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 March 28, 1998
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
------
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 March 28, 1998
Common Stock, $.001 par value 1,696 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
------------------
March 28, March 29,
1998 1997
-------- --------
<S> <C> <C>
Net revenues $ 6,001 $ 6,448
Costs and expenses:
Cost of sales 2,749 2,307
Research and development 595 581
Marketing, general and administrative 711 693
Purchased in-process research
and development 165 --
-------- --------
Operating costs and expenses 4,220 3,581
-------- --------
Operating income 1,781 2,867
Interest expense (7) (7)
Interest income and other, net 207 215
-------- --------
Income before taxes 1,981 3,075
Provision for taxes 708 1,092
-------- --------
Net income $ 1,273 $ 1,983
======== ========
Basic earnings per common share $ 0.78 $ 1.21
======== ========
Diluted earnings per common share $ 0.72 $ 1.10
======== ========
Cash dividends declared per
common share $ 0.030 $ 0.025
======== ========
Weighted average common shares outstanding 1,641 1,638
Dilutive effect of:
Employee stock options 89 106
1998 Step-Up Warrants 45 56
-------- --------
Weighted average common shares
outstanding, assuming dilution 1,775 1,800
======== ========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
<PAGE> 3
Item 1. Financial Statements (continued)
<TABLE>
Intel Corporation
Consolidated Condensed Balance Sheets March 28, Dec. 27,
(in millions) 1998 1997
------- -------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,073 $ 4,102
Short-term investments 5,256 5,630
Trading assets 280 195
Accounts receivable, net 3,092 3,438
Inventories:
Raw materials 254 255
Work in process 1,035 928
Finished goods 532 514
------- -------
1,821 1,697
------- -------
Deferred tax assets 680 676
Other current assets 70 129
------- -------
Total current assets 16,272 15,867
------- -------
Property, plant and equipment 19,013 18,127
Less accumulated depreciation (7,876) (7,461)
------- -------
Property, plant and equipment, net 11,137 10,666
Long-term investments 2,082 1,839
Other assets 738 508
------- -------
TOTAL ASSETS $30,229 $28,880
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 255 $ 212
Long-term debt redeemable within one year 110 110
Accounts payable 1,324 1,407
Accrued compensation and benefits 739 1,268
Deferred income on shipments to distributors 516 516
Accrued advertising 417 500
Other accrued liabilities 974 842
Income taxes payable 1,519 1,165
------- -------
Total current liabilities 5,854 6,020
------- -------
Long-term debt 441 448
Deferred tax liabilities 1,164 1,076
Put warrants 1,185 2,041
Stockholders' equity:
Preferred Stock -- --
Common Stock and capital in excess
of par value 4,955 3,311
Retained earnings 16,475 15,926
Accumulated other comprehensive income 155 58
------- -------
Total stockholders' equity 21,585 19,295
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $30,229 $28,880
======= =======
</TABLE>
Certain 1997 amounts have been reclassified to conform to the 1998
presentation.
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>
Three Months Ended
------------------
March 28, March 29,
1998 1997
---- ----
<S> <C> <C>
Cash flows provided by (used for)
operating activities:
Net income $ 1,273 $ 1,983
Adjustments to reconcile net income to
net cash provided
by operating activities:
Depreciation 630 521
Net loss on retirements of property,
plant and equipment 28 23
Deferred taxes 36 33
Purchased in-process research and development 165 --
Changes in assets and liabilities:
Accounts receivable 364 (261)
Inventories (111) (80)
Accounts payable (100) 75
Accrued compensation and benefits (529) (407)
Income taxes payable 350 460
Tax benefit from employee stock plans 88 51
Other assets and liabilities (125) (176)
------- -------
Total adjustments 796 239
------- -------
Net cash provided by operating activities 2,069 2,222
------- -------
Cash flows provided by (used for)
investing activities:
Additions to property, plant and equipment (1,129) (789)
Purchase of Chips and Technologies, Inc.,
net of cash acquired (321) --
Purchases of available-for-sale investments (2,143) (2,263)
Sales of available-for-sale investments 21 75
Maturities and other changes in
available-for-sale investments 2,440 1,292
------- -------
Net cash (used for) investing activities (1,132) (1,685)
Cash flows provided by (used for)
financing activities:
Increase in short-term debt, net 43 24
Additions to long-term debt 13 68
Proceeds from sales of shares through
employee stock plans and other 199 137
Proceeds from exercise of
1998 Step-Up Warrants 1,620 22
Proceeds from sales of put warrants -- 88
Repurchase and retirement of Common Stock (1,792) (1,176)
Payment of dividends to stockholders (49) (41)
------- -------
Net cash provided by (used for)
financing activities 34 (878)
------- -------
Net increase (decrease)
in cash and cash equivalents $ 971 $ (341)
======= =======
Supplemental disclosures of
cash flow information:
Cash paid during the period for:
Interest $ 8 $ 8
Income taxes $ 230 $ 548
</TABLE>
Certain 1997 amounts have been reclassified to conform to the 1998 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 27, 1997. 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 27, 1997.
