Intel Case Analysis Nathan Belew Salt Lake City Community College Shauna HatfieldWhen we refer to Intel technologies 10-k report and navigate down to Item 1, we're able to see the type of business in which intel operates. Intel designs and manufactures advanced microprocessors and chipsets. These microprocessors and chipsets have the ability to be enhanced with additional hardware or software. With These capabilities, Intel’s processors and chipsets have a high demand for customers who either use these components to design or manufacture equipment. Intel’s products have been implemented into numerous computing applications, such as notebooks, desktops, servers, tablets, smartphones, automated factory systems, and medical devices (Item 1). After reviewing the CEO’s and chairman’s letter we found some useful information that will further help conduct our analysis. Intel's datacenter business revenue grew by $11 billion due to the influx of demand in cloud storage, high performance computing storage, and networking (CEO Letter). The chairman includes in his letter that in the upcoming year, client computing, the data center, software, and embedded systems will continue to maintain their leadership positions as important business segments of the company. The CEO lists that the company paid out $6.6 Billion to shareholders in the form of dividends, from that amount repurchased shares. In the chairman's letter he mentions of that $6.6 Billion paid out, $4.5 billion was used for dividend payouts and $2.1 billion was spent towards the repurchase of shares. The chairman states in letter that the cumulative amount paid to shareholders in dividends and share repurchases has reached $125 billion (Chairman Letter)The CEO states that intel is the leading industry in semiconductor manufacture offering Tri-gate transistors and 22-nanometer technology-based products. The CEO believes they're leading the industry field because their relentless pursuit in Moore’s law of advancing technology. Moore’s law has been implemented into all of Intel's product lines with the results being, higher performing products, lower energy requirements, and low cost per transistor. The chairman states in his letter that he believes Moore’s law will continue to tell them about the future of computing devices. The CEO states in his letter that mobile client computing is expanding in features that include 2 in 1 capabilities such as notebooks and tablets. Intel is taking aggressive actions to keep up with this expanding market. In 2013, Intel shipped more than 10 million microprocessors for tablets. For 2014, Intel has created a goal to increase the microprocessors shipped to 40 Million. The chairman’s letter expresses that it’s imperative that Intel remains competitive in the tablets market. By doing so protects and grows Intel’s core businesses while also pursuing new opportunities for growth (Chairman Letter). Intel’s CEO brings to attention that Intel is constantly working on innovated products to keep up with the fast-paced market. Some of these technological innovations Intel has created have been for small wearable devices. Among some of the other innovative products, Intel has created products that enable rapid innovation by inventors, entrepreneurs, and product designers. The chairman brings to attention in is letter that nay-sayers be lieve technology has reached its limit, but the chairman contests these nay-sayers. The innovated products Intel has created have continued to transform. The chairman believes that opportunities are still as big and interesting as at any time in Intel’s history.The auditor has assessed the consolidated balance sheet, income and comprehensive income, stockholders’ equity, and cash flow. After auditing these consolidated statements, the auditors found that Intel fairly presented their financial statements, operations, and cash flows. With these results, the auditor expresses an unqualified opinion on the financial statements. The auditors assessed Intel’s internal control over financial reporting to find that internal control is maintained and is reported in accordance of GAAP. The auditors express an unqualified opinion. ‘The auditor assessed Item 8 which is where all the consolidated financial statements are. This item is used to determine the fairness of Intel's financial statements and whether they're in accordance to GAAP standards. The assessment continues on to Item 9a where ‘management discusses their internal control procedures for financial reporting and preparation of consolidated financial statements. In Intel’s MD&A section of the 10-k report we find that they've successfully listed their internal and external sources of liquidity. Intel states that their primary source of cash is generate from their operations. Intel sees the commercial paper program is another potential source of external liquidity (MD&A). Intel