|
|
|
|
|
|
Notes to Consolidated Condensed Financial Statements
|
|
|
|
|
|
|
|
|
|
Note 1 :
|
Basis of Presentation
|
We prepared our interim Consolidated Condensed Financial Statements that accompany these notes in conformity with U.S. GAAP, consistent in all material respects with those applied in our 2020 Form 10-K.
We have made estimates and judgments affecting the amounts reported in our Consolidated Condensed Financial Statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This report should be read in conjunction with the Consolidated Financial Statements in our 2020 Form 10-K where we include additional information about our policies and the methods and assumptions used in our estimates.
|
|
|
|
|
|
Note 2 :
|
Operating Segments
|
We manage our business through the following operating segments:
▪CCG
▪DCG
▪IOTG
▪Mobileye
▪NSG
▪PSG
We derive a substantial majority of our revenue from platform products, which are our principal products and considered as one product class. We offer platform products that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone SoC, or a multichip package based on Intel architecture. Platform products are used in various form factors across our CCG, DCG, and IOTG operating segments. Our non-platform, or adjacent products, can be combined with platform products to form comprehensive platform solutions to meet customer needs.
CCG and DCG are our reportable operating segments. IOTG, Mobileye, NSG, and PSG do not meet the quantitative thresholds to qualify as reportable operating segments; however, we have elected to disclose the results of these non-reportable operating segments. Our Internet of Things portfolio, presented as Internet of Things, is comprised of IOTG and Mobileye operating segments. In 2021, our DCG operating segment includes the results of our Intel® OptaneTM memory business, and our NSG operating segment is composed of our NAND memory business. Refer to "Note 8: Acquisitions and Divestitures" within Notes to Consolidated Condensed Financial Statements for further information on the pending divestiture of our NAND memory business.
We have an “all other” category that includes revenue, expenses, and charges such as:
▪results of operations from non-reportable segments not otherwise presented;
▪historical results of operations from divested businesses;
▪results of operations of start-up businesses that support our initiatives, including our foundry business;
▪amounts included within restructuring and other charges;
▪a portion of employee benefits, compensation, and other expenses not allocated to the operating segments; and
▪acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The CODM, who is our CEO, does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. The accounting policies for segment reporting are the same as for Intel as a whole.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
8
|
Net revenue and operating income (loss) for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
Net revenue:
|
|
|
|
|
|
|
|
|
Client Computing Group
|
|
|
|
|
|
|
|
|
Platform
|
|
$
|
8,954
|
|
|
$
|
8,762
|
|
|
$
|
27,968
|
|
|
$
|
25,703
|
|
Adjacent
|
|
710
|
|
|
1,085
|
|
|
2,410
|
|
|
3,415
|
|
|
|
9,664
|
|
|
9,847
|
|
|
30,378
|
|
|
29,118
|
|
Data Center Group
|
|
|
|
|
|
|
|
|
Platform
|
|
5,747
|
|
|
5,151
|
|
|
16,261
|
|
|
17,759
|
|
Adjacent
|
|
749
|
|
|
754
|
|
|
2,254
|
|
|
2,256
|
|
|
|
6,496
|
|
|
5,905
|
|
|
18,515
|
|
|
20,015
|
|
Internet of Things
|
|
|
|
|
|
|
|
|
IOTG
|
|
1,042
|
|
|
677
|
|
|
2,940
|
|
|
2,230
|
|
Mobileye
|
|
326
|
|
|
234
|
|
|
1,030
|
|
|
634
|
|
|
|
1,368
|
|
|
911
|
|
|
3,970
|
|
|
2,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Volatile Memory Solutions Group
|
|
1,105
|
|
|
1,153
|
|
|
3,310
|
|
|
4,150
|
|
Programmable Solutions Group
|
|
478
|
|
|
411
|
|
|
1,450
|
|
|
1,431
|
|
|
|
|
|
|
|
|
|
|
All other
|
|
81
|
|
|
106
|
|
|
873
|
|
|
311
|
|
Total net revenue
|
|
$
|
19,192
|
|
|
$
|
18,333
|
|
|
$
|
58,496
|
|
|
$
|
57,889
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Client Computing Group
|
|
$
|
3,317
|
|
|
$
|
3,554
|
|
|
$
|
11,197
|
|
|
$
|
10,621
|
|
Data Center Group
|
|
2,057
|
|
|
1,903
|
|
|
5,271
|
|
|
8,494
|
|
|
|
|
|
|
|
|
|
|
Internet of Things
|
|
|
|
|
|
|
|
|
IOTG
|
|
276
|
|
|
61
|
|
|
775
|
|
|
374
|
|
Mobileye
|
|
105
|
|
|
47
|
|
|
361
|
|
|
131
|
|
|
|
381
|
|
|
108
|
|
|
1,136
|
|
|
505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Volatile Memory Solutions Group
|
|
442
|
|
|
29
|
|
|
1,015
|
|
|
285
|
|
Programmable Solutions Group
|
|
76
|
|
|
40
|
|
|
246
|
|
|
217
|
|
All other
|
|
(1,046)
|
|
|
(575)
|
|
|
(4,398)
|
|
|
(2,328)
|
|
Total operating income
|
|
$
|
5,227
|
|
|
$
|
5,059
|
|
|
$
|
14,467
|
|
|
$
|
17,794
|
|
Disaggregated net revenue for each period was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
Platform revenue
|
|
|
|
|
|
|
|
|
CCG desktop platform
|
|
$
|
2,983
|
|
|
$
|
2,483
|
|
|
$
|
8,262
|
|
|
$
|
7,691
|
|
CCG notebook platform
|
|
5,953
|
|
|
6,275
|
|
|
19,655
|
|
|
17,976
|
|
CCG other platform1
|
|
18
|
|
|
4
|
|
|
51
|
|
|
36
|
|
DCG platform
|
|
5,747
|
|
|
5,151
|
|
|
16,261
|
|
|
17,759
|
|
IOTG platform
|
|
948
|
|
|
595
|
|
|
2,679
|
|
|
2,008
|
|
|
|
15,649
|
|
|
14,508
|
|
|
46,908
|
|
|
45,470
|
|
|
|
|
|
|
|
|
|
|
Adjacent revenue2
|
|
3,543
|
|
|
3,825
|
|
|
11,588
|
|
|
12,419
|
|
Total revenue
|
|
$
|
19,192
|
|
|
$
|
18,333
|
|
|
$
|
58,496
|
|
|
$
|
57,889
|
|
1 Includes our tablet and service provider revenue.
2 Includes all of our non-platform products for CCG, DCG, and IOTG such as modem, Ethernet, and silicon photonics, as well as Mobileye, NSG, and PSG products, as well as revenue included in our "all other" category.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
9
|
|
|
|
|
|
|
Note 3 :
|
Earnings Per Share
|
We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(In Millions, Except Per Share Amounts)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
Net income available to common stockholders
|
|
$
|
6,823
|
|
|
$
|
4,276
|
|
|
$
|
15,245
|
|
|
$
|
15,042
|
|
Weighted average shares of common stock outstanding—basic
|
|
4,061
|
|
|
4,188
|
|
|
4,055
|
|
|
4,233
|
|
Dilutive effect of employee equity incentive plans
|
|
25
|
|
|
23
|
|
|
34
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding—diluted
|
|
4,086
|
|
|
4,211
|
|
|
4,089
|
|
|
4,269
|
|
Earnings per share—basic
|
|
$
|
1.68
|
|
|
$
|
1.02
|
|
|
$
|
3.76
|
|
|
$
|
3.55
|
|
Earnings per share—diluted
|
|
$
|
1.67
|
|
|
$
|
1.02
|
|
|
$
|
3.73
|
|
|
$
|
3.52
|
|
Potentially dilutive shares of common stock from employee equity incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs, and the assumed issuance of common stock under the stock purchase plan.
Securities which would have been anti-dilutive are insignificant and are excluded from the computation of diluted earnings per share in all periods presented.
|
|
|
|
|
|
Note 4 :
|
Contract Liabilities
|
Contract liabilities consist of prepayments received from customers on long-term prepaid supply agreements toward future product delivery and other revenue deferrals from regular ongoing business activity. Contract liabilities were $351 million as of September 25, 2021 ($1.9 billion as of December 26, 2020).
