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AMD (AMD)
Q3 2012 Results
-- AMD revenue $1.27 billion, 10 percent sequential decrease and a 25
percent decrease year-over-year
-- Net loss $157 million, loss per share $0.21, operating loss $131
million
-- Non-GAAP(1) net loss $150 million, loss per share $0.20, operating
loss $124 million
-- Gross margin 31 percent
AMD (AMD) today announced revenue for the third quarter of 2012
of $1.27 billion, a net loss of $157 million, or $0.21 per share, and
an operating loss of $131 million. The company reported a non-GAAP
net loss of $150 million, or $0.20 per share, and a non-GAAP
operating loss of $124 million. AMD is also announcing a
restructuring plan designed to reduce operating expenses and better
position the company competitively.
"The PC industry is going through a period of very significant change
that is impacting both the ecosystem and AMD," said Rory Read, AMD
president and CEO. "It is clear that the trends we knew would
re-shape the industry are happening at a much faster pace than we
anticipated. As a result, we must accelerate our strategic
initiatives to position AMD to take advantage of these shifts and put
in place a lower cost business model. Our restructuring efforts are
designed to simplify our product development cycles, reduce our
breakeven point and enable us to fund differentiated product roadmaps
and strategic breakaway opportunities."
GAAP Financial Results
----------------------------------------------------------------------------
Q3-12 Q2-12 Q3-11
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Revenue $1.27B $1.41B $1.69B
----------------------------------------------------------------------------
Operating income (loss) $(131)M $77M $138M
----------------------------------------------------------------------------
Net income (loss) / Earnings $(157)M/$(0.21) $37M/$0.05 $97M/$0.13
(loss) per share
----------------------------------------------------------------------------
Non-GAAP Financial Results(1)
----------------------------------------------------------------------------
Q3-12 Q2-12 Q3-11
----------------------------------------------------------------------------
Revenue $1.27B $1.41B $1.69B
----------------------------------------------------------------------------
Operating income (loss) $(124)M $86M $146M
----------------------------------------------------------------------------
Net income (loss) / Earnings $(150)M/$(0.20) $46M/$0.06 $110M/$0.15
(loss) per share
----------------------------------------------------------------------------
Quarterly Summary
-- Gross margin was 31 percent.
-- Gross margin decreased sequentially due to an inventory write-down
of approximately $100 million primarily consisting of first
generation A-Series Accelerated Processor Units (APUs) ("Llano"),
weaker-than-expected demand, which contributed to lower average
selling prices (ASPs) for the company’s microprocessor products
and lower utilization of the company’s back-end manufacturing
facilities.
-- Cash, cash equivalents and marketable securities balance, including
long-term marketable securities, was $1.48 billion at the end of the
quarter. The sequential cash decline was primarily from cash used in
operations.
-- Computing Solutions segment revenue decreased 11 percent sequentially
and 28 percent year-over-year. The sequential decrease was driven
primarily by a weaker consumer buying environment impacting sales to
Original Equipment Manufacturers (OEMs) as well as lower ASPs across
all geographies.
-- Operating loss was $114 million, compared with operating income of
$82 million in Q2-12 and $149 million in Q3-11.
-- Microprocessor ASP decreased sequentially and year-over-year.
-- AMD launched the second generation A-series APU for the desktop
channel market, offering PC enthusiasts affordable performance,
discrete-level graphics, multiple cores and fast processing for
outstanding responsiveness.
-- AMD Introduced the AMD Z-60 APU tablet processor for upcoming
Windows 8 tablets. Supporting full HD 1080p of resolution, the AMD
Z-60 APU delivers up to 10 hours of idle battery life, nearly
eight hours of Web browsing and six hours of video playback(2).
-- AMD launched the AMD AppZone, a new online showcase where
consumers can download and run thousands of popular Android(TM)
apps on AMD-based tablets, notebooks and all-in-one PCs.
-- Qualcomm and Samsung became Founder members of the HSA Foundation,
adding their support to AMD’s vision of delivering a common
hardware standard for heterogeneous computing. Since its formation
in June 2012, the HSA Foundation has more than doubled its
membership.