states that they have capital purchase obligations for the next year. These obligations represent commitments for the construction or purchase of property, plant, and equipment. Intel expects to spend roughly 5.3 billion in 2014 (MD&A).. Breaking down Intel's sales we find that net revenue decreased by $633 million in 2013, component units contributed 3% of that decrease.In Intel's disclosure about market risk, they describe in their equity prices that they've recognized a 25% loss in market prices. Intel approximates that $1.6 billion decrease can occur in their marketable equity securities based on the value as of December 29, 2013. Increase or 2013 © 2012-—«Decrease Assets Current Assets: Cash and cash equivalents 6.1% — 10.1% -33.1% Short-term investments 65% 4.7% 49.3% Trading assets 9.1% 6.7% 48.5% Accounts receivable, Net 3.9% 4.5% 6.5% Inventories 45% 5.6% “11.9% Deferred tax assets 28% 2.5% 22.5% Other current assets 18% 3.0% 34.4% Total current assets 34.7% 37.2% 2.3% PPE 34.0% 33.2% 12.3% Marketable, equity securities 6.7% 5.2% 40.6% Other long-term investments 16% 0.6% 198.8% Goodwill 11.4% 10.3% 8.3% Identified intangible assets, Net 5.6% 7.4% “17.4% Other long-term assets 5.9% 4.9% 32.3% Total Assets 100.0% _ 100.0% 309.4% Liabilities and stockholders’ equity Current Liabilities: Short-term debt 0.3% 0.4% -9.9% ‘Accounts payable 3.2% 3.6% -1.8% Accrued compensation and benefits 3.4% 3.5% 5.1% Accrued advertising 11% 1.2% 0.6% Deferred income 23% 2.3% 8.5%Other accrued liabilities, 44% 4.3% 11.9% Total Current liabilities 14.7% 15.3% 5.2% Long-term debt 14.3% 15.6% 0.22% Long-term deferred tax liabilities 4.8% 4.0% 28.9% Other long-term liabilities __ 3.2% 4A% -19.7% Total liabilities 36.9% 39.3% Stockholders’ equity: Preferred stock 0.0% 0.0% 0.0% ‘Common Stock 23.3% 23.1% 10.6% AOC! (loss) 13% —-05% 411.5% Retained earnings 38.4% 38.1% 10.4% Total stockholders’ equity 63.1% 60.7% 13.8% Total liabilities and stockholders’ equity 100% 100% Cash and Cash equivalents In 2013 we see that cash is 6.1% of total assets. We see a decrease of 33.1% from 2012's 10.1% of total assets. This is reasonably justified as because the increases in other accounts such as short-term investments, trading assets, and other investment accounts seen in the balance sheet. Cash would've been used to contribute to short-term investments increase of 49.3% from 2012 to 2013. This also goes for any other investment account listed on the Balance Sheet. Inventories Intel uses the FIFO method to compute their inventory. This method affects this cost of goods sold in the income statement. FIFO may report a lower cost of goods sold, all depends on the cost of the units. In 2013, we see Intel reports a balance of $458 in raw material, $1,998 in work in progress, and 1,716 in finished goods totaling up to 4,172 for the inventory account. From these balances we determine that 58.9% of the inventory isn’t available for sale yet and that 41.1% of the inventory is completed and ready for sale. In 2012,work in progress inventory and finished goods decreased by 9.9% and 15.76%, respectively. This decrease gives a slight explanation to why Intel had a decrease from 2012 to 2013 of 11.5%, PP&E In the financial notes for PP&E we find that Intel uses the straight-line method for depreciation to equally depreciate their buildings and equipment. For equipment, Intel determines a 2 to 4-year useful life. For buildings, Intel determines a 10 to 25-year useful life span. As seen in note __, the gross total for PP&€E is $73,316 before accumulated depreciation. From this gross total we can use this to figure out the percentage that buildings, equipment, and construction in progress contributes to the PP&E account along with the accumulated depreciation allocated to both building and equipment. Land & building contributes 28.8% to the total PP&E account; Machinery & equipment contributes 55.2%; Construction in progress consists of 16% of the PP&E account. Since CIP isn’t depreciable we'll take the building and equipment to determine what amount of accumulated depreciation was allocated to each. When we exclude CIP, we get a gross amount for PP&E of $61,635 from this amount we determine that 34.23% of accumulated depreciation will be allocated to the depreciation of the building assets and 65.77% of accumulated depreciation will be allocated to the depreciation of equipment. The accumulated depreciation total for each is $14,372 and $27,616, respectively. In our horizontal analysis we see that Intel grew their PP&E by 12.3% 2013 ©2012-2011 2010 PPRE 12.3% 18.4% 32.0% 3.9%Accounts receivable In our horizontal analysis of accounts receivable, we see a decrease of 6.5% from 2012 to 2013. The valuation and qualifying allowance for doubtful receivables is fairly presented. In 2011, Intel wrote an expense of 8 million for bad debts, didn’t write off any accounts