10-Q 1 a2017q3-10qdocument.htm 10-Q Document


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 September 30, 2017
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
intellogo-color.jpg
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
Accelerated filer  ¨
Non-accelerated filer   ¨
Smaller reporting company  ¨
Emerging growth company  ¨
 
 
(Do not check if a smaller reporting company)
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 September 30, 2017
Common stock, $0.001 par value
 
4,680 million




INTEL CORPORATION
 
FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2017
INDEX





Forward-Looking Statements
This Quarterly Report on Form 10-Q contains 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," “would,” "should," “could,” 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 management's expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described throughout this report and our Annual Report on Form 10-K for the year ended December 31, 2016, particularly the "Risk Factors" sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. The forward-looking statements in this Form 10-Q do not reflect the potential impact of any divestitures, mergers, acquisitions, or other business combinations that had not been completed as of October 26, 2017. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and Intel does not undertake, and expressly disclaims any duty, to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.

1



PART I – FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
(In Millions, Except Per Share Amounts)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Net revenue
 
$
16,149

 
$
15,778

 
$
45,708

 
$
43,013

Cost of sales
 
6,092

 
5,795

 
17,406

 
16,927

Gross margin
 
10,057

 
9,983

 
28,302

 
26,086

Research and development
 
3,223

 
3,069

 
9,824

 
9,460

Marketing, general and administrative
 
1,666

 
2,006

 
5,624

 
6,239

Restructuring and other charges
 
4

 
372

 
189

 
1,786

Amortization of acquisition-related intangibles
 
49

 
74

 
124

 
253

Operating expenses
 
4,942

 
5,521

 
15,761

 
17,738

Operating income
 
5,115

 
4,462

 
12,541

 
8,348

Gains (losses) on equity investments, net
 
846

 
(12
)
 
1,440

 
488

Interest and other, net
 
(31
)
 
(132
)
 
336

 
(340
)
Income before taxes
 
5,930

 
4,318

 
14,317

 
8,496

Provision for taxes
 
1,414

 
940

 
4,029

 
1,742

Net income
 
$
4,516

 
$
3,378

 
$
10,288

 
$
6,754

Basic earnings per share of common stock
 
$
0.96

 
$
0.71

 
$
2.19

 
$
1.43

Diluted earnings per share of common stock
 
$
0.94

 
$
0.69

 
$
2.12

 
$
1.39

Cash dividends declared per share of common stock
 
$
0.5450

 
$
0.5200

 
$
1.0775

 
$
1.0400

Weighted average shares of common stock outstanding:
 
 
 
 
 
 
 
 
Basic
 
4,688

 
4,734

 
4,707

 
4,728

Diluted
 
4,821

 
4,877

 
4,849

 
4,872

See accompanying notes.

2



INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Net income
 
$
4,516

 
$
3,378

 
$
10,288

 
$
6,754

Changes in other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses) on available-for-sale investments
 
399

 
412

 
408

 
357

Deferred tax asset valuation allowance
 

 
(2
)
 

 
(5
)
Net unrealized holding gains (losses) on derivatives
 
19

 
61

 
350

 
274

Net prior service (costs) credits
 
2

 
1

 
(8
)
 
4

Actuarial valuation
 
11

 
10

 
241

 
(289
)
Net foreign currency translation adjustment
 
5

 
(2
)
 
513

 
(1
)
Other comprehensive income (loss)
 
436

 
480

 
1,504

 
340

Total comprehensive income
 
$
4,952

 
$
3,858

 
$
11,792

 
$
7,094

See accompanying notes.

3



INTEL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited)
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
9,075

 
$
5,560

Short-term investments
 
1,446

 
3,225

Trading assets
 
6,983

 
8,314

Accounts receivable, net
 
5,954

 
4,690

Inventories
 
6,929

 
5,553

Assets held for sale
 

 
5,210

Other current assets
 
2,767

 
2,956

Total current assets
 
33,154

 
35,508

Property, plant and equipment, net of accumulated depreciation of $58,048 ($53,934 as of December 31, 2016)
 
39,472

 
36,171

Marketable equity securities
 
6,059

 
6,180

Other long-term investments
 
3,844

 
4,716

Goodwill
 
24,389

 
14,099

Identified intangible assets, net
 
13,058

 
9,494

Other long-term assets
 
7,112

 
7,159

Total assets
 
$
127,088

 
$
113,327

Liabilities, temporary equity, and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Short-term debt
 
$
4,142

 
$
4,634

Accounts payable
 
3,554

 
2,475

Accrued compensation and benefits
 
2,805

 
3,465

Accrued advertising
 
892

 
810

Deferred income
 
1,706

 
1,718

Liabilities held for sale
 

 
1,920

Other accrued liabilities
 
7,590

 
5,280

Total current liabilities

20,689

 
20,302

Long-term debt
 
27,498

 
20,649

Long-term deferred tax liabilities
 
2,943

 
1,730

Other long-term liabilities
 
4,152

 
3,538

Contingencies (Note 18)
 

 

Temporary equity
 
870

 
882

Stockholders’ equity:
 
 
 
 
Preferred stock
 

 

Common stock and capital in excess of par value, 4,680 issued and outstanding (4,730 issued and outstanding as of December 31, 2016)
 
26,547

 
25,373

Accumulated other comprehensive income (loss)
 
1,610

 
106

Retained earnings
 
42,779

 
40,747

Total stockholders’ equity
 
70,936

 
66,226

Total liabilities, temporary equity, and stockholders’ equity
 
$
127,088

 
$
113,327

See accompanying notes.