-- AMD announced new products that firmly cement the company as the
leader in fabric computing and micro servers, including the
SeaMicro SM15000, which extends the SeaMicro Freedom Fabric beyond
the chassis to connect directly to massive disk arrays and which
will also be offered with AMD Opteron processors.
-- Graphics segment revenue decreased seven percent sequentially and 15
percent year-over-year. Graphics processor unit (GPU) revenue
decreased 14 percent sequentially due to lower unit shipments to OEMs
partially offset by higher channel sales.
-- Operating income was $18 million, compared with $31 million in
Q2-12 and $12 million in Q3-11.
-- GPU ASP was up sequentially and year-over-year.
-- AMD continued to expand its industry-leading graphics solutions:
-- AMD launched the next generation of AMD FirePro(TM) products
based on the company’s Graphics Core Next Architecture. Setting
new levels of performance-per-dollar, the AMD FirePro W5000,
W7000, W8000 and W9000 GPUs are capable of delivering 1.5 times
greater performance than other available solutions(3).
-- AMD added to its powerful line-up of professional graphics
solutions with the introduction of the AMD FirePro S7000 and S9000
cards for server data center environments. Excelling at compute
and virtual desktop infrastructure (VDI), these solutions redefine
data center graphics capability while consuming 95 percent less
power at idle and dramatically cutting data center operating
costs(4).
-- AMD announced a collaboration with CiiNOW to deliver the first
cloud gaming solution powered by AMD Radeon(TM) graphics to
enable the best online gaming experience possible.
Operational Restructuring Designed to Enhance Financial Results, Set
New Revenue Breakeven Target
AMD’s restructuring plan, a significant portion of which will be
implemented in the fourth quarter of 2012, will include a workforce
reduction and site consolidations.
AMD expects that the restructuring actions taken in the fourth
quarter of 2012 will result in operational savings, primarily in
operating expenses, of approximately $20 million in the fourth
quarter of 2012 and approximately $190 million in 2013. The savings
will be largely driven through a reduction of AMD’s global workforce
by approximately 15 percent, which is expected to be largely
completed in the fourth quarter of 2012. The company currently
estimates it will record a restructuring expense in the fourth
quarter of 2012 of approximately $80 million in connection with these
actions.
AMD is also putting in place a business model to break even at an
operating income level of $1.3 billion of quarterly revenue. The
company is targeting to achieve this by the end of the third quarter
of 2013.
"Our restructuring efforts are decisive actions that position AMD to
compete more effectively and improve our financial results," said Mr.
Read. "Reducing our workforce is a difficult, but necessary, step to
take advantage of the eventual market recovery and capitalize on
growth opportunities for our products outside of the traditional PC
market."
Current Outlook
AMD’s outlook statements are based on current expectations. The
following statements are forward-looking, and actual results could
differ materially depending on market conditions and the factors set
forth under "Cautionary Statement" below.
For the fourth quarter of 2012, AMD expects revenue to decrease 9
percent, plus or minus 4 percent, sequentially.
For additional details regarding AMD’s results and outlook please see
the CFO commentary posted at quarterlyearnings.amd.com.
AMD Teleconference
AMD will hold a conference call for the financial community at 2:00
p.m. PT (5:00 p.m. ET) today to discuss its third quarter financial
results and provide more details with respect to today’s
restructuring announcement. AMD will provide a real-time audio
broadcast of the teleconference on the Investor Relations page of its
Web site at AMD. The webcast will be available for 10 days after the
conference call.
About AMD
AMD (AMD) is a semiconductor design innovator leading the next
era of vivid digital experiences with its groundbreaking AMD
Accelerated Processing Units (APUs) that power a wide range of
computing devices. AMD’s server computing products are focused on
driving industry-leading cloud computing and virtualization
environments. AMD’s superior graphics technologies are found in a
variety of solutions ranging from game consoles, PCs to
supercomputers. For more information, visit http://www.amd.com.
