The press release announcing Intel's earnings for the fourth quarter of 2008, which ended on 27 December, did not include a complete Cash Flow statement. When we analyzed the data in the initial announcement and computed gauge scores, we had to estimate Cash Flow from Operations and Cash Used for Investment.Intel (NASDAQ: INTC) subsequently filed a formal 10-K for 2008 with complete financial statements and footnotes. We have updated our analysis to incorporate the latest information, and this post identifies the revisions. The 10-K did not change our examination of the fourth-quarter Income Statement.
http://sheet.zoho.com/public/ncarvin/intc-income-statement-2?mode=html
A Semiconductor Industry titan, Intel Corporation manufactures integrated circuits for computers, servers, hand-held devices, and communication products.The fourth quarter was brutal for the Intel in almost every respect. Worldwide economic slowness took a big bite out of the sales of products that include semiconductors. This performance was anticipated by the stock market which punished Intel shares long before sales fell precipitously.
As it turned out, our Cash Flow estimates were a little too pessimistic. When we plugged in the actual Cash Flow data from the 10-K, the Overall Gauge rose from an initial calculation of 47 points to 50 points. The full and up-to-date set of scores are listed here:
- Cash Management: 18 of 25 (up from 14 in September)
- Growth: 0 of 25 (down from 10)
- Profitability: 11 of 25 (down from 19)
- Value: 14 of 25 (down from 15)
- Overall: 50 of 100 (down from 63)
If we were to use Intel's current price per share of $12.41, instead of the year-end closing price of $14.66, the Value gauge would rise 6 points and the Overall gauge would increase 8 points to 58.
In the tables below, only metrics related to Cash Flow are different from those reported in our original analysis.
| Cash Management | December 2008 | 3 months prior | 12 months prior |
| Current Ratio | 2.5 | 2.1 | 2.8 |
| LTD/Equity | 4.8% | 4.9% | 4.6% |
| Debt/CFO | 0.2 years | 0.2 years | 0.2 years |
| Inventory/CGS | 77.5 days | 72.9 days | 76.1 days |
| Finished Goods/Inventory | 41.6% | 40.8% | 41.6% |
| Days of Sales Outstanding (DSO) | 20.8 days | 25.8 days | 25.2 days |
| Working Capital/Market Capitalization | 14.3% | 10.4% | 9.5% |
| Cash Conversion Cycle Time | 47.7 days | 47.4 days | 53.1 days |
| Gauge Score (0 to 25) | 18 | 14 | 15 |
Despite weak business conditions, Intel's Balance Sheet remains strong. The only area is concern is the higher Inventory level, which isn't surprising given that sales were so much less than originally expected. Debt is low, and working capital is high.
| Growth | December 2008 | 3 months prior | 12 months prior |
| Revenue growth | -2.0% | 7.4% | 8.3% |
| Revenue/Assets | 70.7% | 75.8% | 73.7% |
| CFO growth | -13.5% | 8.2% | 18.7% |
| Net Income growth | -24.1% | 18.1% | 38.3% |
| Gauge Score (0 to 25) | 0 | 10 | 15 |
Revenue, Cash Flow, and Net Income all contracted.
| Profitability | December 2008 | 3 months prior | 12 months prior |
| Operating Expenses/Revenue | 76.2% | 73.9% | 78.6% |
| ROIC | 21.1% | 24.9% | 21.2% |
| FCF/Equity | 14.0% | 20.9% | 19.2% |
| Accrual Ratio | 0.5% | 0.6% | 7.7% |
| Gauge Score (0 to 25) | 11 | 19 | 14 |
Operating expenses increased substantially as a percentage of Revenue in the quarter, but they are still lower than they were one year ago. Free Cash Flow dropped substantially, but not as much as we had initially feared.
| Value | December 2008 | 3 months prior | 12 months prior |
| P/E | 15.6 | 14.5 | 22.9 |
| P/E to S&P 500 average P/E | 96% | 81% | 129% |
| Price/Revenue | 2.2 | 2.7 | 4.2 |
| Enterprise Value/Cash Flow (EV/CFO) | 6.6 | 7.4 | 11.6 |
| Gauge Score (0 to 25) | 14 | 15 | 0 |
The gauge, which takes a contrary view of share prices, had risen sharply in the first three quarters of the year. Although the share price continued to fall, the plunging earnings in the fourth quarter provided a counteracting negative force.
Intel's valuation ratios can be compared with other companies in the Semiconductor industry.
| Overall | December 2008 | 3 months prior | 12 months prior |
| Gauge Score (0 to 100) | 50 | 63 | 34 |
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