2. Interest income and other includes (in millions):
<TABLE>
Three Months Ended
------------------
March 28, March 29,
1998 1997
---- ----
<S> <C> <C>
Interest income $ 160 $ 127
Foreign currency gains -- 13
Other income (expense), net 47 75
----- -----
Total $ 207 $ 215
===== =====
</TABLE>
Other income for both periods presented consists primarily of gains on
sales of equity investments.
3. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," as of the first
quarter of 1998. SFAS No. 130 establishes new rules for the reporting
and display of comprehensive income and its components, however it has
no impact on the Company's net income or stockholders' equity.
The components of comprehensive income, net of tax, are as follows
(in millions):
<TABLE>
Three Months Ended
------------------
March 28, March 29,
1998 1997
---- ----
<S> <C> <C>
Net income $ 1,273 $ 1,983
Change in unrealized gain (loss)
on available-for-sale
investments 97 (86)
------- -------
Comprehensive income $ 1,370 $ 1,897
======= =======
</TABLE>
Accumulated other comprehensive income presented on the accompanying
consolidated condensed balance sheets consists of the accumulated net
unrealized gain on available-for-sale investments.
4. Between December 27, 1997 and March 14, 1998, approximately 78 million
of the Company's 1998 Step-Up Warrants to purchase shares of Common
Stock were exercised at a price of $20.875 per share. Approximately
78 million shares of Common Stock were issued, and the Company
received proceeds of approximately $1.6 billion. The expiration date
of these warrants was March 14, 1998.
5. During the first quarter of 1998, the Company repurchased 22.1
million shares of Common Stock under the Company's authorized
repurchase program at a cost of $1.8 billion, including 1.7 million
shares for $127 million upon the exercise of outstanding put
warrants. During the quarter, the Company's Board of Directors
approved an increase in the repurchase program of up to 100
million additional shares, bringing the total authorization to
380 million shares. As of March 28, 1998, after allowing
for the outstanding put warrants, approximately 129.7 million shares
remained available under the repurchase program. (See Item 2.
Management's Discussion and Analysis for subsequent activity.)
<PAGE> 6
Item 1. Financial Statements (continued)
Intel Corporation, Notes to Consolidated Condensed Financial Statements
(continued)
6. 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. On certain of these warrants, the Company
simultaneously entered into additional contractual arrangements which
cause the warrants to terminate if the Company's stock price reaches
specified levels. Activity during the first quarter of 1998 is
summarized as follows:
<TABLE>
Put Warrants Outstanding
------------------------
Cumulative Net Number Potential
(in millions) Premium Received Of Warrants Obligation
------------- ----------- ----------- ----------
<S> <C> <C> <C>
December 27,
1997 $623 26.3 $2,041
Exercises -- (1.7) (127)
Expirations -- (9.8) (729)
---- ---- ------
March 28, 1998 $623 14.8 $1,185
==== ==== ======
</TABLE>
The 14.8 million put warrants outstanding on March 28, 1998 expire on
various dates between May and August 1998 and have exercise prices
ranging from $69 to $95 per share, with an average exercise price of
$80. 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.)