Cautionary Statement
This document contains forward-looking statements concerning AMD, its
fourth quarter of 2012 revenue, its targeted revenue breakeven point
and the timing to attain its breakeven point, and its restructuring
plan, including the timing of actions in connection with the plan,
anticipated restructuring charges and operational savings, which are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
commonly identified by words such as "believes, "expects," "may,"
"will," "should," "seeks," "intends," "pro forma," "estimates,"
"anticipates," "plans," "projects," and other terms with similar
meaning. Investors are cautioned that the forward-looking statements
in this release are based on current beliefs, assumptions and
expectations, speak only as of the date of this release and involve
risks and uncertainties that could cause actual results to differ
materially from current expectations. Risks include the possibility
that Intel Corporation’s pricing, marketing and rebating programs,
product bundling, standard setting, new product introductions or
other activities may negatively impact the company’s plans; the
company may be unable to develop, launch and ramp new products and
technologies in the volumes that are required by the market at mature
yields on a timely basis; that the company’s third party foundry
suppliers will be unable to transition its products to advanced
manufacturing process technologies in a timely and effective way or
to manufacture the company’s products on a timely basis in sufficient
quantities and using competitive technologies; the company will be
unable to obtain sufficient manufacturing capacity or components to
meet demand for its products; the company’s requirements for wafers
are less than the fixed number of wafers that it agreed to purchase
from GLOBALFOUNDRIES (GF) in 2012 or GF encounters problems that
significantly reduce the number of functional die the company
receives from each wafer; that customers stop buying the company’s
products or materially reduce their operations or demand for the
company’s products; that the company may be unable to maintain the
level of investment in research and development that is required to
remain competitive; that there may be unexpected variations in the
market growth and demand for its products and technologies in light
of the product mix that the company may have available at any
particular time or a decline in demand; that the company will require
additional funding and may be unable to raise sufficient capital on
favorable terms, or at all; that global business and economic
conditions will not improve or will worsen; that demand for computers
will be lower than currently expected; and the effect of political or
economic instability, domestically or internationally, on the
company’s sales or supply chain. Investors are urged to review in
detail the risks and uncertainties in the company’s Securities and
Exchange Commission filings, including but not limited to the
Quarterly Report on Form 10-Q for the quarter ended June 30, 2012.
AMD, the AMD Arrow logo, AMD Opteron, AMD Radeon, and combinations
thereof, are trademarks of Advanced Micro Devices, Inc. Other names
are for informational purposes only and used to identify companies
and products and may be trademarks of their respective owner.
(1) In this press release, in addition to GAAP financial results, the
Company has provided non-GAAP financial measures including non-GAAP
net income (loss), non-GAAP earnings (loss) per share, non-GAAP
operating income (loss), non-GAAP operating expenses, and non-GAAP
gross margin. These non-GAAP financial measures reflect certain
adjustments as presented in the tables in this press release. The
Company also provided Adjusted EBITDA and non-GAAP Adjusted free cash
flow as supplemental measures of its performance. These items are
defined in the footnotes to the selected corporate data tables
provided at the end of this press release. The Company is providing
these financial measures because it believes this non-GAAP
presentation makes it easier for investors to compare its operating
results for current and historical periods and also because the
Company believes it assists investors in comparing the Company’s
performance across reporting periods on a consistent basis by
excluding items that it does not believe are indicative of its core
operating performance and for the other reasons described in the
footnotes to the selected data tables. Refer to corresponding tables
at the end of this press release for additional AMD data.
