Press Release: Intel Reports Fourth-Quarter And Annual Results
Posted By Kathy Smith
Date: January 16, 2002
Fourth-Quarter Earnings Excluding Acquisition-Related Costs* $0.15 Per Share
Fourth-Quarter Earnings Per Share $0.07
Intel Investor Relations Web site:
Q4 earnings conference call live on Web site at 2:30 p.m. PST
Conference call replay number: (719) 457-0820; confirmation code 542500
Replay available shortly after end of conference call through Jan. 22
* Acquisition-related costs consist of one-time write-offs of purchased, in-process research and development and goodwill, and the ongoing amortization of goodwill and other acquisition-related intangibles and costs. Intangibles include, for example, the value of the acquired companies' developed technology, trademarks and workforce-in-place. Earnings excluding acquisition-related costs differ from earnings presented according to GAAP because they exclude these costs.
SANTA CLARA, Calif., Jan. 15, 2002 - Intel Corporation today announced fourth-quarter revenue of $7.0 billion, up 7 percent sequentially and down 20 percent year over year.
For the fourth quarter, net income excluding acquisition-related costs was $998 million, up 52 percent sequentially and down 62 percent year over year. Fourth-quarter earnings excluding acquisition-related costs were $0.15 per share, up 50 percent from $0.10 in the third quarter and down 61 percent from $0.38 in the fourth quarter of 2000.
Including acquisition-related costs in accordance with generally accepted accounting principles (GAAP), fourth-quarter net income was $504 million, up 375 percent sequentially and down 77 percent year over year. Earnings per share were $0.07, up 250 percent from $0.02 in the third quarter and down 78 percent from $0.32 in the fourth quarter of 2000.
Acquisition-related costs in the fourth quarter consisted of $550 million of amortization of goodwill and other acquisition-related intangibles and costs.
"2001 was a terrible year for our industry," said Craig R. Barrett, president and chief executive officer. "Despite this backdrop, we introduced exciting new products, including the industry's first 2.0 GHz processor, gained market segment share, and earned over $1 billion. We also rapidly ramped our industry-leading 0.13-micron process technology and began production on 300mm wafers.
"While 2001 was difficult for Intel, I can't imagine changing places with any other company on the planet," Barrett said. "Our 2001 R&D and manufacturing investments position us to grow faster than the industry when the high tech recovery occurs."
During the quarter, the company paid its quarterly cash dividend of $0.02 per share. The dividend was paid on Dec. 1 to stockholders of record on Nov. 7. Intel has paid a regular quarterly cash dividend for more than nine years.
Also during the quarter, the company repurchased a total of 35 million shares of common stock at a cost of $1.0 billion under an ongoing program. For the year, Intel repurchased approximately 133 million shares at a cost of approximately $4.0 billion. Since the program began in 1990, the company has repurchased approximately 1.5 billion shares at a total cost of approximately $26 billion.
As of the beginning of 2002, Intel is adopting FASB rules 141 and 142 concerning accounting for business combinations and goodwill. The company performed the initial test for impairment of goodwill at the time of adoption and determined that there was no impairment. The effect of the goodwill non-amortization provisions of FAS 141 and 142 is expected to result in a substantial reduction in the difference between the company's earnings excluding acquisition-related costs and the company's earnings on a GAAP basis. Intel expects to continue to report earnings excluding acquisition-related costs for a period of time to provide a consistent basis for financial comparisons.
Revenue for 2001 was $26.5 billion, down 21 percent from $33.7 billion in 2000. Net income excluding acquisition-related costs was $3.6 billion, down 70 percent from $12.1 billion in 2000. Earnings excluding acquisition-related costs were $0.52 per share, down 70 percent from $1.73 in 2000.
Including acquisition-related costs in accordance with GAAP, net income in 2001 was $1.3 billion, down 88 percent from $10.5 billion in 2000. For 2001, earnings per share were $0.19, down 87 percent from $1.51 in 2000.
Acquisition-related costs in 2001 consisted of $198 million in one-time charges for purchased in-process research and development and $2.3 billion in amortization of goodwill and other acquisition-related intangibles and costs.
The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after Dec. 29, 2001.
Intel plans to provide a mid-quarter Business Update to the Outlook provided below on March 7.
Continuing uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters.