receivables. During 2012, Intel lowered their allowance expense by 62.5% and wrote off 1 million in accounts receivable. In 2013, Intel made a good call on increasing the bad debts allowance because the unexpected shift in write offs of 5 million. Within the MD&A we discover that the top three customers (Hewlett-Packard, Dell, and Lenovo) accounted for 34% of Intel’s account receivables in 2013. Deferred tax asset (liability) In 2013, Intel's deferred tax asset makes up 2.8% of total assets. Deferred tax her percentage to total assets compared to other current assets. Looking at the previous year we see deferred taxes made up only 2.5% of total assets, leaving it at the lowest contributor. An increase is determined when horizontally analyzing the two years. From 2012 to 2013, deferred tax asset grew by 22.5%, Overall looking at the growth between 2012 and 2013, a few current asset accounts have decreased by double digit percentages, with the lowest decrease to be accounts receivable. Short-term investments and trading assets nearly increased by more than half its balance in2012. For long-term assets, the only account to have decreased from 2012 to 2013 was the identified intangible assets account. The highest growth account for long-term assets was other long-term investments. Current liabilities Intel decreased their short-term debt by 9.9% from 2012 to 2013. This barely decreased the percentage of total liabilities. Intel paid off more of their accounts payable resulting in a decrease of 1.8% from 2012 to 2013. This showed a .4% drop in comparison to total liabilities. Other accrued liabilities grew by 11.9% being one of the highest increases in current liabilities from 2012 to 2013. Long-term debt From our vertical analysis we that long-term debt only makes up 14.3% of total liabilities and with our horizontal analysis an insignificant increase of .22% is seen from 2012 to 2013. Years prior, Intel saw an growth of 85.43% in long-term debt from 2011 to 2012. From 2010 to 2012, an astonishing increase of 241.07% was seen in long-term debt. 2013-2012 2011 ©2010 Long-term debt 0.22% 85.43% — 241.07% 1.37% In the MD&A section of the financial statements the higher amount of long-term debt issued in 2011. In the notes, Intel states they recognize their long-term debt at a amortized cost for their senior notes and convertible debentures.Intel holds a commitment held under a non-cancelable lease agreement for the total amount of 870 ranging from 2014-2019 and thereafter. Intel also has committed to the purchase of property, plant, and equipment totaled to $5.5 billion as of 2013. Intel entered a series of agreements with ASML to accelerate development. A contingency Intel went through was a shareholder litigation. Intel announced they'd acquire all of McAfee’s common stock for $48.00 per share. McAfee allegedly breached their fiduciary duties and that McAfee and Intel aided and abetted those breaches of duty. Damages were assessed and the court ruled that shares must be purchased at $62.08 Deferred taxes can be either listed as a current asset, non-current, and as a long-term liability depending on when taxes will be paid and if they've been accruing. Intel records a valuation allowance to reduce deferred tax assets to the amount that it is believed more likely than not to be realized. Among the deferred tax assets, accrued compensation and other benefits reported the highest amount in tax assets. With deferred tax liabilities, PP&E was the highest costing tax liability. Equity accounts listed in the balance sheet consists of preferred stock, common stack, accumulated other comprehensive income, and retained earnings. Preferred stock doesn’t hold a balance as because of the 50 shares authorized, zero has been issued. In this paper we'll be covering the vertical and horizontal analysis of the Income statement and statement of shareholder's equity. Beginning with the top of the income statement we'll analyze the net sales for 2013. As seen in our horizontal analysis, revenuesfor 2013 dropped by 1.19%. Intel states in their annual report that the cause of this was due to low preforming sales of their PCG platform in the first half of the fiscal year. Intel also includes in their MD&A, that sales increased during the fourth quarter due to stabilization in the PC market leading to more sales volume, inevitably increase revenue by 3%. Market stabilization for the PC market is a good sign for Intel because revenues may continue to grow in the preceding years. When looking at intel’s vertical analysis we can see that cost of goods sold made up __ of total revenues this is a 4.94% growth compared to 2012. Intel states in their MD&A that higher startup costs were incurred due to their next generation process technology. The higher factory costs were recognized in the cost of goods sold, resulting in a decrease of 4.92% in gross margin