10-Q 1 a10qdocument3282015.htm 10-Q 10Q Document 3.28.2015


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended March 28, 2015.
Or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from                  to                 
Commission File Number 000-06217
INTEL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
94-1672743
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
2200 Mission College Boulevard, Santa Clara, California
 
95054-1549
(Address of principal executive offices)
 
(Zip Code)
(408) 765-8080
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  þ    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer  ¨
 
Non-accelerated filer  ¨
 
Smaller reporting company  ¨
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
Shares outstanding of the Registrant’s common stock:
Class
 
Outstanding as of April 17, 2015
Common stock, $0.001 par value
 
4,744 million




PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
 
 
Three Months Ended
(In Millions, Except Per Share Amounts)
 
Mar 28,
2015
 
Mar 29,
2014
Net revenue
 
$
12,781

 
$
12,764

Cost of sales
 
5,051

 
5,151

Gross margin
 
7,730

 
7,613

Research and development
 
2,995

 
2,846

Marketing, general and administrative
 
1,953

 
2,047

Restructuring and asset impairment charges
 
105

 
137

Amortization of acquisition-related intangibles
 
62

 
73

Operating expenses
 
5,115

 
5,103

Operating income
 
2,615

 
2,510

Gains (losses) on equity investments, net
 
32

 
48

Interest and other, net
 
26

 
112

Income before taxes
 
2,673

 
2,670

Provision for taxes
 
681

 
740

Net income
 
$
1,992

 
$
1,930

Basic earnings per share of common stock
 
$
0.42

 
$
0.39

Diluted earnings per share of common stock
 
$
0.41

 
$
0.38

Cash dividends declared per share of common stock
 
$
0.48

 
$
0.45

Weighted average shares of common stock outstanding:
 
 
 
 
Basic
 
4,741

 
4,974

Diluted
 
4,914

 
5,117

See accompanying notes.

2



INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
 
Three Months Ended
(In Millions)
 
Mar 28,
2015
 
Mar 29,
2014
Net income
 
$
1,992

 
$
1,930

Other comprehensive income, net of tax:
 
 
 
 
Change in net unrealized holding gains (losses) on available-for-sale investments
 
(342
)
 
(77
)
Change in deferred tax asset valuation allowance
 
(3
)
 
(2
)
Change in net unrealized holding gains (losses) on derivatives
 
(89
)
 
14

Change in net prior service (costs) credits
 
2

 
(42
)
Change in actuarial valuation
 
12

 
(2
)
Change in net foreign currency translation adjustment
 
(178
)
 
22

Other comprehensive income (loss)
 
(598
)
 
(87
)
Total comprehensive income
 
$
1,394

 
$
1,843

See accompanying notes.

3



INTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
4,244

 
$
2,561

Short-term investments
 
1,864

 
2,430

Trading assets
 
8,010

 
9,063

Accounts receivable, net
 
3,246

 
4,427

Inventories
 
4,418

 
4,273

Deferred tax assets
 
2,048

 
1,958

Other current assets
 
2,636

 
3,018

Total current assets
 
26,466

 
27,730

 
 
 
 
 
Property, plant and equipment, net of accumulated depreciation of $47,990 ($46,471 as of December 27, 2014)
 
33,296

 
33,238

Marketable equity securities
 
6,549

 
7,097

Other long-term investments
 
1,675

 
2,023

Goodwill
 
10,766

 
10,861

Identified intangible assets, net
 
4,211

 
4,446

Other long-term assets
 
6,603

 
6,561

Total assets
 
$
89,566

 
$
91,956

 
 
 
 
 
Liabilities, temporary equity, and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Short-term debt
 
$
1,121

 
$
1,604

Accounts payable
 
2,775

 
2,748

Accrued compensation and benefits
 
2,011

 
3,475

Accrued advertising
 
1,014

 
1,092

Deferred income
 
2,196

 
2,205

Other accrued liabilities
 
5,918

 
4,895

Total current liabilities

15,035

 
16,019

 
 
 
 
 
Long-term debt
 
12,112

 
12,107

Long-term deferred tax liabilities
 
3,462

 
3,775

Other long-term liabilities
 
3,125

 
3,278

Contingencies (Note 19)
 

 

Temporary equity
 
908

 
912

Stockholders’ equity:
 
 
 
 
Preferred stock
 

 

Common stock and capital in excess of par value, 4,742 shares issued and outstanding (4,752 issued and 4,748 outstanding as of December 27, 2014)
 
22,395

 
21,781

Accumulated other comprehensive income (loss)
 
68

 
666

Retained earnings
 
32,461

 
33,418

Total stockholders’ equity
 
54,924

 
55,865

Total liabilities, temporary equity, and stockholders’ equity
 
$
89,566

 
$
91,956

See accompanying notes.

4



INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
 
 
 
Three Months Ended
(In Millions)
 
Mar 28,
2015
 
Mar 29,
2014
Cash and cash equivalents, beginning of period
 
$
2,561

 
$
5,674

Cash flows provided by (used for) operating activities:
 
 
 
 
Net income
 
1,992

 
1,930

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation
 
1,848

 
1,720

Share-based compensation
 
368

 
283

Restructuring and asset impairment charges
 
105

 
137

Excess tax benefit from share-based payment arrangements
 
(22
)
 
(7
)
Amortization of intangibles
 
251

 
287

(Gains) losses on equity investments, net
 
(32
)
 
(48
)
Deferred taxes
 
(171
)
 
(25
)
Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
1,167

 
78

Inventories
 
(137
)
 
405

Accounts payable
 
(71
)
 
(95
)
Accrued compensation and benefits
 
(1,659
)
 
(1,229
)
Income taxes payable and receivable
 
221

 
200

Other assets and liabilities
 
555

 
(135
)
Total adjustments
 
2,423

 
1,571

Net cash provided by operating activities
 
4,415

 
3,501

 
 
 
 
 
Cash flows provided by (used for) investing activities:
 
 
 
 
Additions to property, plant and equipment
 
(2,025
)
 