** Revenue in the first quarter is expected to be between $6.4 billion and $7.0 billion.
** Gross margin percentage in the first quarter is expected to be 50 percent, plus or minus a couple of points, versus 51 percent in the fourth quarter. Intel's gross margin percentage varies primarily with revenue levels, product mix, product pricing, changes in unit costs, capacity utilization, and the timing of factory ramps and associated costs.
** Gross margin percentage for 2002 is expected to be 51 percent, plus or minus a few points, versus 49 percent in 2001.
** Expenses (R&D, excluding in-process R&D, plus MG&A) in the first quarter are expected to be between $2.0 billion and $2.1 billion, versus $2.0 billion in the fourth quarter. Expenses may vary from this expectation depending in part on the level of revenue and profits.
** R&D spending, excluding in-process R&D, is expected to be approximately $4.1 billion in 2002, up from $3.8 billion in 2001. The higher R&D spending will enable Intel to strengthen and expand its product portfolio for the computing and communications market segments while continuing to lead the development of future-generation manufacturing technologies.
** Capital spending for 2002 is expected to be approximately $5.5 billion, versus $7.3 billion in 2001. In 2001, Intel made significant investments in 0.13-micron capacity and also began the initial build-out of its 300mm capacity, enabling the company to aggressively ramp both technologies in 2002. Intel's 300mm technology delivers more than double the die output per wafer, allowing the company to grow capacity with greater capital efficiency and lower manufacturing costs over the next few years.
** Gains from equity investments and interest and other for the first quarter are expected to be zero due to the expectation of a net loss on equity investments of approximately $50 million, primarily as a result of impairment charges. Gains from equity investments and interest and other will vary depending on equity market levels and volatility, the realization of expected gains or losses on investments, including gains on investments acquired by third parties, determination of impairment charges, interest rates, cash balances and assuming no unanticipated items.
** The tax rate for 2002 is expected to be approximately 28.4 percent, excluding the impact of acquisition-related costs. The expected rate is higher than 25.7 percent in 2001, primarily due to changes in the distribution of income among various tax jurisdictions.
** Depreciation is expected to be approximately $1.1 billion in the first quarter and approximately $4.6 billion for the year.
** Amortization of acquisition-related intangibles and costs is expected to be approximately $120 million in the first quarter. With the adoption of FASB rules 141 and 142 effective the beginning of the year, the company will no longer amortize goodwill from acquisitions, but will continue to amortize other acquisition-related intangibles and costs. For the full year, amortization of acquisition-related intangibles and costs is expected to be approximately $440 million.
The statements by Craig R. Barrett, the above statements contained in this Outlook, and the statements in the Fourth-Quarter and Recent Highlights section referring to plans and expectations for the current quarter and the future are forward-looking statements that involve a number of risks and uncertainties. In addition to the factors discussed above, other factors that could cause actual results to differ materially include the following: business and economic conditions and trends in the computing and communications industries in various geographic regions; possible disruption in commercial activities occasioned by terrorist activity and armed conflict, such as changes in logistics and security arrangements, and reduced end-user purchases relative to expectations; changes in customer order patterns; changes in the mixes of microprocessor types and speeds, purchased components and other products; competitive factors, such as competing chip architectures and manufacturing ! technologies, competing software-compatible microprocessors, and acceptance of new products in specific market segments; pricing pressures; development and timing o= introduction of compelling software applications; excess or obsolete inventory and variations in inventory valuation; continued success in technological advances, including development and implementation of new processes and strategic products for specific market segments; execution of the manufacturing ramp including the transition to 0.13-micron process technology; excess manufacturing capacity; the ability to grow new networking, communications, wireless and other Internet-related businesses and successfully integrate and operate any acquired businesses; impact of events outside the United States, such as the business impact of fluctuating currency rates or unrest or political instability in a locale, such as unrest in Israel; unanticipated costs or other adverse effects associated with processors and other products containing errata (deviations from published specifications); litigation involving antitrust, intellectual property, co= umer, stockholder and other issues; and other risk factors listed from time to time in the company's SEC reports, including but not limited to the report on Form 10-Q for the quarter ended Sept. 29, 2001 (Part I, Item 2, Outlook section).
