Intel Corp 8-K 2012-10-16
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Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95054-1549
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The PC Client Group had revenue of $8.6B, down 1% from the second quarter. Year over year, PC Client Group revenue was down 8%. PC Client platform volume was up 1% sequentially and down 4% from a year ago. PC Client platform average selling prices were down 1% sequentially and down 4% from a year ago.
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The Data Center Group had revenue of $2.7B, down 5% from the second quarter. Year over year, Data Center Group revenue was up 6%. Data Center platform volume was up 1% sequentially and 4% from a year ago. Data Center platform average selling prices were down 7% sequentially and up 1% from a year ago.
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The other Intel architecture group had revenue of $1.2B, up 6% from the second quarter. The quarter on quarter growth is driven by higher embedded revenue and well as higher Intel Mobile Communications (IMC) revenue, formerly the Infineon wireless division. Year over year, the other Intel architecture group’s revenue was down 14%.
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+ 1.5 points:
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Lower platform** unit cost
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- 1.0 point:
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Higher other cost of sales
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- 0.5 point:
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Lower platform** average selling prices
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+ 1.0 point:
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Lower platform** unit cost
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- 1.0 point:
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Lower platform** unit volumes
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- 4.5 points:
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Higher other cost of sales (primarily excess capacity charges)
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- 1.5 points:
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Higher inventory write-offs (primarily our next generation micro-architecture product, code-named Haswell, built prior to qualification for sale)
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Demand could be different from Intel's expectations due to factors including changes in business and economic conditions, including supply constraints and other disruptions affecting customers; customer acceptance of Intel’s and competitors’ products; changes in customer order patterns including order cancellations; and changes in the level of inventory at customers. Uncertainty in global economic and financial conditions poses a risk that consumers and businesses may defer purchases in response to negative financial events, which could negatively affect product demand and other related matters.
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Intel operates in intensely competitive industries that are characterized by a high percentage of costs that are fixed or difficult to reduce in the short term and product demand that is highly variable and difficult to forecast. Revenue and the gross margin percentage are affected by the timing of Intel product introductions and the demand for and market acceptance of Intel's products; actions taken by Intel's competitors, including product offerings and introductions, marketing programs and pricing pressures and Intel’s response to such actions; and Intel’s ability to respond quickly to technological developments and to incorporate new features into its products.
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The gross margin percentage could vary significantly from expectations based on capacity utilization; variations in inventory valuation, including variations related to the timing of qualifying products for sale; changes in revenue levels; segment product mix; the timing and execution of the manufacturing ramp and associated costs; start-up costs; excess or obsolete inventory; changes in unit costs; defects or disruptions in the supply of materials or resources; product manufacturing quality/yields; and impairments of long-lived assets, including manufacturing, assembly/test and intangible assets.
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The tax rate expectation is based on current tax law and current expected income. The tax rate may be affected by the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets.
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Gains or losses from equity securities and interest and other could vary from expectations depending on gains or losses on the sale, exchange, change in the fair value or impairments of debt and equity investments; interest rates; cash balances; and changes in fair value of derivative instruments. The majority of our marketable equity security portfolio balance is concentrated in ASML Holding, N.V, and declines in value could result in impairment charges, impacting gains or losses on equity securities.
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Intel's results could be affected by adverse economic, social, political and physical/infrastructure conditions in countries where Intel, its customers or its suppliers operate, including military conflict and other security risks, natural disasters, infrastructure disruptions, health concerns and fluctuations in currency exchange rates.
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Expenses, particularly certain marketing and compensation expenses, as well as restructuring and asset impairment charges, vary depending on the level of demand for Intel's products and the level of revenue and profits.
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Intel’s results could be affected by the timing of closing of acquisitions and divestitures.
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Intel's results could be affected by adverse effects associated with product defects and errata (deviations from published specifications), and by litigation or regulatory matters involving intellectual property, stockholder, consumer, antitrust, disclosure and other issues, such as the litigation and regulatory matters described in Intel's SEC reports. An unfavorable ruling could include monetary damages or an injunction prohibiting Intel from manufacturing or selling one or more products, precluding particular business practices, impacting Intel’s ability to design its products, or requiring other remedies such as compulsory licensing of intellectual property.
