Intel 2014 Annual Report Download - page 33

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to
the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations,
financial condition, and cash flows. MD&A is organized as follows:
•Overview. Discussion of our business and overall analysis of financial and other highlights affecting the company in order to
provide context for the remainder of MD&A.
•Critical Accounting Estimates. Accounting estimates that we believe are most important to understanding the assumptions
and judgments incorporated in our reported financial results and forecasts.
•Results of Operations. Analysis of our financial results comparing 2014 to 2013 and comparing 2013 to 2012.
•Liquidity and Capital Resources. Analysis of changes in our balance sheets and cash flows, and discussion of our financial
condition and potential sources of liquidity.
•Fair Value of Financial Instruments. Discussion of the methodologies used in the valuation of our financial instruments.
•Contractual Obligations and Off-Balance-Sheet Arrangements. Overview of contractual obligations, contingent liabilities,
commitments, and off-balance-sheet arrangements outstanding as of December 27, 2014, including expected payment
schedule.
The various sections of this MD&A contain a number of forward-looking statements that involve a number of risks and
uncertainties. Words such as “anticipates,” “expects,” “intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,”
“may,” “will,” “should,” and variations of such words and similar expressions are intended to identify such forward-looking
statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and
trends in our businesses, uncertain events or assumptions, and other characterizations of future events or circumstances are
forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties
and risk factors described throughout this filing and particularly in “Risk Factors” in Part I, Item 1A of this Form 10-K. Our actual
results may differ materially, and these forward-looking statements do not reflect the potential impact of any divestitures, mergers,
acquisitions, or other business combinations that had not been completed as of February 13, 2015.
Overview
Our results of operations for each period were as follows:
Three Months Ended Twelve Months Ended
(Dollars in Millions, Except Per Share Amounts)
Dec 27,
2014
Dec 28,
2013 Change
Dec 27,
2014
Dec 28,
2013 Change
Net revenue ................................ $ 14,721 $ 13,834 $ 887 $ 55,870 $ 52,708 $ 3,162
Gross margin ............................... $ 9,621 $ 8,571 $ 1,050 $ 35,609 $ 31,521 $ 4,088
Gross margin percentage ..................... 65.4% 62.0% 3.4% 63.7% 59.8% 3.9%
Operating income ............................ $ 4,453 $ 3,549 $ 904 $ 15,347 $ 12,291 $ 3,056
Net income ................................. $ 3,661 $ 2,625 $ 1,036 $ 11,704 $ 9,620 $ 2,084
Diluted earnings per share of common stock ....... $ 0.74 $ 0.51 $ 0.23 $ 2.31 $ 1.89 $ 0.42
Our results for Q4 2014 were a strong finish to a great year. We achieved record net revenue of $14.7 billion, up 6% from Q4
2013. We achieved increased net revenue and unit sales growth in the PCCG segment, with net revenue up 3% and operating
profit up 18% from Q4 2013. DCG achieved 25% net revenue growth and 39% operating income growth from Q4 2013. We saw a
moderate increase in net inventory levels from Q3 2014 as we are efficiently managing capacity while ramping our 5th generation
Intel Core processor family on 14nm, code-named “Broadwell.” The worldwide PC supply chain appears to be healthy, with
inventory levels appropriate as we enter Q1 2015.
Gross margin improved by approximately three and a half percentage points from Q4 2013. The increase from Q4 2013 was
primarily due to lower factory start-up costs, lower PCCG and DCG platform (Platform) unit costs, higher Platform average selling
prices, and higher Platform unit sales. These items were partially offset by the impact of higher cash consideration associated
with our tablet platform and higher production costs on our 14nm products treated as period charges.
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