4



INTEL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
 
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
Cash and cash equivalents, beginning of period
 
$
5,560

 
$
15,308

Cash flows provided by (used for) operating activities:
 
 
 
 
Net income
 
10,288

 
6,754

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation
 
4,990

 
4,684

Share-based compensation
 
1,051

 
1,136

Restructuring and other charges
 
189

 
1,786

Amortization of intangibles
 
999

 
1,176

(Gains) losses on equity investments, net
 
(1,372
)
 
(414
)
(Gains) losses on divestitures
 
(387
)
 

Deferred taxes
 
570

 
(188
)
Changes in assets and liabilities:1
 
 
 
 
Accounts receivable
 
(1,128
)
 
(100
)
Inventories
 
(1,245
)
 
(118
)
Accounts payable
 
171

 
188

Accrued compensation and benefits
 
(551
)
 
(1,874
)
Income taxes payable and receivable
 
979

 
961

Other assets and liabilities
 
315

 
(333
)
Total adjustments
 
4,581

 
6,904

Net cash provided by operating activities
 
14,869

 
13,658

Cash flows provided by (used for) investing activities:
 
 
 
 
Additions to property, plant and equipment
 
(7,709
)
 
(6,095
)
Acquisitions, net of cash acquired
 
(14,499
)
 
(15,151
)
Purchases of available-for-sale investments
 
(1,977
)
 
(7,962
)
Sales of available-for-sale investments
 
4,610

 
3,793

Maturities of available-for-sale investments
 
3,488

 
4,928

Purchases of trading assets
 
(9,792
)
 
(9,953
)
Maturities and sales of trading assets
 
11,806

 
7,867

Investments in loans receivable and reverse repurchase agreements
 

 
(223
)
Collection of loans receivable and reverse repurchase agreements
 
250

 
911

Investments in non-marketable equity investments
 
(726
)
 
(893
)
Proceeds from divestitures
 
3,124

 

Other investing
 
893

 
405

Net cash used for investing activities
 
(10,532
)
 
(22,373
)
Cash flows provided by (used for) financing activities:
 
 
 
 
Increase (decrease) in short-term debt, net
 
(5
)
 
426

Issuance of long-term debt, net of issuance costs
 
7,716

 
2,734

Repayment of debt
 
(1,502
)
 

Proceeds from sales of common stock through employee equity incentive plans
 
637

 
1,024

Repurchase of common stock
 
(3,611
)
 
(2,054
)
Restricted stock unit withholdings
 
(424
)
 
(434
)
Payment of dividends to stockholders
 
(3,794
)
 
(3,692
)
Other financing
 
161

 
155

Net cash provided by (used for) financing activities
 
(822
)
 
(1,841
)
Net increase (decrease) in cash and cash equivalents
 
3,515

 
(10,556
)
Cash and cash equivalents, end of period
 
$
9,075

 
$
4,752

 
 
 
 
 
Supplemental disclosures of noncash investing activities and cash flow information:
 
 
 
 
Acquisition of property, plant, and equipment included in accounts payable and accrued liabilities
 
$
1,736

 
$
1,505

Non-marketable equity investment in McAfee from divestiture
 
$
1,078

 
$

Cash paid during the period for:
 
 
 
 
Interest, net of capitalized interest and interest rate swap payments/receipts
 
$
386

 
$
472

Income taxes, net of refunds
 
$
2,328

 
$
843

1 
The impact of assets and liabilities reclassified as held for sale was not considered in the changes in assets and liabilities within cash flows from operating activities. See "Note 10: Acquisitions and Divestitures" for additional information.
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 fiscal year ended December 31, 2016 (2016 Form 10-K).
We have a 52- or 53-week fiscal year that ends on the last Saturday in December. Our fiscal year 2017 is a 52-week year ending on December 30, 2017, while our fiscal year 2016 was a 53-week fiscal year that ended on December 31, 2016. The first quarter of fiscal year 2016 was a 14-week quarter compared to the standard 13-week quarters.
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 report should be read in conjunction with the consolidated financial statements in our 2016 Form 10-K.
Note 2: Accounting Policies
Advertising
Through cooperative advertising programs, such as our Intel Inside® program, we reimburse customers for marketing activities for certain of our products. We accrue cooperative advertising obligations and record the costs at the same time that the related revenue is recognized. We record cooperative advertising costs as marketing, general and administrative (MG&A) expenses to the extent that an advertising benefit separate from the revenue transaction can be identified and the fair value of that advertising benefit received is determinable. We record any excess in cash paid to customers over the fair value of the advertising benefit we receive as a reduction in revenue.
We are transitioning customers from the current offerings under the Intel Inside® program to cooperative advertising offerings more tailored to customers and their marketing audiences. In the second half of 2017, we are recording cooperative advertising costs as a reduction of revenue as we no longer meet the criteria for recording these expenses within MG&A.
Note 3: Recent Accounting Standards
We assess the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board on our financial statements. The tables below describe impacts from newly issued standards as well as material updates to our previous assessments, if any, from our 2016 Form 10-K.
Accounting Standards Adopted
Standard/Description
Effective Date and Adoption Considerations
Effect on Financial Statements or Other Significant Matters
Intangibles - Goodwill and Other - Simplifying the Test for Goodwill Impairment. This accounting standard update eliminates Step 2 from the existing guidance to simplify how goodwill impairment tests are performed.
With the elimination of this step, a goodwill impairment test is performed by comparing the fair value of a reporting unit to its carrying value. An impairment charge is recognized for the amount by which the reporting unit's carrying value exceeds its fair value.

We elected to early adopt this accounting standard update in the second quarter of 2017 on a prospective basis.