The following table shows the changes in contract liability balances relating to long-term prepaid supply agreements during the first nine months of 2021:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
|
Prepaid supply agreements balance as of December 26, 2020
|
|
$
|
1,625
|
|
|
|
|
Concession payment
|
|
(950)
|
|
Prepaids utilized
|
|
(627)
|
|
Prepaid supply agreements balance as of September 25, 2021
|
|
$
|
48
|
|
During the first quarter of 2021, we settled an agreement with our largest prepaid customer whose prepayment balance made up $1.6 billion of our contract liability balance as of December 26, 2020. We returned $950 million to the customer and recognized $584 million in revenue for having completed performance of the prepaid supply agreement. The prepaid supply agreement is excluded from the NAND memory business and is recorded as Corporate revenue in the first nine months of 2021 in the "all other" category presented in "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements.
|
|
|
|
|
|
Note 5 :
|
Other Financial Statement Details
|
Inventories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
Raw materials
|
|
$
|
1,274
|
|
|
$
|
908
|
|
Work in process
|
|
6,304
|
|
|
5,693
|
|
Finished goods
|
|
2,220
|
|
|
1,826
|
|
Total inventories
|
|
$
|
9,798
|
|
|
$
|
8,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
10
|
Interest and Other, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
Interest income
|
|
$
|
37
|
|
|
$
|
53
|
|
|
$
|
111
|
|
|
$
|
229
|
|
Interest expense
|
|
(144)
|
|
|
(160)
|
|
|
(463)
|
|
|
(481)
|
|
Other, net
|
|
31
|
|
|
33
|
|
|
24
|
|
|
(164)
|
|
Total interest and other, net
|
|
$
|
(76)
|
|
|
$
|
(74)
|
|
|
$
|
(328)
|
|
|
$
|
(416)
|
|
Interest expense in the preceding table is net of $95 million of interest capitalized in the third quarter of 2021 and $288 million in the first nine months of 2021 ($81 million in the third quarter of 2020 and $251 million in the first nine months of 2020).
|
|
|
|
|
|
Note 6 :
|
Restructuring and Other Charges
|
A restructuring program was approved in the first quarter of 2020 to further align our workforce with our continuing investments in the business and to execute the planned divestiture of Home Gateway Platform, a division of CCG. These actions are substantially complete as of September 25, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Employee severance and benefit arrangements
|
|
$
|
21
|
|
|
$
|
(17)
|
|
|
$
|
43
|
|
|
$
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation charges and other
|
|
16
|
|
|
(2)
|
|
|
2,267
|
|
|
54
|
|
|
Asset impairment charges
|
|
5
|
|
|
(6)
|
|
|
287
|
|
|
2
|
|
|
Total restructuring and other charges
|
|
$
|
42
|
|
|
$
|
(25)
|
|
|
$
|
2,597
|
|
|
$
|
146
|
|
|
Litigation charges and other includes a charge of $2.2 billion in the first quarter of 2021 related to the VLSI litigation, which is recorded as a Corporate charge in the "all other" category presented in "Note 2: Operating Segments" within Notes to Consolidated Condensed Financial Statements. Refer to "Note 13: Contingencies" within Notes to Consolidated Condensed Financial Statements for further information on legal proceedings related to the VLSI litigation.
Asset impairment charges includes impairments related to the shutdown in the second quarter of 2021 of two of our non-strategic businesses, the results of which are included in the “all other” category presented in “Note 2: Operating Segments” within Notes to Consolidated Condensed Financial Statements. The goodwill related to these businesses was impaired, resulting in a charge of $237 million recognized in the second quarter of 2021 in the “all other” category along with other impairment charges related to these businesses.
Debt Investments
Trading Assets
For trading assets still held at the reporting date we recorded net losses of $144 million in the third quarter of 2021 and $329 million in the first nine months of 2021 ($205 million of net gains in the third quarter of 2020 and $347 million of net gains in the first nine months of 2020). Net gains on the related derivatives were $156 million in the third quarter of 2021 and $346 million in the first nine months of 2021 ($163 million of net losses in the third quarter of 2020 and $334 million of net losses in the first nine months of 2020).
Available-for-Sale Debt Investments
Available-for-sale investments include corporate debt, government debt, and financial institution instruments. Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms, such as commercial paper, fixed- and floating-rate bonds, money market fund deposits, and time deposits. As of September 25, 2021 and December 26, 2020, substantially all time deposits were issued by institutions outside the U.S. The adjusted cost of our available-for-sale investments was $10.8 billion as of September 25, 2021 and $7.8 billion as of December 26, 2020. The adjusted cost of our available-for-sale investments approximated the fair value for these periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
11
|
The fair value of available-for-sale debt investments, by contractual maturity, as of September 25, 2021, was as follows:
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
Fair Value
|
Due in 1 year or less
|
|
$
|
7,823
|
|
Due in 1–2 years
|
|
631
|
|
Due in 2–5 years
|
|
322
|
|
Due after 5 years
|
|
—
|
|
Instruments not due at a single maturity date
|
|
2,035
|
|
Total
|
|
$
|
10,811
|
|
Equity Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
Marketable equity securities
|
|
$
|
2,064
|
|
|
$
|
1,830
|
|
Non-marketable equity securities
|
|
3,970
|
|
|
3,304
|
|
Equity method investments
|
|
16
|
|
|
18
|
|
Total
|
|
$
|
6,050
|
|
|
$
|
5,152
|
|
The components of gains (losses) on equity investments, net for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
|
|
|
Ongoing mark-to-market adjustments on marketable equity securities
|
|
$
|
(192)
|
|
|
$
|
(146)
|
|
|
$
|
(345)
|
|
|
$
|
(84)
|
|
|
|
|
|
Observable price adjustments on non-marketable equity securities
|
|
79
|
|
|
5
|
|
|
702
|
|
|
142
|
|
|
|
|
|
Impairment charges
|
|
(38)
|
|
|
(40)
|
|
|
(111)
|
|
|
(233)
|
|
|
|
|
|
Sale of equity investments and other¹
|
|
1,858
|
|
|
237
|
|
|
2,124
|
|
|
387
|
|
|
|
|
|
Total gains (losses) on equity investments, net
|
|
$
|
1,707
|
|
|
$
|
56
|
|
|
$
|
2,370
|
|
|
$
|
212
|
|
|
|
|
|
1 Sale of equity investments and other includes realized gains (losses) on sales of non-marketable equity investments, our share of equity method investees' gains (losses) and distributions, and initial fair value adjustments recorded upon a security becoming marketable.
Gains and losses for our marketable and non-marketable equity securities for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Net gains (losses) recognized during the period on equity securities
|
|
$
|
346
|
|
|
$
|
19
|
|
|
$
|
883
|
|
|
$
|
102
|
|
|
Less: Net (gains) losses recognized during the period on equity securities sold during the period
|
|
(46)
|
|
|
(12)
|
|
|
(189)
|
|
|
(87)
|
|
|
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date
|
|
$
|
300
|
|
|
$
|
7
|
|
|
$
|
694
|
|
|
$
|
15
|
|
|
Sale of equity investments and other during the third quarter of 2021 includes $447 million of initial fair value adjustments related to four companies that went public, and a McAfee special dividend of $1.1 billion paid in connection with the sale of McAfee's Enterprise Business to Symphony Technology Group.
Beijing Unisoc Technology Ltd.
We account for our interest in Beijing Unisoc Technology Ltd. (Unisoc) as a non-marketable equity security. In the first quarter of 2021, we recognized $471 million in observable price adjustments in our investment in Unisoc and as of September 25, 2021, the net book value of the investment was $1.1 billion ($658 million as of December 26, 2020).
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
12
|
|
|
|
|
|
|
Note 8 :
|
Acquisitions and Divestitures
|
Acquisitions
On May 4, 2020, we acquired Moovit, a MaaS solutions company, for total consideration of $915 million. The fair values of the assets acquired relate to goodwill of $638 million and intangible assets of $331 million. The goodwill arising from the acquisition is attributed to the expected synergies and other benefits that will be generated from the combination of Intel and Moovit. Substantially all of the goodwill will not be deductible for local tax purposes. The acquisition-related intangible assets are primarily related to Moovit's monthly active user base and application platform. The goodwill and operating results of Moovit are included in our Mobileye operating segment.
