exercise
Price"), payable in lawful money of the United States of America, determined in
accordance with the following table:
Exercise Date
-------------
After the Close On or Before the Exercise Price
of Business Close of Business Per Share
--------------- ----------------- --------------
May 13, 1993 March 14, 1994 $17.875**
March 14, 1994 March 14, 1995 $18.625**
March 14, 1995 March 14, 1996 $19.375**
March 14, 1996 March 14, 1997 $20.125**
March 14, 1997 March 14, 1998 $20.875
**(expired prior to, but adjusted to reflect, stock distribution on July 13,
1997)
Subject to the terms and conditions set forth herein and in the Warrant
Agreement referred to on the reverse hereof, this Warrant may be exercised upon
surrender of this Warrant Certificate and payment of the aggregate Exercise
Price (rounded down, if necessary, to the nearest whole cent) at the office or
agency of the Warrant Agent in New York, New York or in Chicago, Illinois (each
such office, a "Warrant Agent Office").
The Exercise Price and the number of Shares purchasable upon exercise of
this Warrant are subject to adjustment upon the occurrence of certain events as
set forth in the Warrant Agreement.
No Warrant may be exercised prior to May 14, 1993 or after the Close of
Business on the Expiration Date, unless the Company exercises its option to
extend such date. After the Close of Business on the Expiration Date, the
Warrants will become wholly void and of no value.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof. Such further provisions shall for
all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed
by its duly authorized officers, and the corporate seal hereunto affixed.
Dated: ________________
INTEL CORPORATION
By _______________________________
[Corporate Seal of Intel Corporation]
Attest:
By _________________________
Countersigned:
HARRIS TRUST AND SAVINGS BANK,
as Warrant Agent
By _________________________
[Form of Reverse of Warrant Certificate]
INTEL CORPORATION
The warrant evidenced by this warrant certificate is a part of a duly
authorized issue of 1998 Step-Up Warrants to purchase a maximum of eighty
million (80,000,000) Shares of Common Stock (subject to adjustment) issued
pursuant to a Warrant Agreement, dated as of March 1, 1993, as the same has and
may be amended from time to time (the "Warrant Agreement"), duly executed and
delivered by the Company to Harris Trust and Savings Bank, as Warrant Agent
(the "Warrant Agent"). The Warrant Agreement hereby is incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants. A copy of the Warrant Agreement may be inspected at
the Warrant Agent Office and is available upon written request addressed to the
Company. All terms used herein that are defined in the Warrant Agreement have
the meanings assigned to them therein.
Warrants may be exercised to purchase Shares from the Company before the
Close of Business on the Expiration Date, at the Exercise Price set forth on
the face hereof, subject to adjustment as described in the Warrant Agreement.
The holder of the Warrant evidenced by this Warrant Certificate may exercise
such Warrant by surrendering the Warrant Certificate, with the form of election
to purchase set forth hereon properly completed and executed, together with
payment of the aggregate Exercise Price (rounded down, if necessary, to the
nearest whole cent), in lawful money of the United States of America, and any
applicable transfer taxes, at the Warrant Agent Office.
In the event that upon any exercise of the Warrant evidenced hereby the
number of Shares actually purchased shall be less than the total number of
Shares purchasable upon exercise of the Warrant evidenced hereby, there shall
be issued to the holder hereof, or such holder's assignee, a new Warrant
Certificate evidencing a Warrant to purchase the Shares not so purchased. No
adjustment shall be made for any cash dividends on any Shares issuable upon
exercise of this Warrant. After the Close of Business on the Expiration Date,
unexercised Warrants shall become wholly void and of no value.
The Company shall not be required to issue fractions of Shares or any
certificates that evidence fractional Shares. In lieu of such fractional
Shares, there shall be paid to holders of the Warrant Certificates with regard
to which such fractional Shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value (as determined pursuant
to the Warrant Agreement) of a full Share.
Warrant Certificates, when surrendered at the Warrant Agent Office by the
registered holder thereof in person or by a legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing a Warrant to purchase in the aggregate a like number of
Shares.
Upon due presentment for registration of transfer of this Warrant
Certificate at the Warrant Agent Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing a Warrant or Warrants to purchase in
the aggregate a like number of Shares shall be issued to the transferee in
exchange for this Warrant Certificate, subject to the limitations provided in
the Warrant Agreement, without charge, except for any tax or other governmental
charge imposed in connection therewith.
The Company and Warrant Agent may deem and treat the registered holder
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose
of any exercise hereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
Election to Exercise
(To be executed upon exercise of the Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______ Shares and
herewith tenders in payment for such Shares $______ in lawful money of the
United States of America, in accordance with the terms hereof. The undersigned
requests that a certificate representing such Shares be registered and
delivered as follows:
---------------------------------------------
Name
---------------------------------------------
Address
---------------------------------------------
Delivery Address (if different)
If such number of Shares is less than the aggregate number of Shares
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the balance of such Shares be registered and delivered as follows:
---------------------------------------------
Name
---------------------------------------------
Address
---------------------------------------------
Delivery Address (if different)
_________________________________ ____________________________________
Social Security or Other Taxpayer Signature
Identification Number of Holder
Note: The above signature must correspond
with the name as written upon the face of
this Warrant Certificate in every particular,
without alteration or enlargement or any
change whatsoever. If the certificate
representing the Shares or any Warrant
Certificate representing Warrants not
exercised is to be registered in a name other
than that in which this Warrant Certificate is
registered, the signature of the holder hereof
must be guaranteed.