from 2012 to 2013. Intel's preferred inventory method for accounting is First In First Out, this method is resourceful if the inventory purchased is relatively cheaper than any inventory purchased after. But In the instance of Intel recognizing higher production costs for their newer generation products, the chosen inventory method barely dampened the effects on the cost of goods of sold, R&D is a crucial expense in oper’ ns for Intel and is expected to be the highest expense for any technology company if their plans are to be a competitive company in the technology industry. Intel’s R & D comprised of 20.13% of total revenues during 2013, this is an increase of 4.56% which isn’t as significant of an increase compared to 2011 to 2012 growth of 21.53%. 2012, R & D still surpassed any other existing expense when comparingthem to total revenues. Intel’s MD&A gives clarification on the increase in spending for the R & D expense, Intel invested more into the products such as smartphones, tablets, and data centers. Intel also states inside the MD&A that higher process development costs were incurred for their new 14nm technology. Intel’s marketing objectives are to build a strong, well-known product that connects businesses and consumers to a meaningful, valuable, and reliable product. Intel advertises their product on television, print, and the internet. When looking at Intel’s vertical analysis, we can see that MG&A has nearly been consistent between 2011 to 2013 when comparing it to total revenues. From 2011 to 2012, intel had a spike of 5.05% in growth with only a minor change of .38% in growth between 2012 to 2013. Within the notes to the financial. statements, Intel states that any cash in excess of the fair value of the advertisement benefit is recognized as a reduction in revenue. Intel includes in the MD&A an explanation to the growth of 5.05% between 2011 to 2012, this is due to higher compensation expenses and annual salary increases as well as additional employees added to the company after the acquisition of McAfee. Operating profit is in a declining trend currently with 2011 at 32.37% of revenues, being the highest year in operating profits of the three years. This result mainly comes from the total amount Intel allocated to their R & D expense during 2011. Growth for Operating profits declined nearly consistent with each other for 2012 and 2013 at 16.24% and 16.03, respectivelyIntel's effective tax rates have decreased from 2011 to 2013, this is due having lower Income before taxes year after year. During 2011, provision for taxes was made up of 8.96% of total revenues with an effective tax rate of 27.21%. 2011 sat at the highest Income before tax than all other years. For 2012, a decrease in growth of 20.07% is seen when ‘comparing it to 2011. Provision for taxes only comprised of 7.25% of revenues with Income before taxes only being 27.88% of total revenues, which was a decrease in growth of 16.35% between 2011 and 2012. The decrease in Income before taxes practically explains why a lower effective tax rate of 26.01% was used for 2012. For 2013, provision for taxes decreased by 22.67% when comparing it to 2012. Provision for taxes made up 5.67% of revenues with income before taxes making up 23.93% of revenues, providing us with an effective tax rate of 23.72%. A decreasing trend is seen among the following years in the effective tax rates and may be associated with the decreasing trend in Income before taxes. Intel had a 23.97% net profit margin for 2011, | believe this occurred because less expenses were incurred during that fiscal year. Due to having spent less on expenses that period, Intel had more taxable Income for the period but only needed to allocate 8.96% of revenues towards taxes, leaving a higher profit margin compared to the proceeding years. During 2012, Intel incurred more expenses compared to 2011 resulting in a decline of 16.24% in operating income. 2012 net profit margin comprised of 20.63% of revenues, which was a decrease in growth of 14.97% compared to 2011. With 2013, net profit margin was made up of 18.25% of total revenues which was a decrease of 12.59% compared to 2012. Thisdeclining trend may be explained by the increase of operating expense incurred during 2012 and 2013. Intel’s earning per shares gradually decreased from 2011 to 2013. Weighted shares outstanding also decreased among the years. 