AMD 1999 Annual Report Download - page 125

Comparison of Segment Income (Loss)
In the first half of 1999 and in 1998 and 1997, we operated in two segments: (1)
the AMD segment and (2) the Vantis segment. For a comparison of segment net
sales, refer to the previous discussions on net sales by product group.
The following is a summary of operating income (loss) by segment for 1999,
1998 and 1997:
(Millions) 1999 1998 1997
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AMD segment $(327) $(185) $(127)
Vantis segment 6 22 37
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Total $(321) $(163) $ (90)
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The AMD segment's operating loss increased by $142 million in 1999 compared to
1998 primarily due to an increase in fixed costs associated with the continued
facilitization of Fab 25 and research and development costs related to Dresden
Fab 30, the Motorola alliance and the AMD Athlon microprocessor. We also
incurred $38 million in restructuring and other special charges in 1999. The
increases in costs were partially offset by higher net sales in CPG and the
Memory Group.
The Vantis segment's operating income decreased in 1999 compared to 1998
due primarily to the sale of Vantis on June 15, 1999, resulting in sales
activity for 24 weeks in 1999. In addition to the shorter period for sales
activity in 1999, Vantis net sales for the first half of 1999 were also lower
compared to the first half of 1998 due to lower sales of SPLD products which
were partially offset by higher sales of CPLD products.
FINANCIAL CONDITION
Cash flow from operating activities was $260 million in 1999 compared to $142
million in 1998 and $399 million in 1997. Net operating cash flows in 1999
increased $118 million over 1998 primarily due to a decrease in net loss of $15
million and an increase in the net change in operating assets and liabilities of
$245 million, which was mainly due to higher payables and accrued liabilities.
The increase in net operating cash flows was partially offset by a decrease in
net non-cash adjustments to net loss of $142 million. This offset was primarily
due to the gain on the sale of Vantis which was partially offset by a larger
decrease in deferred income tax assets in 1999 compared to 1998.
Investing activities consumed $142 million in cash during 1999 compared to
$977 million in 1998 and $633 million in 1997. Cash used in investing activities
decreased in 1999 compared to 1998 primarily due to an offset from proceeds from
the sale of Vantis, as well as lower capital expenditures.
Our financing activities used cash of $174 million in 1999 compared to
providing cash of $950 million in 1998 and $309 million in 1997. In 1999, we
used cash primarily for payments on debt and capital lease obligations,
including repayment of the secured term loan under the Credit Agreement. Our
1998 sources of cash included proceeds from the Convertible Subordinated Notes,
borrowings from Dresdner Bank AG and capital investment grants and interest
subsidies from the Federal Republic of Germany and the State of Saxony.
Financing activities for all years presented include proceeds from the issuance
of common stock under employee stock plans.
The Credit Agreement provided for a $150 million three-year secured
revolving line of credit and a $250 million four-year secured term loan. On June
25, 1999, we terminated the secured revolving line of credit. On July 13, 1999,
we replaced the Credit Agreement with a new Loan and Security Agreement (the
Loan Agreement) with a consortium of banks led by Bank of America. On July 30,
1999, we repaid the outstanding principal balance of $86 million on the secured
term loan and terminated the Credit Agreement. Under the Loan Agreement, which
provides for a four-year secured revolving line of credit of up to $200 million,
we can borrow, subject to amounts which may be set aside by the lenders, up to
85 percent of our eligible accounts receivable from Original Equipment
Manufacturers (OEMs) and 50 percent of our eligible accounts receivable from
distributors. We must comply with certain financial covenants if the level of
domestic cash we hold declines to certain levels, or the amount of borrowings
under the Loan Agreement rises to certain levels. Our obligations under the Loan
Agreement are secured by a pledge of most of our accounts receivable, inventory,
general intangibles and the related proceeds. As of December 26, 1999, we had
not borrowed any funds under the Loan Agreement. In addition, we had available
unsecured, uncommitted bank lines of credit in the amount of $71 million.
We currently plan to make additional capital investments of approximately
$800 million in 2000, although actual expenditures may vary. These investments
include those relating to the continued facilitization of Dresden Fab 30 and Fab
25.
AMD Saxony, an indirect wholly owned German subsidiary of AMD, has
constructed and is installing equipment in Dresden Fab 30, a 900,000-square-foot
submicron integrated circuit manufacturing and design facility located in
Dresden, in the State of Saxony, Germany. AMD, the Federal Republic of Germany,
Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000