AMD 2010 Annual Report Download - page 68

debt, resulting in a non-cash accounting entry. Because we do not receive the cash from the distributor to reduce
the accounts receivable, the distributor’s payment is never reflected in our cash flows from operating activities.
On February 11, 2011, we terminated these supplier agreements.
Generally, under U.S. GAAP, the reduction in accounts receivable is assumed to be a source of operating
cash flows. Therefore, we believe that treating the payments from our distributor customers to the IBM Parties as
if we actually received the cash from the distributor and then used that cash to pay down the debt to the IBM
Parties is more reflective of the economic substance of our financing arrangement with the IBM Parties. We
calculate and communicate adjusted free cash flow because our management believes it is of importance to
investors to understand the nature of these cash flows. Our calculation of 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 adjusted free cash flow as an alternative to GAAP liquidity measures of cash flows from operating or
financing activities.
We believe that in the event we require additional funding, we will be able to access the capital markets on
terms and in amounts adequate to meet our objectives. However, given the possibility of changes in market
conditions or other occurrences, we cannot be certain that such funding will be available on terms favorable to us
or at all.
Over the longer term, should additional funding be required, such as to meet payment obligations of our
long-term debt when due, we may need to raise the required funds through borrowings or public or private sales
of debt or equity securities, which may be issued from time to time under an effective registration statement,
through the issuance of securities in a transaction exempt from registration under the Securities Act of 1933, or a
combination of one or more of the foregoing. However, global market and economic conditions have been
challenging, with tighter credit conditions and recession in most major economies. While global economic
conditions have improved since the first half of 2009, there can be no assurance that conditions will continue to
improve, and they could worsen. If market conditions do not continue to improve or deteriorate, it may limit our
ability to access the capital markets to meet liquidity needs, on favorable terms or at all, resulting in adverse
effects on our liquidity and financial condition, including our ability to refinance maturing liabilities and access
the capital markets to meet liquidity needs.
Auction Rate Securities
As a result of the uncertainties in the credit markets as mentioned above, all of our ARS were negatively
affected and auctions for these securities failed to settle on their respective settlement dates. While many of these
securities continue to be illiquid, there have been no defaults, and we have received all interest payments as they
became due.
In October 2008, UBS AG (UBS) offered to repurchase all of the ARS that we purchased from UBS prior to
February 13, 2008. We accepted this offer. We had the right, but not the obligation, to sell, at par, these ARS to
UBS from June 30, 2010 through July 2, 2012. During the third quarter of 2010, UBS had redeemed all of our
UBS ARS without us exercising the put option.
During 2010, we received $27 million upon the redemption of ARS we had carried at $26 million.
As of December 25, 2010, the par value of our ARS was $66 million, with an estimated fair value of $57
million. Total ARS, at fair value, represented 3% of our total investment portfolio as of December 25, 2010.
Based on the recent tender and redemption activities and the fact that the secondary market for these
securities has become more liquid, with pricing generally similar to our carrying value, we classified these
securities as marketable securities as of December 25, 2010, because we have the intent and believe we have the
ability to sell these securities within the next 12 months.
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