We expect the adoption of this update to simplify our annual goodwill impairment testing process, by eliminating the need to estimate the implied fair value of a reporting unit’s goodwill, if its respective carrying value exceeds fair value.




6

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


Accounting Standards Not Yet Adopted
Standard/Description
Effective Date and Adoption Considerations
Effect on Financial Statements or Other Significant Matters
Financial Instruments - Recognition and Measurement.  Requires changes to the accounting for financial instruments that primarily affect equity securities, financial liabilities measured using the fair value option, and the presentation and disclosure requirements for such instruments.

Effective in the first quarter of 2018.

Changes to our marketable equity securities are required to be adopted using a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. A cumulative-effect adjustment equal to the balance of unrealized gains or losses in accumulated other comprehensive income (loss) for these securities as of December 31, 2017 will be recorded to retained earnings in the period of adoption. Due to fluctuations in our portfolio, the precise impact from adopting the standard will not be known until December 31, 2017.

Since management has elected to apply the measurement alternative to non-marketable equity securities, changes to these securities are adopted prospectively.

Marketable equity securities previously classified as available-for-sale equity investments will be measured and recorded at fair value with changes in fair value recorded through the income statement.

All non-marketable equity securities formerly classified as cost method investments will be measured and recorded using the measurement alternative upon adoption. Equity securities measured and recorded using the measurement alternative are recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes. Adjustments resulting from impairments and observable price changes will be recorded in the income statement.

Beginning in the first quarter of 2018, in accordance with the standard, fair value measurement and hierarchy disclosures will no longer be provided for equity securities measured using the measurement alternative. In addition, the existing impairment model will be replaced with a new one-step qualitative impairment model. No initial adoption adjustment will be recorded for these instruments since the standard is required to be applied prospectively for securities measured using the measurement alternative.

We are finalizing our impact assessment and changes to our accounting policies and financial statement disclosures.

Compensation - Retirement Benefits - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This amended standard was issued to provide additional guidance on the presentation of net benefit cost in the income statement and on the components eligible for capitalization in assets. The service cost component of the net periodic benefit cost will continue to be reported within operating income on the consolidated income statement. All other non-service components are required to be presented separately outside operating income and only service costs will be eligible for inventory capitalization.
Effective in the first quarter of 2018.
Changes to the presentation of benefit costs are required to be adopted retrospectively while changes to the capitalization of service costs into inventories are required to be adopted prospectively. The standard permits, as a practical expedient, to use the amounts disclosed in the Retirement Benefit Plans footnote for the prior comparative periods as the estimation basis for applying the retrospective presentation requirement.
We expect the adoption of the amended standard to result in the reclassification of approximately $260 million from non-service components above the subtotal of operating income to interest and other, net, for the year ended December 31, 2016. We are continuing to assess the impacts of adoption to our 2017 financial statements.




7

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


Note 4: Operating Segments Information
We manage our business through the following operating segments:
Client Computing Group (CCG)
 
Includes platforms designed for notebooks, 2 in 1 systems, desktops (including all-in-ones and high-end enthusiast PCs), tablets, phones, wireless and wired connectivity products, and mobile communication components.
 
Data Center Group (DCG)
 
Includes workload-optimized platforms for compute, storage, and network functions and related products designed for enterprise, cloud, and communication infrastructure market segments.
 
Internet of Things Group (IOTG)
 
Includes platforms designed for Internet of Things market segments, including retail, transportation, industrial, video, buildings and smart cities, along with a broad range of other market segments.
 
Non-Volatile Memory Solutions Group (NSG)
 
Includes Intel® Optane™ SSD products and NAND flash memory products primarily used in solid-state drives.
 
Programmable Solutions Group (PSG)
 
Includes programmable semiconductors primarily field-programmable gate array (FPGAs) and related products for a broad range of market segments, including communications, data center, industrial, military, and automotive.
 
All other
 
Includes results from our other non-reportable segments and corporate-related charges.
We offer platforms that incorporate various components and technologies, including a microprocessor and chipset, a stand-alone System-on-Chip, or a multichip package. A platform may be enhanced by additional hardware, software, and services offered by Intel. Platforms are used in various form factors across our CCG, DCG, and IOTG operating segments. We derive a substantial majority of our revenue from platforms, which is our principal product.
In the third quarter of 2017, we completed our tender offer for the outstanding ordinary shares of Mobileye B.V. (Mobileye), formerly known as Mobileye N.V. In the second quarter of 2017, we completed the planned divestiture of Intel Security Group (ISecG). The results are reported within the "all other" category. See "Note 10: Acquisitions and Divestitures" for additional information.
The “all other” category includes revenue, expenses, and charges such as:
results of operations from non-reportable segments;
amounts included within restructuring and other charges;
a portion of profit-dependent compensation and other expenses not allocated to the operating segments;
historical results of operations of divested businesses;
results of operations of start-up businesses that support our initiatives, including our foundry business; and
acquisition-related costs, including amortization and any impairment of acquisition-related intangibles and goodwill.
The Chief Operating Decision Maker (CODM), which is our Chief Executive Officer (CEO), does not evaluate operating segments using discrete asset information. Operating segments do not record inter-segment revenue. We do not allocate gains and losses from equity investments, interest and other income, or taxes to operating segments. Although the CODM uses operating income to evaluate the segments, operating costs included in one segment may benefit other segments. Except for these differences, the accounting policies for segment reporting are the same as for Intel as a whole.

