Intel 1998 Annual Report Download - page 49

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The provision for taxes reconciles to the amount computed by applying the statutory federal rate of 35% to income before taxes as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at fiscal year-ends were as follows:
U.S. income taxes were not provided for on a cumulative total of approximately $2.2 billion of undistributed earnings for certain non-U.S.
subsidiaries. The Company intends to reinvest these earnings indefinitely in operations outside the United States.
During 1998, the Company settled all tax and related interest for years 1991 through 1996 with the Internal Revenue Service ("IRS"). The
settlement did not result in a material effect on the Company's 1998 financial statements. Years after 1996 are open to examination by the IRS.
Management believes that adequate amounts of tax and related interest and penalties, if any, have been provided for any adjustments that may
result for these years.
Employee benefit plans
Stock option plans. Intel has a stock option plan under which officers, key employees and non-employee directors may be granted options to
purchase shares of the Company's authorized but unissued Common Stock. The Company also has a stock option plan under which stock
options may be granted to employees other than officers and directors. The Company's Executive Long-Term Stock Option Plan, under which
certain key employees, including officers, have been granted stock options, terminated in September 1998. Although this termination will not
affect options granted prior to this date, no further grants may be made under this plan. Under all of the plans, the option exercise price is equal
to the fair market value of Intel Common Stock at the date of grant.
Options currently expire no later than 10 years from the grant date, and generally vest within 5 years. Proceeds received by the Company from
exercises are credited to Common Stock and capital in excess of par value. Additional information with respect to stock option plan activity is
as follows:
(IN MILLIONS) 1998 1997 1996
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Computed expected tax $3,198 $3,731 $2,777
State taxes, net of federal benefits 208 249 186
Foreign income taxed at different rates (339) (111) (127)
Other 2 (155) (59)
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PROVISION FOR TAXES $3,069 $3,714 $2,777
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(IN MILLIONS) 1998 1997
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DEFERRED TAX ASSETS
Accrued compensation and benefits $117 $ 76
Deferred income 181 200
Inventory valuation and related reserves 106 163
Interest and taxes 52 49
Other, net 162 188
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618 676
DEFERRED TAX LIABILITIES
Depreciation (911) (882)
Unremitted earnings of certain subsidiaries (152) (162)
Unrealized gain on investments (324) (32)
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(1,387) (1,076)
NET DEFERRED TAX (LIABILITY) ------ ------
$ (769) $ (400)
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OUTSTANDING OPTIONS
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WEIGHTED
SHARE AVERAGE
AVAILABLE FOR NUMBER EXERCISE
(IN MILLIONS) OPTIONS OF SHARES PRICE
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DECEMBER 30, 1995 173.8 342.0 $ 5.30
Grants (53.4) 53.4 $17.28
Exercises -- (47.4) $ 2.47
Cancellations 10.2 (10.2) $ 8.53
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