(2) Power projections based on calculations carried out by AMD
Performance Labs measuring total system and individual component
power at Windows Idle, while web browsing, and while viewing a 9:57
minute video in h.264 format, viewed at 720P setting at 60 nits. The
AMD Z-60 based reference platform is projected to measure .75 W at
idle, 1.1 W during web browsing, 1.6 W during video playback and .02
W during a system S3 "sleep" state. Total system power for the
reference platform is projected at 2.9 W at idle, 3.9 W during web
browsing, 4.8 W during video playback and .08 W during a system S3
"sleep" state. Battery life calculations were derived using a 30Whr
battery pack at 98% utilization. The AMD Z-60 power projections are
based on a reference system configuration including the Dual Core
Z-60 1.0GHz APU with AMD Radeon(TM) HD 6250 graphics, 2GB DDR3-1066
system memory and Microsoft Windows 8. Details for Windows 8 power
states are outlined in the confidential Win8 logo specification.
BRNeB-I10
(3) AMD FirePro(TM) W9000 can support 1.95 billion triangles per
second, compared to Nvidia Quadro 6000 supporting 1.3 billion
triangles per second. See
http://www.nvidia.com/object/product-quadro-6000-us.html. FP-44
(4) Results based on internal measurements of AMD Radeon(TM) HD 7970
with AMD ZeroCore Power technology enabled and AMD Radeon(TM) HD 6970
comparing ASIC power consumption in "long idle" state (PC display
turned off after a long period of relative inactivity and lack of
user input). GRDT-11
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)
Quarter Ended Nine Months Ended
------------------------------- --------------------
Sep. 29, Jun. 30, Oct. 1, Sep. 29, Oct. 1,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
Net revenue $ 1,269 $ 1,413 $ 1,690 $ 4,267 $ 4,877
Cost of sales 877 775 934 3,210 2,710
--------- --------- --------- --------- ---------
Gross margin 392 638 756 1,057 2,167
Gross margin % 31% 45% 45% 25% 44%
Research and
development 328 345 361 1,041 1,095
Marketing, general
and administrative 188 212 249 630 749
Amortization of
acquired intangible
assets 4 4 8 9 26
Restructuring
charges, net 3 - - 11 -
--------- --------- --------- --------- ---------
Operating income
(loss) (131) 77 138 (634) 297
Interest income 2 2 3 6 8
Interest expense (44) (43) (42) (130) (137)
Other income
(expense), net 16 (5) (7) 10 8
--------- --------- --------- --------- ---------
Income (loss) before
dilution gain in
investee and income
taxes (157) 31 92 (748) 176
Benefit for income
taxes - (6) (5) (38) -
Dilution gain in
investee, net - - - - 492
--------- --------- --------- --------- ---------
Net income (loss) $ (157) $ 37 $ 97 $ (710) $ 668
--------- --------- --------- --------- ---------
Net income (loss) per
share
Basic $ (0.21) $ 0.05 $ 0.13 $ (0.96) $ 0.92
Diluted $ (0.21) $ 0.05 $ 0.13 $ (0.96) $ 0.90
--------- --------- --------- --------- ---------
Shares used in per
share calculation
Basic 745 739 729 739 725
Diluted 745 755 741 739 742
--------- --------- --------- --------- ---------
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Millions)
Quarter Ended Nine Months Ended
------------------------------- --------------------
Sep. 29, Jun. 30, Oct. 1, Sep. 29, Oct. 1,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
Total comprehensive
income (loss) $ (154) $ 41 $ 89 $ (706) $ 659
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions)
--------- --------- ---------
Sep. 29, Jun. 30, Dec. 31,
2012 2012 2011
--------- --------- ---------
Assets
Current assets:
Cash, cash equivalents and marketable
securities $ 1,300 $ 1,579 $ 1,765
Accounts receivable, net 683 744 919
Inventories, net 744 833 476
Prepaid expenses and other current assets 88 77 69
--------- --------- ---------
Total current assets 2,815 3,233 3,229
Long-term marketable securities 180 180 149
Property, plant and equipment, net 685 707 726
Investment in GLOBALFOUNDRIES - - 278
Acquisition related intangible assets, net 100 105 8
Goodwill 553 553 323
Other assets 279 263 241
--------- --------- ---------
Total Assets $ 4,612 $ 5,041 $ 4,954
========= ========= =========
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 412 $ 471 $ 363
Payable to GLOBALFOUNDRIES 448 661 177
Accrued liabilities 534 548 550
Deferred income on shipments to
distributors 110 126 123
Current portion of long-term debt and
