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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required)
For the fiscal year ended December 30, 1995, OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from ___________to___________
Commission File Number 0-6217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1672743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 Mission College Boulevard, Santa Clara, California, 95052-8119
(Address of principal executive offices, Zip Code)
Registrant's telephone number, including area code (408) 765-8080
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
1998 Step-Up Warrants to Purchase Common Stock
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES__X__ NO_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Aggregate market value of voting stock held
by non-affiliates of the registrant as of February 24, 1996
$46.67 billion
821.2 million shares of Common Stock outstanding as of February 24, 1996
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of Annual Report to Stockholders for fiscal year ended
December 30, 1995 - Part II, and Part IV.
(2) Portions of Proxy Statement dated April 4, 1996 - Part III.
PAGE 2
PART I
ITEM 1. BUSINESS
INDUSTRY
Intel Corporation and its subsidiaries (collectively called "Intel," the
"Company" or the "Registrant") operates predominantly in one industry segment.
The Company designs, develops, manufactures and markets microcomputer
components and related products at various levels of integration.
Intel components consist of silicon-based semiconductors etched with complex
patterns of transistors. Each one of these integrated circuits can perform the
functions of thousands--even millions--of individual transistors, diodes,
capacitors and resistors.
PRODUCTS
The Company's major products include microprocessors and related board-level
products, chipsets, embedded processors and microcontrollers, flash memory
chips, network and communications products and conferencing products.
Microprocessors and Related Board-Level Products.
- -------------------------------------------------
A microprocessor is the central processing unit of a computer system. It
processes system data and controls other devices in the system, acting as the
brains of a computer. Intel's flagship microprocessors include the Pentium(R)
Pro and the Pentium(R) microprocessor families.
Intel-designed board-level products are used as basic building blocks for
consumer, technical and commercial computing applications. Many original
equipment manufacturers (OEMs) use Intel's board-level products to build their
own PCs, microcomputers, real-time control systems and other products. OEM
customers buy at this level of integration to accelerate their time-to-market
and to direct their investments to other areas of their product lines. The
Company provides board-level products to give OEM customers flexibility by
enabling them to choose whether to buy at the component or board-level.
Intel's developments in the area of semiconductor design and manufacturing
have made it possible to decrease the feature size of circuits etched into
silicon. This permits a greater number of transistors to be used on each
microprocessor, and a greater number of microprocessors to be placed on each
silicon wafer. The result is microprocessors that are smaller, faster, consume
less power and cost less to manufacture. In 1995, the Company ramped its first
production on its most advanced 0.35 micron process technology. Intel plans to
add additional 0.35 micron capacity in 1996, enabling very high-volume
production of its newest, fastest Pentium Pro and Pentium microprocessors.
During 1995, the rapid transition of the PC market to the Pentium
microprocessor continued. Quarterly unit shipments of the Pentium
microprocessor family surpassed the Intel486(TM) microprocessor family in the
third quarter of 1995. The Pentium microprocessors now power entry-level to
high-end computers. Intel significantly enhanced the performance of the
Pentium microprocessor family in 1995, introducing new versions operating at
120 and 133 MHz, and in January of 1996, 150 and 166 MHz. Intel plans to
introduce to the market higher performance versions of the Pentium
microprocessor, including versions with enhancements to improve performance of
multimedia and communications applications. Intel also introduced, in 1995,
new 90- and 120-MHz versions, and in early 1996, a 133-MHz version of the
Pentium microprocessor for mobile computers that have lower power consumption
and a smaller package than the desktop/server version.
PAGE 3
MICROPROCESSORS AND RELATED BOARD-LEVEL PRODUCTS, CONTINUED.
- ------------------------------------------------------------
In late 1995, Intel introduced its sixth-generation processor, the Pentium
Pro microprocessor at speeds of 150, 166, 180 and 200MHz. The Pentium Pro
microprocessor is fully compatible with prior generations and delivers
performance comparable to that of high-end workstations. The Pentium Pro
microprocessor uses Intel's Dynamic Execution architecture to increase the
amount of work that can be done in parallel. In 1996, Pentium Pro
microprocessors are expected to be used for enterprise server applications and
business desktops utilizing full 32-bit software environments such as Windows
NT*. The Pentium Pro microprocessor also offers enhanced multiprocessing and
manageability features for high-performance desktops and servers. The Pentium
Pro microprocessor uses a high-speed bus between the CPU and second-level
cache memory to provide optimum performance.
Sales of the Pentium microprocessor family comprised a majority of the
Company's revenues and a substantial majority of its gross margin in 1995. A
significant and growing portion of the Company's revenues and gross margins
were derived from sales of the Pentium microprocessor family in 1994. During
1995, the Intel486 microprocessor family represented a significant but rapidly
declining portion of the Company's revenues and gross margins. The Intel486
microprocessor family comprised a majority of the Company's revenues and a
substantial majority of its gross margin during 1994 and 1993. The Intel486
microprocessor products are now offered primarily for embedded applications.