7. In January 1998, the Company acquired the outstanding shares of Chips
and Technologies, Inc., a supplier of graphics accelerator chips for
the mobile computing market segment. The purchase price was
approximately $430 million ($321 million in net cash). During the first
quarter, the Company recorded a nondeductible charge of $165 million
for purchased in-process research and development, representing the
appraised value of products still in the development stage that were
not considered to have reached technological feasibility and had no
alternative future use.
8. In October 1997, Intel and Digital announced that they had agreed to
establish a broad-based business relationship. The two companies agreed
to request a stay of all lawsuits until government review of the
agreement was completed, following which the lawsuits would be dismissed
with prejudice. On April 23, 1998 the Federal Trade Commission ("FTC")
notified Intel and Digital that the FTC will not seek to enjoin
settlement of the legal dispute between the companies. Intel currently
expects that the settlement and the related transactions will be
completed in the second quarter of 1998.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - First Quarter of 1998 Compared to First Quarter of 1997
Revenues for Q1 1998 declined by 7% compared to Q1 1997 primarily due to lower
processor prices and decreasing revenues from sales of related board-level
products, as well as lower flash memory and chipsets revenues. Processor unit
volumes increased in Q1 1998 compared to Q1 1997, with higher volumes of
processors based on the P6 micro-architecture** partially offset by lower
volumes of Intel(R) Pentium(R) family processors.
Cost of sales increased by 19% from Q1 1997 to Q1 1998 due to the shift in
product mix, reflecting the cost of purchased components for the Single Edge
Contact ("SEC") cartridge in the Intel(R) Pentium(R) II processor, higher
fixed costs and higher unit volumes. Gross margin decreased from 64% in Q1
1997 to 54% in Q1 1998 due to lower processor revenues, the impact of the SEC
cartridge and the higher fixed costs.
For Q1 1998, sales of microprocessors based on the P6 micro-architecture
represented a significant and growing portion of the Company's revenues and a
majority of its gross margin. For Q1 1997, these products represented a
significant portion of both revenues and gross margin. Sales of Pentium family
microprocessors represented a significant but declining portion of revenues
and gross margin in Q1 1998, and they constituted a majority of revenues and a
substantial majority of gross margin in Q1 1997.
Operating expenses rose by a total of $197 million, or 15%, from Q1 1997 to Q1
1998, and included a one-time charge of $165 million for in-process research
and development related to the acquisition of Chips and Technologies, Inc.
which was completed during the quarter. The remaining increase was primarily
due to higher levels of spending on product development programs and expenses
related to headcount, partially offset by lower Intel Inside(R) and profit
dependent expenses. Excluding the one-time charge, operating expenses were 22%
of revenues in Q1 of 1998, and 20% of revenues in Q1 1997.
Interest and other income for Q1 1998 decreased by $8 million over the prior
year due primarily to lower gains on sales of equity investments partially
offset by increased interest income due to higher average investment balances.
The provision for taxes decreased by $384 million compared to Q1 of 1997,
primarily due to the decrease in pretax income in Q1 of 1998. The effective
tax rate for the quarter was 35.7%, including the impact of the nondeductible
one-time charge related to the acquisition of Chips and Technologies, Inc.
Without the one-time charge, the tax rate would have been 33%, lower than the
35.5% in Q1 1997.
Financial Condition
The Company's financial condition remains very strong. As of March 28, 1998,
cash, trading assets and short- and long-term investments totaled $12.7
billion, up from $11.8 billion at December 27, 1997. The Company's other
sources of available liquidity include authorized commercial paper borrowings
of up to $700 million. The Company also maintains the authority to issue an
aggregate of approximately $1.4 billion in debt, equity and other securities
under shelf registration statements filed with the Securities and Exchange
Commission.