capital lease obligations 5 489 489
Other current liabilities 46 57 72
--------- --------- ---------
Total current liabilities 1,555 2,352 1,774
Long-term debt and capital lease
obligations, less current portion 2,035 1,532 1,527
Other long-term liabilities 33 40 63
Stockholders’ equity:
Capital stock:
Common stock, par value 7 7 7
Additional paid-in capital 6,780 6,752 6,672
Treasury stock, at cost (109) (108) (107)
Accumulated deficit (5,687) (5,530) (4,977)
Accumulated other comprehensive loss (2) (4) (5)
--------- --------- ---------
Total stockholders’ equity 989 1,117 1,590
--------- --------- ---------
Total Liabilities and Stockholders’ Equity $ 4,612 $ 5,041 $ 4,954
========= ========= =========
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
Nine Months
Quarter Ended Ended
------------- -------------
Sep. 29, Sep. 29,
2012 2012
------------- -------------
Cash flows from operating activities:
Net loss $ (157) $ (710)
Adjustments to reconcile net loss to net
cash used in operating activities:
Non-cash portion of the limited waiver of
exclusivity from GLOBALFOUNDRIES - 278
Depreciation and amortization 66 194
Benefit for deferred income taxes (1) (41)
Compensation recognized under employee
stock plans 27 74
Non-cash interest expense 5 17
Other - (1)
Changes in operating assets and liabilities:
Accounts receivable 60 237
Inventories 89 (266)
Prepaid expenses and other current assets (14) (30)
Other assets 5 (13)
Payable to GLOBALFOUNDRIES (213) 271
Accounts payable, accrued liabilities and
other (107) (62)
------------- -------------
Net cash used in operating activities $ (240) $ (52)
------------- -------------
Cash flows from investing activities:
Acquisition of SeaMicro, Inc., net of cash
acquired - (281)
Purchases of property, plant and equipment (32) (111)
Purchases of available-for-sale securities (201) (749)
Proceeds from sale and maturity of
available-for-sale securities 241 1,091
Other (18) (23)
------------- -------------
Net cash used in investing activities $ (10) $ (73)
------------- -------------
Cash flows from financing activities:
Net proceeds from debt issuance 491 491
Net proceeds from foreign grants 6 18
Proceeds from issuance of AMD common stock - 12
Repayments of debt and capital lease
obligations (486) (488)
Other - (1)
------------- -------------
Net cash provided by financing activities $ 11 $ 32
------------- -------------
Net decrease in cash and cash equivalents (239) (93)
------------- -------------
Cash and cash equivalents at beginning of
period $ 1,015 $ 869
------------- -------------
Cash and cash equivalents at end of period $ 776 $ 776
------------- -------------
ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
(Millions except headcount)
Quarter Ended Nine Months Ended
------------------------------------------------------ ---------------------
Segment and Category Sep. 29, Jun. 30, Oct. 1, Sep. 29, Oct. 1,
Information 2012 2012 2011 2012 2011
------------------------------------------------------ ---------------------
Computing Solutions
(1)
Net revenue $ 927 $ 1,046 $ 1,286 $ 3,176 $ 3,693
Operating income
(loss) $ (114) $ 82 $ 149 $ 92 $ 391
Graphics (2)
Net revenue 342 367 403 1,091 1,183
Operating income 18 31 12 83 24
All Other (3)
Net revenue - - 1 - 1
Operating loss (35) (36) (23) (809) (118)
Total
Net revenue $ 1,269 $ 1,413 $ 1,690 $ 4,267 $ 4,877
Operating income
(loss) $ (131) $ 77 $ 138 $ (634) $ 297
------------------------------------------------------ ---------------------
Other Data
Depreciation and
amortization
(excluding
amortization of
acquired
intangible assets) $ 62 $ 61 $ 71 $ 185 $ 221
Capital additions $ 32 $ 39 $ 58 $ 111 $ 163
Adjusted EBITDA (4) $ (35) $ 173 $ 239 $ 359 $ 642
Cash, cash
equivalents and
marketable
securities (5) $ 1,480 $ 1,759 $ 1,857 $ 1,480 $ 1,857
Adjusted free cash
flow (6) $ (272) $ 42 $ 131 $ (163) $ 428
Total assets $ 4,612 $ 5,041 $ 5,236 $ 4,612 $ 5,236
Long-term debt and
capital lease
obligations,
including current
portion $ 2,040 $ 2,021 $ 2,060 $ 2,040 $ 2,060
Headcount 11,813 11,737 12,019 11,813 12,019
------------------------------------------------------ ---------------------
See footnotes on the next page
(1) Computing Solutions segment includes microprocessors, as standalone
devices or as incorporated as an Accelerated Processing Unit, chipsets,
and embedded processors.
