AMD 2005 Annual Report Download - page 30

Table of Contents
Moreover, as of December 25, 2005, our cash, cash equivalents and short-term investments totaled $1.8 billion, which includes cash proceeds of approximately
$260 million from Spansion’s repayment of amounts outstanding under loans due to us, compared to $1.2 billion as of December 26, 2004.
We also substantially completed the construction and initial facilitization of Fab 36, our 300-millimeter wafer fabrication facility in Dresden, Germany.
We intend to make production shipments of wafers manufactured using 90-nanometer technology in Fab 36 in the first quarter of 2006 and to begin
manufacturing using 65-nanometer technology by the end of 2006. Our goal is to be substantially converted to 65-nanometer technology in Fab 36 by mid-2007.
The additional capacity gained through the use of larger 300-millimeter wafers plays an important role in our growth plans for the next several years. We plan to
add production output on a steady year-to-year basis, while also keeping fab utilization at consistently high levels.
For 2006, we anticipate further growth in both annual net sales and market share. We believe critical success factors include our ability to: continue to
increase market acceptance of our AMD64 technology, particularly by business enterprises, including small and medium businesses, as well as large enterprises,
academic institutions and government institutions; strengthen our relationships with key customers and suppliers and establish relationships with new customers
and suppliers that are industry leaders in their markets; successfully develop and transition to the latest manufacturing process technologies; ramp the production
at Fab 36 and at a third-party foundry on a timely basis in response to market requirements; develop and introduce new products on a timely basis and achieve
efficient and timely volume production of these products; extend our portfolio of x86 technology from the traditional PC and server markets into embedded
applications in such markets as storage subsystems, networking and telephony equipment, handheld computing devices, computation and office equipment
products, and consumer electronics; design and deliver products that meet the demands of consumers as digital content becomes increasingly used with a variety
of connected digital devices; and continue to expand our participation in high-growth global markets.
We intend the discussion of our financial condition and results of operations that follows to provide information that will assist you in understanding our
financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that resulted in those changes, and how
certain accounting principles, policies and estimates affect our financial statements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to
our revenues, inventories, asset impairments, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although
actual results have historically been reasonably consistent with management’s expectations, the actual results may differ from these estimates or our estimates
may be affected by different assumptions or conditions.
We believe the following critical accounting policies are the most significant to the presentation of our financial statements and require the most difficult,
subjective and complex judgments.
Revenue Reserves. We record a provision for estimated sales returns and allowances on product sales and a provision for estimated future price
reductions in the same period that the related revenues are recorded. We base these estimates on actual historical sales returns, allowances, historical price
reductions, market activity, and other known or anticipated trends and factors. These estimates are subject to management’s judgment, and actual provisions
could be different from our estimates and current provisions, resulting in future adjustments to our revenues and operating results.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006