Major sources of cash during the first quarter of 1998 included cash generated
from operations, which totaled $2.1 billion, and approximately $1.6 billion
received upon the exercise of the 1998 Step-Up Warrants. Major uses of cash
during the quarter included $1.8 billion to buy back 22.1 million shares of
Common Stock, capital spending of $1.1 billion for property, plant and
equipment, primarily for microprocessor manufacturing capacity, and $321
million in net cash for the acquisition of Chips and Technologies, Inc.
- ------------------
** The P6 micro-architecture products include the Intel(R) Pentium(R) Pro,
Intel(R) Pentium(R) II and Intel(R) Celeron(TM) processors.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Financial Condition (continued)
The Company's five largest customers accounted for approximately 39% of net
revenues for the three month period ended March 28, 1998. At March 28, 1998,
these customers accounted for approximately 35% of net accounts receivable.
Key financing activities in the first quarter of 1998 included the repurchase
of 22.1 million shares of Common Stock for $1.8 billion as part of the
Company's authorized stock repurchase program, including 1.7 million shares
for $127 million upon the exercise of outstanding put warrants. During the
same period, 9.8 million previously outstanding put warrants expired
unexercised. From the end of the first quarter of 1998 through May 6, 1998,
the Company repurchased 8.9 million shares of its Common Stock at a cost of
$712 million and issued 3.0 million put warrants, receiving premiums of $17
million. As of May 6, 1998, Intel had the potential obligation to repurchase
17.8 million shares of Common Stock at an aggregate cost of $1.4 billion
under outstanding put warrants. The exercise price of these outstanding
warrants ranged from $69 to $95 per share, with an average exercise price of
$80 per share. During the first quarter of 1998, the Company's Board of
Directors approved an increase of up to 100 million additional shares in the
Company's repurchase program, bringing the total authorization to 380 million
shares. As of May 6, 1998, 117.8 million shares remained available for
repurchase under the repurchase authorization, after allowing for the
outstanding put warrants.
In October 1997, the Company and Digital Equipment Corporation ("Digital")
announced that they had agreed to establish a broad-based business
relationship. Under the agreement, Intel will purchase Digital's semiconductor
operations, including facilities in Hudson, Massachusetts as well as
development operations in Jerusalem, Israel and Austin, Texas for approximately
$700 million. As the companies have been notified that the Federal Trade
Commission will not oppose the transaction, Intel currently expects that the
transaction will be completed in Q2 1998.
Management considers cash flow from operations and available sources of
liquidity to be adequate to meet business requirements in the foreseeable
future, including planned capital expenditure programs, working capital
requirements, the potential 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.
These statements do not reflect the potential impact of any future mergers or
acquisitions, except for the previously announced transaction with Digital.
The Company expects revenue for the second quarter of 1998 to be flat to
slightly down from the first quarter revenue of $6.0 billion. The Company
expects sequential revenue growth to resume in the second half of 1998. Revenue
is partly a function of the mix of microprocessors and related purchased
components 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. Revenue is also subject to the rate of
growth of the computing industry and the impact of economic conditions in
various geographic regions.
Intel's strategy is to introduce ever higher performance microprocessors
tailored for the different segments of the worldwide computer market. 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 each computer market segment. In line with this strategy,
the Company is seeking to develop higher performance microprocessors for each
market segment, including servers, workstations, high-end business PCs, the
basic PC and other product lines. During the first quarter, the Company began
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Outlook (continued)
shipping the first Intel(R) Celeron(TM) processor, intended to meet the
computing needs of many new PC users. The Company may continue to reduce
microprocessor prices at such times as it deems appropriate in order to bring
its technology to market within each relevant market segment.
The Company expects the gross margin percentage in the second quarter of 1998
to be down a few points from 54% in the first quarter, primarily the result
of purchased components used on the SEC cartridge for the Pentium II processor.