Divestitures
NAND Memory Business
On October 19, 2020, we signed an agreement with SK hynix Inc. (SK hynix) to divest our NAND memory business, including our NAND memory fabrication facility in Dalian, China and certain related equipment and tangible assets (the Fab Assets), our NAND SSD business (the NAND SSD Business), and our NAND memory technology and manufacturing business (the NAND OpCo Business). Our Intel Optane memory business is expressly excluded from the transaction. The transaction will occur over two closings for total consideration of $9.0 billion in cash, of which $7.0 billion will be received upon initial closing, not to occur prior to November 1, 2021, and the remaining $2.0 billion will be received no earlier than March 2025. The consummations of the first closing and the second closing are subject to customary conditions, including the receipt of certain governmental approvals.
At the first closing, Intel will sell to SK hynix the Fab Assets and the NAND SSD Business, and SK hynix will assume from Intel certain liabilities related to the Fab Assets and the NAND SSD Business. In connection with the first closing, we and certain affiliates of SK hynix will also enter into a NAND wafer manufacturing and sale agreement pursuant to which we will manufacture and sell to SK hynix NAND memory wafers to be manufactured using the Fab Assets in Dalian, China, until the second closing.
We will transfer certain employees, IP, and other assets related to the NAND OpCo Business to separately created, wholly owned subsidiaries of Intel at the first closing. The equity interest of these wholly owned subsidiaries will transfer to SK hynix at the second closing. We have concluded based on the terms of the transaction agreements that the subsidiaries will be variable interest entities for which we are not the primary beneficiary, and accordingly will deconsolidate at the first closing.
The carrying amounts of the major classes of NAND assets held for sale included the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
Inventories
|
|
$
|
804
|
|
|
$
|
962
|
|
Property, plant and equipment, net
|
|
5,594
|
|
|
4,363
|
|
Total assets held for sale
|
|
$
|
6,398
|
|
|
$
|
5,325
|
|
We ceased recording depreciation on property, plant and equipment as of the date the assets triggered held for sale accounting. The agreement provides for total capital purchases of approximately $1.8 billion in 2021 and amounts prior to the first closing will be classified as assets held for sale in the Consolidated Condensed Balance Sheets and within additions to held for sale NAND property, plant and equipment on the Consolidated Condensed Statements of Cash Flows.
As of September 25, 2021, our short-term debt was $4.7 billion, primarily comprised of the current portion of our long-term debt ($2.5 billion as of December 26, 2020).
In the second quarter of 2021, we settled $500 million of our senior notes due May 2021.
In the third quarter of 2021, we issued a total of $5.0 billion aggregate principal senior notes. We intend to use the proceeds from the offering of the notes for general corporate purposes, including, but not limited to, refinancing of outstanding debt, funding for working capital, and capital expenditures. In the first quarter of 2021, we entered into a $5.0 billion variable-rate revolving credit facility which, if drawn, is expected to be used for general corporate purposes. The revolving credit facility matures in March 2026 and had no borrowings outstanding as of September 25, 2021.
We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program.
Our senior floating rate notes pay interest quarterly and our senior fixed rate notes pay interest semiannually. We may redeem the fixed rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under our notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and effectively rank junior to all liabilities of our subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
13
|
Long-term Debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
|
|
(In Millions)
|
|
Effective Interest Rate
|
|
Amount
|
|
Amount
|
|
|
Floating-rate senior notes:
|
|
|
|
|
|
|
|
|
Three-month LIBOR plus 0.35%, due May 2022
|
|
0.56
|
%
|
|
$
|
800
|
|
|
$
|
800
|
|
|
|
Fixed-rate senior notes:
|
|
|
|
|
|
|
|
|
1.70%, due May 2021
|
|
—
|
%
|
|
—
|
|
|
500
|
|
|
|
3.30%, due October 2021
|
|
2.98
|
%
|
|
2,000
|
|
|
2,000
|
|
|
|
2.35%, due May 2022
|
|
1.96
|
%
|
|
750
|
|
|
750
|
|
|
3.10%, due July 2022
|
|
2.70
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
4.00%, due December 2022¹
|
|
2.95
|
%
|
|
400
|
|
|
417
|
|
|
|
2.70%, due December 2022
|
|
2.28
|
%
|
|
1,500
|
|
|
1,500
|
|
|
|
4.10%, due November 2023
|
|
3.22
|
%
|
|
400
|
|
|
400
|
|
|
|
2.88%, due May 2024
|
|
2.31
|
%
|
|
1,250
|
|
|
1,250
|
|
|
|
2.70%, due June 2024
|
|
2.14
|
%
|
|
600
|
|
|
600
|
|
|
|
3.40%, due March 2025
|
|
3.45
|
%
|
|
1,500
|
|
|
1,500
|
|
|
|
3.70%, due July 2025
|
|
2.16
|
%
|
|
2,250
|
|
|
2,250
|
|
|
|
2.60%, due May 2026
|
|
0.64
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
3.75%, due March 2027
|
|
3.79
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
3.15%, due May 2027
|
|
1.22
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
1.60%, due August 2028
|
|
1.68
|
%
|
|
1,000
|
|
|
—
|
|
|
|
2.45%, due November 2029
|
|
2.39
|
%
|
|
2,000
|
|
|
2,000
|
|
|
|
3.90%, due March 2030
|
|
3.92
|
%
|
|
1,500
|
|
|
1,500
|
|
|
|
2.00%, due August 2031
|
|
2.04
|
%
|
|
1,250
|
|
|
—
|
|
|
|
4.00%, due December 2032
|
|
1.25
|
%
|
|
750
|
|
|
750
|
|
|
|
4.60%, due March 2040
|
|
4.60
|
%
|
|
750
|
|
|
750
|
|
|
|
2.80%, due August 2041
|
|
2.82
|
%
|
|
750
|
|
|
—
|
|
|
|
4.80%, due October 2041
|
|
2.02
|
%
|
|
802
|
|
|
802
|
|
|
|
4.25%, due December 2042
|
|
1.42
|
%
|
|
567
|
|
|
567
|
|
|
|
4.90%, due July 2045
|
|
2.12
|
%
|
|
772
|
|
|
772
|
|
|
|
4.10%, due May 2046
|
|
1.41
|
%
|
|
1,250
|
|
|
1,250
|
|
|
|
4.10%, due May 2047
|
|
1.37
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
4.10%, due August 2047
|
|
0.92
|
%
|
|
640
|
|
|
640
|
|
|
|
3.73%, due December 2047
|
|
1.77
|
%
|
|
1,967
|
|
|
1,967
|
|
|
|
3.25%, due November 2049
|
|
3.19
|
%
|
|
2,000
|
|
|
2,000
|
|
|
|
4.75%, due March 2050
|
|
4.74
|
%
|
|
2,250
|
|
|
2,250
|
|
|
|
3.05%, due August 2051
|
|
3.07
|
%
|
|
1,250
|
|
|
—
|
|
|
|
3.10%, due February 2060
|
|
3.11
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
4.95%, due March 2060
|
|
4.99
|
%
|
|
1,000
|
|
|
1,000
|
|
|
|
3.20%, due August 2061
|
|
3.22
|
%
|
|
750
|
|
|
—
|
|
|
|
Oregon and Arizona bonds:
|
|
|
|
|
|
|
|
|
2.40%-2.70%, due December 2035 - 2040
|
|
2.49
|
%
|
|
423
|
|
|
423
|
|
|
|
5.00%, due March 2049
|
|
2.12
|
%
|
|
138
|
|
|
138
|
|
|
|
5.00%, due June 2049
|
|
2.15
|
%
|
|
438
|
|
|
438
|
|
|
|
Total Senior Notes and Other Borrowings
|
|
|
|
39,697
|
|
|
35,214
|
|
|
|
Unamortized premium/discount and issuance costs
|
|
|
|
(402)
|
|
|
(378)
|
|
|
|
Hedge accounting fair value adjustments
|
|
|
|
1,009
|
|
|
1,565
|
|
|
|
Long-term debt
|
|
|
|
40,304
|
|
|
36,401
|
|
|
|
Current portion of long-term debt
|
|
|
|
(4,694)
|
|
|
(2,504)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
|
|
$
|
35,610
|
|
|
$
|
33,897
|
|
|
|
1 To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest rate swaps with an aggregate notional amount of $396 million, which effectively converted these notes to U.S.-dollar-denominated notes. For further discussion on derivatives in cash flow hedging relationships, see "Note 12: Derivative Financial Instruments."