8

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


Net revenue and operating income (loss) for each period were as follows:
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Net revenue:
 
 
 
 
 
 
 
 
Client Computing Group
 
 
 
 
 
 
 
 
Platform
 
$
8,132

 
$
8,258

 
$
23,163

 
$
22,395

Other
 
728

 
634

 
1,886

 
1,384

 
 
8,860

 
8,892

 
25,049

 
23,779

Data Center Group
 
 
 
 
 
 
 
 
Platform
 
4,439

 
4,164

 
12,344

 
11,589

Other
 
439

 
378

 
1,138

 
979

 
 
4,878

 
4,542

 
13,482

 
12,568

Internet of Things Group
 
 
 
 
 
 
 
 
Platform
 
680

 
605

 
1,926

 
1,673

Other
 
169

 
84

 
364

 
239

 
 
849

 
689

 
2,290

 
1,912

Non-Volatile Memory Solutions Group
 
891

 
649

 
2,631

 
1,760

Programmable Solutions Group
 
469

 
425

 
1,334

 
1,249

All other
 
202

 
581

 
922

 
1,745

Total net revenue
 
$
16,149

 
$
15,778

 
$
45,708

 
$
43,013

Operating income (loss):
 
 
 
 
 
 
 
 
Client Computing Group
 
$
3,600

 
$
3,327

 
$
9,656

 
$
7,123

Data Center Group
 
2,255

 
2,110

 
5,403

 
5,639

Internet of Things Group
 
146

 
191

 
390

 
403

Non-Volatile Memory Solutions Group
 
(52
)
 
(134
)
 
(291
)
 
(453
)
Programmable Solutions Group
 
113

 
78

 
302

 
(184
)
All other
 
(947
)
 
(1,110
)
 
(2,919
)
 
(4,180
)
Total operating income
 
$
5,115

 
$
4,462

 
$
12,541

 
$
8,348


9

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


Note 5: Earnings Per Share
We computed basic earnings per share of common stock based on the weighted average number of shares of common stock outstanding during the period. We computed diluted earnings per share of common stock based on the weighted average number of shares of common stock outstanding plus potentially dilutive shares of common stock outstanding during the period.
 
 
Three Months Ended
 
Nine Months Ended
(In Millions, Except Per Share Amounts)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Net income available to common stockholders
 
$
4,516

 
$
3,378

 
$
10,288

 
$
6,754

Weighted average shares of common stock outstanding—basic
 
4,688

 
4,734

 
4,707

 
4,728

Dilutive effect of employee equity incentive plans
 
34

 
47

 
43

 
54

Dilutive effect of convertible debt
 
99

 
96

 
99

 
90

Weighted average shares of common stock outstanding—diluted
 
4,821

 
4,877

 
4,849

 
4,872

Basic earnings per share of common stock
 
$
0.96

 
$
0.71

 
$
2.19

 
$
1.43

Diluted earnings per share of common stock
 
$
0.94

 
$
0.69

 
$
2.12

 
$
1.39

Potentially dilutive shares of common stock from employee incentive plans are determined by applying the treasury stock method to the assumed exercise of outstanding stock options, the assumed vesting of outstanding restricted stock units (RSUs), and the assumed issuance of common stock under the stock purchase plan. Potentially dilutive shares of common stock for our 2005 debentures are determined by applying the if-converted method. However, as our 2009 debentures require settlement of the principal amount of the debt in cash upon conversion, with the conversion premium paid in cash or stock at our option, potentially dilutive shares of common stock are determined by applying the treasury stock method.
In all periods presented, potentially dilutive securities which would have been antidilutive are insignificant and are excluded from the computation of diluted earnings per share.
In all periods presented, we included our 2009 debentures in the calculation of diluted earnings per share of common stock because the average market price was above the conversion price. We could potentially exclude the 2009 debentures in the future if the average market price is below the conversion price.
Note 6: Other Financial Statement Details
Inventories
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Raw materials
 
$
1,115

 
$
695

Work in process
 
3,965

 
3,190

Finished goods
 
1,849

 
1,668

Total inventories
 
$
6,929

 
$
5,553

Deferred Income
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Deferred income on shipments of components to distributors
 
$
1,530

 
$
1,475

Deferred income from software, services and other
 
176

 
243

Current deferred income
 
$
1,706


$
1,718


10

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


Gains (Losses) on Equity Investments, Net
The components of gains (losses) on equity investments, net for each period were as follows:
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Share of equity method investee losses, net
 
$
(110
)
 
$
(10
)
 
$
(129
)
 
$
(30
)
Impairments
 
(10
)
 
(48
)
 
(613
)
 
(137
)
Gains on sales, net
 
944

 
38

 
2,020

 
553

Dividends
 

 

 
68

 
74

Other, net
 
22

 
8

 
94

 
28

Total gains (losses) on equity investments, net
 
$
846

 
$
(12
)
 
$
1,440

 
$
488

Interest and Other, Net
The components of interest and other, net for each period were as follows:
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Interest income
 
$
137

 
$
56

 
$
349

 
$
159

Interest expense
 
(191
)
 
(180
)
 
(493
)
 
(575
)
Other, net
 
23

 
(8
)
 
480

 
76

Total interest and other, net
 
$
(31
)
 
$
(132
)
 
$
336

 
$
(340
)
Interest expense in the preceding table is net of $77 million of interest capitalized in the third quarter of 2017 and $212 million in the first nine months of 2017 ($36 million in the third quarter of 2016 and $82 million in the first nine months of 2016).
Note 7: Restructuring and Other Charges
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
2016 Restructuring Program
 
$
2

 
$
349

 
$
(51
)
 
