AMD 2011 Annual Report Download - page 65

actually received the cash from the distributor and then used that cash to pay down the debt to the IBM Parties
was more reflective of the economic substance of the financing arrangement with the IBM Parties. We calculate
and communicate adjusted free cash flow because our management believes it is important for 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 cash, cash equivalents and marketable securities balances as of December 31, 2011,
anticipated cash flow from operations and available external financing will be sufficient to fund operations,
including capital expenditures over the next twelve months.
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. Uncertain global economic conditions have in the past and may in
the future adversely impact our business. We cannot assure you that conditions will improve, and they could
worsen. If market conditions do not improve or deteriorate, we may be limited in our ability to access the capital
markets to meet liquidity needs, on favorable terms or at all, which could adversely affect our liquidity and
financial condition, including our ability to refinance maturing liabilities.
Auction Rate Securities
As a result of the uncertainties in the credit markets as mentioned above, all of our auction rate securities
(ARS) were negatively affected and auctions for these securities failed to settle on their respective settlement
dates since February 2008. However, there have been no defaults, and we have received all interest payments as
they became due.
During 2011, we received proceeds of $21 million upon the redemption of ARS that had a carrying value of
$19 million.
As of December 31, 2011, the par value of our ARS was $45 million, with an estimated fair value of $38
million. Total ARS, at fair value, represented 2% of our total investment portfolio as of December 31, 2011.
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 31, 2011. We have the intent and believe we have the ability
to sell these securities within the next 12 months.
Operating Activities
Net cash provided by operating activities was $382 million in 2011. Net income of $491 million was
adjusted for non-cash charges consisting primarily of $317 million of depreciation and amortization expense, a
$209 million impairment charge on our investment in GF, $90 million of stock based compensation expense, and
$21 million of interest expense related to our 6.00% Notes and our 8.125% Notes. These charges were partially
offset by recognition of a one-time, non-cash gain of $492 million due to the dilution of our equity interest in GF.
The net changes in operating assets at December 31, 2011 compared to December 25, 2010 included an increase
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