10-QPeriod: Q2 FY2016

INTEL CORP Quarterly Report for Q2 Ended Apr 2, 2016

Filed May 2, 2016For Securities:INTC

Summary

Intel Corporation reported net revenue of $13.7 billion for the first quarter of 2016, a 7% increase year-over-year, driven by strong performance in its Data Center Group (DCG) and the inclusion of the newly acquired Altera Corporation (now Programmable Solutions Group - PSG). Diluted earnings per share were $0.42, a slight increase from $0.41 in the prior year period. The company saw growth in its core computing segments, with Client Computing Group (CCG) revenue up 2% and DCG revenue up 9%. However, the overall gross margin percentage decreased slightly to 59.3% from 60.5%, impacted by acquisition-related costs and higher unit costs. Intel generated $4.1 billion in operating cash flow, but net cash used in investing activities significantly increased due to the $14.5 billion acquisition of Altera.

Financial Highlights

55 data points
Beta

Revenue

$13.70B

59.3% Gross Margin

Net Income

$2.05B

14.9% Net Margin

EPS (Diluted)

$0.42

Total Assets

$105.47B

Cash & Equivalents

$3.06B

Free Cash Flow

$2.71B

Financial Statements
Beta
Revenue$13.70B
Cost of Revenue$5.57B
Gross Profit$8.13B
R&D Expenses$3.25B
SG&A Expenses$2.23B
Operating Expenses$5.56B
Operating Income$2.57B
Interest Expense$208.00M
Net Income$2.05B
EPS (Basic)$0.43
EPS (Diluted)$0.42
Shares Outstanding (Basic)4.72B
Shares Outstanding (Diluted)4.88B

Key Highlights

  • 1Net revenue increased 7% year-over-year to $13.7 billion, exceeding the previous year's $12.8 billion.
  • 2Diluted earnings per share grew to $0.42 from $0.41 in the prior year's quarter.
  • 3The acquisition of Altera Corporation for $14.5 billion was completed in December 2015, and its results are now included, forming the Programmable Solutions Group (PSG).
  • 4Data Center Group (DCG) revenue showed strong growth, increasing 9% to $4.0 billion.
  • 5Client Computing Group (CCG) revenue saw a modest 2% increase to $7.5 billion.
  • 6Operating income decreased slightly by 2% to $2.6 billion, impacted by acquisition-related costs.
  • 7The company generated $4.1 billion in cash from operating activities.
  • 8Significant investment outflows occurred due to the Altera acquisition, resulting in a substantial decrease in cash and cash equivalents.

Frequently Asked Questions

The acquisition of Altera Corporation, completed in December 2015, significantly impacted the financial results. It contributed $359 million in net revenue and formed the new Programmable Solutions Group (PSG). However, it also led to acquisition-related costs and adjustments, which impacted gross margin and operating income negatively.

The Data Center Group (DCG) showed strong growth with a 9% increase in revenue, indicating continued demand in the cloud and enterprise sectors. The Client Computing Group (CCG) experienced a modest 2% revenue growth. The Internet of Things Group (IOTG) also performed well with a 22% revenue increase. The new Programmable Solutions Group (PSG) contributed revenue, while the Non-Volatile Memory Solutions Group (NSG) saw a 6% revenue decline.

Following the Altera acquisition, Intel's cash and cash equivalents, short-term investments, and trading assets decreased significantly to $15.1 billion from $25.3 billion at the end of the previous year. Total debt increased to $25.4 billion, partly due to financing the acquisition through long-term debt and a credit facility. Despite the reduction in cash, the company stated it has sufficient financial resources to meet its business requirements.

Intel is involved in ongoing legal proceedings related to competition matters, particularly with the European Commission and consumer class actions, which continue to be defended. Furthermore, Intel announced a 2016 Restructuring Program subsequent to the quarter, which involves facility closures and a workforce reduction of up to 12,000 positions, expected to incur charges of approximately $1.2 billion in the second quarter of 2016.