2011 had the highest EPS of 2.46 because of the high amount of net income of 12,942, 2011 was also the highest year with weighted outstanding shares of 5,256. During 2012, weighted shares outstanding decreased by a change of 260, due to this, EPS for the year slightly decreased to 2.20. Intel reported a net income of 9,620 for 2013, weighted outstanding shares decreased by a change of 26, reporting a EPS of 1.94. A declining trend is seen of 10.56% from 2011 to 2012 and a decline of 11.81% from 2012 to 2013. Among the items in the statement of comprehensive income, change in net unrealized holding gains (losses) for available-for-sale investments was the highest item for 2013. This item is reported at the fair value of the investments, only being adjusted up or down during the end of each reporting period. TI ed holding gains (losses) acts as a holding tank inside of the other comprehensive Income statement and is only realized once Intel decides to sell the investment, which than will funnel through into net income. In the segment analysis part of this paper, we can determine the amount of cash generated from each of the following top contributing businesses to Intel's sales. In 2013, Hewlett- Packard contributed 17% to Intel’s net revenue, Dell Inc at 15%, Lenovo Group Limited accounted for 12%. Each of those amounts in dollar form were $8,960, $7,906, and $6,325, respectively. For 2012 each business contributed: Hewlett-Packard at 18%; Dell Inc at 14%;and Lenovo Group Limited at 11%. Each of those amounts in dollar form were $9,601, $7,468, and $5,868, respectively. For 2011, each business contributed: Hewlett-Packard at 19%; Dell Inc at 15%; and Lenovo Group Limited at 9%. Each amount in dollar form would be $10,260, $8,100, and $4,860, respectively. Looking into the statement of shareholders equity, we can determine that there has been a positive growth change in the balance from 2011 to 2012of 13.77%. The most significant ‘items that change from 2012 to 2012 were other comprehensive income with a positive change of 329.84% and repurchase of shares with a negative change of 52.25%. These two accounts comprised of -4.77% and 3.21% of the total balance during 2012. The increase in the proceeds from sales of shares is cause by incentive plans to employees, as explained in the line items name. What the repurchase of common stock means is that, the company purchased back this stock as treasury stock, which ultimately affects the EPS by increasing the ratio. These repurchases may be used back as an incentive to employees as well.Common-size Horizontal Growth Analysis 2013 Growth 2012 Growth 2011 Net Revenue $52,708 119% $ 53,341 1.22% $53,999 Cost of Sales $21,187 4.94% —_$ 20,190 __-0.26% —_$20,242 Gross Margin $31,521 -4.92% _§ 33,151 1.80% _$33,757 R&D $10611 4.56% $ 10,148 21.53% —$ 8,350 Marketing, General, and admin $ 8088 0.38% $ 8057 5.05% $7,670 Restructuring and asset impairment $240 Amortization of acquisition- related intangibles $ 291___-5.52% _$ 308 18.46% $260 Operating expenses $19,230 3.87% _$ 18513 13.72% _$16,280 Operating Income $12,291 16.03% ~$ 14,638 -16.24% $17,477 Gains (Losses) on equity investments, Net $ 471 234.04% $ 141 25.89% $ 112 Interest and other, net $ (151) -260.60% $ 94 -51.00% § 192 Income before taxes $12,611 -15.21% _$ 14,873 -16.35% _$17,781 Provision for taxes $2,991 22.67% _$ 3,868 -20.07% _$ 4,839 Net Income $9,620 12.59% “$11,005 -14.97% "$12,942Common-size Vertical Analysis Net Revenue Cost of Sales Gross Margin R&D Marketing, General, and admin Restructuring and asset impairment 2013 '$ 52,708 $ 21,187 $31,521 $ 10,611 $ 8,088 $ 240 Amortization of acquisition- related intangibles $ 291 Operating expenses Operating Income Gains (Losses) on equity investments, Net Interest and other, net Income before taxes Provision for taxes ‘Net Income $ 19,230 $12,291 $ 471 $ (154) $12,611 $ 2,991 $ 9,620 10.00% 40.20% 59.80% 20.13% 15.34% 0.46% 0.55% 36.48% 23.32% 0.89% 0.29% 23.93% 5.67% 18.25% 2012 53,341 20,190 33,151 10,148 8,057 308 18,513 14,638 141 94 14,873 3,868 11,005 10.00% 37.85% 62.15% 19.02% 15.10% 0.00% 0.58% 34.71% 27.44% 0.26% 0.18% 27.88% 7.25% 20.63% 2011 $53,999 $20,242 $33,757 $ 8,350 $ 7,670 $ 260 $16,280 $17,477 $ 12 * ae $17,781 $ 4,839 $12,942 '100.00% 37.49% 62.51% 15.46% 14.20% 0.00% 0.48% 30.15% 32.37% 0.21% 0.36% 32.93% 8.96% 23.97%‘common stock and capital in excess of par Number of shares Amount, Aoct Retained earnings Total Balance 12/25/2010 5,511 100.00% 16,178 100.0% $333 100.00% $32,919 100.00% 49,430 Net income 12,942 39.31% 12,942 OCI (loss) -1114 -334.53% 114 Total Comprehensive income 11,828 Sale of Shares 142 2.58% 2,019 12.48% 2,019 Equity awards 48 0.30% 48 Share-based compensation 1053 6.51% 1,053 Repurchase of common stock “653 -11.85% 262 -13.98% “12,078 -36.69% -14,340 Cash Dividends “4127 -12.54% _-4,127 Balance 12/25/2011 5,000 10.00% 17,036 100.0% -781 100.0% 29,656 10.00% 45,911 Net income 11,005 37.11% 11,005 CI (loss) 382 Total Comprehensive income 382 -48.91% 11,387 Sale of Shares 148 2.96% 2,257 13.25% 2,257 Equity awards Share-based compensation 1,108 6.50% 1,108 Repurchase of common stock 204 -4.08% 937 5.50% 4,173 -14.07% — -5,110 Cash Dividends -4,350__-14.67% __-4,350 Balance 12/25/2012 4,944 100.00% 19,464 10.00% 399 10.00% 32,138 10.00% 51,203 Net income 9,620 29.93% 9,620 OCI (loss) 1,642 -411.53% 1,642 Total Comprehensive