During 1995, Overdrive(R) processors, a family of upgrade microprocessors,
expanded to include products based on the Pentium microprocessor that will
allow users to upgrade their Intel486 microprocessor systems. In early 1996,
Intel announced Overdrive processors that upgrade systems to equivalents of
120-, 125- and 133-MHz versions of the Pentium microprocessor.
CHIPSETS. The Company's core-logic chipsets support incremental performance,
ease-of-use and new capabilities for systems based on Intel's Pentium and
Pentium Pro microprocessors. Based on these incremental capabilities, and the
growth of the Pentium microprocessor-based systems, Intel has become a
significant supplier of core-logic chipsets. The Intel 430FX chipset
introduced in early 1995, won numerous awards and has become one of the most
popular chipsets in the industry. Intel plans to introduce several new members
of this product family in 1996.
Based on the Peripheral Components Interconnect (PCI) bus, the Intel 430
PCIset family for the Pentium microprocessors and the Intel 440 PCIset family
for the Pentium Pro microprocessors support and extend the graphic, video and
other capabilities of many Intel processor-based systems.
EMBEDDED PROCESSORS AND MICROCONTROLLERS.
- -----------------------------------------
Intel provides embedded products such as microprocessors, microcontrollers and
memory components to application segments that are focused on enhancing the PC
and voice and data communication. Embedded products are used in many
peripheral devices, including keyboards, printers, networks, copiers and fax
machines, which enhance the PC's capabilities and make it easier to use. In
addition, embedded products are improving the functionality of wireless
communication devices such as cellular phones and pagers, and enabling the
development of new peripherals such as digital cameras and personal digital
assistants. Intel's embedded products provide advanced technology to other
market segments as well, including commercial and military avionics, medical
instrumentation, automotive and factory automation control products.
Intel's embedded products line consists of 32-bit processors, including the
i960(R) processor family and the embedded Intel386(TM) and Intel486 processor
families; the 80C186 16-bit processor family; MCS(R) 96 16-bit
microcontrollers, and 8-bit microcontrollers, such as the MCS 51 and MCS 251
microcontroller families.
The Company introduced several embedded control products in 1995, including
the 80960RP processor, used in server motherboards and adapter cards connected
to servers; the 83C196EA and 87C196CB 16-bit microcontrollers for automotive
and industrial applications, and the 8xC51RA/RB/RC 8-bit microcontrollers.
During 1995, Intel also started shipping in volume its new MCS 251
microcontroller, the 8xC251SB. Intel has begun to implement the Universal
Serial Bus (USB) specification in microcontroller products.
________________________
* Other brands and names are the property of their respective owners.
PAGE 4
FLASH MEMORY PRODUCTS. Memory components are used to store user data and
computer program code. Flash memory retains information when the power is off.
Intel is a leader in flash applications, such as PC BIOS, cellular phones and
networking. The Company was a key player in defining and promoting the
Miniature Card specification for low-cost, very small form-factor flash cards
to be used in a variety of consumer electronics applications. In 1995, Intel
expanded its SmartVoltage memory product line with additional densities and a
low-voltage device targeted for the mobile market.
NETWORK AND COMMUNICATIONS PRODUCTS. These hardware and software products are
sold to corporate network administrators and PC users through distributor and
reseller channels. The product line improves the performance, capabilities and
manageability of PC desktop and server systems in corporate networks.
Intel's networking products are designed to provide high-bandwidth
communications to PC desktop and server systems, and to make it easier for LAN
administrators to install and manage their systems. The architecture that
delivers this management capability is called Smart Network Services.
Intel's networking products consist of LAN products, such as the
EtherExpress(TM) family of adapters and Express Stackable Hubs, and network
management products, including the LANDesk(R) Management Group of products.
Supporting the Smart Network Services strategy are new or upgraded LAN
products: EtherExpress PRO adapters that use flash memory for one-step
installation and configuration; EtherExpress PRO/100, a fast Ethernet adapter
that can operate at 10 or 100 megabytes per second; Express Stackable Hubs;
StorageExpress(TM) backup servers; NetportExpress(TM) print servers; LANDesk
Management Suite software, which combines management of desktop systems and
servers on LANs; LANDesk Workgroup Manager; LANDesk Server Manager Pro; and
LANDesk Virus Protect.
CONFERENCING PRODUCTS. In 1994, Intel introduced its ProShare conferencing
products. This product line includes Intel's ProShare(TM) Conferencing Video
System 200, a PC-based video-conferencing system that offers full application
and document sharing and is certified in over 25 countries. It gives users
powerful information-sharing capabilities and an innovative way to convey
ideas. ProShare conferencing products deliver instant communications.
The ProShare Conferencing Video System 200 supports video and data conferences
over ISDN or corporate LAN/WAN networks. The product supports industry
standards, such as the H.320 international telecommunications standard, to
conduct video conferences with other H.320-compliant products, including room
conferencing systems.
