AMD 2003 Annual Report Download - page 34

Table of Contents
Memory Products operating loss of $189 million in 2003 increased $30 million from 2002. Further quantification of the changes is not practical due to the
consolidation of FASL LLC on June 30, 2003.
Memory Products operating loss was $159 million in 2002 compared to $268 million of operating income in 2001. The change in the operating result was
primarily due to decrease in net sales of $392 million as a result of a 36 percent decline in average selling prices due to continued weakness in the Flash memory
market.
Our All Other operating loss of $21 million in 2003 improved by $384 million compared to 2002, primarily due to $331 million of restructuring and other
special charges included in the 2002 results, and a $14 million credit adjustment to the restructuring charge in 2003.
Our All Other operating loss of $405 million in 2002 increased by $270 million compared to 2001. The operating loss included $331 million of
restructuring and other special charges in 2002 compared to approximately $89 million in 2001. The remaining increase of operating loss was primarily due to an
increase in operating loss of Personal Connectivity Solutions products, partially offset by approximately $27 million of improvement of operating results in
Foundry Services.
Financial Condition
Our cash, cash equivalents and short-term investments at December 28, 2003 totaled $1.1 billion, which included approximately $330 million in cash, cash
equivalents, and short-term investments maintained by FASL LLC. FASL LLC’s operating agreement governs its ability to use this cash balance for operations
or to distribute it to us and Fujitsu. Pursuant to the operating agreement, and subject to restrictions contained in third party loan agreements, FASL LLC must
first distribute any cash balance to us and Fujitsu in an amount sufficient to cover each party’s estimated tax liability, if any, related to FASL LLC’s taxable
income for each fiscal year. Any remaining cash balance after the tax liability distribution would be used by FASL LLC to fund its operations in accordance with
its budget. If any cash remains, it must be used to repay FASL LLC’s outstanding debt to us and Fujitsu. Any remaining cash after such distributions is
distributed at the discretion of FASL LLC’s Board of Managers, to us and Fujitsu, pro rata, based on each party’s membership interest at the time of distribution,
which currently is 60 percent and 40 percent.
Net cash provided by operating activities was approximately $296 million in 2003. Although we had a net loss of $274 million for the year, adjustments
for non-cash charges, which were primarily depreciation and amortization, resulted in a positive cash flow from operations. The net changes in operating assets
in 2003 as compared to 2002 included an increase in accounts receivable due to higher net sales and the consolidation of FASL LLC’s results of operations,
which include FASL LLC’s sales to Fujitsu, and an increase in net inventory due to the consolidation of FASL LLC’s results of operations. At December 28,
2003, Fujitsu accounted for approximately 31 percent of our consolidated net accounts receivable and approximately 13 percent of our consolidated net sales.
The net changes in payables and accrued liabilities included payments in 2003 of $90 million for a technology license from IBM, approximately $64 million of
payments in 2003 under the 2002 Restructuring Plan and an accrual of $29 million in December 2003 related to our license from IBM for technology and
know-how related to manufacturing products on 300-millimeter silicon wafers.
Net cash used in operating activities was $120 million in 2002, primarily as a result of our net loss of $1,303 million, adjusted by non-cash related charges.
Changes in operating assets and liabilities in 2002 as compared to 2001 were attributable to a decrease in accounts receivable due to a 31 percent decrease in net
sales. At December 29, 2002, inventory increased as compared to December 29, 2001 due to an increase of products to support anticipated 2003 sales, a change
in the mix of inventory, and the impact of Flash memory production from Fab 25 following its conversion from logic manufacturing.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004