The Company expects the quarterly gross margin percentage to reach its lowest
level for the year in the second quarter. Intel's gross margin expectation for
1998 is 52 percent plus or minus a few points. 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 gross margin percentage in any period varies depending on the
level of revenues and on the mix of types and speeds of microprocessors sold,
as well as the mix of microprocessors and purchased components. The Pentium II
processor is packaged with purchased components in the SEC cartridge, and the
inclusion of purchased components tends to increase unit costs. Accordingly,
sales of the Pentium II processor increase absolute dollar margins but tend to
lower the gross margin percentage. Various other factors (including unit
volumes and costs, yield issues associated with production at factories, ramp
of new technologies, excess or obsolete inventory, variations in inventory
valuation 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.
The Company has expanded manufacturing capacity over the last few years and
continues to expand capacity based on the assumed continued success of its
strategy and the acceptance of its products in specific market segments. The
Company currently expects capital expenditures for 1998 to be approximately
$5.0 billion, down from guidance of $5.3 billion in the Company's 1997 Annual
Report. This spending plan is dependent upon expectations regarding
manufacturing efficiencies, delivery times of various machines and construction
schedules for new facilities. Depreciation for 1998 is expected to be
approximately $2.9 billion, up from guidance of $2.7 billion in the Annual
Report. Depreciation in the second quarter of 1998 is expected to be
approximately $690 million.
Spending on research and development and marketing, general and
administrative expenses in the second quarter of 1998 is expected to be
approximately 3 to 5 percent higher than first quarter expenses of $1.3
billion. The $1.3 billion represents first quarter expenses excluding the $165
million charge for in-process research and development. Expense projections
for the second quarter of 1998 incorporate annual salary increases and are
dependent in part on changes in revenue and profit dependent expenses. For all
of 1998, research and development spending is expected to be approximately
$2.8 billion, including the one-time charge for in-process research and
development in the first quarter. Guidance of $2.8 billion in the Annual Report
excluded the one-time charge.
In an effort to control expenses, the Company expects to reduce headcount by
approximately 3,000 people over the next 6 months predominantly through
attrition, augmented by localized reductions in workforce.
The Company expects net interest and other (including interest expense) for the
second quarter of 1998 to be approximately $160 million, assuming no
significant changes in interest rates or expected cash balances, and no
unanticipated items.
The tax rate for the remaining quarters of 1998 is expected to be 33%. The tax
rate guidance for 1998 has been lowered from guidance of 34% in the Annual
Report. This estimate is based on current tax law and current estimate of
earnings and is subject to change.
The Company's future results of operations and the other forward-looking
statements contained in this outlook, in particular the statements regarding
revenues, pricing, new product development, gross margin, capital
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Outlook (continued)
spending, depreciation, research and development expenses, marketing and
general and administrative expenses, net interest and other, and tax rate
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: changes in customer order patterns,
including changes in customer and channel inventory levels; competitive
factors, such as rival chip architectures and manufacturing technologies,
competing software-compatible microprocessors and acceptance of new products
in specific market segments; pricing pressures; timing of software industry
product introductions; continued success in technological advances, including
development and implementation of new processes and strategic products for
specific market segments; execution of the manufacturing ramp; excess or
shortage of manufacturing capacity; the ability to successfully integrate and
operate any acquired businesses; unanticipated costs or other adverse effects
associated with processors and other products containing errata (deviations
from published specifications); and litigation involving intellectual property,
consumer and other 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures
About Market Risk, in the Registrant's Annual Report on Form 10-K for the year
ended December 27, 1997 and to the subheading "Financial Market Risks" under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on page 23 of the Registrant's 1997 Annual Report to
Stockholders.
<PAGE> 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Part I, Item 3, Legal Proceedings, in the Registrant's
Annual Report on Form 10-K for the year ended December 27, 1997 for
descriptions of the following and other legal proceedings.
Digital Equipment Corporation v. Intel
U.S. District Court, District of Mass. (97-40080)
-------------------------------------------------
In October 1997, Intel and Digital announced that they had agreed to establish
a broad-based business relationship. The two companies agreed to request a
stay of all lawsuits until government review of the agreement was completed,
following which the lawsuits would be dismissed with prejudice. On April 23,
1998 the Federal Trade Commission ("FTC") notified Intel and Digital Equipment
Corporation that the FTC will not seek to enjoin settlement of the legal
dispute between the companies. Intel currently expects that the settlement and
the related transactions will be completed in the second quarter of 1998.
