Intel faces $600 mln IRS liability
Also, chipmaker's 10-K shows impact of stock options
By Chris Kraeuter, CBS.MarketWatch.com
Last Update: 12:12 PM ET Feb. 23, 2004
SAN FRANCISCO (CBS.MW) -- Intel said it could be liable for $600 million, plus interest, for federal back taxes following a regular examination by the IRS of the chipmaker's tax returns for 1999 and 2000.
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The disclosures, along with the hypothetical impact of employee stock options on earnings, were made in Intel's (INTC: news, chart, profile) annual report filed Monday with the Security and Exchange Commission.
Shares of the Santa Clara, Calif.-based company slipped 2.6 percent to $29.20 as part of a broad technology decline.
Intel said the IRS proposed certain adjustments related to Intel's tax benefits on export sales following the examination, which occurred in August. The IRS has yet to issue a formal assessment on the matter.
Intel said it disagrees with the IRS and will use appeal procedures, if it can.
Also, Intel said the IRS could reach similar decisions in future audits that would concern business results after 2000. Intel said the IRS started last month an examination into tax returns for 2001 and 2002.
If Intel loses its battle with the IRS, the impact to the periods in question would be material, the company said, but that its overall financial position, cash flows or business trends would not be impacted.
Intel also repeated in the filing capital expenditure and gross margin targets for 2004 that were initially issued in January. Among other disclosures in the company's 10-K:
For the year, Intel reported net income of $5.6 billion, or 85 cents a share, but including as an expense $991 million in stock-based employee compensation cuts net income to $4.65 billion, or 71 cents a share. Companies are not currently required to expense stock options.
Intel issued options representing 110 million shares, its fewest amount since 1999. Including cancellations, net options issued totaled 70 million.
As a percentage of shares outstanding, Intel issued 1.1 percent of its base in options, also the lowest amount since 1999.
The percentage of those options granted to the company's top five executives, however, rose to 2.4 percent from 1.7 percent in 2002. From 1999 to 2001, that percentage was kept below 1 percent.
Overall, the cumulative amount of options held by the company's top five executives as a percentage of options outstanding remained steady at 2.1 percent.
Intel's write-downs of pre-IPO investments declined again in 2003. Intel said its impairments for non-marketable securities totaled $319 million compared with $524 million in 2002 and $1.1 billion in 2001. Intel still holds non-marketable securities worth $665 million.
Intel will host a midquarter update on March 4.
Chris Kraeuter is a reporter for CBS.MarketWatch.com in San Francisco. |