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
14
|
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
|
|
|
|
Fair Value Measured and Recorded at Reporting Date Using
|
|
|
|
Fair Value Measured and Recorded at Reporting Date Using
|
|
|
|
|
(In Millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
|
|
$
|
—
|
|
|
$
|
736
|
|
|
$
|
—
|
|
|
$
|
736
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
|
Financial institution instruments¹
|
|
2,035
|
|
|
718
|
|
|
—
|
|
|
2,753
|
|
|
2,781
|
|
|
636
|
|
|
—
|
|
|
3,417
|
|
|
|
Government debt²
|
|
2,200
|
|
|
164
|
|
|
—
|
|
|
2,364
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Reverse repurchase agreements
|
|
—
|
|
|
1,350
|
|
|
—
|
|
|
1,350
|
|
|
—
|
|
|
1,900
|
|
|
—
|
|
|
1,900
|
|
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
|
|
—
|
|
|
870
|
|
|
—
|
|
|
870
|
|
|
—
|
|
|
428
|
|
|
—
|
|
|
428
|
|
|
|
Financial institution instruments¹
|
|
—
|
|
|
2,066
|
|
|
—
|
|
|
2,066
|
|
|
—
|
|
|
1,179
|
|
|
—
|
|
|
1,179
|
|
|
|
Government debt²
|
|
—
|
|
|
1,068
|
|
|
—
|
|
|
1,068
|
|
|
—
|
|
|
685
|
|
|
—
|
|
|
685
|
|
|
|
Trading assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
|
|
—
|
|
|
5,121
|
|
|
—
|
|
|
5,121
|
|
|
—
|
|
|
3,815
|
|
|
—
|
|
|
3,815
|
|
|
|
Financial institution instruments¹
|
|
67
|
|
|
4,014
|
|
|
—
|
|
|
4,081
|
|
|
131
|
|
|
2,847
|
|
|
—
|
|
|
2,978
|
|
|
|
Government debt²
|
|
—
|
|
|
13,559
|
|
|
—
|
|
|
13,559
|
|
|
—
|
|
|
8,945
|
|
|
—
|
|
|
8,945
|
|
|
|
Other current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
4
|
|
|
323
|
|
|
—
|
|
|
327
|
|
|
48
|
|
|
644
|
|
|
—
|
|
|
692
|
|
|
|
Loans receivable³
|
|
—
|
|
|
211
|
|
|
—
|
|
|
211
|
|
|
—
|
|
|
439
|
|
|
—
|
|
|
439
|
|
|
|
Marketable equity securities
|
|
272
|
|
|
1,792
|
|
|
—
|
|
|
2,064
|
|
|
136
|
|
|
1,694
|
|
|
—
|
|
|
1,830
|
|
|
|
Other long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
|
|
—
|
|
|
684
|
|
|
—
|
|
|
684
|
|
|
—
|
|
1,520
|
|
|
—
|
|
1,520
|
|
|
|
Financial institution instruments¹
|
|
—
|
|
|
203
|
|
|
—
|
|
|
203
|
|
|
—
|
|
257
|
|
|
—
|
|
257
|
|
|
|
Government debt²
|
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
|
—
|
|
415
|
|
|
—
|
|
415
|
|
|
|
Other long-term assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
—
|
|
|
961
|
|
|
13
|
|
|
974
|
|
|
—
|
|
1,520
|
|
|
30
|
|
|
1,550
|
|
|
|
Loans receivable³
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
157
|
|
|
—
|
|
157
|
|
|
|
Total assets measured and recorded at fair value
|
|
$
|
4,578
|
|
|
$
|
33,906
|
|
|
$
|
13
|
|
|
$
|
38,497
|
|
|
$
|
3,096
|
|
|
$
|
27,131
|
|
|
$
|
30
|
|
|
$
|
30,257
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
$
|
29
|
|
|
$
|
527
|
|
|
$
|
—
|
|
|
$
|
556
|
|
|
$
|
—
|
|
|
$
|
810
|
|
|
$
|
—
|
|
|
$
|
810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
|
Total liabilities measured and recorded at fair value
|
|
$
|
29
|
|
|
$
|
536
|
|
|
$
|
—
|
|
|
$
|
565
|
|
|
$
|
—
|
|
|
$
|
815
|
|
|
$
|
—
|
|
|
$
|
815
|
|
|
|
1Level 1 investments consist of money market funds. Level 2 investments consist primarily of commercial paper, certificates of deposit, time deposits, and notes and bonds issued by financial institutions.
2Level 1 investments consist primarily of U.S. Treasury securities. Level 2 investments consist primarily of U.S. agency notes and non-U.S. government debt.
3The fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance.
Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
Our non-marketable equity securities, equity method investments, and certain non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment or observable price adjustment is recognized in the current period. If an observable price adjustment or impairment is recognized on our non-marketable equity securities during the period, we classify these assets as Level 3.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
15
|
Financial Instruments Not Recorded at Fair Value on a Recurring Basis
Financial instruments not recorded at fair value on a recurring basis include non-marketable equity securities and equity method investments that have not been remeasured or impaired in the current period, grants receivable, and issued debt.
We classify the fair value of grants receivable as Level 2. The estimated fair value of these financial instruments approximates their carrying value. The aggregate carrying value of grants receivable as of September 25, 2021 was $399 million (the aggregate carrying value of grants receivable as of December 26, 2020 was $139 million).
We classify the fair value of issued debt (excluding commercial paper and drafts payable) as Level 2. The fair value of these instruments was $44.6 billion as of September 25, 2021 ($40.9 billion as of December 26, 2020).
|
|
|
|
|
|
Note 11 :
|
Other Comprehensive Income (Loss)
|
The changes in accumulated other comprehensive income (loss) by component and related tax effects in the first nine months of 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
|
|
|
|
Unrealized Holding Gains (Losses) on Derivatives
|
|
Actuarial Valuation and Other Pension Expenses
|
|
Translation Adjustments and Other
|
|
Total
|
Balance as of December 26, 2020
|
|
|
|
|
|
$
|
731
|
|
|
$
|
(1,565)
|
|
|
$
|
83
|
|
|
$
|
(751)
|
|
Other comprehensive income (loss) before reclassifications
|
|
|
|
|
|
(313)
|
|
|
5
|
|
|
(41)
|
|
|
(349)
|
|
Amounts reclassified out of accumulated other comprehensive income (loss)
|
|
|
|
|
|
(196)
|
|
|
47
|
|
|
(14)
|
|
|
(163)
|
|
Tax effects
|
|
|
|
|
|
119
|
|
|
(14)
|
|
|
11
|
|
|
116
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
(390)
|
|
|
38
|
|
|
(44)
|
|
|
(396)
|
|
Balance as of September 25, 2021
|
|
|
|
|
|
$
|
341
|
|
|
$
|
(1,527)
|
|
|
$
|
39
|
|
|
$
|
(1,147)
|
|
We estimate that we will reclassify approximately $90 million (before taxes) of net derivative gains included in accumulated other comprehensive income (loss) into earnings within the next 12 months.
|
|
|
|
|
|
Note 12 :
|
Derivative Financial Instruments
|
Volume of Derivative Activity
Total gross notional amounts for outstanding derivatives at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
|
|
Foreign currency contracts
|
|
$
|
35,012
|
|
|
$
|
31,209
|
|
|
|
Interest rate contracts
|
|
14,960
|
|
|
14,461
|
|
|
|
Other
|
|
2,419
|
|
|
2,026
|
|
|
|
Total
|
|
$
|
52,391
|
|
|
$
|
47,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
16
|
Fair Value of Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
(In Millions)
|
|
Assets1
|
|
Liabilities2
|
|
Assets1
|
|
Liabilities2
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign currency contracts3
|
|
$
|
99
|
|
|
$
|
74
|
|
|
$
|
551
|
|
|
$
|
2
|
|
Interest rate contracts
|
|
966
|
|
|
—
|
|
|
1,498
|
|
|
—
|
|
Total derivatives designated as hedging instruments
|
|
1,065
|
|
|
74
|
|
|
2,049
|
|
|
2
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
Foreign currency contracts3
|
|
221
|
|
|
378
|
|
|
142
|
|
|
685
|
|
Interest rate contracts
|
|
11
|
|
|
84
|
|
|
3
|
|
|
128
|
|
Equity contracts
|
|
4
|
|
|
29
|
|
|
48
|
|
|
—
|
|
Total derivatives not designated as hedging instruments
|
|
236
|
|
|
491
|
|
|
193
|
|
|
813
|
|
Total derivatives
|
|
$
|
1,301
|
|
|
$
|
565
|
|
|
$
|
2,242
|
|
|
$
|
815
|
|
1Derivative assets are recorded as other assets, current and non-current.