Status of Business Outlook and Scheduled Business Update
Intel expects that its corporate representatives will meet privately during the quarter with investors, the media, investment analysts and others. At these meetings, Intel may reiterate the Outlook published in this press release. At the same time, Intel will keep this press release and Outlook publicly available on its Web site (www.intc.com). Prior to the Business Update and related Quiet Periods (described below), the public can continue to rely on the Outlook on the Web site as still being Intel's current expectations on matters covered, unless Intel publishes a notice stating otherwise.
Intel intends to publish a Business Update press release on March 7. From the close of business on March 1 until publication of the Business Update, Intel will observe a "Quiet Period." During the Quiet Period, the Outlook as provided in this press release and the company's filings with the SEC on Forms 10-K and 10-Q should be considered to be historical, speaking as of prior to the Quiet Period only and not subject to update by the company. During the Quiet Period, Intel representatives will not comment concerning the Outlook or Intel's financial results or expectations.
A Quiet Period operating in similar fashion with regard to the Business Update and the company's SEC filings will begin at the close of business on March 15 and will extend until the day Intel's next quarterly Earnings Release is published, presently scheduled for April 16.
FOURTH QUARTER 2001 BUSINESS REVIEW
Intel Architecture Group
** Microprocessor unit shipments set a record.
** Chipset unit shipments were higher sequentially.
** Motherboard unit shipments were higher sequentially.
Wireless Communications and Computing Group
** Flash memory unit shipments were higher sequentially.
Intel Communications Group
** Unit shipments of Ethernet connectivity products were higher sequentially.
** Unit shipments of network processing components, which include embedded Intel® Pentium® III processors, network processors and I/O processors, were higher sequentially.
** Average selling prices of microprocessors were down slightly from the third quarter primarily due to increased sales of Pentium III processors for the Microsoft* Xbox* design.
** Gross margin percentage in the fourth quarter was 51.3 percent, higher than the revised expectation primarily because of higher than expected microprocessor units and lower than expected manufacturing spending.
** Expenses (R&D, excluding in-process R&D, plus MG&A) in the fourth quarter were $2.0 billion, which is at the low end of expectations and approximately flat sequentially.
** The tax rate was approximately 25.7 percent in the fourth quarter, excluding the impact of acquisition-related costs.
** Gains or losses on equity investments and interest and other were a net loss of $214 million in the fourth quarter, as compared to an expectation of a net loss of $230 million. The net loss on equity investments was $287 million, including the impact of impairment charges of approximately $270 million.
FOURTH-QUARTER AND RECENT HIGHLIGHTS
Intel Architecture Group ** In January, Intel introduced the first Pentium® 4 processors based on the company's industry-leading 0.13-micron technology. Available at speeds of 2.2 GHz and 2.0 GHz, the new processors are the world's fastest, bringing the industry's highest performance to today's most demanding PC applications. Using 0.13-micron technology, Intel was able to double the size of the processor's performance-enhancing level two (L2) cache memory while reducing die size by over 30 percent.
** In January, the company introduced the Intel® 845 chipset for Pentium 4 processor-based systems with support for double data rate (DDR) memory. With the Intel 845 and Intel 850 chipsets, the company is delivering Pentium 4 processor technology throughout the performance and mainstream desktop PC market segments, with a range of platform solutions supporting all of today's major memory technologies.
** At the Consumer Electronics Show in January, leading notebook PC manufacturers demonstrated forthcoming PCs based on the mobile Pentium 4 Processor-M, which is scheduled to ship later in the first quarter. Based on Intel's advanced 0.13-micron technology, the mobile Pentium 4 Processor-M will provide users with the highest levels of performance along with new wireless technologies such as IEEE 802.11x and Bluetooth.
** In January, Intel introduced a 1.4 GHz server version of the Intel Pentium III processor with 512 KB of L2 cache. Based on Intel's 0.13-micron technology, the processor is ideal for rack-mounted and pedestal front-end application servers, as well as new ultra-dense server configurations.
** Also in January, Intel released the Intel® Celeron® processor at 1.3 GHz. Based on 0.13-micron technology, the processor represents Intel's fastest offering for the price-sensitive, value desktop PC market segment.
** In December, Intel shipped its first telecommunications server building block products. Intel is offering carrier-grade, dual processor servers in 1U and 2U form factors that conform to the stringent reliability requirements defined by the Network Equipment Building Specification and European Telecom Standards Institute.
** In December, Intel's OEM customers began shipping initial pilot systems based on the next-generation Intel® Itanium™ processor, code named McKinley, to end-users. The McKinley processor is expected to be generally available in mid-2002.
