Intel 2003 Annual Report Download - page 43

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Table of Contents
Index to Financial Statements
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Gains (Losses) on Equity Securities, Interest and Other, and Taxes
Losses on equity securities, net, interest and other, net and taxes for the three years ended December 27, 2003 were as follows:
Losses on equity securities and certain equity derivatives for 2003 were $283 million compared to $372 million for 2002. The net loss for
2003 included impairment charges of approximately $319 million, primarily related to non-marketable equity securities, compared to
impairment charges of approximately $524 million in 2002. The decrease in the impairment charges in 2003 reflected the decrease in the total
carrying amount of the non-marketable equity investment portfolio. The impairment charges in 2002 were partially offset by net gains of
approximately $57 million related to equity security trading assets and $110 million of net gains on related equity derivatives. The $57 million
net gains included a gain of approximately $120 million, resulting from the designation of formerly restricted equity investments as trading
assets as they became marketable. The cumulative difference between their cost and fair market value at the time they became marketable was
recorded as a gain in 2002. For 2001, the net loss of $466 million included impairments of $1.1 billion, partially offset by net gains on
transactions of $517 million and net mark-to-market gains on equity security trading assets and derivatives of $90 million.
Our effective income tax rate was 24.2% in 2003, 25.9% in 2002 and 40.9% in 2001. The decrease in the effective tax rate in 2003 was
primarily attributed to tax benefits of $758 million related to divestitures that closed during the year. Although the pre-tax losses on the
divestitures for financial statement purposes were not significant, the company was able to recognize tax losses because the tax basis in the
stock of the companies sold exceeded the book basis. The impact of these benefits was partially offset by the non-deductible goodwill
impairment and a higher percentage of profits in higher tax jurisdictions. The decrease in the effective rate in 2002 compared to 2001 was
primarily attributed to a decrease in non-deductible acquisition-related costs, including amortization of goodwill, and tax benefits of $75
million related to divestitures during 2002, partially offset by a greater portion of our profits being generated in higher tax jurisdictions. See
“Business Outlook” for a discussion of our income tax rate expectations.
40
(In Millions)
2003
2002
2001
Losses on equity securities, net
$
(283
)
$
(372
)
$
(466
)
Interest and other, net
$
192
$
194
$
393
Provision for taxes
$
1,801
$
1,087
$
892