Intel 2001 Annual Report Download - page 39

Our effective income tax rate was 40.9% in 2001, 30.4% in 2000 and 34.9% in 1999. Excluding the impact of non-deductible IPR&D charges, amortization of non-deductible goodwill,
and tax benefits related to prior years of $100 million in 2001 and $600 million in 2000, our adjusted effective tax rate was 25.7% in 2001, 31.8% in 2000 and 33% in 1999. The lower
adjusted rate in 2001 compared to 2000 was due to a shift in the mix of income in various tax jurisdictions. The lower adjusted rate in 2000 compared to 1999 reflected the impact of the
resolution reached with the Internal Revenue Service in 2000 on a number of issues, including adjustments related to the intercompany allocation of profits.
Purchased in
-process research and development
The following table summarizes the significant assumptions underlying the valuations related to IPR&D from major companies acquired at the time of acquisition in fiscal 2001, 2000
and 1999.
Included below are further details regarding the technology acquired in these transactions.
2001 acquisitions > In March, we acquired Xircom, Inc., which specializes in PC cards and other products used to connect mobile computing devices to corporate networks and the Internet.
Xircom had 20 IPR&D projects, each contributing from 1% to 24% of the total IPR&D value. The in-process projects included the development of next-generation PC card devices for
portable computing connectivity that support various computing standards. These projects ranged from 5% to 86% complete. All projects had expected completion dates in 2001 at the time
of acquisition. Expected completion dates for three projects comprising 30% of the total IPR&D value were revised to 2002, and nine additional projects representing 33% of the total
IPR&D value were cancelled in the third quarter of 2001 in order to focus on core competencies and the next generation of current products. Xircom's remaining projects were completed as
scheduled.
In April, we acquired VxTel Inc., which designs signal and packet processing silicon and system-level solutions that form the foundation for next-generation optical networks. VxTel had
two IPR&D projects, with its digital signal processor project accounting for 89% of the total IPR&D value. The project was 84% complete at the time of acquisition and was completed in
2001.
In May, we acquired LightLogic, Inc., which designs advanced opto-electronic modules for next-generation optical communications systems. LightLogic had four IPR&D projects, each
contributing from 8% to 52% of the total IPR&D value. These projects ranged from 40% to 80% complete and had expected completion dates in 2001 at the time of acquisition. Two projects
have been completed, and the remaining two projects are expected to be completed in 2002.
2000 acquisitions > In March, we acquired GIGA A/S. GIGA specializes in the design of advanced, high-speed communications chips used in optical networking and communications
products that direct traffic across the Internet and corporate networks. One project accounted for 73% of the IPR&D value and was approximately 61% complete at the time of acquisition.
This project was completed on schedule in 2000.
1999 acquisitions > In July, we acquired Dialogic Corporation. Dialogic designs, manufactures and markets computer hardware and software enabling technology for computer telephony
systems. Two projects accounted for 65% of the value assigned to IPR&D and were 55% to 60% complete at the time of acquisition. Dialogic's projects have been completed.
In August, we acquired Level One Communications, Inc. Level One provides silicon connectivity, switching and access solutions for high-speed telecommunications, and networking
applications. Eight IPR&D projects were identified and valued, ranging from 39% to 86% complete at the time of acquisition. Level One's projects have been completed.
In November, we acquired DSP Communications, Inc. DSP Communications develops and supplies form-
fit reference designs, chipsets and software for mobile telephone manufacturers.
Four IPR&D projects were identified and valued, with each project representing from 9% to 31% of the total IPR&D value and ranging from 10% to 90% complete at the time of acquisition.
Significant portions of three projects, representing 73% of the value assigned to IPR&D, have been cancelled, with technology development efforts refocused on next-generation standards.
Projects completed represented approximately 23% of the value assigned to IPR&D.
Financial condition
Although 2001 was a difficult year, our financial condition remained strong. At December 29, 2001, cash, short-term investments and trading assets totaled $11.6 billion, down from
$13.8 billion at December 30, 2000. Total short-term and long-term debt of $1.5 billion was 4% of stockholders' equity at the end of 2001, compared to 3% of stockholders' equity at the end
of 2000. At the end of 2001, we had future operating lease obligations not included on our balance sheet totaling $610 million, primarily related to facilities. In addition, at the end of 2001,
we had contractual obligations of $1.9 billion for the purchase or construction of property, plant and equipment. See "Outlook" for a discussion of capital expenditure expectations for 2002.
For 2001, cash provided by operating activities was $8.7 billion, compared to $12.8 billion in 2000 and $12.1 billion in 1999. Although unit sales were down significantly in 2001, we
ended the year with inventory levels approximately the same as at the end of 2000. Raw materials and finished goods inventory decreased, offset by an increase in work-in-process inventory
associated with the ramp of the
Pentium 4 processor and the 0.13-micron manufacturing process technology. For 2001, accounts receivable decreased significantly, primarily due to the lower revenues, but the days' sales
(Dollars in millions) IPR&D
Estimated
cost to
complete
technology
Discount
rate
applied to
IPR&D
Weighted
average
cost of
capital
2001
Xircom $
53
$
7
25—
55
%
22
%
VxTel $
68
$
14
25—
35
%
22
%
LightLogic
$
46
$
7
25
—
35
%
23
%
2000
GIGA
$
52
$
12
20
%
15
%
1999
Dialogic $
83
$
32
22
%
17
%
Level One
$
231
$
19
30
%
23
%
DSP Communications $
59
$
13
20
%
17
%