2Derivative liabilities are recorded as other liabilities, current and non-current.
3The majority of these instruments mature within 12 months.
Amounts Offset in the Consolidated Condensed Balance Sheets
The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with various counterparties, and cash and non-cash collateral posted under such agreements at the end of each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sep 25, 2021
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Balance Sheet
|
|
|
(In Millions)
|
|
Gross Amounts Recognized
|
|
Gross Amounts Offset in the Balance Sheet
|
|
Net Amounts Presented in the Balance Sheet
|
|
Financial Instruments
|
|
Cash and Non-Cash Collateral Received or Pledged
|
|
Net Amount
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets subject to master netting arrangements
|
|
$
|
1,295
|
|
|
$
|
—
|
|
|
$
|
1,295
|
|
|
$
|
(329)
|
|
|
$
|
(913)
|
|
|
$
|
53
|
|
Reverse repurchase agreements
|
|
1,350
|
|
|
—
|
|
|
1,350
|
|
|
—
|
|
|
(1,350)
|
|
|
—
|
|
Total assets
|
|
2,645
|
|
|
—
|
|
|
2,645
|
|
|
(329)
|
|
|
(2,263)
|
|
|
53
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities subject to master netting arrangements
|
|
408
|
|
|
—
|
|
|
408
|
|
|
(329)
|
|
|
(79)
|
|
|
—
|
|
Total liabilities
|
|
$
|
408
|
|
|
$
|
—
|
|
|
$
|
408
|
|
|
$
|
(329)
|
|
|
$
|
(79)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec 26, 2020
|
|
|
|
|
|
|
|
|
Gross Amounts Not Offset in the Balance Sheet
|
|
|
(In Millions)
|
|
Gross Amounts Recognized
|
|
Gross Amounts Offset in the Balance Sheet
|
|
Net Amounts Presented in the Balance Sheet
|
|
Financial Instruments
|
|
Cash and Non-Cash Collateral Received or Pledged
|
|
Net Amount
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets subject to master netting arrangements
|
|
$
|
2,235
|
|
|
$
|
—
|
|
|
$
|
2,235
|
|
|
$
|
(264)
|
|
|
$
|
(1,904)
|
|
|
$
|
67
|
|
Reverse repurchase agreements
|
|
1,900
|
|
|
—
|
|
|
1,900
|
|
|
—
|
|
|
(1,900)
|
|
|
—
|
|
Total assets
|
|
4,135
|
|
|
—
|
|
|
4,135
|
|
|
(264)
|
|
|
(3,804)
|
|
|
67
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities subject to master netting arrangements
|
|
711
|
|
|
—
|
|
|
711
|
|
|
(264)
|
|
|
(447)
|
|
|
—
|
|
Total liabilities
|
|
$
|
711
|
|
|
$
|
—
|
|
|
$
|
711
|
|
|
$
|
(264)
|
|
|
$
|
(447)
|
|
|
$
|
—
|
|
We obtain and secure available collateral from counterparties against obligations, including securities lending transactions and reverse repurchase agreements, when we deem it appropriate.
Derivatives in Cash Flow Hedging Relationships
The before-tax net gains or losses attributed to cash flow hedges, recognized in other comprehensive income (loss), were $28 million net losses in the third quarter of 2021 and $313 million net losses in the first nine months of 2021 ($267 million net gains in the third quarter of 2020 and $286 million net gains in the first nine months of 2020). Substantially all of our cash flow hedges were foreign currency contracts for all periods presented.
During the first nine months of 2021 and 2020, the amounts excluded from effectiveness testing were insignificant.
Derivatives in Fair Value Hedging Relationships
The effects of derivative instruments designated as fair value hedges, recognized in interest and other, net for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (Losses) Recognized in Consolidated Condensed Statements of Income on Derivatives
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
|
|
|
Interest rate contracts
|
|
$
|
(55)
|
|
|
$
|
(36)
|
|
|
$
|
(532)
|
|
|
$
|
996
|
|
|
|
|
|
Hedged items
|
|
55
|
|
|
36
|
|
|
532
|
|
|
(996)
|
|
|
|
|
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
The amounts recorded on the Consolidated Condensed Balance Sheets related to cumulative basis adjustments for fair value hedges for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line Item in the Consolidated Condensed Balance Sheet in Which the Hedged Item is Included
|
|
Carrying Amount of the Hedged Item Asset/(Liabilities)
|
|
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount Assets/(Liabilities)
|
|
(In Millions)
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
|
Sep 25, 2021
|
|
Dec 26, 2020
|
|
Long-term debt
|
|
$
|
(12,963)
|
|
|
$
|
(13,495)
|
|
|
$
|
(966)
|
|
|
$
|
(1,498)
|
|
|
The total notional amount of pay-variable and receive-fixed interest rate swaps was $12.0 billion as of September 25, 2021 and $12.0 billion as of December 26, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Statements
|
Notes to Financial Statements
|
18
|
Derivatives Not Designated as Hedging Instruments
The effects of derivative instruments not designated as hedging instruments on the Consolidated Condensed Statements of Income for each period were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
(In Millions)
|
|
Location of Gains (Losses)
Recognized in Income on Derivatives
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
Sep 25, 2021
|
|
Sep 26, 2020
|
|
|
|
|
Foreign currency contracts
|
|
Interest and other, net
|
|
$
|
170
|
|
|
$
|
(166)
|
|
|
$
|
382
|
|
|
$
|
(228)
|
|
|
|
|
|
Interest rate contracts
|
|
Interest and other, net
|
|
(7)
|
|
|
(3)
|
|
|
14
|
|
|
(94)
|
|
|
|
|
|
Other
|
|
Various
|
|
84
|
|
|
138
|
|
|
279
|
|
|
95
|
|
|
|
|
|
Total
|
|
|
|
$
|
247
|
|
|
$
|
(31)
|
|
|
$
|
675
|
|
|
$
|
(227)
|
|
|
|
|
|
Legal Proceedings
We are a party to various legal proceedings, including those noted in this section. In the first quarter of 2021, we accrued a charge of $2.2 billion related to litigation involving VLSI, described below. Excluding this charge, management at present believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends; however, legal proceedings and related government investigations are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions could include substantial monetary damages. In addition, in matters for which injunctive relief or other conduct remedies are sought, unfavorable resolutions could include an injunction or other order prohibiting us from selling one or more products at all or in particular ways, precluding particular business practices, or requiring other remedies. An unfavorable outcome may result in a material adverse impact on our business, results of operations, financial position, and overall trends. We might also conclude that settling one or more such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could include substantial payments. Except as specifically described below, we have not concluded that settlement of any of the legal proceedings noted in this section is appropriate at this time.
European Commission Competition Matter
In 2001, the EC commenced an investigation regarding claims by Advanced Micro Devices, Inc. (AMD) that we used unfair business practices to persuade customers to buy our microprocessors. We received numerous requests for information and documents from the EC and we responded to each of those requests. The EC issued a Statement of Objections in July 2007 and held a hearing on that Statement in March 2008. The EC issued a Supplemental Statement of Objections in July 2008. In May 2009, the EC issued a decision finding that we had violated Article 82 of the EC Treaty and Article 54 of the European Economic Area Agreement. In general, the EC found that we violated Article 82 (later renumbered as Article 102 by a new treaty) by offering alleged "conditional rebates and payments" that required our customers to purchase all or most of their x86 microprocessors from us. The EC also found that we violated Article 82 by making alleged "payments to prevent sales of specific rival products." The EC imposed a fine in the amount of €1.1 billion ($1.4 billion as of May 2009), which we subsequently paid during the third quarter of 2009, and ordered us to "immediately bring to an end the infringement referred to in" the EC decision.
The EC decision contained no specific direction on whether or how we should modify our business practices. Instead, the decision stated that we should "cease and desist" from further conduct that, in the EC's opinion, would violate applicable law. We took steps, which are subject to the EC's ongoing review, to comply with that decision pending appeal. We had discussions with the EC to better understand the decision and to explain changes to our business practices.
