Intel 2010 Annual Report Download - page 62

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Table of Contents
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Liquidity
Cash generated by operations is our primary source of liquidity. As of December 25, 2010, cash and cash equivalents,
marketable debt instruments included in trading assets, and short-term investments totaled $21.5 billion. In addition to the
$21.5 billion, we have $3.9 billion in loans receivable and other long-term investments that we include when assessing our
investment portfolio. In the first quarter of 2011, we completed the acquisition of the WLS business of Infineon. Total net cash
consideration for the acquisition is estimated at $1.4 billion. For further information, see “Note 15: Acquisitions” in Part II,
Item 8 of this Form 10-K.
Substantially all of our investments in debt instruments are with A/A2 or better rated issuers, and a substantial majority of the
issuers are rated AA-/Aa3 or better.
Our commercial paper program provides another potential source of liquidity. We have an ongoing authorization from our
Board of Directors to borrow up to $3.0 billion, including through the issuance of commercial paper. Maximum borrowings
under our commercial paper program during 2010 were $150 million, although no commercial paper remained outstanding as
of December 25, 2010. Our commercial paper was rated A-1+ by Standard & Poor’s and P-1 by Moody’s as of December 25,
2010. We also have an automatic shelf registration statement on file with the SEC, pursuant to which we may offer an
unspecified amount of debt, equity, and other securities.
We believe that we have the financial resources needed to meet our business requirements for the next 12 months, including
capital expenditures for worldwide manufacturing and assembly and test; working capital requirements; and potential
dividends, common stock repurchases, and acquisitions or strategic investments.
Fair Value of Financial Instruments
When determining fair value, we consider the principal or most advantageous market in which we would transact, and we
consider assumptions that market participants would use when pricing the asset or liability. For further information, see “Fair
Value” in “Note 2: Accounting Policies” in Part II, Item 8 of this Form 10-K.
Credit risk is factored into the valuation of financial instruments that we measure and record at fair value on a recurring basis.
When fair value is determined using pricing models, such as a discounted cash flow model, the issuer’s credit risk
and/or Intel’s credit risk is factored into the calculation of the fair value, as appropriate.
Marketable Debt Instruments
As of December 25, 2010, our assets measured and recorded at fair value on a recurring basis included $24 billion of
marketable debt instruments. Of these instruments, $7 billion was classified as Level 1, $16.7 billion as Level 2, and $308
million as Level 3.
Our balance of marketable debt instruments that are measured and recorded at fair value on a recurring basis and classified as
Level 1 was classified as such due to the use of observable market prices for identical securities that are traded in active
markets. Management judgment was required to determine the levels for the frequency of transactions that should be met for a
market to be considered active. Our assessment of an active market for our marketable debt instruments generally takes into
consideration the number of days each individual instrument trades over a specified period.
Of the $16.7 billion balance of marketable debt instruments measured and recorded at fair value on a recurring basis and
classified as Level 2, approximately 45% of the balance was classified as Level 2 due to the use of a discounted cash flow
model and approximately 55% due to the use of non-binding market consensus prices that are corroborated with observable
market data.
Our marketable debt instruments that are measured and recorded at fair value on a recurring basis and classified as Level 3
were classified as such due to the lack of observable market data to corroborate either the non-
binding market consensus prices
or the non-binding broker quotes. When observable market data is not available, we corroborate the non-binding market
consensus prices and non-binding broker quotes using unobservable data, if available.
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