(2) Graphics segment includes graphics, video and multimedia products
developed for use in desktop and notebook computers, including home
media PCs, professional workstations and servers as well as revenue
received in connection with the development and sale of game console
systems that incorporate the Company’s graphics technology.
(3) All Other category includes certain expenses and credits that are not
allocated to any of the operating segments. Also included in this
category are amortization of acquired intangible assets, stock-based
compensation expense, restructuring charges and a charge related to the
limited waiver of exclusivity from GLOBALFOUNDRIES ("GF").
(4) Reconciliation of GAAP operating income (loss) to Adjusted EBITDA*
Quarter Ended Nine Months Ended
------------------------------ --------------------
Sep. 29, Jun. 30, Oct. 1, Sep. 29, Oct. 1,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
GAAP operating income
(loss) $ (131) $ 77 $ 138 $ (634) $ 297
Limited waiver of
exclusivity from
GLOBALFOUNDRIES - - - 703 -
Payments to
GLOBALFOUNDRIES - - - - 24
Legal settlement - 5 - 5 5
Depreciation and
amortization 62 61 71 185 221
Employee stock-based
compensation expense 27 26 22 74 69
Amortization of
acquired intangible
assets 4 4 8 9 26
Restructuring charges,
net 3 - - 11 -
SeaMicro acquisition
costs - - - 6 -
--------- --------- --------- --------- ---------
Adjusted EBITDA $ (35) $ 173 $ 239 $ 359 $ 642
========= ========= ========= ========= =========
(5) Cash, cash equivalents and marketable securities also include the long-
term portion of marketable securities.
(6) Non-GAAP adjusted free cash flow reconciliation**
Quarter Ended Nine Months Ended
------------------------------- --------------------
Sep. 29, Jun. 30, Oct. 1, Sep. 29, Oct. 1,
2012 2012 2011 2012 2011
--------- --------- --------- --------- ---------
GAAP net cash
provided by (used
in) operating
activities $ (240) $ 81 $ 189 $ (52) $ 195
Non-GAAP adjustment - - - - 396
--------- --------- --------- --------- ---------
Non-GAAP net cash
provided by (used
in) operating
activities (240) 81 189 (52) 591
Purchases of
property, plant
and equipment (32) (39) (58) (111) (163)
--------- --------- --------- --------- ---------
Non-GAAP adjusted
free cash flow $ (272) $ 42 $ 131 $ (163) $ 428
========= ========= ========= ========= =========
* The Company presents "Adjusted EBITDA" as a supplemental measure of its
performance. Adjusted EBITDA for the Company is determined by adjusting
operating income (loss) for depreciation and amortization, employee stock-
based compensation expense and amortization of acquired intangible assets.
In addition, for the third quarter of 2012 and the nine months ended
September 29, 2012, the Company included net restructuring charges; for the
nine months ended September 29, 2012, the Company also included an
adjustment for the limited waiver of exclusivity from GF, a legal settlement
with a third party and costs related to acquisition of SeaMicro, Inc.; for
the nine months ended October 1, 2011, the Company included adjustments
related to a payment to GF and a legal settlement with a third party. The
payment to GF occurred in the first quarter of 2011 when the Company
incurred a charge of $24 million in cost of sales related to a payment to GF
in the form of cash and GF Class A Preferred Shares that the Company owned.