income 11,262 Sale of Shares 130 2.63% 1,593 8.18% 1,593 Equity awards Share-based compensation 1117 5.74% 417 Repurchase of common stock “107 -2.16% “638 3.28% “1802 $.61% — -2,440 Cash Dividends “4479 -13.94% __-4,479 Balance 12/29/2013 4,967 3 21,536 $1243 $35,477 3 58,256 10.00% 26.18% 2.25% 23.93% 4.08% 0.10% 2.13% -29.01% 8.35% 10.00% 23.97% 0.83% 24.80% 4.92% 0.00% 2.81% “11.13% 9.47% 10.00% 18.79% 3.21% 21.99% 3.11% 0.00% 2.18% 477% 8.75%common stock and capital in excess of par Number of shares Amount ACI Retained earnings Total Balance 12/25/2010 5511 16,178 $333 $32,919 49,430 Net income 12,942 12,942 CI (loss) “1134 114 Total Comprehensive income 11,828 Sale of Shares 142 2,019 2,019 Equity awards 48 48 Share-based compensation 1,053 1,053 Repurchase of common stock -653 -2,262 “12,078 -14,340 Cash Dividends 4,127 -4,127 Balance 12/25/2011 5,000 17,036 “781 29,656 45,911 Net income 11,005 11,005, OC! (loss) 382 Total Comprehensive income 382 11,387 Sale of Shares 148 2,257 2,257 Equity awards Share-based compensation 1,108 1,108 Repurchase of common stock -204 937 -4,173 5,110 Cash Dividends -4,350 -4,350 Balance 12/25/2012 4908 19,464 “399 32,138 51,203, ‘Net income 9,620 9,620 OCI (loss) 1,642 1,642 Total Comprehensive income Sale of Shares 130 1,593 1,593 Equity awards Share-based compensation 4117 1117 Repurchase of common stock “107 -638 “1,802 -2,440 Cash Dividends -4,479 -4,479 Balance 12/29/2013 4,967 $ 21,536 $ 1243 ‘$35,477 $58,256 7.12% 14.97% -134.29% 3.73% 11.79% 5.22% 64.37% 5.403% 11.53% -12.59% 329.84% -1.10% 29.42% 0.81% 52.25% 2.97% 13.77%When analyzing the most significant item changes in current assets and liabilities section of the operating activities of the statement of cash flows we determine that inventories, income taxes payable and receivable, and other assets and liabilities have the most significant positive change to the operating activities during 2013. These line items increased operating cash to be greater than net income. More inventory was sold than purchased during 2013, creating a positive change in the operating activities. This change was made up of $1,189 or -189.94% from 2012-2013. When looking at what the percentage of this line item made up of total adjustments for operating activities, we can see that it was 5.05% of total adjustments to the operating activities. Between the years of 2011 to 2012 a change of $(383) or 157.61% is known which we can associated with Intel req ing more Inventory to be purchased. Next to income taxes payable and receivable, a change of $790 or 344.98% between 2012 to 2013 is determined. As this item may be presented as a positive number in the operating activities, this doesn’t mean more cash was taken in but means that a decrease in the cash balance occurred. This line item made up of 9.13% of total adjustments during 2013 and 2.91% during 2012 with a decrease in growth of $(431) or -65.30% from 2011 to 2012. No consistency is seen among these line items and couldn’t have any trend in them associated. Other assets and liabilities has increase by a dramatic amount from 2012 to 2013 being a change of $771 or 820.21% comprising of only 7.75% of total adjustments for 2013. These changes in other current assets and liabilities have no consistency among the year because between 2011 to 2012 only had a change of $(93) or -49.73% which directly shows that no real trend may be seen in this item. Looking at the changes in net cash provided by operating activities, a decline of -9.92% or a change of (2,079) is seen between the years of 2011 to 2012. This decrease may be associatedwith the number of items that were considered as outflows during 2012. 2013 had a growth of 10.02% or a change of $1,892 and can be associated to the number of inflows Intel had. Investing activities ‘Some of the most significant item percentage changes among the investing activities would include, acquisitions and sale of available-for-sale investments. While there are other high dollar outflows and inflows, there has be a near consistency or trend among those items, so we'll be focusing on the previously stated line items. For the acquisitions line item, Intel states that they acquired McAfee and Wireless Solutions in addition to 11 other companies during 2011 which could be an explanation to the high outflow of $8,721. During 2012, the acquisitions line item changed by $8,083 or -92.68. During 2012 Intel completed 15 acquisitions in exchange for $638 million. For 2013, Intel acquired 12 business in exchange for $925 million dollars, resulting in a change of $(287) or 44.98%. During 2011, Intel sold off some of their available-for-sale investments to fund the acquisition of McAfee, explaining the inflow of $9,076 billion and the significant change of $6,794 or -74.86% from 2011 to 2012 Financing activities The financing activities among the three years has shown a