(2,689
)
Acquisitions, net of cash acquired
 
(57
)
 
(108
)
Purchases of available-for-sale investments
 
(139
)
 
(2,509
)
Sales of available-for-sale investments
 
43

 
174

Maturities of available-for-sale investments
 
1,079

 
2,913

Purchases of trading assets
 
(2,475
)
 
(3,225
)
Maturities and sales of trading assets
 
3,398

 
2,693

Investments in non-marketable equity investments
 
(278
)
 
(144
)
Other investing
 
5

 
146

Net cash used for investing activities
 
(449
)
 
(2,749
)
 
 
 
 
 
Cash flows provided by (used for) financing activities:
 
 
 
 
Increase (decrease) in short-term debt, net
 
(486
)
 
(245
)
Excess tax benefit from share-based payment arrangements
 
22

 
7

Proceeds from sales of common stock through employee equity incentive plans
 
341

 
479

Repurchase of common stock
 
(750
)
 
(545
)
Restricted stock unit withholdings
 
(51
)
 
(27
)
Payment of dividends to stockholders
 
(1,137
)
 
(1,119
)
Collateral associated with repurchase of common stock
 
325

 

Decrease in liability due to return of collateral associated with repurchase of common stock
 
(325
)
 

Other financing
 
(213
)
 
(200
)
Net cash used for financing activities
 
(2,274
)
 
(1,650
)
 
 
 
 
 
Effect of exchange rate fluctuations on cash and cash equivalents
 
(9
)
 
1

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
1,683

 
(897
)
 
 
 
 
 
Cash and cash equivalents, end of period
 
$
4,244

 
$
4,777

 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Income taxes, net of refunds
 
$
596

 
$
571

See accompanying notes.

5



INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited
Note 1: Basis of Presentation
We prepared our interim consolidated condensed financial statements that accompany these notes in conformity with U.S. generally accepted accounting principles, consistent in all material respects with those applied in our Annual Report on Form 10-K for the year ended December 27, 2014. We have reclassified certain prior period amounts to conform to current period presentation.
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Fiscal year 2016 is a 53-week fiscal year, and the first quarter of 2016 will be a 14-week quarter.
We have made estimates and judgments affecting the amounts reported in our consolidated condensed financial statements and the accompanying notes. The actual results that we experience may differ materially from our estimates. The interim financial information is unaudited, but reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 27, 2014.
Note 2: Recent Accounting Standards
In May 2014, the Financial Accounting Standards Board issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. As currently issued, the new standard is effective beginning in the first quarter of 2017; early adoption is prohibited. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. We have not yet selected a transition method nor have we determined the impact of the new standard on our consolidated condensed financial statements.
Note 3: Fair Value
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 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. Our financial assets are measured and recorded at fair value, except for cost method investments, cost method loans receivable, equity method investments, grants receivable, and reverse repurchase agreements with original maturities greater than approximately three months. Substantially all of our liabilities are not measured and recorded at fair value.
Fair Value Hierarchy
The three levels of inputs that may be used to measure fair value are as follows:
Level 1. Quoted prices in active markets for identical assets or liabilities.
Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets, or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. Level 2 inputs also include non-binding market consensus prices that can be corroborated with observable market data, as well as quoted prices that were adjusted for security-specific restrictions.
Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. Level 3 inputs also include non-binding market consensus prices or non-binding broker quotes that we were unable to corroborate with observable market data.

6

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
Assets and liabilities measured and recorded at fair value on a recurring basis at the end of each period were as follows: 
 
 
March 28, 2015
 
December 27, 2014
 
 
Fair Value Measured and Recorded at Reporting Date Using
 
 
 
Fair Value Measured and Recorded at Reporting Date Using
 
 
(In Millions)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 
$

 
$
742

 
$

 
$
742

 
$

 
$
48

 
$

 
$
48

Financial institution instruments
 
226

 
2,172

 

 
2,398

 
321

 
1,119

 

 
1,440

Government debt
 

 
50

 

 
50

 

 

 

 

Reverse repurchase agreements
 

 
238

 

 
238

 

 
268

 

 
268

Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 
262

 
509

 
32

 
803

 
363

 
412

 
31

 
806

Financial institution instruments
 
100

 
502

 

 
602

 
149

 
1,050

 

 
1,199

Government debt
 
108

 
351

 

 
459

 
252

 
173

 

 
425

Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
 

 
668

 
40

 
708

 

 
766

 
58

 
824

Corporate debt
 
1,922

 
576

 

 
2,498

 
2,625

 
339

 

 
2,964

Financial institution instruments
 
950

 
615

 

 
1,565

 
1,146

 
613

 

 
1,759

Government debt
 
1,077

 
2,162

 

 
3,239

 
1,295

 
2,221

 

 
3,516

Other current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 

 
776

 
2

 
778

 

 
559

 
2

 
561

Loans receivable
 

 
332

 

 
332

 

 
505

 

 
505

Marketable equity securities
 
6,487

 

 
62

 
6,549

 
7,097

 

 

 
7,097

Other long-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
 

 
2

 
4

 
6

 

 
2

 
4

 
6

Corporate debt
 
542

 
519

 
13

 
1,074

 
453

 
728

 
13

 
1,194

Financial institution instruments
 
197

 
255

 

 
452

 
189

 
319

 

 
508

Government debt
 
68

 
75

 

 
143

 
75

 
240

 

 
315

Other long-term assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 

 
68

 
16

 
84

 

 
35

 
22

 
57

Loans receivable
 

 
316

 

 
316

 

 
216

 

 
216

Total assets measured and recorded at fair value
 
11,939

 
10,928

 
169

 
23,036

 
13,965

 
9,613

 
130

 
23,708

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other accrued liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities
 

 
596

 
2

 
598

 

 
563

 

 
563

Other long-term liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities
 

 
13

 

 
13

 

 
17

 

 
17

Total liabilities measured and recorded at fair value
 
$

 
$
609

 
$
2

 
$
611

 
$

 
$
580

 
$

 
$
580

Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits.