$
1,763

Other charges
 
2

 
23

 
240

 
23

Total restructuring and other charges
 
$
4

 
$
372

 
$
189

 
$
1,786

2016 Restructuring Program
In the second quarter of 2017, we substantially completed the 2016 Restructuring Program. For further information, see "Note 7: Restructuring and Other Charges" in Part II, Item 8 of our 2016 Form 10-K.
Restructuring and other charges by type for the 2016 Restructuring Program for the period were as follows:
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Employee severance and benefit arrangements
 
$
(2
)
 
$
338

 
$
(72
)
 
$
1,752

Pension settlement charges
 

 
10

 

 
10

Asset impairment and other charges
 
4

 
1

 
21

 
1

Total restructuring and other charges
 
$
2

 
$
349

 
$
(51
)
 
$
1,763


11

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


Restructuring and other activity for the 2016 Restructuring Program for the first nine months of 2017 was as follows:
(In Millions)
 
Employee Severance and Benefits
 
Asset Impairments and Other
 
Total
Accrued restructuring balance as of December 31, 2016
 
$
585

 
$
10

 
$
595

Additional accruals
 

 
21

 
21

Adjustments
 
(72
)
 

 
(72
)
Cash payments
 
(282
)
 
(25
)
 
(307
)
Non-cash settlements
 

 
(2
)
 
(2
)
Accrued restructuring balance as of September 30, 2017
 
$
231

 
$
4

 
$
235

A substantial majority of the accrued restructuring balance as of September 30, 2017 is expected to be paid within the next 12 months and was recorded within accrued compensation and benefits. Restructuring actions related to this program that were approved in 2016 impacted approximately 15,000 employees.
Other charges
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
ISecG separation costs
 
$
1

 
$
23

 
$
144

 
$
23

Other
 
1

 

 
96

 

Total other charges
 
$
2

 
$
23

 
$
240

 
$
23

Note 8: Income Taxes
Our effective income tax rate was 28.1% in the first nine months of 2017 compared to 20.5% in the first nine months of 2016. A majority of the increase in the effective rate was attributable to the $822 million tax expense due to our divestiture of ISecG.
Note 9: Investments
Available-for-Sale Investments
 
 
September 30, 2017
 
December 31, 2016
(In Millions)
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Adjusted Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
Corporate debt
 
$
2,603

 
$
12

 
$
(7
)
 
$
2,608

 
$
3,847

 
$
4

 
$
(14
)
 
$
3,837

Financial institution instruments
 
7,709

 
6

 
(4
)
 
7,711

 
6,098

 
5

 
(11
)
 
6,092

Government debt
 
986

 
3

 
(3
)
 
986

 
1,581

 

 
(8
)
 
1,573

Marketable equity securities
 
2,101

 
3,958

 

 
6,059

 
2,818

 
3,363

 
(1
)
 
6,180

Total available-for-sale investments
 
$
13,399

 
$
3,979

 
$
(14
)
 
$
17,364

 
$
14,344

 
$
3,372

 
$
(34
)
 
$
17,682

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 September 30, 2017 (most time deposits were issued by institutions outside the U.S. as of December 31, 2016).

12

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


During the third quarter of 2017, we sold available-for sale investments for proceeds of $2.9 billion ($195 million in the third quarter of 2016). During the first nine months of 2017, we sold available-for-sale investments for proceeds of $4.7 billion ($4.0 billion in the first nine months of 2016). The gross realized gains on sales of available-for-sale investments were $927 million in the third quarter of 2017 and $2.0 billion in the first nine months of 2017 ($41 million in the third quarter of 2016 and $538 million in the first nine months of 2016).
On April 28, 2017, Cloudera, Inc. (Cloudera) completed its initial public offering and we have designated our previous equity and cost method investments in Cloudera as available-for-sale. During the second quarter of 2017, we determined we had an other-than-temporary decline in the fair value of our investment and recognized an impairment charge of $278 million. We recognized the impairment in the second quarter due to the duration and severity of the decline in the investment's fair value, which we determined was below cost based upon observable market prices after the initial public offering.
The fair value of available-for-sale debt investments, by contractual maturity, as of September 30, 2017, were as follows:
(In Millions)
 
Fair Value
Due in 1 year or less
 
$
3,314

Due in 1–2 years
 
1,573

Due in 2–5 years
 
2,200

Due after 5 years
 
71

Instruments not due at a single maturity date
 
4,147

Total
 
$
11,305

Equity Method Investments
McAfee
In the second quarter of 2017, we closed our divestiture of the ISecG business and retained a 49% interest in McAfee as partial consideration. Our investment is accounted for under the equity method of accounting and is classified within other long-term assets. In the third quarter of 2017, we received a $735 million dividend from McAfee and recorded our share of equity method investee losses. The carrying value of our investment was $257 million as of September 30, 2017. For further information related to the divestiture of the ISecG business, see "Note 10: Acquisitions and Divestitures".
IM Flash Technologies, LLC
Since the inception of IM Flash Technologies, LLC (IMFT) in 2006, Micron Technology, Inc. (Micron) and Intel have jointly developed NAND flash memory and, most recently, 3D XPoint™ technology products. Intel also purchases jointly developed products directly from Micron under certain supply agreements.
As of September 30, 2017, we own a 49% interest in IMFT. The carrying value of our investment was $855 million as of September 30, 2017 ($849 million as of December 31, 2016) and is classified within other long-term assets.
IMFT is a variable interest entity and all costs of IMFT are passed on to Micron and Intel through sale of products or services in proportional share of ownership. Our portion of IMFT costs, primarily related to product purchases and production-related services, was approximately $115 million in the third quarter of 2017 and approximately $350 million in the first nine months of 2017 (approximately $115 million in the third quarter of 2016 and approximately $315 million in the first nine months of 2016). The amount due to IMFT for product purchases and services provided was approximately $73 million as of September 30, 2017 (approximately $95 million as of December 31, 2016).
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. Except for the amount due to IMFT for product purchases and production-related 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 September 30, 2017. 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.

