Business Context and Reporting Period
Company: Advanced Micro Devices, Inc. (AMD)
Filing Type: Form 8-K (Current Report)
Report Date: October 27, 2011
Reporting Period: Fiscal Quarter ended October 1, 2011 (Third Fiscal Quarter of 2011)
This filing announces financial results and includes commentary from the Chief Financial Officer. It details the Company's transition in accounting for its investment in GLOBALFOUNDRIES Inc. (GF) from the equity method to the cost method beginning in the first fiscal quarter of 2011.
Key Financial Metrics and Non-GAAP Adjustments
The filing text does not provide specific GAAP revenue, net income, or cash flow figures for the quarter; these are contained in the attached press release (Exhibit 99.1) and financial schedules (Exhibit 99.2). However, the filing details specific adjustments used to derive non-GAAP measures:
- Debt Repurchase Loss: In the third fiscal quarter of 2011, AMD repurchased $150 million face value of its 6.00% Convertible Senior Notes due 2015, resulting in a recognized loss of $5 million.
- Non-GAAP Net Income Adjustments: Excludes amortization of acquired intangible assets and the loss on debt repurchase.
- Adjusted EBITDA: Adjusts operating income for depreciation, amortization, stock-based compensation, and amortization of acquired intangible assets.
- Non-GAAP Adjusted Free Cash Flow: Previously adjusted for distributor payments to IBM Credit LLC under supplier agreements. As of February 11, 2011, these agreements were terminated. Consequently, no adjustments for these payments were made in the third quarter of 2011.
Material Changes and Accounting Shifts
- GLOBALFOUNDRIES Accounting: Effective Q1 2011, AMD began accounting for its investment in GF under the cost method, whereas Q1 2010 through Q4 2010 utilized the equity method. This change impacts the recognition of equity income/loss and dilution gains.
- IBM Supplier Agreements: The Company terminated supplier agreements with IBM Credit LLC on February 11, 2011. As a result, there were no outstanding invoices related to this financing arrangement in Q3 2011, altering the calculation of non-GAAP adjusted free cash flow compared to prior periods.
- Debt Reduction: The Company executed a partial repurchase of outstanding indebtedness ($150 million face value) in Q3 2011, compared to an $800 million repurchase in Q3 2010.
Guidance, Outlook, and Risks
The filing text does not contain specific forward-looking guidance, revenue forecasts, or management outlook statements; these are referenced as being contained in the attached exhibits. The filing emphasizes that non-GAAP measures are provided to assist investors in comparing performance across periods by excluding items not indicative of core operating performance, such as amortization of acquired intangibles from the ATI acquisition and debt repurchase losses. Investors are cautioned that non-GAAP measures should not be viewed as alternatives to GAAP measures.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP revenue, net income, and earnings per share figures for the quarter ended October 1, 2011.
- Verify the reconciliation tables in Exhibit 99.2 to understand the exact dollar impact of the $5 million debt repurchase loss and intangible asset amortization on non-GAAP results.
- Confirm the current status of the investment in GLOBALFOUNDRIES Inc. and the implications of the cost method accounting on future earnings volatility.
- Check for any updated liquidity positions or debt covenants following the $150 million debt repurchase.