Signature Guaranteed:
- ------------------------------
Assignment
(To be executed by the registered holder if such
holder desires to transfer the Warrant Certificate)
For Value Received, the undersigned registered holder hereby sells,
assigns and transfers unto
----------------------------------
Name of Assignee
----------------------------------
Address of Assignee
this Warrant Certificate, together with all right, title and interest therein,
and does irrevocably constitute and appoint ____________________ attorney, to
transfer the within Warrant Certificate on the books of the Warrant Agent, with
full power of substitution.
______________________________ __________________________________
Dated Signature
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular,
without alteration or enlargement or
any change whatsoever.
______________________________
Social Security or Other Taxpayer
Identification Number of Assignee
Signature Guaranteed:
______________________________
Exhibit 11.1
INTEL CORPORATION
COMPUTATION OF EARNINGS PER SHARE (2)
(In millions, except per share amounts)
<TABLE>
Three Months Ended Six Months Ended
------------------ -----------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
1997 1996 1997 1996
------------------ -----------------
<S> <C> <C> <C> <C>
PRIMARY SHARES CALCULATION:
Reconciliation of weighted
average number of shares
outstanding to amount used in
primary earnings per share
computation:
Weighted average number of
shares outstanding 1,635 1,648 1,636 1,646
Add shares issuable from assumed
exercise of options and warrants 162 128 162 122
------ ------ ------ ------
Weighted average number of shares
outstanding as adjusted 1,797 1,776 1,798 1,768
====== ====== ====== ======
FULLY DILUTED SHARES CALCULATION:
Reconciliation of weighted average
number of shares outstanding to
amount used in fully diluted
earnings per share computation:
Weighted average number of shares
outstanding 1,635 1,648 1,636 1,646
Add shares issuable from assumed
exercise of options and warrants 162 134 162 134
------ ------ ------ ------
Weighted average number of shares
outstanding as adjusted 1,797 1,782 1,798 1,780
====== ====== ====== ======
NET INCOME $1,645 $1,041 $3,628 $1,935
====== ====== ====== ======
PRIMARY EARNINGS PER SHARE $ 0.92 $ 0.59 $ 2.02 $ 1.09
====== ====== ====== ======
(1) FULLY DILUTED EARNINGS PER
SHARE $ 0.92 $ 0.58 $ 2.02 $ 1.09
====== ====== ====== ======
<FN>
<F1>
(1) Earnings per common equivalent share presented on the face of the
statements of income represent primary earnings per share. Dual presentation
of primary and fully diluted earnings per share has not been made on the
statement of income because the differences are insignificant.
<F2>
(2) A two-for-one stock split effected as a special stock distribution was paid
on July 13, 1997 to stockholders of record as of June 10, 1997. All share and
per share amounts reported herein have been adjusted to reflect the effects
of this split.
</FN>
</TABLE>
Exhibit 12.1
INTEL CORPORATION
STATEMENT SETTING FORTH THE COMPUTATION
OF RATIOS OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
Six Months Ended
Jun. 28, Jun. 29,
1997 1996
----------------------
<S> <C> <C>
Income before taxes $ 5,625 $ 2,977
Add fixed charges net of
capitalized interest 23 13
-------- --------
Income before taxes and fixed
charges (net of capitalized
interest) $ 5,648 $ 2,990
======== ========
Fixed charges:
Interest $ 14 $ 8
Capitalized interest 5 17
Estimated interest component
of rental expense 9 5
-------- --------
Total fixed charges $ 28 $ 30
======== ========
Ratio of earnings before taxes and
fixed charges, to fixed charges 202 100
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Intel Corporation's
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND CONSOLIDATED CONDENSED BALANCE
SHEETS and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 4002
<SECURITIES> 4055
<RECEIVABLES> 3950<F3>
<ALLOWANCES> 0
<INVENTORY> 1443
<CURRENT-ASSETS> 14189
<PP&E> 15833
<DEPRECIATION> 6661
<TOTAL-ASSETS> 25147
<CURRENT-LIABILITIES> 4635
<BONDS> 468
1566<F1>
0
<COMMON> 3001
<OTHER-SE> 14405
<TOTAL-LIABILITY-AND-EQUITY> 25147
<SALES> 12408
<TOTAL-REVENUES> 12408
<CGS> 4650
<TOTAL-COSTS> 4650
<OTHER-EXPENSES> 1156<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 5625
<INCOME-TAX> 1997
<INCOME-CONTINUING> 3628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3628
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 0<F4>
<FN>
<F1>Item consists of put warrants.
<F2>Item consists of research and development.
<F3>Item shown net of allowance, consistent with the balance sheet
presentation.
<F4>Item not reported because immaterially different from primary
EPS.
</FN>
</TABLE>