13

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


Non-marketable Cost Method Investments
Beijing UniSpreadtrum Technology Ltd.
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 phones. We agreed to invest up to 9.0 billion Chinese yuan (approximately $1.5 billion as of the date of the agreement) for a minority stake of approximately 20% of Beijing UniSpreadtrum Technology Ltd., a holding company under Tsinghua Unigroup. During 2015, we invested $966 million to complete the first phase of the equity investment and accounted for our interest using the cost method of accounting. During the second quarter of 2017, we reduced our expectation of the company's future operating performance due to competitive pressures, which resulted in an other-than-temporary impairment charge of $147 million.
Trading Assets
Net gains related to trading assets still held at the reporting date were $81 million in the third quarter of 2017 and $433 million in the first nine months of 2017 (there were $72 million net gains related to trading assets still held at the reporting date in the third quarter of 2016 and $245 million of net gains in the first nine months of 2016). Net losses on the related derivatives were $75 million in the third quarter of 2017 and $402 million in the first nine months of 2017 (net losses of $54 million in the third quarter of 2016 and $224 million in the first nine months of 2016).
Note 10: Acquisitions and Divestitures
Acquisition of Mobileye
On August 21, 2017, we completed our tender offer for all of the outstanding ordinary shares of Mobileye, a global leader in the development of computer vision and machine learning, data analysis, localization and mapping for advanced driver assistance systems and autonomous driving. This acquisition combines Mobileye's leading computer vision expertise with Intel’s high-performance computing and connectivity expertise to create automated driving solutions from car to cloud. The combination is expected to accelerate innovation for the automotive industry and position Intel as a leading technology provider in the fast-growing market for highly and fully autonomous vehicles. The transaction also extends Intel’s strategy to invest in data-intensive market opportunities that build on our strengths in computing and connectivity from the cloud, through the network, to the device.
As of the completion of the tender offer, we acquired substantially all of the outstanding ordinary shares of Mobileye. We acquired 84.4% of the outstanding shares on August 8, 2017 and 97.3% as of August 21, 2017, and we intend to acquire all remaining outstanding shares. We have reflected the acquisition of the additional outstanding shares and reduction to the noncontrolling interest by $1.8 billion in the tables below.
Total consideration to acquire Mobileye was $14.5 billion (net of $366 million of cash and cash equivalents acquired).
The preliminary fair values of the assets acquired and liabilities assumed by major class in the acquisition of Mobileye were recognized as follows:
(In Millions)
 
 
Short-term investments and marketable securities
 
$
370

Tangible assets
 
227

Goodwill
 
10,278

Identified intangible assets
 
4,482

Current liabilities
 
(69
)
Deferred tax liabilities and other
 
(418
)
Noncontrolling interest
 
(375
)
Total
 
$
14,495

We assumed outstanding unvested Mobileye stock options and RSUs granted under two Mobileye equity plans. We will not grant additional equity awards under these two Mobileye equity plans. In connection with the acquisition, we recognized share-based compensation expense of $71 million for cash-settled awards.

14

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


The preliminary allocation of the purchase price was based upon estimates and assumptions that are subject to change within the one year measurement period. The primary areas of the purchase price allocation that are not yet finalized are certain tax matters, identification of contingencies, and goodwill.
The fair value of the noncontrolling interest was determined based on the quoted share price of Mobileye as of August 8, 2017, and the remaining outstanding shares that constitute the noncontrolling interest. We recorded the noncontrolling interest as a component of equity.
Goodwill of $10.3 billion arising from the acquisition is attributed to the expected synergies and other benefits that will be generated from the combination of Intel and Mobileye. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes. The goodwill recognized from the acquisition is included within "all other."
The identified intangible assets assumed in the acquisition of Mobileye were recognized as follows:
 
 
Fair Value
(In Millions)
 
Weighted Average
Estimated Useful Life
(In Years)
Developed technology
 
$
2,346

 
9
Customer relationships
 
713

 
12
Brands
 
64

 
10
Identified intangible assets subject to amortization
 
3,123

 
 
In-process research and development
 
1,359

 
 
Identified intangible assets not subject to amortization
 
1,359

 
 
Total identified intangible assets
 
$
4,482

 
 
Acquired developed technology represents the fair value of Mobileye products that have reached technological feasibility and are a part of Mobileye’s product offerings, as opposed to in-process research and development which represents the fair value of products that have not reached technological feasibility. Customer relationships represent the fair values of the underlying relationships and agreements with Mobileye’s customers.
Divestiture of Intel Security Group
On April 3, 2017, we closed the transaction with TPG VII Manta Holdings, L.P., now known as Manta Holdings, L.P. (TPG), transferring certain assets and liabilities relating to ISecG to a newly formed, jointly-owned, separate cybersecurity company called McAfee.
Total consideration received was $4.2 billion, consisting of $924 million in cash proceeds, $1.1 billion in the form of equity representing a 49% ownership interest in McAfee, and $2.2 billion in the form of promissory notes issued by McAfee and TPG. During the third quarter of 2017, McAfee and TPG repaid the $2.2 billion of promissory notes, which are included within proceeds from divestiture.
The carrying amounts of the major classes of ISecG assets and liabilities as of the transaction close date included the following:
(In Millions)
 