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INTEL CORPORATION
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SUPPLEMENTAL RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
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In addition to disclosing financial results in accordance with United States (U.S.) generally accepted accounting principles (GAAP), this document contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our expectations for future results. The non-GAAP financial measures disclosed by the company exclude the amortization of acquisition-related intangible assets, as well as the related income tax effect. Amortization of acquisition-related intangible assets consists of the amortization of developed technology, trade names, and customer relationships acquired in connection with business combinations. We record charges relating to the amortization of these intangibles in our GAAP financial statements. Amortization charges for our acquisition-related intangible assets are inconsistent in size and are significantly impacted by the timing and valuation of our acquisitions. Consequently, our non-GAAP adjustment excludes these charges to facilitate an evaluation of our current operating performance and comparisons to our past operating performance.
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Set forth below are reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. The non-GAAP financial measures disclosed by the company have limitations and should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for period to period comparisons in our budget, planning and evaluation processes, and to show the reader how our performance compares to other periods.
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Three Months Ended
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Nine Months Ended
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Sept 29,
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Oct 1,
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Sept 29,
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Oct 1,
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2012
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2011
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2012
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2011
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GAAP GROSS MARGIN
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$ | 8,515 | $ | 9,018 | $ | 25,334 | $ | 24,805 | ||||||||
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Adjustment for the amortization of acquisition-related intangibles
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141 | 135 | 420 | 345 | ||||||||||||
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NON-GAAP GROSS MARGIN
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$ | 8,656 | $ | 9,153 | $ | 25,754 | $ | 25,150 | ||||||||
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GAAP GROSS MARGIN PERCENTAGE
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63.3 | % | 63.4 | % | 63.6 | % | 61.8 | % | ||||||||
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Adjustment for the amortization of acquisition-related intangibles
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1.0 | % | 0.9 | % | 1.0 | % | 0.9 | % | ||||||||
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NON-GAAP GROSS MARGIN PERCENTAGE
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64.3 | % | 64.3 | % | 64.6 | % | 62.7 | % | ||||||||
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GAAP OPERATING INCOME
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$ | 3,841 | $ | 4,785 | $ | 11,483 | $ | 12,878 | ||||||||
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Adjustment for the amortization of acquisition-related intangibles
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215 | 211 | 653 | 533 | ||||||||||||
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NON-GAAP OPERATING INCOME
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$ | 4,056 | $ | 4,996 | $ | 12,136 | $ | 13,411 | ||||||||
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GAAP NET INCOME
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$ | 2,972 | $ | 3,468 | $ | 8,537 | $ | 9,582 | ||||||||
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Adjustment for:
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Amortization of acquisition-related intangibles
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215 | 211 | 653 | 533 | ||||||||||||
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Income tax effect
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(72 | ) | (45 | ) | (219 | ) | (114 | ) | ||||||||
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NON-GAAP NET INCOME
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$ | 3,115 | $ | 3,634 | $ | 8,971 | $ | 10,001 | ||||||||
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GAAP DILUTED EARNINGS PER COMMON SHARE
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$ | 0.58 | $ | 0.65 | $ | 1.65 | $ | 1.75 | ||||||||
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Adjustment for:
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Amortization of acquisition-related intangibles
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0.04 | 0.04 | 0.13 | 0.10 | ||||||||||||
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Income tax effect
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(0.02 | ) | (0.01 | ) | (0.05 | ) | (0.02 | ) | ||||||||
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NON-GAAP DILUTED EARNINGS PER COMMON SHARE
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$ | 0.60 | $ | 0.68 | $ | 1.73 | $ | 1.83 | ||||||||
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INTEL CORPORATION
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SUPPLEMENTAL RECONCILIATION OF GAAP TO NON-GAAP OUTLOOK
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Set forth below is a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure. The non-GAAP financial measure disclosed by the company has limitations and should not be considered a substitute for, or superior to, the financial measure prepared in accordance with GAAP, and the financial outlook prepared in accordance with GAAP and the reconciliations from this outlook should be carefully evaluated. Please refer to "Supplemental Reconciliation of GAAP to non-GAAP Results" in this document for a detailed explanation of the adjustment made to the comparable GAAP measures, the ways management uses the non-GAAP measures, and the reasons why management believes the non-GAAP measures provide useful information for investors.
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Q4 2012 Outlook
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GAAP GROSS MARGIN PERCENTAGE
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57%
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+/- a couple percentage points
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Adjustment for the amortization of acquisition-related intangibles
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1%
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NON-GAAP GROSS MARGIN PERCENTAGE
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58%
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+/- a couple percentage points
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