We appealed the EC decision to the Court of First Instance (which has been renamed the General Court) in July 2009. The hearing of our appeal took place in July 2012. In June 2014, the General Court rejected our appeal in its entirety. In August 2014, we filed an appeal with the European Court of Justice. In November 2014, Intervener Association for Competitive Technologies filed comments in support of Intel’s grounds of appeal. The EC and interveners filed briefs in November 2014, we filed a reply in February 2015, and the EC filed a rejoinder in April 2015. The Court of Justice held oral argument in June 2016. In October 2016, Advocate General Wahl, an advisor to the Court of Justice, issued a non-binding advisory opinion that favored Intel on a number of grounds. The Court of Justice issued its decision in September 2017, setting aside the judgment of the General Court and sending the case back to the General Court to examine whether the rebates at issue were capable of restricting competition. The General Court has appointed a panel of five judges to consider our appeal of the EC’s 2009 decision in light of the Court of Justice’s clarifications of the law. In November 2017, the parties filed initial “Observations” about the Court of Justice’s decision and the appeal and were invited by the General Court to offer supplemental comments to each other’s “Observations,” which the parties submitted in March 2018. Responses to other questions posed by the General Court were filed in May and June 2018. The General Court heard oral argument in March 2020. Pending the final decision in this matter, the fine paid by Intel has been placed by the EC in commercial bank accounts where it accrues interest.
|
|
|
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Financial Statements
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Notes to Financial Statements
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19
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Litigation Related to Security Vulnerabilities
In June 2017, a Google research team notified us and other companies that it had identified security vulnerabilities (now commonly referred to as “Spectre” and “Meltdown”) that affect many types of microprocessors, including our products. As is standard when findings like these are presented, we worked together with other companies in the industry to verify the research and develop and validate software and firmware updates for impacted technologies. On January 3, 2018, information on the security vulnerabilities was publicly reported, before software and firmware updates to address the vulnerabilities were made widely available.
Numerous lawsuits have been filed against Intel and, in certain cases, our current and former executives and directors, in U.S. federal and state courts and in certain courts in other countries relating to the Spectre and Meltdown security vulnerabilities, as well as other variants of these vulnerabilities that have since been identified.
As of October 20, 2021, consumer class action lawsuits relating to the above class of security vulnerabilities publicly disclosed since 2018 were pending in the United States, Canada, and Israel. The plaintiffs, who purport to represent various classes of purchasers of our products, generally claim to have been harmed by Intel's actions and/or omissions in connection with the security vulnerabilities and assert a variety of common law and statutory claims seeking monetary damages and equitable relief. In the United States, numerous individual class action suits filed in various jurisdictions were consolidated in April 2018 for all pretrial proceedings in the U.S. District Court for the District of Oregon. In March 2020, the court granted Intel's motion to dismiss the complaint in that consolidated action but granted plaintiffs leave to amend. In March 2021, the court granted Intel’s motion to dismiss the amended complaint, but granted plaintiffs leave to further amend in part. Plaintiffs filed a further amended complaint in May 2021 which Intel moved to dismiss in July 2021. In Canada, in one case pending in the Superior Court of Justice of Ontario, an initial status conference has not yet been scheduled. In a second case pending in the Superior Court of Justice of Quebec, a stay of the case is in effect until December 2021. In Israel, two consumer class action lawsuits were filed in the District Court of Haifa. The plaintiff voluntarily dismissed the first lawsuit in July 2021. Intel filed a motion to stay the second case pending resolution of the consolidated proceeding in the United States, and a hearing on that motion has been scheduled for April 2022. Additional lawsuits and claims may be asserted seeking monetary damages or other related relief. We dispute the pending claims described above and intend to defend those lawsuits vigorously. Given the procedural posture and the nature of those cases, including that the pending proceedings are in the early stages, that alleged damages have not been specified, that uncertainty exists as to the likelihood of a class or classes being certified or the ultimate size of any class or classes if certified, and that there are significant factual and legal issues to be resolved, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from those matters. In addition to these lawsuits, Intel stockholders filed multiple shareholder derivative lawsuits since January 2018 against certain current and former members of our Board of Directors and certain current and former officers, alleging that the defendants breached their duties to Intel in connection with the disclosure of the security vulnerabilities and the failure to take action in relation to alleged insider trading. The complaints sought to recover damages from the defendants on behalf of Intel. Some of the derivative actions were filed in the U.S. District Court for the Northern District of California and were consolidated, and the others were filed in the Superior Court of the State of California in San Mateo County and were consolidated. The federal court granted defendants' motion to dismiss in August 2018 on the ground that plaintiffs failed to plead facts sufficient to show they were excused from making a pre-lawsuit demand on the Board. The federal court granted plaintiffs leave to amend their complaint, but subsequently dismissed the cases in January 2019 at plaintiffs' request. The California Superior Court entered judgment in defendants' favor in August 2020 after granting defendants' motions to dismiss plaintiffs' consolidated complaint and three successive amended complaints, all for failure to plead facts sufficient to show plaintiffs were excused from making pre-lawsuit demand on the Board. Plaintiffs filed a notice of appeal of the California court's judgment in October 2020.
In January 2021, another Intel stockholder filed a derivative lawsuit in the Superior Court in San Mateo County against certain current and former officers and members of our Board of Directors. The lawsuit asserts claims similar to those dismissed in August 2020, except that it alleges that the stockholder made a pre-lawsuit demand on our Board of Directors and that the demand was wrongfully refused. In May 2021, the court granted defendants' motion to stay the action pending the outcome of any litigation plaintiff may choose to file in Delaware where Intel’s bylaws require such claims be filed.
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Financial Statements
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Notes to Financial Statements
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20
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Institute of Microelectronics, Chinese Academy of Sciences v. Intel China, Ltd., et al.
In February 2018, the Institute of Microelectronics of the Chinese Academy of Sciences (IMECAS) sued Intel China, Ltd., Dell China, Ltd. (Dell), and Beijing JingDong Century Information Technology, Ltd. (JD) for patent infringement in the Beijing Higher People's Court. IMECAS alleges that Intel’s Core series processors infringe Chinese patent CN 102956457 (’457 Patent). The complaint demands an injunction and damages of at least RMB 200 million plus the cost of litigation. In March 2018, Dell tendered indemnity to Intel, which Intel granted in April 2018. JD also tendered indemnity to Intel, which Intel granted in October 2018. The Beijing Higher People’s Court held a final trial hearing in September 2021. No ruling has been issued. In March 2018, Intel filed an invalidation request on the ‘457 patent with the China National Intellectual Property Administration (CNIPA). The CNIPA held an oral hearing in September 2018 and in February 2019 upheld the validity of the challenged claims. Intel filed a complaint in April 2019 with the Beijing Intellectual Property Court challenging the February 2019 CNIPA ruling, and the Beijing IP Court held oral arguments in July 2021. In January 2020, Intel filed a second invalidation request on the ‘457 patent with the CNIPA, for which the CNIPA heard oral argument in July 2020 and in November 2020 held the challenged apparatus claims invalid. IMECAS filed a complaint in February 2021 with the Beijing IP Court challenging the November 2020 CNIPA ruling. In December 2020, Intel filed a third invalidation request on the ’457 patent with the CNIPA, which heard oral argument in June 2021 and issued a ruling in September 2021 holding the challenged claims not invalid. In September 2018 and March 2019, Intel filed petitions with the U.S. Patent & Trademark Office (USPTO) requesting institution of inter partes review (IPR) of U.S. Patent No. 9,070,719, the U.S. counterpart to the ‘457 patent. The USPTO denied institution of Intel’s petitions in March and October 2019, respectively. In April 2019, Intel filed a request for rehearing and a petition for a Precedential Opinion Panel (POP) in the USPTO to challenge the denial of its first IPR petition, and in November 2019 Intel filed a request for rehearing on the second IPR petition. In January 2020, the USPTO denied the POP petition on the first IPR petition. In June 2020, the Patent Trial and Appeal Board denied Intel's rehearing requests on both petitions.
In October 2019, IMECAS filed second and third lawsuits, in the Beijing IP Court, alleging infringement of Chinese Patent No. CN 102386226 (‘226 Patent) based on the manufacturing and sale of Intel’s Core i3 microprocessors. Defendants in the second case are Lenovo (Beijing) Co., Ltd. (Lenovo) and Beijing Jiayun Huitong Technology Development Co. Ltd. (BJHT). Defendants in the third case are Intel Corp., Intel China Co., Ltd., the Intel China Beijing Branch, Beijing Digital China Co., Ltd. (Digital China), and JD. Both complaints demand injunctions plus litigation costs. The complaint in the second lawsuit reserves the right to claim damages in unspecified amounts. The complaint in the third lawsuit claims damages of RMB 10 million. Intel China's jurisdictional challenge was denied in June 2021. No trial proceedings have occurred or are yet scheduled in these lawsuits. In December 2019, Lenovo tendered indemnity to Intel, which Intel granted in March 2020. In July 2020, Intel and Lenovo filed invalidation requests on the '226 patent with the CNIPA. The CNIPA heard oral argument in December 2020, during which IMECAS proposed amendments to two claims. The CNIPA ruled in April 2021 on both invalidation requests, finding the two amended claims as well as the unamended claims not invalid. Intel and Lenovo filed complaints in July 2021 with the Beijing IP Court challenging the April 2021 CNIPA rulings.