Intergraph Corporation v. Intel
U.S. District Court, Northern District of Alabama, Northeastern Division
(CV-97-N-3023-NE)
------------------------------------------------------------------------
On April 10, 1998, the Court ordered Intel to continue to treat Intergraph as
it does similarly-situated customers, for example with respect to access to
confidential information and product supply. Intel has filed an appeal from
this ruling. Although the ultimate outcome of this lawsuit cannot be
determined at this time, management, including internal counsel, does not
believe that the ultimate outcome will have a material adverse effect on
Intel's financial position or overall trends in results of operations.
Item 2. Changes in Securities
Between December 27, 1997 and March 14, 1998, approximately 78 million of
the Company's 1998 Step-Up Warrants to purchase shares of Common Stock were
exercised at a price of $20.875 per share, in accordance with their terms.
Approximately 78 million shares of Common Stock were issued, and the Company
received proceeds of approximately $1.6 billion. The expiration date of these
warrants was March 14, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
12.1 Statement setting forth the computation of ratios of earnings to
fixed charges.
27 Financial Data Schedule.
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K (continued)
(b) Reports on Form 8-K.
1) Intel filed a report on Form 8-K, dated January 13, 1998, relating to
financial information for Intel Corporation for the quarter and the
year ended December 27, 1997 and forward-looking statements relating
to 1998 and the 1st Quarter of 1998, as presented in a press release
of January 13, 1998.
2) Intel filed a report on Form 8-K, dated March 4, 1998, relating to an
update to forward- looking statements relating to 1998 and the 1st
Quarter of 1998, and certain matters related to the acquisition of Chips
and Technologies, Inc., as presented in a press release of March 4, 1998.
3) Intel filed a report on Form 8-K, dated March 5, 1998, relating to
certain information regarding Legal Proceedings.
<PAGE> 13
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: May 12, 1998 By:/s/ Andy D. Bryant
--------------------------------
Andy D. Bryant
Vice President, Chief Financial
Officer and Principal Accounting
Officer
Exhibit 12.1
INTEL CORPORATION
STATEMENT SETTING FORTH THE COMPUTATION
OF RATIOS OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
Three Months Ended
March 28, March 29,
1998 1997
----------------------
<S> <C> <C>
Income before taxes $ 1,981 $ 3,075
Add fixed charges net of
capitalized interest 12 11
-------- --------
Income before taxes and fixed
charges (net of capitalized
interest) $ 1,993 $ 3,086
======== ========
Fixed charges:
Interest $ 7 $ 7
Capitalized interest 2 3
Estimated interest component
of rental expense 5 4
-------- --------
Total $ 14 $ 14
======== ========
Ratio of earnings before taxes and
fixed charges, to fixed charges 142 220
</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> 3-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-END> MAR-28-1998
<CASH> 5073
<SECURITIES> 5536
<RECEIVABLES> 3092<F3>
<ALLOWANCES> 0
<INVENTORY> 1821
<CURRENT-ASSETS> 16272
<PP&E> 19013
<DEPRECIATION> 7876
<TOTAL-ASSETS> 30229
<CURRENT-LIABILITIES> 5854
<BONDS> 441
1185<F1>
0
<COMMON> 4955
<OTHER-SE> 16630
<TOTAL-LIABILITY-AND-EQUITY> 30229
<SALES> 6001
<TOTAL-REVENUES> 6001
<CGS> 2749
<TOTAL-COSTS> 2749
<OTHER-EXPENSES> 760<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 1981
<INCOME-TAX> 708
<INCOME-CONTINUING> 1273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1273
<EPS-PRIMARY> .78<F4>
<EPS-DILUTED> .72
<FN>
<F1>Item consists of put warrants.
<F2>Item consists of research and development, including $165 million
for purchased in-process research and development.
<F3>Item shown net of allowance, consistent with the balance sheet
presentation.
<F4>Item consists of basic earnings per share
</FN>
</TABLE>