** In November, Intel announced new products for low-power, space-saving "ultra dense" servers. The Ultra Low Voltage Pentium® III processor at 700 MHz runs at a server-industry-low of 1.1 volts, includes 512 KB of on-chip cache memory, and delivers the highest performance in its class. The complementary Intel® 440GX chipset delivers server-specific reliability and performance features such as error correcting code (ECC) and large memory support up to 2 GB.
Intel Communications Group
** In November, Intel launched the industry's first suite of wireless networking products based on the IEEE 802.11a specification. Intel's new products include wireless hubs, adapters and software that allow businesses and consumers to connect to corporate networks and the Internet five times faster than with wireless products based on the 802.11b specification.
** In October, Intel announced communications hardware building blocks based on a new version of the CompactPCI* specification. The products include chassis, backplanes and hot-swap power supplies that enable telecom, networking and computing equipment manufacturers to deploy packet-switched solutions for high-performance applications such as 3G wireless cellular services, voice over Internet protocol (VOIP) and streaming media.
** Also in October, Intel introduced the PBX Digital Gateway, which enables organizations to deploy cost-effective Internet Protocol (IP)-based telephony services with their existing telecommunications equipment. Also at the conference, Intel and Compaq Computer announced a fully integrated speech server platform for bringing applications such as voice portals, speech-enabled Interactive Voice Response, unified messaging and conferencing to the service provider and enterprise market segments.
Wireless Communications and Computing Group ** In November, Intel announced that its Intel® StrataFlash® memories will be used by leading manufacturers of digital set-top boxes for cable, satellite and antenna-operated televisions. The vendors include Scientific-Atlanta, Motorola Broadband Communications Sector, Thomson Multimedia and Hughes Network Systems.
** In October, Intel announced the industry's first flash memory built on 0.13-micron technology. The new flash memory is nearly 50 percent smaller and consumes less power than its 0.18-micron predecessor, making it ideal for cell phones and other electronic equipment for which small size and low power consumption are critical requirements.
** During the quarter, membership in the Intel® Personal Internet Client Architecture (PCA) Developer Network increased to more than 800 companies. The Intel PCA Developer Network provides wireless hardware and software companies with development, technical and marketing support for designing cell phones, personal digital assistants (PDAs) and other mobile Internet devices and applications supporting Intel PCA. The number of hardware and software design tools available to the members grew to more than 400 during the quarter.
New Business Group
** In November, Intel® Online Services announced a new automated service technology that extends the company's managed services capabilities, and adds remote management and other productivity improvements. The Intel® Open Control Technology gives customers and system integrators shared management and flexible control of e-Business solutions, whether they are located in an Intel Online Services data center, a customer data center or another third-party facility.
Technology and Manufacturing Review
** In December, Intel began producing 0.13-micron microprocessors on 300mm wafers. A second 300mm wafer facility is scheduled to come on line in the second half of 2002.
** During the quarter, Intel expanded its 0.13-micron manufacturing network to four 200mm factories that are now producing the company's most advanced microprocessors, including the latest Pentium 4 processors at 2.2 GHz and 2.0 GHz.
** During the quarter, Intel exceeded its goal of doubling Pentium 4 processor production versus the third quarter.
** In November, Intel researchers announced the development of a TeraHertz transistor, which is based on new structures and materials designed to overcome a number of the technical barriers to continued industry progress according to Moore's Law. When used in future technology generations, TeraHertz transistors are expected to enable chips with 25 times the number of transistors of today's microprocessors, operating at 10 times the speed, with no increase in power consumption or heat dissipation.
Intel Capital, Intel's strategic investment program, focuses on making equity investments and acquisitions to grow the Internet economy in support of Intel's strategic interests. Intel Capital invests in hardware, software and services companies in several market segments, including computing, networking, and wireless communications. For more information, please visit www.intel.com/capital.
As of the end of the quarter, Intel Capital's strategic equity portfolio included over 500 companies worldwide. The portfolio includes securities of both publicly traded and private companies as follows:
|Dec. 29, 2001||Carrying Value (in millions)|
|Marketable equity securities||$229|
|Other equity investments||$1,499|
As of Dec. 29, the total carrying value of the portfolio included approximately $46 million of net unrealized appreciation on the marketable equity securities.