7

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


During the first three months of 2015, we transferred corporate debt, government debt, and financial institution instruments of approximately $494 million from Level 1 to Level 2 of the fair value hierarchy and approximately $398 million from Level 2 to Level 1 ($123 million of corporate debt and government debt from Level 1 to Level 2 and $230 million of corporate debt, government debt, and financial institution instruments from Level 2 to Level 1 during the first three months of 2014). A substantial majority of these transfers were based on changes in market activity for the underlying securities. Our policy is to reflect transfers between the fair value hierarchy levels at the beginning of the quarter in which a change in circumstances resulted in the transfer.
Investments in Debt Instruments
Debt instruments reflected in the preceding table include investments such as asset-backed securities, corporate debt, financial institution instruments, government debt, and reverse repurchase agreements classified as cash equivalents. We classify our debt instruments as Level 2 when we use observable market prices for identical securities that are traded in less active markets. When observable market prices for identical securities are not available, we price the debt instruments using our own models, such as a discounted cash flow model, or non-binding market consensus prices based on the proprietary valuation models of pricing providers or brokers. We corroborate non-binding market consensus prices with observable market data using statistical models when observable market data exists, quoted market prices for similar instruments, or pricing models such as a discounted cash flow model. These valuation models incorporate a number of inputs, including non-binding and binding broker quotes; observable market prices for identical or similar instruments; and the internal assumptions of pricing providers or brokers that use observable market inputs and unobservable market inputs that we consider to be not significant. The discounted cash flow model uses observable market inputs, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. All significant inputs are derived from or corroborated with observable market data.
The fair values of debt instruments classified as Level 3 are generally derived from discounted cash flow models, performed either by us or our pricing providers, using inputs that we are unable to corroborate with observable market data. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes.
Fair Value Option for Loans Receivable
We elected the fair value option for loans receivable when the interest rate or currency exchange rate risk was hedged at inception with a related derivative instrument. As of March 28, 2015, the fair value of our loans receivable for which we elected the fair value option did not significantly differ from the contractual principal balance based on the contractual currency. Loans receivable are classified within other current assets and other long-term assets. Fair value is determined using a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Gains and losses from changes in fair value on the loans receivable and related derivative instruments, as well as interest income, are recorded in interest and other, net. During all periods presented, changes in the fair value of our loans receivable were largely offset by gains or losses on the related derivative instruments, resulting in an insignificant net impact on our consolidated condensed statements of income. Gains and losses attributable to changes in credit risk are determined using observable credit default spreads for the issuer or comparable companies; these gains and losses were insignificant during all periods presented. We did not elect the fair value option for loans receivable when the interest rate or currency exchange rate risk was not hedged at inception with a related derivative instrument. Loans receivable not measured and recorded at fair value are included in the following "Financial Instruments Not Recorded at Fair Value on a Recurring Basis" section.
Assets Measured and Recorded at Fair Value on a Non-Recurring Basis
Our non-marketable equity investments, marketable equity method investments, and non-financial assets, such as intangible assets and property, plant and equipment, are recorded at fair value only if an impairment is recognized.
Some of our non-marketable equity investments have been measured and recorded at fair value due to events or circumstances that significantly impacted the fair value of those investments, resulting in other-than-temporary impairments. We classified these investments as Level 3 because the valuations used unobservable inputs that were significant to the fair value measurements and required management judgment due to the absence of quoted market prices. Impairments recognized on non-marketable equity investments held as of March 28, 2015, were $38 million during the first three months of 2015 ($38 million during the first three months of 2014 on non-marketable equity investments held as of March 29, 2014).

8

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Financial Instruments Not Recorded at Fair Value on a Recurring Basis
On a quarterly basis, we measure the fair value of our grants receivable, cost method loans receivable, non-marketable cost method investments, reverse repurchase agreements with original maturities greater than approximately three months, and indebtedness carried at amortized cost; however, the assets are recorded at fair value only when an impairment is recognized. The carrying amounts and fair values of financial instruments not recorded at fair value on a recurring basis at the end of each period were as follows:
 
 
March 28, 2015
(In Millions)
 
Carrying
Amount
 
Fair Value Measured Using
 
Fair Value
Level 1
 
Level 2
 
Level 3
 
Grants receivable
 
$
660

 
$

 
$
662

 
$

 
$
662

Loans receivable
 
$
250

 
$

 
$
250

 
$

 
$
250

Non-marketable cost method investments
 
$
1,800

 
$

 
$

 
$
2,690

 
$
2,690

Reverse repurchase agreements
 
$
450

 
$

 
$
450

 
$

 
$
450

Short-term debt
 
$
1,092

 
$

 
$
1,734

 
$

 
$
1,734

Long-term debt
 
$
12,112

 
$
10,825

 
$
2,138

 
$

 
$
12,963

NVIDIA Corporation cross-license agreement liability
 
$
196

 
$

 
$
199

 
$

 
$
199

 
 
December 27, 2014
(In Millions)
 
Carrying
Amount
 
Fair Value Measured Using
 
Fair Value
Level 1
 
Level 2
 
Level 3
 
Grants receivable
 
$
676

 
$

 
$
679

 
$

 
$
679

Loans receivable
 
$
250

 
$

 
$
250

 
$

 
$
250

Non-marketable cost method investments
 
$
1,769

 
$

 
$

 
$
2,599

 
$
2,599

Reverse repurchase agreements
 
$
450

 
$

 
$
450

 
$

 
$
450

Short-term debt
 
$
1,588

 
$

 
$
2,145

 
$

 
$
2,145

Long-term debt
 
$
12,107

 
$
11,467

 
$
1,309

 
$

 
$
12,776

NVIDIA Corporation cross-license agreement liability
 
$
395

 
$

 
$
399

 
$

 
$
399

The fair value of our grants receivable is determined using a discounted cash flow model, which discounts future cash flows using an appropriate yield curve. As of March 28, 2015 and December 27, 2014, the carrying amount of our grants receivable was classified within other current assets and other long-term assets, as applicable.
The carrying amount and fair value of loans receivable exclude loans measured and recorded at a fair value of $648 million as of March 28, 2015 ($721 million as of December 27, 2014). The fair value of our loans receivable and reverse repurchase agreements, including those held at fair value, is determined using a discounted cash flow model. All significant inputs in the models are derived from or corroborated with observable market data, such as LIBOR-based yield curves, currency spot and forward rates, and credit ratings. The credit quality of these assets remains high, with credit ratings of A+/A1 for the majority of our loans receivable and reverse repurchase agreements as of March 28, 2015.