trend in a declining outflow of cash for the financing activities. Between 2011 and 2012, Intel acquired less common stock in 2012 than they had in 2011, this gave the difference between the two years a significant change in net cash used for financing activities resulting in a change of $9,692 billion or -87.32%. Between 2012 and 2013, Intel hadn't issued at any addition long-term debt, so no outflow is shown and creating a change of $6,124 million or a decrease of 100%. Common stock purchased between 2012 and 2013 decreased by -52.25% with a change of $2,670.Common Size Cash & Equivalents, Beginning Net Income Non-cash activities adjustments Depreciation Share-based compensation Asset impalement ‘Tax benefit from share -based Amortization of intangibles (Gains) Losses on equi (gains) Losses on divertitures Deferred taxes: Changes in asset and abilities: Accounts receivable mectes Accounts payable Accrued compensation and benefits Income taxes payable and receivable Other assets and liabilities Total Adjustments Net cash provided by operating activities Cash flors provided by Investing a Additions to PP&E Acquisitions, net of cash acquired Purchases of AFS investments Sales of AF! Maturities of AF investments Purchases of trading assets Maturities and sales of trading assets Collection of loans receivable Origination of loans receivable Investments in non-marketable equity 2013 Vertical 2012 Vertical 2011 Vertical $8,478 $5,065 $ 54,998 $9,620 $11,005 $ 12,942 $6,790 60.86% $ 6,357 80.68% $ 5141 64.09% $4118 10.02% $ 1,102 13.99% $1,053 13.13% $240 2.15% 0.00% 0.00% $ (49) 0.44% $ (142) 180% =$ (37) 0.46% $1202 11.13% = $ 1,165 14.79% = $ 923 11.51% $ (425) 381% $ (141) 179% $ (112) “1.40% 0.00% 0.00% $ (164) 2.04% $ (900) “8.07% = $ — (242) -3.07% $ 790 9.85% 0.00% 0.00% $ om 243% $ (176) 2.23% $ (678) 8.45% $ 563 5.05% $ (626) “7.95% = $ — (243) -3.03% $267 239% $ 67 0.85% $ 596 7.43% s 155 139% $ 192 2.40% = $ — (95) “1.18% $ 1019 913% $ 29 291% $ 660 8.23% S865 7.15% $94 119% $187 2.33% $11,156 10.00% $7,879 10.00% $8021 10.00% $20,776 $18,884 $ 20,963 $ (10,711) 59.27% $ (11,027) 78.43% —$ (10,764) 104.49% $ (925) 5.12% $ (638) 454% —$ (8,721) 84.66% $ (22,493) 69.13% $ (8,694) «61.83% —$ (11,230) 109.02% Saas “5.17% $ 2282 16.23% + $ 9,076 88.11% S 8,336 46.12% § 5369 38.19% © $ 11,029 —-107.07% $ (16,718) 92.50% $ (16,892) 120.14% —$ (11,314) 109.83% $13,677 “75.68% $15,786 12.28% $$ 11,771 -114.27% $ 132 073% $ 146 1.08% $134 “1.30% $ (200) 111% $ (216) 154% — $ (206) 2.00% $ (440) 2.43% $ (475) 3.38% $ — (693) 6.73%Proceeds from the sale of IM flash Singapore, LLP assets and certain IM flash Technologies, UC assets, Return on equity method investments Purchases of licensed technology & patents Proceeds from divestitures Other investing Net cash used for Investing activities Cash flows provided by financing activities Changes in short-term debt, net Proceeds from government grants ‘Tax benefit from share based arrangement Issuance of long-term debt, net issue cost Repayment of debt Proceeds from sales of shares through ‘employee equity incentive plans Repurchase of common stock Payment of didvidends to stockholders Other Financing Net cash used for financing activities Effect of exchange rate fluctuations on cash and cash equivalents ‘Net increase (Decrease) in cash and cash equivalents Cash and cash equivalents, end of year 0.00% $ 605 4.30% 0.00% $ 45 0.25% $ 137 097% $ 263 “2.55% $ (36) 0.20% $ (815) 5.80% $ (66) 0.64% 0.00% 0.00% $ 50 0.49% $ 326 -180% $369 2.62% $370 3.59% $ (18,073) 10.00% _$ (14,060) 100.0% _$ (10,301) __100.00% $ (31) 6.22% $ 65 4.62% $ 209 “1.88% $ 129 “25.90% S$ 63 “447% $124 “1.12% $ 49 98% $ 142 10.09% $ 37 0.33% 0.00% $ 6124 -434.94% + $ 4,962 —-44.70% 0.00% — $ (125) 8.88% 0.00% $ 1588 = -318.88% = $ «2,111 © -149.93% 9 $2,045 18.42% $ (2,440) 489.96% — $ (5,110) 362.93% —$ (14,340) 19.19% $ (4,479) 89.40% — $ (4,350) 308.95% $4,127) 37.18% $314) 63.05% $ _(328)__—-23.30% $10) 0.09% S$ _(498) 100.0% $ (4,408) _100.00% _$ (11,100) 100.0% $ (9) $ (3) $ 5 $__ (2,804) $3,413 $__(433) $5,674 $8,478 $5,065Trend Analysis Cash & Equivalents, Beginning Net income Non-cash activities adjustments Depreciation Share-based compensation Asset impairment Tax benefit from share -based Amortization of intangibles (Gains) Losses on equity investments (gains) Losses on divertitures Deferred taxes Changes in asset and liabilities: Accounts receivable Inventories Accounts payable ‘Accrued compensation and benefits Income taxes payable and receivable Other assets and liabilities Total Adjustments, Net cash provided by operating activities Cash flors provided by Investing activities ‘Additions to PP&E ‘Acquisitions, net of cash acquired Purchases of AFS investments Sales of AFS investments Maturities of AFS investments Purchases of trading assets Maturities and sales of trading assets Collection of loans