Cash Flow Analysis---Intel
Page 4.
Some other interesting tidbits from INTC's 10K:
Stock option plans > The company has a stock option plan under which officers, key employees and non-employee directors may be granted options to purchase shares of the company's authorized but unissued common stock. The company also has a broad-based stock option plan under which stock options may be granted to all employees other than officers and directors. During 2001, the Board of Directors approved an increase to the authorized shares under this plan, which made an additional 900 million shares available for grant to employees other than officers and directors.
900 MILLION more shares just waiting to be given out to insiders, doesn't that just warm the cockles of your heart?
There are 768.5 MILLION shares worth of options outstanding that have already been issued (although ONLY 230.9 MILLION appear to be currently exercisable with the average exercise price of $11.27/share so at today's prices, insiders can make a cool 50% profit and none of it will be viewed by INTC as compensation.)
They did take a sensible position on Black-Scholes:
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single measure of the fair value of employee stock options.
I liked some of this statement:
In April 2001, the company acquired Cognet, Inc. in exchange for cash and 3.6 million unregistered shares of Intel common stock, of which approximately 1.4 million shares are contingent upon the continued employment of the founding stockholders. An additional 900,000 registered shares are issuable to certain employees contingent upon meeting certain performance criteria and are not included in purchase consideration. In addition to the total common stock and cash consideration of $156 million, payment of approximately $60 million in cash compensation is contingent upon continued employment of certain employees and meeting certain performance criteria.
especially when combined with this one:
In addition to the transactions described above, Intel purchased other businesses in seven smaller transactions in 2001 (thirteen in 2000 and seven in 1999). The 2001 transactions were in exchange for total consideration of $228 million, $73 million in cash and $147 million representing 3.2 million unregistered shares of Intel common stock. Of these shares, 1.9 million shares are contingent upon the continued employment of certain employees. The remaining consideration of $8 million related to the value of assumed options. A total of $153 million was allocated to goodwill for these transactions in 2001, while $71 million was allocated to deferred stock compensation and $22 million to purchased in-process research and development (IPR&D). Consideration for the smaller transactions in 2000 was $513 million, with $477 million allocated to goodwill, $5 million to intangibles and $10 million to IPR&D. In 1999, consideration for these transactions was $468 million, with $363 million allocated to goodwill, $44 million to intangibles and $9 million to IPR&D.
Does that last bolded statement mean it gets added back into cash flow at some point since amortization of Goodwill is a "non-cash" event? Makes me suspicious of the $2.338 Billion in amortized goodwill added back in the top portion of the SCF for 2001. If the investment decision was a close one, I'd have to try to re-assure myself that this whole amount of Amortized Goodwill was eligible to be added back instead of some of it being expensed. But it's not worth the effort for me in light of the results so far.
Timba |