In 1995, the ProShare Conferencing Video System 200 became one of the
industry's leading desktop conferencing products. This system won many industry
awards, including "Editors' Choice" from PC Magazine UK, CADENCE magazine and
PC Laptop Computers magazine. -------------- -------
- -------------------
Also in 1995, Intel introduced the ProShare TeamStation, a group video
conferencing system for meeting rooms, with all the features of the ProShare
Conferencing Video System 200.
PAGE 5
MANUFACTURING
A majority of the Company's wafer production and some assembly and final
testing of VLSI (very large-scale integration) components are conducted at
domestic Intel facilities in Chandler, Arizona; Aloha, Oregon; Santa Clara and
Folsom, California; and Rio Rancho, New Mexico. A significant portion of
Intel's production of microprocessor board-level products and systems takes
place at facilities in Hillsboro, Oregon and Las Piedras, Puerto Rico.
Outside the United States, a significant portion of Intel's VLSI wafer
production, including microprocessor fabrication, is conducted at plants in
Jerusalem, Israel and Leixlip, Ireland. A significant portion of Pentium
processor production is conducted at the Ireland site. A majority of the
Company's VLSI component assembly and testing is performed at facilities in
Penang, Malaysia and Manila, Philippines. A significant portion of Intel's
production of microprocessor board-level products and systems is conducted at
facilities in Leixlip, Ireland and Penang, Malaysia.
In general, if Intel were unable to fabricate wafers or assemble or test its
products abroad, or if air transportation between its foreign facilities and
the United States were disrupted, there could be a materially adverse effect
upon the Company's operations. In addition to normal manufacturing risks,
foreign operations are subject to certain additional exposures, including
political instability, currency controls and fluctuations, and tariff and
import restrictions. To date, Intel has not experienced significant
difficulties related to these foreign business risks.
To augment capacity, Intel uses subcontractors to perform assembly of certain
products and wafer fabrication for certain VLSI components, primarily flash
memory and chipsets, and for production capacity of board-level products. A
significant portion of Intel's production of board-level products is conducted
through the use of subcontractors in Penang, Malaysia. The Company cannot give
assurances that it will be able to fully satisfy demand for certain of these
products.
The manufacture of integrated circuits is a complex process. Normal
manufacturing risks include errors in the fabrication process, defects in raw
materials, as well as other factors, all of which can affect yields.
EMPLOYEES
At December 30, 1995, the Company employed approximately 41,600 people
worldwide.
SALES
Most of Intel's products are sold or licensed through sales offices located
near major concentrations of users throughout the United States, Europe,
Japan, Asia-Pacific and other parts of the world.
The Company also uses distributors (industrial and retail) and representatives
to distribute its products both in the United States and overseas. Typically,
distributors handle a wide variety of products, including those competitive
with Intel products, and fill orders for many customers. Most of Intel's
sales to distributors are made under agreements allowing for price protection
and/or the right of return on unsold merchandise. Sales representatives
generally do not offer directly competitive products, but may carry
complementary items manufactured by others. Representatives do not maintain a
product inventory; instead, their customers place large-quantity orders
directly with Intel and are referred to distributors for smaller orders.
Intel sold products to over one thousand customers worldwide in 1995, none of
which represented more than 10% of total revenues.
PAGE 6
BACKLOG
Intel's sales are made primarily pursuant to standard purchase orders for
delivery of standard products. Intel has some agreements that give a customer
the right to purchase a specific number of products during a time period.
Although not generally obligating the customer to purchase any particular
number of such products, some of these agreements do contain billback clauses.
As a matter of industry practice, billback clauses are difficult to enforce.
The quantity actually purchased by the customer, as well as the shipment
schedules, are frequently revised during the agreement term to reflect changes
in the customer's needs. In light of industry practice and experience, Intel
does not believe that such agreements are meaningful for determining backlog
figures. Intel believes that only a small proportion of its order backlog is
noncancellable and that the dollar amount associated with the noncancellable
portion is immaterial. Therefore, Intel does not believe that backlog as of
any particular date is necessarily indicative of future results.
COMPETITION
The Company competes in different product lines to various degrees on the
basis of price, performance, availability and quality. Many companies compete
with Intel and are engaged in the same basic fields of activity, including
research and development. Both foreign and domestic, these competitors range
in size from large multinationals to smaller companies competing in
specialized market segments. Intel is engaged in a rapidly advancing field of
technology in which its ability to compete depends upon the continuing
improvement of its products and processes, continuing cost reductions and the
development of new products to meet changing customer requirements.
Prices decline rapidly in the semiconductor industry as unit volume grows, as
competition develops, and as production experience is accumulated. In
microprocessor board-level and system products, Intel competes with board
manufacturers and microprocessor-based computer manufacturers. Some of these
competitors are also Intel customers.
A number of competitors have developed products that are software compatible
with some of the Company's key products. Many of Intel's competitors are
licensed to use Intel patents. Furthermore, based on the current case law,
Intel's competitors can design microprocessors that are compatible with Intel
microprocessors and avoid Intel patent rights through the use of foundry
services that have licenses with Intel. Competitors' products may add features
and increase performance. The Company also faces significant competition from
companies that offer rival microprocessor architectures. The Company cannot
predict whether such rival architectures will gain market acceptance or
provide increased competition to the Company's products. Future distortion of
price maturity curves could occur as software compatible products enter the
market in significant volume or alternative architectures gain market
acceptance.