receivable Origination of loans receivable Investments in non-marketable equity 2013 Change Growth 2012 Change Growth 2011 $8478 $ 3,413 67.38% $5,065 _$ (433)_-7.88%_$ 5,498, $ 9,620 $ (1,385) -12.59% $ 11,005 $ (1,937) 14.97% $ 12,942 $ $ 6790 $ 433, 681% $ 6357 $ 1216 23.65% $ 5,141 Sry 6 145% $ 1102 $ 49 4.65% $ 1,053 $ 240 $ 240 S$: S$ (49) $93 65.49% =~ (142) $ (105) 283.78% $ — (37) $ 12022 $ 77 661% $ 1165 $ 242 26.22% $ 923 $ (425) $ (284) 20142% $+ (141) $ (29) 25.89% $ (112) $ 164 -100.00% $ (164) $ (900) $ (658) 27190% $ (242) $ (1,032) -130.63% $ 790 $s $ 271 $ 447 -253.98% $ (176) $ 502 -74.04% $ (678) $ 563 $ 1,189 -189.94% $ (626) $ (383) 157.1% $ (243) $267 $ 200 29851% $ 67 $ (529) -88.76% $ 596 $ 155 $ (37) 19.27% «—$ = 192 $287 -302.11% —$ — (95) $1,019 $ 790 344.98% $ 229 $ (431) -65.30% $ 660 $865 $771 82021% $94 $ _(93)_—-49.73% $187 $11,156 $3277 4159% $7879 S$ (142) 177% $8,021 $20,776 $ 1,892 10.02% $ 18,884 $ (2,079) 9.92% _ $ 20,963 aa $ (10,711) $ 316 2.87% —$ (11,027) $ (263) 2.44% — $ (10,764) S (925) $ (287) 498% —-$ ~——(638) $8,083 | 9216B% $ (8,721) $ (12,493) $ (3,799) 43.70% + $ (8,694) $ 2,536 -22.58% — $ (11,230) S 934 $ (2,348) /)ES907% $s 2,282 $ (6,794) ETAIBEH $s 9,076 $ 8,336 $ 2,967| 55.26% $ 5,369 $ (5,660)| 81.32% $ 11,029 $ (16,718) $ 174 1.03% —$ (16,892) $ (5,578) 49.30% | $ (11,314) $ 13,677 $ (2,109) -13.36% $ 15,786 $ 4015 34.11% + $ 11,71 $ 132 $ (14) 959% $ 146 $ 12 896% $ 134 $ (200) $ 16 741% =$ (216) $ (10) 4.85% $ (206) $ (440) $35 737% = $ (475) $218 -31.46% + $ (693)Proceeds from the sale of IM flash Singapore, LLP assets and certain IM flash Technologies, LC assets Return on equity method investments Purchases of licensed technology & patents Proceeds from divestitures Other investing. Net cash used for Investing activities Cash flows provided by financing activ Changes in short-term debt, net Proceeds from government grants ‘Tax benefit from share based arrangement Issuance of long-term debt, net issue cost Repayment of debt Proceeds from sales of shares through employee equity incentive plans Repurchase of common stock Payment of didvidends to stockholders Other Financing Net cash used for financing activities Effect of exchange rate fluctuations on cash and cash equivalents Net increase (Decrease) in cash and cash equivalents Cash and cash equivalents, end of year $ (605) -100.00% $ 605 $ 605 $ 45 $ (92) -67.15% $ 137 $ (126) -47.91% $ 263 $ (36) $ 779 95.58% $ (815) $ (749) 1134.85% $ (66) S$ - — #DIV/o! $ (50) -100.00% $ 50 $326 $ (43) -11.65% _$ 369 $_(1).——-0.27%_$ 370 $ (18,073) $ (4013) 28.54% _$ (14,060) $ (3,759) 36.49% __$ (10,301) $ $B $ (96) -147.69% $ 65 $ (144) -68.90% $ 209 $129 $ 66 10476% $ 63 $ (61) -49.19% $ 124 $ 49 $ (93) 65.49% $ 142 $ 105 283.78% $ 37 $ (6124) -100.00% $ 6124 $ 1,162 23.42% $ 4,962 $ 125 -100.00% $ (125) $ (125) $1588 $ (523) 24.77% $ 2111 $ 66 3.23% + $ 2,085 $ (2,440) $ 2,670 52.25% — $ (5,110) $ 9,230 -64.37% — $ (14,340) $ (4,479) $ (129) 2.97% © $ (4,350) $ (223) 5.40% © $ (4,127) $ (314) $ 14 4.27% _$__ (328) $__(318) _3180.00% _$ (10) S$ (498) $910 64.63% S$ (1,408) $9,692 -87.32% _ $ (11,100) $ (9) $__(6)__200.00% _$ (3) $___(8)_-160.00% _$ 5 $ (2,804) $ (6,217) -182.16% $3,413 $3,846 -888.22% $$ (433) S 5,674 $ (2,804) _-33.07% _$ 8478 $ 3,413 67.38% $ 5,065Intel ratios Liqui Current Ratio Quick Ratio Cash Flow liquidity ‘Average collection period Days inventory held Days payable outstanding Cash Conversion Activity Accounts receivable Inventory turnover Payables turnover Fixed asset turnover Total Asset turnover Leverage: Debt Ratio long-term debt to total capitalization Debt to equity Financial leverage indez Times interest earned Cash interest coverage Fixed coverage Cash flow adequacy Profitability Gross profit margin Operating profit margin Effective tax rate 2013 2.36 2.06 24.81 71.87 51.15 45.53 a7. 5.08 744 1.68 0.57 36.92% 22.08% 58.54% 81.39735 59.8% 23.3% 23.7% 2012 2.43 2.06 26.23 85.58 54.65 57.16 13.92 426 6.68 191 0.63 39.30% 20.42% 64.74% 155.7234 62.1% 27.4% 26.0%Net profit margin Cash flow margin Return on total assets Return on equity Cash return on assets Market Earnings per share Price to earnings Dividend Payaout Dividend yield Liquidity: Short-Run Solvency Current Ratio Quick Ratio Liquidity of Current Assets Avg. Collection Period Days Inventory Held Days Payable Outstanding Cash Conversion Cycle Operating Efficiency: Asset Management Accounts Receivable Turnover Inventory Turnover ‘Accounts Payable Turnover Fixed Asset Turnover Total Asset Turnover Return on Total Assets Profitability: Margins Gross Profit Margin Operating Profit Margin Returns Return on Total Assets Industry ratios 22 12 70 R 80 5.2 83 15.2 1s 13.43% 28.7% 1.6% 13.43% 18.3% 39.4% 10.4% 16.5% 22.5% og71 20.6% 35.4% 13.0% 21.5% 22.4%Return on Equity 79.15% Market Measures: Earnings per Share 15.06 Price to Earnings 11.58