Intel 2002 Annual Report Download - page 31

IPR&D value. The project was 84% complete at the time of acquisition and was completed in 2001.
In May, we acquired LightLogic, which designed 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 were completed in 2001, and the remaining projects
were completed in 2002.
2000 Acquisition. In March, we acquired GIGA. GIGA specialized 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.
Financial Condition
Our financial condition remains strong. At December 28, 2002, cash, short-
term investments and debt instruments included in trading assets
totaled $12.2 billion, up from $11.2 billion at December 29, 2001. At December 28, 2002, total short-term and long-term debt was $1.4 billion
and represented 4% of stockholders' equity. At December 29, 2001, total debt was $1.5 billion and also represented 4% of stockholders' equity.
At the end of 2002, we had future operating lease obligations not included on our balance sheet totaling $504 million, primarily related to
facilities. In addition, at the end of 2002, we had contractual obligations not included on our balance sheet of $2.0 billion for the purchase or
construction of property, plant and equipment and $75 million for acquisition-related deferred cash compensation. See "Outlook" for a
discussion of capital expenditure expectations for 2003.
36
For 2002, cash provided by operating activities was $9.1 billion, compared to $8.8 billion in 2001 and $12.8 billion in 2000. Cash was
provided by net income adjusted for non-cash related items. Decreases in accounts payable, as we lowered our overall spending in 2002, were
offset by increases in compensation accruals and taxes payable, and inventory and receivables were relatively flat. For 2002, our three largest
customers accounted for approximately 38% of net revenue, with one of these customers accounting for approximately 16% of revenue and
another accounting for approximately 15%. At December 28, 2002, these three largest customers accounted for approximately 39% of net
accounts receivable.
We used $5.8 billion in net cash for investing activities during 2002, compared to $330 million during 2001 and $10.0 billion during 2000.
The increase in cash used for investing activities compared to 2001 reflected net sales and maturities of available-for-
sale investments in 2001 as
we shifted our portfolio of investments in debt securities to shorter term maturities and a larger portion of the portfolio was classified as cash
equivalents. At the same time, capital expenditures decreased to $4.7 billion in 2002 as we continued to invest in property, plant and equipment,
primarily for additional microprocessor manufacturing capacity, but at a lower rate than in the prior two years. Capital expenditures were
$7.3 billion in 2001 and $6.7 billion in 2000. In addition, the net cash paid for acquisitions decreased to approximately $57 million in 2002
($883 million in 2001 and $2.3 billion in 2000).
We used $3.9 billion in net cash for financing activities in 2002, relatively flat compared to prior years. The major financing uses of cash in
all three years were for the repurchase of shares and payment of dividends. In 2002, we purchased 183 million shares of common stock for
$4.0 billion (also $4.0 billion in 2001 and 2000). Payment of dividends was $533 million in 2002 ($538 million in 2001 and $470 million in
2000). Financing sources of cash during 2002 were primarily $681 million in proceeds from the sale of shares pursuant to employee stock plans
($762 million in 2001 and $797 million in 2000).
Another potential source of liquidity is authorized borrowings, including commercial paper, of $3.0 billion. Maximum borrowings under
our commercial paper program during 2002 were approximately $240 million, although no commercial paper was outstanding at the end of the
period. We also maintain the ability to issue an aggregate of approximately $1.4 billion in debt, equity and other securities under U.S. Securities
and Exchange Commission shelf registration statements.
We believe that we have the financial resources needed to meet business requirements for the next 12 months, including capital
expenditures for the expansion or upgrading of worldwide manufacturing capacity, working capital requirements, the dividend program and
potential future acquisitions or strategic investments.
Employee Stock Options
Our stock option program is a broad-based, long-term retention program that is intended to attract and retain talented employees and align
stockholder and employee interests. The program currently consists of two plans: one under which officers, key employees and non-employee
directors may be granted options to purchase shares of our stock, and a broad-based plan under which options may be granted to all employees
other than officers and directors. Substantially all of our employees participate in one of the plans. Options granted by the company expire no
later than 10 years from the grant date and generally vest within 5 years. In order to improve the competitiveness and retention value of this
program, options granted in 2003 are generally expected to vest in annual increments over 4 years.