9

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


As of March 28, 2015 and December 27, 2014, the unrealized loss position of our non-marketable cost method investments was insignificant. Our non-marketable cost method investments are valued using a qualitative and quantitative analysis of events or circumstances that impact the fair value of the investment. Qualitative analysis of our investments involves understanding our investee’s revenue and earnings trends relative to pre-defined milestones and overall business prospects; the technological feasibility of our investee’s products and technologies; the general market conditions in the investee’s industry or geographic area, including adverse regulatory or economic changes; and the management and governance structure of the investee. Quantitative assessments of the fair value of our investments are developed using the market and income approaches. The market approach includes the use of financial metrics and ratios of comparable public companies, such as revenue, earnings, comparable performance multiples, recent financing rounds, the terms of the investees’ issued interests, and the level of marketability of the investments. The selection of comparable companies requires management judgment and is based on a number of factors, including comparable companies’ sizes, growth rates, industries, and development stages. The income approach includes the use of a discounted cash flow model, which requires significant estimates regarding investees’ revenue, costs, and discount rates based on the risk profile of comparable companies. Estimates of revenue and costs are developed using available market, historical, and forecast data.
The carrying amount and fair value of short-term debt exclude drafts payable. Our short-term debt recognized at amortized cost includes our 2009 junior subordinated convertible debentures due 2039 (2009 debentures). During the first quarter of 2015, the 2009 debentures were classified as short-term debt on the consolidated condensed balance sheets and convertible at the option of the holder during the second quarter of 2015. For further information, see the "Borrowings" note in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 27, 2014. Our long-term debt recognized at amortized cost is comprised of our senior notes and our convertible debentures. The fair value of most of our senior notes is determined using quoted prices in active markets, and is therefore classified as Level 1. The remaining senior notes are classified as level 2 due to quoted prices obtained from less active markets. The fair value of our 2009 and 2005 convertible debentures is determined using discounted cash flow models with observable market inputs, and takes into consideration variables such as interest rate changes, comparable instruments, subordination discount, and credit-rating changes, and is therefore classified as Level 2.
The NVIDIA Corporation (NVIDIA) cross-license agreement liability in the preceding table was incurred as a result of entering into a long-term patent cross-license agreement with NVIDIA in January 2011, pursuant to which we agreed to make payments to NVIDIA over six years. As of March 28, 2015 the carrying amount of the liability arising from the agreement was classified within other accrued liabilities based on the expected timing of the underlying payments ($200 million in January 2016 treated as cash used for financing activities). As of December 27, 2014, the carrying amount of the liability arising from the agreement was classified within other accrued liabilities and other long-term liabilities, based on the expected timing of the underlying payments ($200 million in each of January 2015 and 2016 treated as cash used for financing activities). The fair value is determined using a discounted cash flow model, which discounts future cash flows using our incremental borrowing rates.

10

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Note 4: Cash and Investments
Cash and investments at the end of each period were as follows:
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
Available-for-sale investments
 
$
13,278

 
$
13,038

Cash
 
816

 
805

Equity method investments
 
1,574

 
1,446

Loans receivable
 
898

 
971

Non-marketable cost method investments
 
1,800

 
1,769

Reverse repurchase agreements
 
688

 
718

Trading assets
 
8,010

 
9,063

Total cash and investments
 
$
27,064

 
$
27,810

Available-for-Sale Investments
Available-for-sale investments at the end of each period were as follows:
 
 
March 28, 2015
 
December 27, 2014
(In Millions)
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Asset-backed securities
 
$
8

 
$

 
$
(2
)
 
$
6

 
$
8

 
$

 
$
(2
)
 
$
6

Corporate debt
 
2,609

 
15

 
(5
)
 
2,619

 
2,040

 
13

 
(5
)
 
2,048

Financial institution instruments
 
3,452

 
1

 
(1
)
 
3,452

 
3,146

 
2

 
(1
)
 
3,147

Government debt
 
651

 
1

 

 
652

 
741

 

 
(1
)
 
740

Marketable equity securities
 
3,300

 
3,255

 
(6
)
 
6,549

 
3,318

 
3,779

 

 
7,097

Total available-for-sale investments
 
$
10,020

 
$
3,272

 
$
(14
)
 
$
13,278

 
$
9,253

 
$
3,794

 
$
(9
)
 
$
13,038

Government debt includes instruments such as non-U.S. government bonds and U.S. agency securities. Financial institution instruments include instruments issued or managed by financial institutions in various forms such as commercial paper, fixed and floating rate bonds, money market fund deposits, and time deposits. Substantially all time deposits were issued by institutions outside the U.S. as of March 28, 2015 and December 27, 2014.
For information on the unrealized holding gains (losses) on available-for-sale investments reclassified out of accumulated other comprehensive income (loss) into the consolidated condensed statements of income, see "Note 18: Other Comprehensive Income (Loss)."
During the first three months of 2015, we sold available-for-sale investments for proceeds of $43 million, none of which was related to sales of cash and cash equivalents ($279 million in the first three months of 2014 of which $105 million related to sales of cash and cash equivalents). The gross realized gains on sales of available-for-sale investments were $43 million in the first three months of 2015 ($67 million in the first three months of 2014).