Apr 3,
2017
Accounts receivable
 
$
317

Goodwill
 
3,601

Identified intangible assets
 
965

Other assets
 
276

Total assets
 
$
5,159

 
 
 
Deferred income
 
$
1,553

Other liabilities
 
276

Total liabilities
 
$
1,829


15

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


As of the transaction close date, we recognized a pre-tax gain of $387 million within "Interest and other, net," which is net of $507 million of currency translation adjustment losses reclassified from accumulated other comprehensive income (loss) associated with currency charges on the carrying values of ISecG goodwill and identified intangible assets. In addition, we recognized a tax expense of $822 million.
Note 11: Identified Intangible Assets
As a result of our acquisition of Mobileye during the third quarter of 2017, we recorded $4.5 billion of identified intangible assets. For further information about these acquired identified intangible assets, see "Note 10: Acquisitions and Divestitures."
 
 
September 30, 2017
(In Millions)
 
Gross Assets
 
Accumulated
Amortization
 
Net
Acquisition-related developed technology
 
$
8,937

 
$
(1,686
)
 
$
7,251

Acquisition-related customer relationships
 
2,052

 
(265
)
 
1,787

Acquisition-related brands
 
143

 
(24
)
 
119

Licensed technology and patents
 
3,237

 
(1,504
)
 
1,733

Identified intangible assets subject to amortization
 
14,369

 
(3,479
)
 
10,890

In-process research and development
 
2,168

 

 
2,168

Identified intangible assets not subject to amortization
 
2,168

 

 
2,168

Total identified intangible assets
 
$
16,537

 
$
(3,479
)
 
$
13,058

 
 
December 31, 2016
(In Millions)
 
Gross Assets
 
Accumulated
Amortization
 
Net
Acquisition-related developed technology
 
$
7,405

 
$
(1,836
)
 
$
5,569

Acquisition-related customer relationships
 
1,449

 
(260
)
 
1,189

Acquisition-related brands
 
87

 
(21
)
 
66

Licensed technology and patents
 
3,285

 
(1,423
)
 
1,862

Identified intangible assets subject to amortization
 
12,226

 
(3,540
)
 
8,686

In-process research and development
 
808

 

 
808

Identified intangible assets not subject to amortization
 
808

 

 
808

Total identified intangible assets
 
$
13,034

 
$
(3,540
)
 
$
9,494

Amortization expenses recorded in the consolidated condensed statements of income for each period were as follows:
 
 
 
 
Three Months Ended
 
Nine Months Ended
(In Millions)
 
Location
 
Sep 30,
2017
 
Oct 1,
2016
 
Sep 30,
2017
 
Oct 1,
2016
Acquisition-related developed technology
 
Cost of sales
 
$
243

 
$
235

 
$
650

 
$
705

Acquisition-related customer relationships
 
Amortization of acquisition-related intangibles
 
45

 
69

 
113

 
234

Acquisition-related brands
 
Amortization of acquisition-related intangibles
 
4

 
5

 
11

 
19

Licensed technology and patents
 
Cost of sales
 
73

 
76

 
225

 
218

Total amortization expense
 
 
 
$
365

 
$
385

 
$
999

 
$
1,176


16

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


We expect future amortization expense for the next five years to be as follows:
(In Millions)
 
Remainder of 2017
 
2018
 
2019
 
2020
 
2021
Acquisition-related developed technology
 
$
262

 
$
1,045

 
$
1,043

 
$
1,011

 
$
976

Acquisition-related customer relationships
 
48

 
181

 
180

 
179

 
179

Acquisition-related brands
 
5

 
20

 
20

 
20

 
20

Licensed technology and patents
 
61

 
239

 
227

 
202

 
187

Total future amortization expenses
 
$
376

 
$
1,485

 
$
1,470

 
$
1,412

 
$
1,362

Note 12: Other Long-Term Assets
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Equity method investments
 
$
1,406

 
$
1,328

Non-marketable cost method investments
 
2,719

 
3,098

Non-current deferred tax assets
 
789

 
907

Pre-payments for property, plant and equipment
 
468

 
347

Loans receivable
 
543

 
236

Reverse repurchase agreements
 

 
250

Other
 
1,187

 
993

Total other long-term assets
 
$
7,112

 
$
7,159

Note 13: Borrowings
Short-Term Debt
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Drafts payable
 
$
21

 
$
25

Current portion of long-term debt
 
4,129

 
4,618

Less: debt issuance costs associated with the current portion of long-term debt
 
(8
)
 
(9
)
Total short-term debt
 
$
4,142

 
$
4,634

Our current portion of long-term debt includes our 2009 junior subordinated convertible debentures due 2039.
We have an ongoing authorization from our Board of Directors to borrow up to $10.0 billion under our commercial paper program. This amount includes an increase of $5.0 billion in the authorization limit approved by our Board of Directors in April 2017.
During the second quarter of 2017, we repaid $500 million of our 1.75% senior notes that matured in May 2017.