Marketable equity securities include the Intel Capital portfolio holdings classified as trading assets or as marketable strategic equity securities, and they are carried at current market value in the balance sheet. Other equity investments include non-marketable securities carried at the lower of cost or market value, and equity derivatives carried at current market value. They are classified in the balance sheet as other assets, except for derivatives offsetting changes in values of other investments, which are classified as assets or liabilities as appropriate. Total portfolio value will vary based on a number of factors, including market fluctuations, investments, dispositions and changes in the marketable status of securities.
The financial review section is in the tables following this release. Along with the income statement and balance sheet information, additional information is available from the Investor Relations Web site at www.intc.com in a spreadsheet format that can be downloaded.
Online delivery of Intel earnings releases, annual reports, press releases and other materials is available via the Internet at www.intc.com.
CONSOLIDATED SUMMARY INCOME STATEMENT DATA
(In millions, except per share amounts)
|Three Months Ended||Twelve Months Ended|
|Dec. 29||Dec. 30||Dec. 29||Dec. 30|
|NET REVENUE||$ 6,983
|Cost of sales||3,402||3,230||13,487||12,650|
|goodwill and other|
|intangibles and costs||550||459||2,338||1,586|
|Operating costs and|
|Gains (losses) on equity|
|Interest and other, net||73
|NET INCOME||$ 504
|PER SHARE||$ 0.08
|PER SHARE||$ 0.07
|PRO FORMA INFORMATION EXCLUDING
|The following pro forma supplemental information excludes the effect of acquisition-related costs. This pro forma information is not prepared in accordance with generally accepted accounting principles.|
|Three Months Ended||Twelve Months Ended|
|Dec. 29||Dec. 30||Dec. 29||Dec. 30|
|Pro forma operating|
|expenses||$ 5,425||$ 5,649||$ 21,747||$21,636|
|Pro forma operating|
|income||$ 1,558||$ 3,053||$ 4,792||$12,090|
|Net income excluding|
|costs||$ 998||$ 2,627||$ 3,606||$12,082|
|Basic earnings per|
|costs||$ 0.15||$ 0.39||$ 0.54||$ 1.80|
|Diluted earnings per|
|costs||$ 0.15||$ 0.38||$ 0.52||$ 1.73|
CONSOLIDATED SUMMARY BALANCE SHEET DATA
|Dec. 29||Sept. 29||Dec. 30|
|Cash and short-term|
|investments||$ 10,326||$ 9,158||$ 13,473|
|Work in process||1,316||1,308||1,057|
|Deferred tax assets|
|Total current assets||17,633||16,867||21,150|
|Property, plant and|
|TOTAL ASSETS||$ 44,395
|Short-term debt||$ 409||$ 302||$ 378|
|Accounts payable and|
|on shipments to|
|Income taxes payable||988
|Total current liabilities||6,570||6,193||8,650|
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
|Q4 2001||Q3 2001||Q4 2000|
|goodwill and other|
|intangibles and costs||$550||$609||$459|
|Proceeds of sales|
|of shares to|
|benefit & other||$298||$314||$95|
|Net cash used|
|(adjusted for stock splits):|
|Average common shares|
|Dilutive effect of:|
|Employees (in thousands)||83.4||86.2||86.1|
|Days sales outstanding||37||38||37|
SUPPLEMENTAL FINANCIAL AND OTHER INFORMATION
OPERATING SEGMENT INFORMATION
($ in millions)
|Full Year||Full Year|
|Q4 2001||Q3 2001||2001||Q4 2000||2000|
|Intel is reporting three operating segments for 2001. Prior period information has been restated to conform to the new presentation.|
|The Intel Architecture Group's products include microprocessors, motherboards and board-level products, including chipsets. The Intel Communications Group's products include Ethernet connections, network processing components, embedded microcontrollers, computer telephony boards and optical networking modules and components. The Wireless Communications and Computing Group's products include flash memory, high-performance/lower-power processors and baseband chipsets for wireless and handheld devices.|
|The "all other" category includes acquisition-related costs, including amortization of goodwill and identified intangibles, in-process research and development, and write-offs of acquisition-related intangibles, as well as the revenues and earnings or losses of the New Business Group. "All other" also includes certain corporate-level operating expenses, including a portion of profit-dependent bonus expenses that are not allocated to the operating segments.|
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