This payment primarily related to certain manufacturing assets of GF which
do not benefit the Company. For the second quarter of 2012, the Company
included a charge of approximately $5 million related to a legal settlement
with a third party. The Company calculates and communicates Adjusted EBITDA
in the financial schedules because the Company’s management believes it is
of importance to investors and lenders in relation to its overall capital
structure and its ability to borrow additional funds. In addition, the
Company presents Adjusted EBITDA because it believes this measure assists
investors in comparing its performance across reporting periods on a
consistent basis by excluding items that the Company does not believe are
indicative of its core operating performance. The Company’s calculation of
Adjusted EBITDA may or may not be consistent with the calculation of this
measure by other companies in the same industry. Investors should not view
Adjusted EBITDA as an alternative to the GAAP operating measure of operating
income (loss) or GAAP liquidity measures of cash flows from operating,
investing and financing activities. In addition, Adjusted EBITDA does not
take into account changes in certain assets and liabilities as well as
interest and income taxes that can affect cash flows.
** The Company also presents non-GAAP adjusted free cash flow in the
earnings release as a supplemental measure of its performance. In 2008 and
2009, the Company and certain of its subsidiaries (collectively, the "AMD
Parties") entered into supplier agreements with IBM Credit LLC and certain
of its subsidiaries (collectively, the "IBM Parties"). Pursuant to these
supplier agreements, the AMD Parties sold to the IBM Parties invoices of
selected distributor customers. Because the Company does not recognize
revenue until its distributors sell its products to their customers, under
GAAP, the Company classified funds received from the IBM Parties as debt on
the balance sheet. Moreover, for cash flow purposes, these funds were
classified as cash flows from financing activities. When a distributor paid
the applicable IBM Party, the Company reduced the distributor’s accounts
receivable and the corresponding debt resulted in a noncash accounting
entry. Because the Company did not receive the cash from the distributor to
reduce the accounts receivable, the distributor’s payment was not reflected
in the Company’s cash flows from operating activities. Non-GAAP adjusted
free cash flow for the Company was determined by adding the distributors’
payments to the IBM Parties to GAAP net cash provided by (used in) operating
activities. This amount was then further adjusted by subtracting capital
expenditures. Generally, under GAAP, the reduction in accounts receivable is
assumed to be a source of operating cash flows. Therefore, the Company
believes that treating the payments from its distributor customers to the
IBM Parties as if the Company actually received the cash from the
distributor and then used that cash to pay down the debt is more reflective
of the economic substance of the transaction. On February 11, 2011, the
Company terminated its supplier agreements with IBM Parties. As a result, as
of the end of the second quarter of 2011, there were no outstanding invoices
relating to the financing arrangement with the IBM Parties, and starting
from the third quarter of 2011, the Company no longer makes quarterly
adjustments for distributors’ payments to the IBM Parties to its GAAP net
cash provided by (used in) operating activities when calculating non-GAAP
adjusted free cash flow. The Company calculates and communicates non-GAAP
adjusted free cash flow in the financial schedules because the Company’s
management believes it is of importance to investors to understand the
nature of these cash flows. The Company’s calculation of non-GAAP adjusted
free cash flow may or may not be consistent with the calculation of this
measure by other companies in the same industry. Investors should not view
non-GAAP adjusted free cash flow as an alternative to GAAP liquidity
measures of cash flows from operating or financing activities. The Company
has provided reconciliations within the press release and financial
schedules of these non-GAAP financial measures to the most directly
comparable GAAP financial measures.
Media Contact
Drew Prairie
512-602-4425
drew.prairie@amd.com
Investor Contact:
Ruth Cotter
408-749-3887
ruth.cotter@amd.com
SOURCE: Advanced Micro Devices
mailto:drew.prairie@amd.com
mailto:ruth.cotter@amd.com
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