11

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


The amortized cost and fair value of available-for-sale debt investments, by contractual maturity, as of March 28, 2015, were as follows:
(In Millions)
 
Cost
 
Fair Value
Due in 1 year or less
 
$
4,697

 
$
4,707

Due in 1–2 years
 
864

 
865

Due in 2–5 years
 
779

 
778

Instruments not due at a single maturity date
 
380

 
379

Total
 
$
6,720

 
$
6,729

Equity Method Investments
IM Flash Technologies, LLC
Micron Technology, Inc. (Micron) and Intel formed IM Flash Technologies, LLC (IMFT) in 2006 to manufacture NAND flash memory products for Micron and Intel. During 2012, we amended the operating agreement for IMFT and entered into agreements with Micron that modified our joint venture relationship.
The amended operating agreement extended the term of IMFT to 2024, unless earlier terminated under certain terms and conditions, and provides that IMFT may manufacture certain emerging memory technologies in addition to NAND flash memory. The amended agreement provides for certain buy-sell rights. Intel has the ability to cause Micron to buy our interest in IMFT. If we exercise this put right, Micron would set the closing date of the transaction within two years following such election and could elect to receive financing from us for one to two years. Subsequent to our put right, and commencing in January 2018, Micron has the right to call our interest in IMFT with the closing date to be effective within one year. Additionally, our agreements with Micron include a supply agreement for Micron to supply us with NAND flash memory products. These agreements also extend and expand our NAND joint development program with Micron to include emerging memory technologies.
As of March 28, 2015, we own a 49% interest in IMFT. The carrying value of our investment was $786 million as of March 28, 2015 ($713 million as of December 27, 2014) and is classified within other long-term assets.
IMFT is a variable interest entity. All costs of the IMFT joint venture will be passed on to Micron and Intel pursuant to our purchase agreements. Intel's portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $95 million in the first three months of 2015 (approximately $105 million in the first three months of 2014). The amount due to IMFT for product purchases and services provided was approximately $20 million as of March 28, 2015 (approximately $60 million as of December 27, 2014).
IMFT depends on Micron and Intel for any additional cash needs. Our known maximum exposure to loss approximated the carrying value of our investment balance in IMFT, which was $786 million as of March 28, 2015. Except for the amount due to IMFT for product purchases and services, we did not have any additional liabilities recognized on our consolidated condensed balance sheets in connection with our interests in this joint venture as of March 28, 2015. Our potential future losses could be higher than the carrying amount of our investment, as Intel and Micron are liable for other future operating costs or obligations of IMFT. Future cash calls could also increase our investment balance and the related exposure to loss. In addition, because we are currently committed to purchasing 49% of IMFT’s production output and production-related services, we may be required to purchase products at a cost in excess of realizable value.
We have determined that we do not have the characteristics of a consolidating investor in the variable interest entity and, therefore, we account for our interest in IMFT using the equity method of accounting.
Cloudera, Inc.
During 2014, we invested in Cloudera, Inc. (Cloudera). Our fully-diluted ownership interest in Cloudera is 17% as of March 28, 2015. Our investment is accounted for under the equity and cost methods of accounting based on the rights associated with different securities we own, and is classified within other long-term assets. The carrying value of our equity method investment was $278 million and of our cost method investment was $454 million as of March 28, 2015 ($280 million for our equity method investment and $454 million for our cost method investment as of December 27, 2014).


12

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Trading Assets
As of March 28, 2015 and December 27, 2014, substantially all of our trading assets were marketable debt instruments. Net losses related to trading assets still held at the reporting date were $200 million in the first three months of 2015 (net gains of $79 million in the first three months of 2014). Net gains on the related derivatives were $194 million in the first three months of 2015 (net losses of $82 million in the first three months of 2014).
Note 5: Inventories
We compute inventory cost on a first-in, first-out basis. Costs incurred to manufacture our products are included in the valuation of inventory beginning in the quarter in which a product meets the technical criteria to qualify for sale to customers. Prior to qualification for sale, costs that do not meet the criteria for research and development (R&D) are included in cost of sales in the period incurred. Inventories at the end of each period were as follows:
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
Raw materials
 
$
528

 
$
462

Work in process
 
2,190

 
2,375

Finished goods
 
1,700

 
1,436

Total inventories
 
$
4,418

 
$
4,273

Note 6: Derivative Financial Instruments
Our primary objective for holding derivative financial instruments is to manage currency exchange rate risk and interest rate risk, and, to a lesser extent, equity market risk, commodity price risk, and credit risk. When possible, we enter into master netting arrangements with counterparties to mitigate credit risk in derivative transactions. A master netting arrangement may allow counterparties to net settle amounts owed to each other as a result of multiple, separate derivative transactions. Generally, our master netting agreements allow for net settlement in case of certain triggering events such as bankruptcy or default of one of the counterparties to the transaction. We may also elect to exchange cash collateral with certain of our counterparties on a regular basis. For presentation on our consolidated condensed balance sheets, we do not offset fair value amounts recognized for derivative instruments under master netting arrangements. Our derivative financial instruments are recorded at fair value and are included in other current assets, other long-term assets, other accrued liabilities, or other long-term liabilities.
Currency Exchange Rate Risk
We are exposed to currency exchange rate risk, and generally hedge our exposures with currency forward contracts, currency interest rate swaps, or currency options. Substantially all of our revenue is transacted in U.S. dollars. However, a significant amount of our operating expenditures and capital purchases is incurred in or exposed to other currencies, primarily the euro, the Japanese yen, the Chinese yuan and the Israeli shekel. We have established balance sheet and forecasted transaction currency risk management programs to protect against fluctuations in the fair value and the volatility of the functional currency equivalent of future cash flows caused by changes in exchange rates. Our non-U.S.-dollar-denominated investments in debt instruments and loans receivable are generally hedged with offsetting currency forward contracts or currency interest rate swaps. We may also hedge currency risk arising from funding foreign currency denominated forecasted investments. These programs reduce, but do not eliminate, the impact of currency exchange movements.

13

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Our currency risk management programs include:
Currency derivatives with cash flow hedge accounting designation that utilize currency forward contracts and currency options to hedge exposures to the variability in the U.S.-dollar equivalent of anticipated non-U.S.-dollar-denominated cash flows. These instruments generally mature within 12 months. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated condensed statements of income as the impact of the hedged transaction.
Currency derivatives without hedge accounting designation that utilize currency forward contracts or currency interest rate swaps to economically hedge the functional currency equivalent cash flows of recognized monetary assets and liabilities, non-U.S.-dollar-denominated debt instruments classified as trading assets, and hedges of non-U.S.-dollar-denominated loans receivable are recognized at fair value. The substantial majority of these instruments mature within 12 months. Changes in the functional currency equivalent cash flows of the underlying assets and liabilities are approximately offset by the changes in the fair value of the related derivatives. We record net gains or losses in the line item on the consolidated condensed statements of income most closely associated with the related exposures, primarily in interest and other, net, except for equity-related gains or losses, which we primarily record in gains (losses) on equity investments, net.
Interest Rate Risk
Our primary objective for holding investments in debt instruments is to preserve principal while maximizing yields. We generally swap the returns on our investments in fixed-rate debt instruments with remaining maturities longer than six months into U.S. dollar three-month LIBOR-based returns, unless management specifically approves otherwise. These swaps are settled at various interest payment times involving cash payments at each interest and principal payment date, with the majority of the contracts having quarterly payments.
Our interest rate risk management programs include:
Interest rate derivatives with cash flow hedge accounting designation that utilize interest rate swap agreements to modify the interest characteristics of debt instruments. For these derivatives, we report the after-tax gain or loss from the effective portion of the hedge as a component of accumulated other comprehensive income (loss), and we reclassify it into earnings in the same period or periods in which the hedged transaction affects earnings, and in the same line item on the consolidated condensed statements of income as the impact of the hedged transaction.
Interest rate derivatives without hedge accounting designation that utilize interest rate swaps and currency interest rate swaps in economic hedging transactions, including hedges of non-U.S.-dollar-denominated debt instruments classified as trading assets and hedges of non-U.S.-dollar-denominated loans receivable recognized at fair value. Floating interest rates on the swaps generally reset on a quarterly basis. Changes in fair value of the debt instruments classified as trading assets and loans receivable recognized at fair value are generally offset by changes in the fair value of the related derivatives, both of which are recorded in interest and other, net.
Equity Market Risk
Our investments include marketable equity securities and equity derivative instruments. We typically do not attempt to reduce or eliminate our equity market exposure through hedging activities at the inception of our investments. Before we enter into hedge arrangements, we evaluate legal, market, and economic factors, as well as the expected timing of disposal to determine whether hedging is appropriate. Our equity market risk management program may include equity derivatives with or without hedge accounting designation that utilize warrants, equity options, or other equity derivatives. We recognize changes in the fair value of such derivatives in gains (losses) on equity investments, net. We also utilize total return swaps to offset changes in liabilities related to the equity market risks of certain deferred compensation arrangements. Gains and losses from changes in fair value of these total return swaps are generally offset by the losses and gains on the related liabilities, both of which are recorded in cost of sales and operating expenses.

14

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Volume of Derivative Activity
Total gross notional amounts for outstanding derivatives (recorded at fair value) at the end of each period were as follows: 
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
 
Mar 29,
2014
Currency forwards
 
$
16,192

 
$
15,578

 
$
11,729

Currency interest rate swaps
 
5,094

 
5,446

 
4,795

Embedded debt derivatives
 
3,600

 
3,600

 
3,600

Interest rate swaps
 
1,128

 
1,347

 
1,311

Total return swaps
 
1,106

 
1,056

 
989

Other
 
72

 
49

 
60

Total
 
$
27,192

 
$
27,076

 
$
22,484

The gross notional amounts for currency forwards and currency interest rate swaps (presented by currency) at the end of each period were as follows:
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
 
Mar 29,
2014
British pound sterling
 
$
314

 
$
410

 
$
487

Chinese yuan
 
4,079

 
3,097

 
1,291

Euro
 
7,332

 
7,486

 
6,199

Indian rupee
 
420

 
418

 
252

Israeli shekel
 
2,010

 
2,489

 
1,878

Japanese yen
 
4,206

 
3,779

 
3,542

Malaysian ringgit
 
827

 
902

 
524

Swiss franc
 
1,146

 
1,289

 
1,256

Other
 
952

 
1,154

 
1,095

Total
 
$
21,286

 
$
21,024

 
$
16,524

During 2014, we entered into a series of agreements with Tsinghua Unigroup Ltd. (Tsinghua Unigroup), an operating subsidiary of Tsinghua Holdings Co. Ltd., to, among other things, jointly develop Intel® architecture- and communications-based solutions for smartphones. Subject to regulatory approvals and other closing conditions, we have also agreed to invest up to 9.0 billion of Chinese yuan (approximately $1.5 billion as of the date of the agreement) for a minority stake of approximately 20% of the holding company under Tsinghua Unigroup. During the fourth quarter of 2014, we entered into $1.5 billion of forward contracts to hedge our anticipated equity funding of the Tsinghua Unigroup investment. The hedges were designated as cash flow hedges and the related gains and losses attributable to changes in the spot rates will be recognized in accumulated other comprehensive income (loss) until the Tsinghua Unigroup shares are either disposed of or impaired. As the shares are either disposed of or impaired, we will reclassify the gains or losses from accumulated other comprehensive income (loss) to gains (losses) on equity investments, net as an offset to the gain or loss recognized for the share disposal or impairment. Hedge gains and losses attributable to changes in the forward rates will be recognized in interest and other, net.

15

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets
The fair value of our derivative instruments at the end of each period were as follows:
 
 
March 28, 2015
 
December 27, 2014
(In Millions)
 
Other
Current
Assets
 
Other
Long-Term
Assets
 
Other
Accrued
Liabilities
 
Other
Long-Term
Liabilities
 
Other
Current
Assets
 
Other
Long-Term
Assets
 
Other
Accrued
Liabilities
 
Other
Long-Term
Liabilities
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Currency forwards
 
$
12

 
$
3

 
$
483

 
$
5

 
$
6

 
$
1

 
$
497

 
$
9

Total derivatives designated as hedging instruments
 
12

 
3

 
483

 
5

 
6

 
1

 
497

 
9

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Currency forwards
 
253

 

 
87

 

 
207

 

 
44

 

Currency interest rate swaps
 
510

 
65

 
12

 

 
344

 
34

 
7

 

Embedded debt derivatives
 

 

 
1

 
8

 

 

 
4

 
8

Interest rate swaps
 
1

 

 
13

 

 
3

 

 
11

 

Other
 
2

 
16

 
2

 

 
1

 
22

 

 

Total derivatives not designated as hedging instruments
 
766

 
81

 
115

 
8

 
555

 
56

 
66

 
8

Total derivatives
 
$
778

 
$
84

 
$
598

 
$
13

 
$
561

 
$
57

 
$
563

 
$
17



16

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Amounts Offset in the Consolidated Condensed Balance Sheets
The gross amounts of our derivative instruments and reverse repurchase agreements subject to master netting arrangements with various counterparties and cash and non-cash collateral posted under such agreements at the end of each period were as follows:
 
 
March 28, 2015
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheet
 
 
(In Millions)
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts Presented in the Balance Sheet
 
Financial Instruments
 
Cash and Non-Cash Collateral Received or Pledged
 
Net Amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets subject to master netting arrangements
 
$
818

 
$

 
$
818

 
$
(465
)
 
$
(231
)
 
$
122

Reverse repurchase agreements
 
688

 

 
688

 

 
(688
)
 

Total assets
 
$
1,506

 
$

 
$
1,506

 
$
(465
)
 
$
(919
)
 
$
122

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
$
585

 
$

 
$
585

 
$
(465
)
 
$
(49
)
 
$
71

Total liabilities
 
$
585

 
$

 
$
585

 
$
(465
)
 
$
(49
)
 
$
71

 
 
December 27, 2014
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Balance Sheet
 
 
(In Millions)
 
Gross Amounts Recognized
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts Presented in the Balance Sheet
 
Financial Instruments
 
Cash and Non-Cash Collateral Received or Pledged
 
Net Amount
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets subject to master netting arrangements
 
$
559

 
$

 
$
559

 
$
(365
)
 
$
(78
)
 
$
116

Reverse repurchase agreements
 
718

 

 
718

 

 
(718
)
 

Total assets
 
$
1,277

 
$

 
$
1,277

 
$
(365
)
 
$
(796
)
 
$
116

Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities subject to master netting arrangements
 
$
559

 
$

 
$
559

 
$
(365
)
 
$
(80
)
 
$
114

Total liabilities
 
$
559

 
$

 
$
559

 
$
(365
)
 
$
(80
)
 
$
114


17

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Derivatives in Cash Flow Hedging Relationships
The before-tax gains (losses), attributed to the effective portion of cash flow hedges, recognized in other comprehensive income (loss) for each period were as follows:
 
 
Three Months Ended
(In Millions)
 
Mar 28,
2015
 
Mar 29,
2014
Currency forwards
 
$
(229
)
 
$
35

Other
 

 
(2
)
Total
 
$
(229
)
 
$
33

Gains and losses on derivative instruments in cash flow hedging relationships related to hedge ineffectiveness and amounts excluded from effectiveness testing, were insignificant during all periods presented in the preceding tables. Additionally, for all periods presented, there was an insignificant impact on results of operations from discontinued cash flow hedges, which arises when forecasted transactions are probable of not occurring.
For information on the unrealized holding gains (losses) on derivatives reclassified out of accumulated other comprehensive income into the consolidated condensed statements of income, see "Note 18: Other Comprehensive Income (Loss)."
Derivatives Not Designated as Hedging Instruments
The effects of derivative instruments not designated as hedging instruments on the consolidated condensed statements of income for each period were as follows:
 
 
 
 
Three Months Ended
(In Millions)
 
Location of Gains (Losses)
Recognized in Income on Derivatives
 
Mar 28,
2015
 
Mar 29,
2014
Currency forwards
 
Interest and other, net
 
$
(18
)
 
$
(15
)
Currency interest rate swaps
 
Interest and other, net
 
253

 
(54
)
Interest rate swaps
 
Interest and other, net
 
(6
)
 

Total return swaps
 
Various
 
31

 
13

Other
 
Gains (losses) on equity investments, net
 
(9
)
 
1

Total
 
 
 
$
251

 
$
(55
)
Note 7: Acquisitions
During the first three months of 2015, we completed one acquisition qualifying as a business combination in exchange for acquisition date consideration of $68 million, a majority of which was cash consideration. Substantially all of the consideration was allocated to goodwill. This acquisition was not significant to our results of operations. For information on goodwill by operating segment, see “Note 8: Goodwill”.

18

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Note 8: Goodwill
Goodwill activity for the first three months of 2015 was as follows:
(In Millions)
 
Dec 27,
2014
 
Acquisitions
 
Transfers
 
Currency Exchange and Other
 
Mar 28,
2015
Client Computing Group
 
$

 
$

 
$
3,708

 
$

 
$
3,708

PC Client Group
 
3,058

 

 
(3,058
)
 

 

Data Center Group
 
2,376

 

 

 

 
2,376

Internet of Things Group
 
428

 

 

 

 
428

Mobile and Communications Group
 
650

 

 
(650
)
 

 

Software and services operating segments
 
4,236

 

 

 
(163
)
 
4,073

All other
 
113

 
68

 

 

 
181

Total
 
$
10,861

 
$
68

 
$

 
$
(163
)
 
$
10,766

During the first quarter of 2015, we combined the PC Client Group (PCCG) and the Mobile and Communications Group (MCG) to create the Client Computing Group (CCG). Due to this reorganization, PCCG and MCG goodwill was transferred to CCG, shown in the preceding table as "Transfers." For further information, see "Note 20: Operating Segments Information."
Note 9: Identified Intangible Assets
Identified intangible assets at the end of each period were as follows:
 