Given the procedural posture and the nature of these cases, the unspecified nature and extent of damages claimed by IMECAS, and uncertainty regarding the availability of injunctive relief under applicable law, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, arising from these matters. We dispute IMECAS’s claims and intend to vigorously defend against them.
VLSI Technology LLC v. Intel
In October 2017, VLSI filed a complaint against Intel in the U.S. District Court for the Northern District of California alleging infringement of eight patents acquired from NXP Semiconductors, N.V. (NXP). The patents, which originated at Freescale Semiconductor, Inc. and NXP B.V., are U.S. Patent Nos. 7,268,588; 7,675,806; 7,706,207; 7,709,303; 8,004,922; 8,020,014; 8,268,672; and 8,566,836. VLSI accuses various FPGA and processor products of infringement. VLSI estimated its damages to be as high as $7.1 billion, and its complaint further sought enhanced damages, future royalties, attorneys’ fees, costs, and interest. In May, June, September, and October 2018, Intel filed IPR petitions challenging the patentability of certain claims in all eight of the patents in-suit. The PTAB instituted review of six patents and denied institution on two patents. As a result of the institution decisions, the parties stipulated to stay the District Court action in March 2019. In December 2019 and February 2020, the PTAB found all claims of the '588 and '303 patents, and some claims of the '922 patent, to be unpatentable. The PTAB found the challenged claims of the '014, '672, and '207 patents to be patentable. Intel moved for a continuation of the stay in March 2020 as it appealed certain rulings by the PTAB. In June 2020, the District Court issued an order continuing the stay through August 2021 and setting trial for December 2022. The Federal Circuit has thus far affirmed the PTAB’s decisions as to the ‘207 and ‘672 patents, and reversed the PTAB’s decision as to the ‘014 patent. The court lifted the stay in September 2021.
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Financial Statements
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Notes to Financial Statements
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21
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In June 2018, VLSI filed a second suit against Intel, in U.S. District Court for the District of Delaware, alleging infringement by various Intel processors of five additional patents acquired from NXP: U.S. Patent Nos. 6,212,663; 7,246,027; 7,247,552; 7,523,331; and 8,081,026. VLSI accused Intel of willful infringement and seeks an injunction or, in the alternative, ongoing royalties, enhanced damages, attorneys’ fees and costs, and interest. In March 2019, the District Court dismissed VLSI’s claims for willful infringement as to all the patents-in-suit except the ‘027 patent, and also dismissed VLSI’s allegations of indirect infringement as to the ‘633, ‘331, and ‘026 patents. In June 2019, Intel filed requests for inter partes review of the patentability of claims in all five patents-in-suit. In January 2020, the District Court vacated an earlier November 2020 trial date based on agreement of the parties; no trial date is currently set. In January 2020, VLSI said that it was no longer asserting any claims of the ‘633 patent. In January and February 2020, the PTAB instituted review of the '552, '633, '331, and '026 patents, but declined to institute review on the '027 patent. As a result, Intel moved for stay of the District Court proceedings. In May 2020, the District Court stayed the case as to the '026 and '552 patents but allowed the case to proceed on the '027 and '331 patents. In January 2021, the PTAB invalidated certain asserted claims of the ‘026 patent, and in February the PTAB invalidated all asserted claims of the ‘552 patent. Intel filed a notice of appeal regarding the PTAB’s decision as to the ‘026 patent in March 2021, and the case remains stayed as to that patent and the '552 patent. For the '027 and '331 patents, VLSI is seeking damages of approximately $4.13 billion plus enhanced damages for the '027 patent. The deadline to file summary judgment motions and challenges to expert witnesses is in January 2022.
In March 2019, VLSI filed a third suit against Intel, also in U.S. District Court for the District of Delaware, alleging infringement of six more patents acquired from NXP: U.S. Patent Nos. 6,366,522; 6,663,187; 7,292,485; 7,606,983; 7,725,759; and 7,793,025. In April 2019, VLSI voluntarily dismissed this Delaware case without prejudice. In April 2019, VLSI filed three new infringement suits against Intel in the U.S. District Court for the Western District of Texas (WDTX) accusing various Intel processors of infringement. The three suits collectively assert the same six patents from the voluntarily dismissed Delaware case plus two additional patents acquired from NXP, U.S. Patent Nos. 7,523,373 and 8,156,357. VLSI accuses Intel of willful infringement and seeks an injunction or, in the alternative, ongoing royalties, enhanced damages, attorneys’ fees and costs, and interest. In the first Texas case, VLSI asserted the ‘373 and ‘759 patents (in December 2020 the court granted Intel summary judgment of non-infringement on the ‘357 patent, which had also been asserted in the first Texas case). That case went to trial in February 2021, and the jury awarded a “lump sum” to VLSI of $1.5 billion for literal infringement of the ‘373 patent and $675 million for infringement under the doctrine of equivalents of the ‘759 patent. The jury found that Intel had not willfully infringed either patent. Intel plans to challenge the verdict in post-trial motions and on appeal. Intel has challenged the verdict with post-trial motions, including filing in May 2021 a motion for a new trial and a motion for judgment as a matter of law that the ‘373 and ‘759 patents are not infringed and the ‘759 patent is invalid. The court denied the motion for new trial in August 2021, but other post-trial motions, including the motion for judgment as a matter of law, remain pending. If the court does not vacate the verdict Intel will challenge it on appeal.
The second Texas case went to trial in April 2021, and the jury found that Intel does not infringe the ‘522 and ‘187 patents. VLSI had sought approximately $3 billion for alleged infringement of those patents, plus enhanced damages for willful infringement. The third case is scheduled for trial in December 2021, and VLSI seeks approximately $2.2 billion to $2.4 billion for alleged infringement of the ‘983, ‘025 and ‘485 patents, plus enhanced damages for willful infringement. In October and November 2019, and in February 2020, Intel filed IPR petitions on certain asserted claims across six of the patents-in-suit in WDTX. Between May and October 2020, the PTAB denied all of these requests and Intel requested a rehearing, as well as review from the POP as to all petitions. All requests for POP review were denied in October and December 2020, and all requests for rehearing were denied as to all petitions between December 2020 and February 2021. Intel filed notices of appeal regarding the discretionary denials for all petitions in February and March of 2021, and VLSI moved to dismiss those appeals in March 2021. The Court dismissed the appeals in May 2021, and Intel petitioned for hearing en banc in June 2021. The Federal Circuit denied the petition in August 2021.
In May 2019, VLSI filed a case in Shenzhen Intermediate People’s Court against Intel, Intel (China) Co., Ltd., Intel Trading (Shanghai) Co., Ltd., and Intel Products (Chengdu) Co., Ltd. VLSI asserts Chinese Patent 201410094015.9 accusing certain Intel Core processors of infringement. VLSI requests an injunction as well as RMB 1 million in damages and RMB 300 thousand in expenses. Defendants filed an invalidation petition in October 2019 with the CNIPA, which held a hearing in September 2021. In May 2020, defendants filed a motion to stay the trial court proceedings pending a determination on invalidity. The court held the first evidentiary hearing in November 2020 and the second in July 2021. The court also held trial proceedings in the hearing in July 2021 and concluded that further trial proceedings were needed but would be stayed pending the outcome of defendants’ invalidity challenge at the CNIPA.
In May 2019, VLSI filed a second case in Shanghai Intellectual Property Court against Intel (China) Co., Ltd., Intel Trading (Shanghai) Co., Ltd., and Intel Products (Chengdu) Co., Ltd. VLSI asserts Chinese Patent 201080024173.7. VLSI accuses certain Intel Core processors and seeks an injunction, as well as RMB 1 million in damages and RMB 300 thousand in expenses. Defendants filed with the CNIPA an invalidation petition in October 2019, and the CNIPA held a hearing in September 2021, but has not yet issued a decision. In June 2020, defendants filed a motion to stay the trial court proceedings pending a determination on invalidity. The court held its first evidentiary hearing in September 2020. The court held a second evidentiary hearing in December 2020, and a trial the same month. At trial, VLSI dropped its monetary damages claim, but still requested expenses (RMB 300 thousand) and an injunction. The court held a second evidentiary hearing in December 2020. The court has not yet issued a decision following the trial. Rather, the court stayed the case in December 2020 pending a determination on invalidity by the CNIPA.
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Financial Statements
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Notes to Financial Statements
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22
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In November 2019, Intel, along with Apple Inc., filed a complaint against Fortress Investment Group LLC, Fortress Credit Co. LLC, Uniloc 2017 LLC, Uniloc USA, Inc., Uniloc Luxembourg S.A.R.L., VLSI, INVT SPE LLC, Inventergy Global, Inc., DSS Technology Management, Inc., IXI IP, LLC, and Seven Networks, LLC. Plaintiffs allege violations of Section 1 of the Sherman Act by certain defendants, Section 7 of the Clayton Act by certain defendants, and California Business and Professions Code section 17200 by all defendants based on defendants' unlawful aggregation of patents. In February 2020, defendants moved to dismiss plaintiffs' complaint. In July 2020, the court granted defendants’ motion to dismiss with leave to amend. The court dismissed antitrust claims related to two DSS patents with prejudice. The plaintiffs filed an amended complaint in August 2020, and defendants moved to dismiss in September 2020. The court heard defendants' motion to dismiss the amended complaint in December 2020 and dismissed plaintiffs’ amended complaint in January 2021, with leave to further amend. In December 2020, the court granted a joint motion by Apple and Seven Networks to dismiss with prejudice Apple’s claims against Seven Networks. Plaintiffs filed a second amended complaint in March 2021. Defendants moved to dismiss the Second Amended Complaint in May 2021. Apple withdrew from the case and dismissed its claims in June 2021. The court heard defendants’ motion to dismiss the Second Amended Complaint in September 2021, and dismissed Intel’s claims with prejudice that same month, entering judgment in favor of defendants.
In June 2020, affiliates controlled by Fortress Investment Group, which also controls VLSI, acquired Finjan Holdings, Inc. Intel had signed a “Settlement, Release and Patent License Agreement” with Finjan in 2012, acquiring a license to the patents of Finjan and its affiliates, current or future, through a capture period of November 20, 2022. The agreement also contains covenants wherein Finjan agrees to cause its affiliates to comply with the agreement. As such, Intel maintains that it now has a license to the patents of VLSI, which has become a Finjan affiliate, and that Finjan must cause VLSI to dismiss its suits against Intel. In August 2020, Intel started dispute resolution proceedings under the agreement. As a part of this dispute resolution process, Intel and Finjan held a mediation in December 2020, but failed to resolve their differences. Intel filed suit to enforce its rights under the License Agreement with Finjan in January 2021 in Delaware Chancery Court. In March 2021, defendants filed motions to dismiss the Chancery Court proceedings. The court heard those motions in May 2021, and dismissed all of Intel’s claims—except the breach of contract claim—with prejudice in September 2021 for lack of jurisdiction because, the court reasoned, Intel’s license defense has been raised in the other U.S. suits between Intel and VLSI and could be adjudicated in one of those actions. The court stayed Intel’s breach of contract claim pending a determination on whether Intel is licensed to VLSI’s patents. In September 2020, Intel filed motions to stay the Texas, Delaware, and Shanghai matters pending resolution of its dispute with Finjan. In November 2020, Intel filed a motion to stay the Shenzhen matter pending resolution of its dispute with Finjan. In November 2020, the Delaware court denied Intel’s motion to stay. The other stay motions remain pending. Finally, Intel filed a motion to amend its answer in the Texas matters to add a license defense in November 2020, and filed a motion to amend its answer in the Delaware matter to add a license defense in February 2021. The Texas court has not yet ruled on Intel’s motion to amend, but the Delaware court granted Intel’s motion in July 2021.
After consideration of the verdicts in the WDTX cases and the additional pending lawsuits filed by VLSI, Intel accrued a charge of $2.2 billion in the first quarter of 2021. We dispute VLSI’s claims and intend to vigorously defend against them.
Litigation Related to 7nm Product Delay Announcement
Starting in July 2020, five securities class action lawsuits were filed in the U.S. District Court for the Northern District of California against Intel and certain current and former officers based on Intel’s July 2020 announcement of 7nm product delays. The plaintiffs, who purport to represent classes of acquirers of Intel stock between October 2019 and July 2020, generally allege that the defendants violated securities laws by making false or misleading statements about the timeline for 7nm products in light of subsequently announced delays. In October 2020, the court consolidated the lawsuits and appointed lead plaintiffs, and in January 2021 the lead plaintiffs filed a consolidated complaint. Defendants moved to dismiss the consolidated complaint in March 2021. We dispute the claims described above and intend to defend the lawsuits vigorously. Given the procedural posture and the nature of those cases, including that the pending proceedings are in the early stages, that alleged damages have not been specified, that uncertainty exists as to the likelihood of a class or classes being certified or the ultimate size of any class or classes if certified, and that there are significant factual and legal issues to be resolved, we are unable to make a reasonable estimate of the potential loss or range of losses, if any, that might arise from those matters. In July 2021, Intel introduced a new process node naming structure, and the 7nm process is now Intel 4.
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Financial Statements
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Notes to Financial Statements
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23
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We use terms throughout our document that are specific to Intel or that are abbreviations that may not be commonly known or used. Below is a list of these terms used in our document.
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Term
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Definition
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2009 Debentures
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3.25% junior subordinated convertible debentures due 2039
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5G
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The fifth-generation mobile network, which is expected to bring dramatic improvements in network speeds and latency, and which we view as a transformative technology and opportunity for many industries
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ADAS
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Advanced driver-assistance systems
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Adjacent products
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All of our non-platform products for CCG, DCG, and IOTG, such as modem, Ethernet and silicon photonics, as well as Mobileye, NSG, and PSG products. Combined with our platform products, adjacent products form comprehensive platform solutions to meet customer needs
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ASIC
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Application-specific integrated circuit
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ASP
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Average selling price
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AV
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Autonomous vehicle
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CCG
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Client Computing Group operating segment
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CODM
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Chief operating decision maker
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COVID-19
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The infectious disease caused by the most recently discovered coronavirus (aka SARS-CoV-2), which was declared a global pandemic by the World Health Organization
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CPU
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Processor or central processing unit
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DCG
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Data Center Group operating segment
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EC
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European Commission
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Form 10-K
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Annual Report on Form 10-K
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Form 10-Q
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Quarterly Report on Form 10-Q
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FPGA
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Field-programmable gate array
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Internet of Things
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The Internet of Things market in which we sell our IOTG and Mobileye products
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IOTG
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Internet of Things Group operating segment
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IP
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Intellectual property
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MD&A
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Management's Discussion & Analysis
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MG&A
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Marketing, general and administrative
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NAND
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NAND flash memory
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nm
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Nanometer
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NSG
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Non-Volatile Memory Solutions Group operating segment
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OEM
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Original equipment manufacturer
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Platform products
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A microprocessor (CPU) and chipset, a stand-alone SoC, or a multichip package, based on Intel architecture. Platform products are primarily used in solutions sold through the CCG, DCG, and IOTG segments
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PSG
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Programmable Solutions Group operating segment
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R&D
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Research and development
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RSU
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Restricted stock unit
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SEC
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U.S. Securities and Exchange Commission
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SoC
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A System-on-a-Chip, which integrates most of the components of a computer or other electronic system into a single silicon chip. We offer a range of SoC platform products in CCG, DCG, and IOTG. In our DCG business, we offer SoCs across many market segments for a variety of applications, including products targeted for 5G base stations and network infrastructure
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SSD
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Solid-state drive
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U.S. GAAP
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U.S. Generally Accepted Accounting Principles
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VLSI
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VLSI Technology LLC
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On July 26, 2021, we provided an update on our manufacturing process and packaging technology roadmaps. As part of this update, we also introduced a new naming structure for our manufacturing process nodes, which includes the name changes summarized below:
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Previous Process Node Name
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New Process Node Name
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10nm SuperFin
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10nm SuperFin (unchanged)
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10nm Enhanced SuperFin
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Intel 7
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Intel 7nm
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Intel 4
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Financial Statements
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Notes to Financial Statements
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24
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