Cash Flow Analysis---Intel
Page 2.
For this analysis I used the most recent 10K. Although there are 2 quarterly reports out since then, I thought the yearly numbers and the resultant yearly comparisons would give me recent enough data from which I could decide whether to look further.
That 10K can be found here: sec.gov
This is directly copied from their SCF and is the "Change in Cash" and the "Cash Flows provided by (used for) financing activities" section. I have had to edit it a bit to get it to fit properly and I place the years at the top of this section when, on the 10K, they are only at the top of the form, not each section.
Cash flows provided by (used for) financing activities:
2001 2000 1999
Increase in short-term debt, net 23 138 69
Additions to long-term debt 306 77 118
Repayment and retirement
of long-term debt (10 ) (46 ) —
Proceeds from sales of shares
through employee stock plans
and other 762 797 543
Proceeds from sales of put warrants — — 20
Repurchase and retirement
of common stock (4,008) (4,007) (4,612)
Payment of dividends
to stockholders (538) (470) (366)
-----------------------------------------------------
Net cash used for
financing activities (3,465) (3,511) (4,228)
----------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 4,994 (719 ) 1,657
So far, this area tells us that INTC appears to have had $4.994B flow to the bottom line in 2001; $719M taken out of the coffers in 2000; and $1.657B into the bank in 1999.
However, let's look at the entries in the financing section. (I will list the amounts for 2001 only in parenthesis after the item, but the reasoning applies equally to each of the three years presented.) The payments of dividends (538), and repayment and retirement of long term debt(10) are optional uses of cash. That means they didn't have to spend the money that way, they could have had many choices, and they chose to give the investor back a small return and pay off debt. therefore, these amounts are considered by me to be part of the FCF and I will add them back into the bottom line numbers. The money received, however, from Increasing short term debt(23), Increasing long term debt(306), and the sale of stock(762) are not money from operations, so I am going to subtract these amounts. Which brings us to the consistantly $4B+ entries for "Repurchase and retirement of common stock".
While it does, indeed appear as though INTC has separated the functions of purchase and issuance, the net impact on the bottom line is still pretty clear when we know where to look.
From the 10K:
Stock repurchase program > The company has an ongoing authorization, as amended, from the Board of Directors to repurchase up to 1.8 billion shares of Intel's common stock in open market or negotiated transactions. During 2001, the company repurchased 133 million shares of common stock at a cost of $4 billion. As of December 29, 2001, the company had repurchased and retired approximately 1.5 billion shares at a cost of $26 billion since the program began in 1990. As of December 29, 2001, 293 million shares remained available under the repurchase authorization.
Which tells us that 133 million shares were purchased for $4.008B which divided out means they paid $30.14/share. I will use this amount as the fair market value of the exercised stock options for the period.
From elsewhere in the 10K:
Options granted by Intel currently expire no later than 10 years from the grant date and generally vest within 5 years. Additional information with respect to stock option plan activity is as follows:
Outstanding options
(Shares in millions)
Shares available # of shares Weighted average
for option exercise price
12/26/98 534.4 625.0 $9.07
Grants (81.2) 81.2 $31.96
Options assumed
in acquisitions — 25.6 $12.87
Exercises — (96.0) $3.32
Cancellations 24.6 (24.6) $16.43
12/25/99 477.8 611.2 $12.87
Grants (162.8) 162.8 $54.68
Options assumed
in acquisitions — 4.3 $5.21
Exercises — (107.5) $4.66
Cancellations 32.6 (32.6) $26.28
12/30/2000 347.6 638.2 $24.16
Supplemental
grant (51.9) 51.9 $25.69
2002 merit grant(67.6) 67.6 $24.37
Other grants (118.6) 118.6 $25.48
Options assumed
in acquisitions — 9.0 $19.25
Exercises — (68.0) $6.06
Cancellations 45.1 (48.8) $35.01
Additional
shares reserved 900.0 — —
12/29/01 1,054.6 768.5 $25.33
Options exercisable at:
12/25/99 206.4 $4.71
12/30/00 195.6 $7.07
12/29/01 230.9 $11.27
So we see that at least 68 million shares were exercised between 12/00 and 12/01. At our above referenced cost per share of $30.14, that amounts to 2.05 BILLION Dollars that got paid to employees via stock options. What did INTC record? You'll love this:
. Under all of the plans, the option exercise price is equal to the fair market value of Intel common stock at the date of grant. and later
Under APB No. 25, because the exercise price of the company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized in the company's financial statements.
So, no expense recorded against income, even though we know they are buying back stock to replace the exercised options to the tune of over 2 BILLION dollars.
Anyway, enough of the rant! So, of the 4.008B listed under Stock Repurchases we are only going to add back the difference between the total and that issued in options (4.008 - 2.05 = 1.958)
So our calculations for this section are: Start with 4994 and add 538 + 10 + 1958 and subtract 23 - 306- 762 for a subtotal cash flow of $6.409B before accounting for the investing stuff.
Timba |