 
March 28, 2015
(In Millions)
 
Gross Assets
 
Accumulated
Amortization
 
Net
Acquisition-related developed technology
 
$
2,964

 
$
(2,273
)
 
$
691

Acquisition-related customer relationships
 
1,644

 
(1,024
)
 
620

Acquisition-related trade names
 
61

 
(51
)
 
10

Licensed technology and patents
 
3,082

 
(1,159
)
 
1,923

Identified intangible assets subject to amortization
 
7,751

 
(4,507
)
 
3,244

Acquisition-related trade names
 
764

 

 
764

Other intangible assets
 
203

 

 
203

Identified intangible assets not subject to amortization
 
967

 

 
967

Total identified intangible assets
 
$
8,718

 
$
(4,507
)
 
$
4,211

 
 
December 27, 2014
(In Millions)
 
Gross Assets
 
Accumulated
Amortization
 
Net
Acquisition-related developed technology
 
$
3,009

 
$
(2,192
)
 
$
817

Acquisition-related customer relationships
 
1,698

 
(1,001
)
 
697

Acquisition-related trade names
 
61

 
(49
)
 
12

Licensed technology and patents
 
3,153

 
(1,224
)
 
1,929

Identified intangible assets subject to amortization
 
7,921

 
(4,466
)
 
3,455

Acquisition-related trade names
 
788

 

 
788

Other intangible assets
 
203

 

 
203

Identified intangible assets not subject to amortization
 
991

 

 
991

Total identified intangible assets
 
$
8,912

 
$
(4,466
)
 
$
4,446


19

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Amortization expenses, with presentation location on the consolidated condensed statements of income, for each period were as follows:
 
 
 
 
Three Months Ended
(In Millions)
 
Location
 
Mar 28,
2015
 
Mar 29,
2014
Acquisition-related developed technology
 
Cost of sales
 
$
120

 
$
146

Acquisition-related customer relationships
 
Amortization of acquisition-related intangibles
 
60

 
70

Acquisition-related trade names
 
Amortization of acquisition-related intangibles
 
2

 
3

Licensed technology and patents
 
Cost of sales
 
69

 
68

Total amortization expenses
 
 
 
$
251

 
$
287

Based on identified intangible assets that are subject to amortization as of March 28, 2015, we expect future amortization expenses for each period to be as follows:
(In Millions)
 
Remainder of 2015
 
2016
 
2017
 
2018
 
2019
Acquisition-related developed technology
 
$
210

 
$
239

 
$
90

 
$
69

 
$
60

Acquisition-related customer relationships
 
179

 
223

 
137

 
34

 
15

Acquisition-related trade names
 
7

 
3

 

 

 

Licensed technology and patents
 
207

 
262

 
219

 
177

 
176

Total future amortization expenses
 
$
603

 
$
727

 
$
446

 
$
280

 
$
251

Note 10: Other Long-Term Assets
Other long-term assets at the end of each period were as follows:
(In Millions)
 
Mar 28,
2015
 
Dec 27,
2014
Equity method investments
 
$
1,574

 
$
1,446

Non-marketable cost method investments
 
1,800

 
1,769

Non-current deferred tax assets
 
638

 
622

Pre-payments for property, plant and equipment
 
515

 
636

Loans receivable
 
316

 
416

Other
 
1,760

 
1,672

Total other long-term assets
 
$
6,603

 
$
6,561

During the first three months of 2015, we received and transferred $179 million of equipment from other long-term assets to property, plant and equipment. The equipment was prepaid in 2012 and 2013. We recognized the pre-payments within operating activities in the consolidated condensed statement of cash flows when we paid for the equipment, and the receipt of the equipment is reflected as a non-cash transaction in the current period.

20

INTEL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — Unaudited (Continued)


Note 11: Restructuring and Asset Impairment Charges
Beginning in the third quarter of 2013, management approved several restructuring actions, including targeted workforce reductions and the exit of certain businesses and facilities. These actions include the wind down of our 200 millimeter wafer fabrication facility in Massachusetts, which ceased production in the first quarter of 2015, and the closure of our assembly and test facility in Costa Rica, which ceased production in the fourth quarter of 2014. These targeted reductions will enable us to better align our resources in areas providing the greatest benefit in the current business environment. We expect these actions to be substantially complete by the end of 2015.
Restructuring and asset impairment charges for each period were as follows:
 
 
Three Months Ended
(In Millions)
 
Mar 28,
2015
 
Mar 29,
2014
Employee severance and benefit arrangements
 
$
99

 
$
137

Asset impairments and other restructuring charges
 
6

 

Total restructuring and asset impairment charges
 
$
105

 
$
137

Restructuring and asset impairment activity for the first three months of 2015 was as follows:
(In Millions)
 
Employee Severance and Benefits
 
Asset Impairments and Other
 
Total
Accrued restructuring balance as of December 27, 2014
 
$
121

 
$
11

 
$
132

Additional accruals
 
99

 
7

 
106

Adjustments
 

 
(1
)
 
(1
)
Cash payments
 
(82
)
 
(4
)
 
(86
)
Non-cash settlements
 

 
(2
)
 
(2
)
Accrued restructuring balance as of March 28, 2015
 
$
138

 
$
11

 
$
149

We recorded the additional accruals and adjustments as restructuring and asset impairment charges in the consolidated condensed statements of income and within the “all other” operating segments category. Most of the accrued restructuring balance as of March 28, 2015 is expected to be paid within the next 12 months and was recorded as a current liability within accrued compensation and benefits on the consolidated condensed balance sheets.
Restructuring actions that were approved in 2015 impacted approximately 1,400 employees. Since the third quarter of 2013, we have incurred a total of $640 million in restructuring and asset impairment charges. These charges included a total of $565 million related to employee severance and benefit arrangements for approximately 9,000 employees, and $75 million in asset impairment charges and other restructuring charges.
Note 12: Deferred Income