It continues to be Intel's strategy to introduce ever-higher performance
microprocessors and work with the software industry to develop compelling
applications that can take advantage of this higher performance, thus driving
demand toward the Company's newer products. Intel also is committed to the
protection of its intellectual property rights against illegal use. There can
be no assurance, however, that competitors will not introduce new products
(either software compatible or of rival architectural designs) or reduce
prices on existing products. Such developments could have an adverse effect on
Intel's revenues and margins.
PAGE 7
RESEARCH AND DEVELOPMENT
The Company's competitive position has developed to a large extent because of
its emphasis on research and development. This emphasis has enabled Intel to
deliver products before they have become available from competitors, and thus
has permitted Intel's customers to commit to the use of these new products in
the development of their own products. Intel's research and development
activities are directed toward developing new products, hardware technologies
and processes, and improving existing products and lowering their cost. Intel
is jointly developing semiconductor processes, software optimization and
microprocessor architecture. New 64-bit processors based on the jointly
developed architecture are expected to be initially targeted at server,
workstation and enterprise computing products, probably in the late 1990s. The
Company also develops "enabling" software technologies, such as open software
specifications and software tools, to enhance the functionality and acceptance
of the personal computer platform. Intel's expenditures for research and
development were $1,296 million, $1,111 million and $970 million in fiscal
years 1995, 1994 and 1993, respectively. As of December 30, 1995, Intel had
approximately 7,700 employees engaged in research and development. The
results of Intel's research and development activities depend upon competitive
circumstances and Intel's ability to transfer new products to production in a
timely and cost-effective manner.
Most design and development of VLSI components and other products is performed
at Intel's facilities in Santa Clara and Folsom, California; Aloha and
Hillsboro, Oregon; Chandler, Arizona; and Haifa, Israel.
INTELLECTUAL PROPERTY AND LICENSING
Intellectual property rights that apply to various Intel products include
patents, copyrights, trade secrets, trademarks and maskwork rights. Because
of the rapidly changing technology and a broad distribution of patents in the
semiconductor industry, Intel's present intention is not to rely primarily on
intellectual property rights to protect or establish its market position.
However, Intel has established an active program to protect its investment in
technology by enforcing all of its intellectual property rights. Intel does
not intend to broadly license its intellectual property rights unless it can
obtain adequate consideration. Reference is also made to the heading
"Competition."
Intel has filed and obtained a number of patents in the United States and
abroad. Intel has entered into patent cross-license agreements with many of
its major competitors.
Intel protects many of its computer programs by copyrighting them. Intel has
registered numerous copyrights with the United States Copyright Office. The
ability to protect or to copyright software in some foreign jurisdictions is
not clear. However, Intel has a policy of requiring customers to sign a
software license contract before providing a customer with certain computer
programs. Certain VLSI components have computer programs embedded in them,
and Intel has obtained copyright protection for some of these programs as
well. Beginning in 1985, Intel has obtained protection for the maskworks for a
number of its components under the Chip Protection Act of 1984.
Intel has obtained certain trademarks and trade names for its products to
distinguish genuine Intel products from those of its competitors and is
currently engaged in a cooperative program with OEMs to identify personal
computers that incorporate genuine Intel microprocessors with the Intel
Inside( logo. Intel maintains certain details about its processes, products
and strategies as trade secrets.
As is the case with many companies in the semiconductor industry, Intel has,
from time to time, been notified of claims that it may be infringing certain
patent rights of others. These claims have been referred to counsel, and they
are in various stages of evaluation and negotiation. If it appears necessary
or desirable, Intel may seek licenses for these intellectual property rights.
Intel can give no assurance that licenses will be offered by all claimants,
that the terms of any offered licenses will be acceptable to Intel or that in
all cases the dispute will be resolved without litigation.
PAGE 8
COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
To Intel's present knowledge, compliance with federal, state and local
provisions enacted or adopted for protection of the environment has had no
material effect upon its operations. However, reference is made to Item 3.
Legal Proceedings, of this Form 10-K.
EXECUTIVE OFFICERS
The following sets forth certain information with regard to executive officers
of Intel (ages are as of December 30, 1995):
Craig R. Barrett (age 56) has been Chief Operating Officer since 1993; a
director of Intel since 1992; and Executive Vice President since 1990.
Andrew S. Grove (age 59) has been a director of Intel since 1974; President
since 1979; and Chief Executive Officer since 1987.
Gordon E. Moore (age 67) has been a director of Intel since 1968 and Chairman
of the Board since 1979.
Leslie L. Vadasz (age 59) has been a director of Intel since 1988; and Senior
Vice President, Director of Corporate Business Development since 1991.
Frank C. Gill (age 52) has been Senior Vice President and General Manager,
Internet and Communications Group since 1996. Prior to that, Mr. Gill was
Senior Vice President and General Manager, Intel Products Group from 1991 to
1996; and Senior Vice President and President of the Systems Group from 1990
to 1991.
David L. House (age 52) has been Senior Vice President and General Manager,
Enterprise Server Group since 1995. Prior to that, Mr. House was Senior Vice
President and Director, Corporate Strategy from 1993 to 1995; Senior Vice
President and General Manager, Architecture Marketing and Applications Group
from 1992 to 1993; and Senior Vice President and President of Microcomputer
Components Group from 1990 to 1991.
Paul S. Otellini (age 45) has been Senior Vice President, Director, Sales
since 1994. Prior to that, Mr. Otellini was Senior Vice President and General
Manager, Microprocessor Products Group, from 1992 to 1994; Vice President and
General Manager, Microprocessor Products Group from 1991 to 1992; and Vice
President, Microcomputer Components Group, General Manager, Micro Products
Group from 1990 to 1991.
Gerhard H. Parker (age 52) has been Senior Vice President and General Manager,
Technology & Manufacturing Group, since 1992. Prior to that, Dr. Parker was
Vice President and General Manager, Technology & Manufacturing Group from 1990
to 1992.
Robert W. Reed (age 49) has been Senior Vice President and General Manager,
Semiconductor Products Group, since 1991. Prior to that, Mr. Reed was Senior
Vice President and Chief Financial Officer from 1990 to 1991.
Ronald J. Whittier (age 59) has been Senior Vice President and General
Manager, Content Group since 1995. Prior to that, Mr. Whittier was Senior Vice
President and General Manager, Intel Architecture Laboratories from 1993 to
1995; Vice President and General Manager, Software Technology Group from 1991
to 1992; and Vice President and Director of Marketing from 1990 to 1991.
Albert Y.C. Yu (age 54) has been Senior Vice President and General Manager,
Microprocessor Products Group since 1993. Prior to that, Dr. Yu was Vice
President and General Manager, Microprocessor Products Group from 1991 to
1993; and Vice President and General Manager, Micro Products Group from 1990
to 1991.
PAGE 9
EXECUTIVE OFFICERS, CONTINUED
Michael A. Aymar (age 48) has been Vice President and General Manager, Desktop
Products Group since 1995. Prior to that, Mr. Aymar was Vice President and
General Manager, Intel486(TM) Microprocessor Division from 1994 to 1995;
Vice President and General Manager, Mobile Computing Group from 1991 to 1994;
and Vice President and General Manager, Santa Clara Microcomputer Division
from 1989 to 1991.
Andy D. Bryant (age 45) has been Vice President and Chief Financial Officer
since 1994. Prior to that, Mr. Bryant was Vice President, Intel Products Group
from 1990 to 1994.
F. Thomas Dunlap, Jr. (age 44) has been Vice President, General Counsel and
Secretary since 1987.
G. Carl Everett, Jr. (age 45) has been Senior Vice President and General
Manager, Desktop Products Group since 1995. Prior to that, Mr. Everett was
Senior Vice President and General Manager, Microprocessor Products Group from
1994 to 1995; and Vice President and Director, Worldwide Sales Group from 1990
to 1994.
Stephen P. Nachtsheim (age 50) has been Vice President and General Manager,
Mobile/Handheld Products Group since 1995. Prior to that, Mr. Nachtsheim was
Vice President and General Manager, Mobile and Home Products Group from 1994
to 1995; and General Manager of European Intel Products Group from 1990 to
1994.
PAGE 10
ITEM 2. PROPERTIES
At December 30, 1995, Intel owned the major facilities described below:
No. of Bldgs. Location Total Sq. Ft. Use
- ------------- -------- ------------- ---
56 United States (A) 9,744,000 Executive and administrative
offices, wafer fabrication,
components testing and
assembly, research and
development, computer and
service functions, system
assembly and warehousing.
6 Ireland 959,000 Wafer fabrication, system
and board assembly, and
administrative offices.
6 Malaysia (B) 531,000 Components assembly and
testing and administrative
offices.
4 Israel 379,000 Wafer fabrication, design
center, sales office and
related support functions.
4 Puerto Rico 292,000 Systems manufacturing, board
assembly, warehousing and
administration.
3 England 184,000 European sales, marketing,
warehousing and related
support functions.
3 Japan 167,000 Sales, warehousing and
related support functions.
1 Philippines (C) 431,000 Components assembly and
testing and administrative
offices.
1 Germany 86,000 European marketing, German
sales and administrative
offices.
At December 30, 1995, Intel also leased 24 major facilities in the U.S.
totaling approximately 893,000 square feet and 11 facilities in other
countries totaling approximately 250,000 square feet. These leases expire at
varying dates through 2005, including renewals at the option of Intel.
Intel believes that its existing facilities are suitable and adequate for its
present purposes, and the productive capacity in such facilities is in general
being utilized. Intel has other facilities available that it can equip to
meet anticipated future demand. These include 4.7 million square feet of
building space under various stages of construction in the United States and
abroad for manufacturing and administrative purposes.
___________________
(A) Includes an idle, 131,000-square-foot facility formerly utilized for
wafer fabrication and administration, which was sold in March 1996.
(B) The lease on a portion of the land used for these facilities expires
in 2032.
(C) Leases on land expire in 1998.
PAGE 11
ITEM 3. LEGAL PROCEEDINGS
A. LITIGATION
Consumer Class Action Suits
- ---------------------------
Machtinger vs. Intel, Cook Co. Circuit Court, IL (94-C-7300)
Anthony Uzzo & Co. vs. Intel, Santa Clara Co. Superior Court (CV745729)
Liberty Bell Equip. vs. Intel, Santa Clara Co. Superior Court (CV745803)
Sloane vs. Intel, Santa Clara Co. Superior Court (CV745876)
Klein vs. Intel, Santa Clara Co. Superior Court (CV745895)
Scalzo vs. Intel, Santa Clara Co. Superior Court (CV745924)
Rep. Electronic Products vs. Intel and Dell,
Wayne Co. Circuit Court, MI (94-435132CK)
Fingold vs. Intel, Santa Clara Co. Superior Court (CV746031)
Lees et al vs. Intel, Camden Co. Superior Court, NJ (L 11508 94)
Kurtz, Orman vs. Intel, Santa Clara Co. Superior Court (CV746116)
Data Technology Services vs. Intel, U.S.D.C., Dist. of CO (94-N-2886)
Carney vs. Intel, Santa Clara Co. Superior Court (CV746128)
- -----------------------------------------------------------
During the period from November 29, 1994 through December 19, 1994, numerous
civil consumer lawsuits were filed in state courts in various states against
the Company. Although the complaints differed, these actions generally
alleged that Intel breached express and implied warranties, engaged in
deceptive advertising and otherwise committed consumer fraud by shipping
Pentium processors which contained a divide problem in the floating point
unit, and by failing to disclose it. The suits sought compensatory and
punitive damages of unspecified amounts. A Stipulation of Settlement covering
all actions was filed in the Santa Clara Superior Court on March 22, 1995 and
became final on June 22, 1995.
Weisberg vs. C. Barrett, W.H. Chen, A. Grove, D.J. Guzy, G. Moore, M.
Palevsky, A. Rock, J. Shaw, L. Vadasz, D. Yoffie, C. Young and Intel
Southern District, NY (C95-0674)
- --------------------------------
On January 31, 1995, the plaintiff brought this suit in Federal Court in New
York (Southern District) as both a derivative and stockholder action to
invalidate the Company's Executive Officer Bonus Plan, alleging that the Plan
is so vague and misleading as to be ambiguous. Plaintiff sought (i)
cancellation of the stockholders' approval of the Plan, (ii) unspecified
damages to Intel by the Board of Directors, and (iii) to enjoin implementation
of the Plan and the payment of any bonuses under the Plan. A hearing was held
on January 12, 1996 to consider and approve a stipulated settlement and
dismissal of the action. The Court approved the settlement, and an order of
dismissal was signed and became effective on January 22, 1996.
Thorn EMI North America, Inc. vs. Intel
and Advanced Micro Devices, Inc., DEL (C95-199)
- -----------------------------------------------
On March 29, 1995, Thorn EMI North America Inc. brought suit in Federal Court
in Delaware against Intel and Advanced Micro Devices, Inc. (AMD) alleging
infringement of a U.S. patent relating to processes for manufacturing
semiconductors, certain of which processes are utilized in the manufacture of
the Company's Pentium(R) and Pentium(R) Pro microprocessors. The plaintiff is
seeking injunctive relief and unspecified damages. On September 8, 1995, Intel
was granted a motion to sever its case from the AMD case. Trial of the
plaintiff's claims against Intel is presently set for June 1996. The Company
believes this lawsuit to be without merit and will defend the case vigorously.
Although the ultimate outcome of this lawsuit cannot be determined at this
time, management, including internal counsel, does not believe that the
ultimate outcome will have a material adverse effect on Intel's financial
position or overall trends in results of operations.
PAGE12
B. ENVIRONMENTAL PROCEEDINGS
Intel has been named to the California and U.S. Superfund lists for three of
its sites and has completed, along with two other companies, a Remedial
Investigation/Feasibility study with the U.S. Environmental Protection Agency
(EPA) to evaluate the groundwater in areas adjacent to its former Mountain
View, California site. The EPA has issued a Record of Decision with respect
to a groundwater cleanup plan at that site. Under the California and U.S.
Superfund statutes, liability for cleanup of the Mountain View site and
adjacent area is joint and several. The Company has reached agreement with
those same two companies which should significantly limit the Company's
liabilities under the proposed cleanup plan. Also, the Company has completed
extensive studies at its other sites and is engaged in cleanup at several of
these sites. In the opinion of management, including internal counsel, the
potential losses to the Company in excess of amounts already accrued arising
out of these matters will not have a material adverse effect on the Company's
financial position or overall trends in results of operations, even if joint
and several liability were to be assessed.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PAGE13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Reference is made to the information regarding market, market price
range and dividend information appearing under "Financial Information by
Quarter (Unaudited)" on page 31 of the Registrant's Annual Report to
Stockholders which information is hereby incorporated by reference.
(b) As of February 24, 1996, there were 85,273 holders of record of the
Registrant's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the information regarding selected financial data for the
fiscal years 1991 through 1995, under the heading "Financial Summary" on page
27 of the Registrant's Annual Report to Stockholders, which information is
hereby incorporated by reference.
In addition, the ratios of earnings to fixed charges for each of the five
years in the period ended December 30, 1995 are as follows:
Fiscal Year
-----------------------------------------------------
1991 1992 1993 1994 1995
12.4x 20.7x 54.4x 39.5x 67.6x
Fixed charges consist of interest expense and the estimated interest component
of rent expense.
PAGE 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to the information appearing under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 28 through 30 of the Registrant's 1995 Annual Report to Stockholders,
which information is hereby incorporated by reference.
Subsequent to December 30, 1995, Intel repurchased 4.1 million shares of
Common Stock under the Company's authorized stock repurchase program at a cost
of $234 million, including 1.8 million shares at a cost of $108 million upon
the exercise of put warrants. The Company also sold 3 million put warrants,
receiving proceeds of $18 million, while 1.5 million previously outstanding
put warrants expired unexercised. As of March 25, 1996, the Company had the
potential obligation to repurchase 11.7 million shares of Common Stock at an
aggregate price of $734 million under outstanding put warrants. The 11.7
million put warrants outstanding at March 25, 1996 expire on various dates
between May 1996 and February 1997 and have exercise prices ranging from $56
to $68 per share, with an average exercise price of $62. After reserving
shares to cover these outstanding put warrants, 26.1 million shares remained
available under the stock repurchase program authorization.
During the third quarter of 1995, a portion of the receivable balance from one
of the Company's five largest customers was converted into a loan. The total
amount receivable from this customer at December 30, 1995 was approximately
$400 million. The total amount receivable from this customer at March 25,
1996 was approximately $356 million. This customer has informed the Company
that it anticipates obtaining additional outside financing. No assurances can
be given that this additional financing will be obtained.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Intel Corporation at December 30, 1995
and December 31, 1994 and for each of the three years in the period ended
December 30, 1995 and the Report of Independent Auditors thereon and Intel
Corporation's unaudited quarterly financial data for the two-year period ended
December 30, 1995 are incorporated by reference from the Registrant's 1995
Annual Report to Stockholders, on pages 14 through 31.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PAGE 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information regarding Directors and Executive
Officers appearing under the heading "Election of Directors" on pages 2
through 4 of the Registrant's Proxy Statement dated April 4, 1996, which
information is hereby incorporated by reference, and to the information under
the heading "Executive Officers" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information appearing under the headings "Directors'
Compensation," "Compensation Committee Interlocks and Insider Participation,"
and "Executive Compensation," on pages 5 and 6, 10 and 12, respectively, of the
Registrant's Proxy Statement dated April 4, 1996, which information is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to information appearing in the Registrant's Proxy Statement
dated April 4, 1996, under the heading "Security Ownership of Certain
Beneficial Owners and Management," on pages 15 and 16, which information is
hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PAGE 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed or
incorporated by reference as part of this annual report.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying index to
financial statements and financial statement schedules is filed as
part of this annual report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed
or incorporated by reference as part of this annual report.
(b) Reports on Form 8-K
None.
PAGE 17
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a)) Reference Page
--------------
1995
Annual
Form Report to
10-K Stockholders
---- ------------
Consolidated Balance Sheets-
December 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . 15
Consolidated Statements of Income for
the years ended December 30, 1995,
December 31, 1994 and December 25, 1993 . . . . . . . . . . . . . . . . 14
Consolidated Statements of Cash Flows
for the years ended December 30, 1995,
December 31, 1994 and December 25, 1993 . . . . . . . . . . . . . . . . 16
Consolidated Statements of Stockholders'
Equity for the years ended December 30, 1995,
December 31, 1994 and December 25, 1993 . . . . . . . . . . . . . . . . 17
Notes to Consolidated Financial Statements-
December 30, 1995, December 31, 1994 and
December 25, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . .18-26
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . .27
Supplementary Information (unaudited)
Financial Information by Quarter . . . . . . . . . . . . . . . . . . . .31
Schedule for years ended December 30, 1995,
December 31, 1994 and December 25, 1993:
II- Valuation and Qualifying Accounts . . . . . . . . . . .18
Schedules other than the one listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown
in the financial statements or notes thereto.
The consolidated financial statements listed in the above index, which are
included in the Company's Annual Report to Stockholders, are hereby
incorporated by reference. With the exception of the pages listed in the
above index and the portions of such report referred to in Items 5, 6, 7 and 8
of this Form 10-K, the 1995 Annual Report to Stockholders is not to be deemed
filed as part of this report.
Page references to the 1995 Annual Report to Stockholders relate to the bound,
printed version of the report.
PAGE 18
INTEL CORPORATION
- -----------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
December 25, 1993, December 31, 1994 and December 30,1995
(In Millions)
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Year Expenses Deductions (A) of Year
---------- ---------- ------------- -------
1993
Allowance for Doubtful Receivables $26 $ 4 $ 8 $22
--- --- --- ---
1994
Allowance for Doubtful Receivables $22 $10 $-- $32
--- --- --- ---
1995
Allowance for Doubtful Receivables $32 $28 $ 3 $57
(A) Uncollectible accounts written off, net of recoveries.
PAGE 19
INDEX TO EXHIBITS
(Item 14(a))
Description
3.1 Intel Corporation Certificate of Incorporation (incorporated by reference
to Exhibit 3.1 of Registrant's Form 10-Q for the quarter ended June 26,
1993 as filed on August 10, 1993).
3.2 Intel Corporation Bylaws as amended, (incorporated by reference to
Exhibit 3.2 of Registrant's Registration Statement on Form 10-Q for the
quarter ended September 25, 1993 as filed on November 9, 1993).
4.1 Agreement to Provide Instruments Defining the Rights of Security Holders
(incorporated by reference to Exhibit 4.1 of Registrant's Form 10-K as
filed on March 28, 1986).
4.2 Warrant Agreement dated as of March 1, 1993, as amended between the
Registrant and Harris Trust and Savings Bank (as successor Warrant Agent)
related to the issuance of 1998 Step-Up Warrants to purchase Common Stock
of Intel Corporation (incorporated by reference to Exhibit 4.6 of
Registrant's Form 10-K as filed on March 25, 1993), together with the
First Amendment to Warrant Agreement dated as of October 18, 1993 and the
Second Amendment to Warrant Agreement dated as of January 17, 1994
(incorporated by reference to Exhibit 4.4 of the Registrant's Form 10-K
as filed on March 25, 1994) and the Third Amendment to Warrant Agreement
dated as of May 1, 1995.
10.1 Intel Corporation 1984 Stock Option Plan, as amended and restated,
effective May 4, 1994 (incorporated by reference to Exhibit 10.2 of
Registrant's Form 10-Q for the quarter ended April 2, 1994 as filed on
May 16, 1994), together with the First Amendment to Intel Corporation
1984 Stock Option Plan, dated July 1995 (incorporated by reference to
Exhibit 10.1 of Registrant's Form 10-Q for the quarter ended July 1, 1995
as filed on August 10, 1995).
10.2 Intel Corporation 1988 Executive Long-Term Stock Option Plan as amended
and restated (incorporated by reference to Exhibit 10.6 of Registrant's
Form 10-Q for the quarter ended April 2, 1994 as filed on May 16, 1994).
10.3 Intel Corporation Executive Officer Bonus Plan as amended and restated
effective January 1, 1995 (incorporated by reference to Exhibit 10.7 of
Registrant's Form 10-Q for the quarter ended April 5, 1995 as filed on
May 15, 1995).
10.4 Intel Corporation Sheltered Employee Retirement Plan Plus, as amended and
restated effective November 1, 1995 (incorporated by reference to Exhibit
4.1 of Registrant's Registration Statement on Form S-8 as filed October
18, 1995).
11. Computation of Per Share Earnings.
12. Statement Setting Forth the Computation of Ratios of Earnings to Fixed
Charges.
13. Portions of the Annual Report to Stockholders for fiscal year ended
December 30, 1995 expressly incorporated by reference herein.
21. Intel Subsidiaries.
23. Consent of Ernst & Young LLP, Independent Auditors.
27. Financial Data Schedule.
PAGE 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTEL CORPORATION
- -----------------
Registrant
INTEL CORPORATION
Registrant
By /s/ F. Thomas Dunlap, Jr.
- ----------------------------
F. Thomas Dunlap, Jr.
Vice President and Secretary
March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Craig R. Barrett
- -------------------- --------------------
Craig R. Barrett Max Palevsky
Director Director
March 27, 1996 March 27, 1996
/s/ Andy D. Bryant /s/ Arthur Rock
- ------------------ ---------------
Andy D. Bryant Arthur Rock
Vice President, Principal Director
Accounting and Chief Financial Officer March 27, 1996
March 27, 1996
/s/ Jane E. Shaw
/s/ Winston H. Chen ----------------
- ------------------- Jane E. Shaw
Winston H. Chen Director
Director March 27, 1996
March 27, 1996
/s/ Leslie L. Vadasz
/s/ Andrew S. Grove --------------------
- ------------------- Leslie L. Vadasz
Andrew S. Grove Director
Principal Executive Officer March 27, 1996
President and Director
March 27, 1996 /s/ David B. Yoffie
-------------------
/s/ D. James Guzy David B. Yoffie
- ----------------- Director
D. James Guzy March 27, 1996
Director
March 27, 1996 /s/ Charles E. Young
--------------------
/s/ Gordon E. Moore Charles E. Young
- ------------------- Director
Gordon E. Moore March 27, 1996
Chairman of the Board
March 27, 1996
??