17

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


Long-Term Debt
Our indebtedness is carried at amortized cost net of applicable hedge adjustments.
(In Millions)
 
Sep 30,
2017
 
Dec 31,
2016
Floating-rate senior notes:
 
 
 
 
$700, three-month LIBOR plus 0.08%, due May 2020
 
$
700

 
$

$800, three-month LIBOR plus 0.35%, due May 2022
 
800

 

Fixed-rate senior notes:
 
 
 
 
$500, 1.75%, due May 2017
 

 
501

$3,000, 1.35%, due December 2017
 
3,000

 
2,999

$600, 2.50%, due November 2018
 
602

 
604

A$250, 3.25%, due December 20191
 
196

 
180

$1,000, 1.85%, due May 2020
 
1,000

 

$1,750, 2.45%, due July 2020
 
1,749

 
1,749

$500, 1.70%, due May 2021
 
499

 
499

$2,000, 3.30%, due October 2021
 
1,995

 
1,988

$750, 2.35%, due May 2022
 
747

 

$1,000, 3.10%, due July 2022
 
994

 
987

A$550, 4.00%, due December 20221
 
431

 
394

$1,500, 2.70%, due December 2022
 
1,491

 
1,480

$400, 4.10%, due November 2023
 
421

 
424

$1,250, 2.88%, due May 2024
 
1,242

 

$600, 2.70%, due June 2024
 
596

 

$2,250, 3.70%, due July 2025
 
2,177

 
2,148

$1,000, 2.60%, due May 2026
 
993

 
983

$1,000, 3.15%, due May 2027
 
991

 

$750, 4.00%, due December 2032
 
745

 
745

$1,500, 4.80%, due October 2041
 
1,491

 
1,491

$925, 4.25%, due December 2042
 
924

 
924

$2,000, 4.90%, due July 2045
 
1,999

 
1,999

$1,007, 4.90%, due August 2045
 

 
995

$915, 4.70%, due December 2045
 
910

 
894

$1,250, 4.10%, due May 2046
 
1,243

 
1,243

$1,000, 4.10%, due May 2047
 
994

 

$640, 4.10%, due August 2047
 
638

 

Junior subordinated convertible debentures:
 
 
 
 
$1,600, 2.95%, due December 2035
 
1,004

 
992

$2,000, 3.25%, due August 2039
 
1,130

 
1,118

Long-term debt
 
31,702

 
25,337

Less: current portion of long-term debt
 
(4,129
)
 
(4,618
)
Less: debt issuance costs
 
(75
)
 
(70
)
Total long-term debt
 
$
27,498

 
$
20,649

1 
To manage foreign currency risk associated with the Australian-dollar-denominated notes issued in 2015, we entered into currency interest rate swaps with an aggregate notional amount of $577 million, which effectively converted these notes to U.S.-dollar-denominated notes. For further discussion on our currency interest rate swaps, see "Note 16: Derivative Financial Instruments."

18

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


During the second quarter of 2017, we issued a total of $7.1 billion aggregate principal amount of senior notes. We intend to use the net proceeds from the offering of the notes for general corporate purposes, which may include refinancing of outstanding debt or repurchases of shares of our common stock.
During the third quarter of 2017, we redeemed the $1.0 billion 4.90% senior notes due August 2045. Additionally, we issued a total of $640 million aggregate principal amount of senior notes. We used the net proceeds from the offering of the notes to finance a portion of the redemption price of our 4.90% senior notes due August 2045.
Our senior floating rate notes pay interest quarterly and our senior fixed rate notes pay interest semiannually. We may redeem the fixed rate notes prior to their maturity at our option at specified redemption prices and subject to certain restrictions. The obligations under the notes rank equally in right of payment with all of our other existing and future senior unsecured indebtedness and effectively rank junior to all liabilities of our subsidiaries.
For further information on our debt instruments, see "Note 14: Borrowings" in Part II, Item 8 of our 2016 Form 10-K.

19

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


Note 14: Fair Value
For information about our fair value policies, and methods and assumptions used in estimating the fair value of our financial assets and liabilities, see “Note 2: Accounting Policies" and "Note 15: Fair Value" in Part II, Item 8 of our 2016 Form 10-K.
Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis
 
 
September 30, 2017
 
December 31, 2016
 
 
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
 
$

 
$
150

 
$

 
$
150

 
$

 
$
498

 
$

 
$
498

Financial institution instruments 1
 
4,146

 
1,619

 

 
5,765

 
1,920

 
811

 

 
2,731

Government debt 2
 

 
100

 

 
100

 

 
332

 

 
332

Reverse repurchase agreements
 

 
1,599

 

 
1,599

 

 
768

 

 
768

Short-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 

 
750

 
6

 
756

 

 
1,332

 
6

 
1,338

Financial institution instruments 1
 

 
557

 

 
557

 

 
1,603

 

 
1,603

Government debt 2
 

 
133

 

 
133

 

 
284

 

 
284

Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-backed securities
 

 
12

 

 
12

 

 
87

 

 
87

Corporate debt
 

 
2,269

 

 
2,269

 

 
2,847

 

 
2,847

Financial institution instruments 1
 
57

 
990

 

 
1,047

 
36

 
1,608

 

 
1,644

Government debt 2
 
31

 
3,624

 

 
3,655

 
32

 
3,704

 

 
3,736

Other current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 
2

 
289

 

 
291

 

 
382

 

 
382

Loans receivable
 

 
88

 

 
88

 

 
326

 

 
326

Marketable equity securities
 
5,584

 
475

 

 
6,059

 
6,180

 

 

 
6,180

Other long-term investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt
 

 
1,697

 
5

 
1,702

 

 
1,995

 
6

 
2,001

Financial institution instruments 1
 

 
1,389

 

 
1,389

 

 
1,758

 

 
1,758

Government debt 2
 

 
753

 

 
753

 

 
957

 

 
957

Other long-term assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets
 

 
74

 
9

 
83

 

 
31

 
9

 
40

Loans receivable
 

 
543

 

 
543

 

 
236

 

 
236

Total assets measured and recorded at fair value
 
9,820

 
17,111

 
20

 
26,951

 
8,168

 
19,559

 
21

 
27,748

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other accrued liabilities: