AMD 2015 Annual Report Download

Download and view the complete annual report

Please find the complete 2015 AMD annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

2015 ANNUAL REPORT ON FORM 10-K

Table of contents

  • Page 1
    2015 ANNUAL REPORT ON FORM 10-K

  • Page 2
    ... processors for its latest EliteBook commercial client systems - a first for AMD. • Becoming the exclusive supplier of discrete GPUs spanning Apple's entire line of consumer and professional computers. • Setting a record for annual semi-custom unit shipments as a critical and trusted partner...

  • Page 3
    ... embedded offerings capable of driving margin-accretive revenue growth across a targeted set of markets including medical imaging devices, digital signage, thin clients, networking and communications, and storage. • New semi-custom designs that leverage our strong IP and system integration...

  • Page 4
    ... Micro Devices, Inc. 2015 ANNUAL REPORT ON FORM 10-K CAUTIONARY STATEMENT The forward-looking statements contained in this letter, including but not limited to, AMD's ability leverage its technology assets to deliver high-performance gaming products, immersive platforms and datacenter solutions...

  • Page 5
    ... on the reported closing sale price of $2.47 per share as reported on The NASDAQ Stock Market (NASDAQ) on June 26, 2015, which was the last business day of the registrant's most recently completed second fiscal quarter. Indicate the number of shares outstanding of each of the registrant's classes of...

  • Page 6
    ... on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ... PART III ...ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and...

  • Page 7
    ... date for the proposed transaction; AMD's expected future filing of patent applications in both the United States and abroad on significant inventions; AMD's expectation that based on the information presently known to management, the securities class action and the shareholder derivative suit will...

  • Page 8
    ... the agreements governing AMD's notes and the Secured Revolving Line of Credit impose restrictions on AMD that may adversely affect its ability to operate its business; the completion and impact of the 2015 Restructuring Plan, its transformation initiatives and any future restructuring actions could...

  • Page 9
    ...the symbol "AMD". Our mailing address and executive offices are located at One AMD Place, Sunnyvale, California 94088, and our telephone number is (408) 749-4000. References in this Annual Report on Form 10-K to "AMD," "we," "us," "management," "our" or the "Company" mean Advanced Micro Devices, Inc...

  • Page 10
    ... include the number and type of cores in a microprocessor, the bit rating of the microprocessor, memory size and data access speed. Developments in IC design and manufacturing process technologies have resulted in significant advances in microprocessor performance. As businesses and consumers...

  • Page 11
    ...the platforms to market faster in a variety of client and server system form factors. We currently base our microprocessors and chipsets on the x86 instruction set architecture and AMD's Direct Connect Architecture, which connects an on-chip memory controller and input/output (I/O) channels directly...

  • Page 12
    ...technology. To that end, we offer CPUs, GPUs, APUs, SoCs and chipsets with multiple low power states that are designed to utilize lower clock speeds and voltages to reduce processor power consumption during active and idle times. The use of intelligent, dynamic power management is designed to create...

  • Page 13
    ... we create and can be found in an APU, GPU, SoC or a combination of a GPU with one of the other foregoing products working in tandem. Our customers generally use our graphics solutions to increase the speed of rendering images and to help improve image resolution and color definition. We develop our...

  • Page 14
    ...-of-sale/self-service kiosks, medical imaging, set-top box and casino gaming machines as well as enterprise class telecommunications, networking, security, storage systems and thin clients (which are computers that serve as an access device on a network). Typically, our embedded products are used in...

  • Page 15
    ... and CPU. Our server brand for microprocessors is AMD Opteronâ„¢. We also sell low-power versions of our AMD Opteron, AMD Athlon and AMD Sempron, as well as AMD Geodeâ„¢, AMD R-Series and G-Series processors as embedded processor solutions. Our product brand for the consumer graphics market is AMD...

  • Page 16
    ... to use the next generation of our products. We work closely with our customers to create differentiated products that leverage our CPU, GPU and APU technology. Customers of our semi-custom products pay us non-recurring engineering fees for design and development services and a purchase price for...

  • Page 17
    ... for low-cost notebooks. Intel could also take actions that place our discrete GPUs at a competitive disadvantage, including giving one or more of our competitors in the graphics market, such as Nvidia Corporation, preferential access to its proprietary graphics interface or other useful information...

  • Page 18
    ... low cost and low power processors for the computing market including tablets and thin-client form factors, as well as dense servers, set-top boxes and gaming consoles. ARM Holdings designs and licenses its ARM architecture to third parties, including us, and offers supporting software and services...

  • Page 19
    ... partners located in the Asia-Pacific region who package and test our final semiconductor products. On October 15, 2015, we entered into an Equity Interest Purchase Agreement (the Equity Interest Purchase Agreement) with Nantong Fujitsu Microelectronics Co., Ltd., a Chinese joint stock company...

  • Page 20
    .... For example, historically, first quarter PC product sales are generally lower than fourth quarter sales. In addition, with respect to our semi-custom SoC products for game consoles, we expect sales patterns to follow the seasonal trends of a consumer business with sales in the first half of the...

  • Page 21
    ... Protection Act of 2010, the Securities and Exchange Commission ("SEC") adopted disclosure and reporting requirements for companies that use "conflict" minerals originating from the Democratic Republic of Congo or adjoining countries. We continue to incur additional costs associated with complying...

  • Page 22
    ... for low-cost notebooks. Intel could also take actions that place our discrete GPUs at a competitive disadvantage, including giving one or more of our competitors in the graphics market, such as Nvidia Corporation, preferential access to its proprietary graphics interface or other useful information...

  • Page 23
    Intel's position in the microprocessor market and integrated graphics chipset market, its introduction of competitive new products, its existing relationships with top-tier OEMs and its aggressive marketing and pricing strategies could result in lower unit sales and a lower average selling price for...

  • Page 24
    ... requirements than those consumers in the PC market, PC sales could be negatively impacted, which could adversely impact our business. Our product roadmap includes a new x86 processor core codenamed "Zen" to help drive our re-entry into high-performance and server computing. We cannot assure you 18

  • Page 25
    that our efforts to execute our product roadmap and address markets beyond our core PC market will result in innovative products and technologies that provide value to our customers. If we fail to or are delayed in developing, qualifying or shipping new products or technologies that provide value to...

  • Page 26
    ... or potential future customers may experience cash flow problems and as a result may modify, delay or cancel plans to purchase our products. Additionally, if our customers are not successful in generating sufficient revenue or are unable to secure financing, they may not be able to pay, or may...

  • Page 27
    ... subsidiaries to pay dividends or make other distributions to us; use the proceeds from sales of assets; enter into certain types of transactions with affiliates; and consolidate or merge or sell our assets as an entirety or substantially as an entirety. Our Secured Revolving Line of Credit also...

  • Page 28
    ... of integrated graphics. In addition, our competitors have significant marketing and sales resources which could increase the competitive environment in such a declining market, leading to lower prices and margins. If competitors introduce competitive new products into the market before us...

  • Page 29
    ... customer demand for our products, including for our older products as our new products are introduced; or our competitors taking aggressive pricing actions. For example, in the third quarter of 2015, we recorded an inventory write-down of $65 million consisting primarily of older generation...

  • Page 30
    ... operating systems) and other components that our customers utilize to support our microprocessor, GPU and APU offerings. We also rely on AIBs to support our GPU and APU products. In addition, our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel...

  • Page 31
    ... our revenue and corresponding gross margin would decline. Our inability to continue to attract and retain qualified personnel may hinder our product development programs. Much of our future success depends upon the continued service of numerous qualified engineering, marketing, sales and executive...

  • Page 32
    ... complementary businesses, solutions or technologies or through divestitures or joint ventures rather than through internal development. The identification of suitable acquisition or joint venture candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete...

  • Page 33
    ... system or network failures, exposing us to significant cost, reputational harm and disruption or damage to our business. In addition, as our IT environment continues to evolve, we are embracing new ways of communicating and sharing data internally and externally with customers and partners using...

  • Page 34
    ... on our networks, including our intellectual property and proprietary or confidential business information relating to our business and that of our customers and business partners. The secure maintenance of this information is critical to our business and reputation. We believe that companies have...

  • Page 35
    ... our testing procedures, errors will not be found in new products or releases after commencement of commercial shipments in the future, which could result in loss of or delay in market acceptance of our products, material recall and replacement costs, delay in recognition or loss of revenue, writing...

  • Page 36
    ... finished products among our facilities, to our manufacturing suppliers and to our customers. In addition, we rely on third parties to provide certain information technology services to us, including help desk support, desktop application services, business and software support applications, server...

  • Page 37
    ...and cash flow. In addition, the majority of our product sales are denominated in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases or decreases in the cost of our products in the local currency of such customers. An appreciation of the...

  • Page 38
    ... or damaged, or are used products represented as new. If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, we may lose a competitive advantage and incur significant...

  • Page 39
    ... could result in additional costs and liabilities. Our operations and properties have in the past been and continue to be subject to various United States and foreign environmental laws and regulations, including those relating to materials used in our products and manufacturing processes, discharge...

  • Page 40
    ... Protection Act of 2010, the Securities and Exchange Commission ("SEC") adopted disclosure and reporting requirements for companies that use "conflict" minerals originating from the Democratic Republic of Congo or adjoining countries. We continue to incur additional costs associated with complying...

  • Page 41
    ... our headquarters in Sunnyvale, California, our principal administrative facilities in Austin, Texas, our main facility with respect to graphics and chipset products located in Markham, Ontario, Canada and a number of smaller regional sales offices located in commercial centers near customers...

  • Page 42
    ...15-cv-04485 ("Ha") was filed against us (as a nominal defendant only) and certain of our directors and officers in the United States District Court for the Northern District of California. The lawsuit also seeks a court order voiding the shareholder vote on AMD's 2015 proxy. The case was transferred...

  • Page 43
    ... 12, 2016, there were 6,263 registered holders of our common stock, and the closing price of our common stock was $1.83 per share as reported on NASDAQ. The following table sets forth on a per share basis the high and low intra-day sales prices on NASDAQ and the New York Stock Exchange for our...

  • Page 44
    ... December 23, 2010 through December 26, 2015. The past performance of our common stock is no indication of future performance. Comparison of Cumulative Five Year Total Return $250 $200 Index Value $150 $100 $50 $0 2010 2011 2012 2013 2014 2015 Period Ending Advanced Micro Devices, Inc. S&P 500...

  • Page 45
    ...$273 million lower of cost or market charge recorded in the fourth quarter of 2012. In 2015, 2014, 2012 and 2011, we implemented restructuring plans and incurred net charges of $53 million, $58 million, $6 million, $100 million and $100 million in 2015, 2014, 2013, 2012 and 2011, respectively, which...

  • Page 46
    ... in other special charges. In 2014, we recorded a goodwill impairment charge of $233 million related to our Computing and Graphics segment. Also in 2014, we recorded a $58 million lower of cost or market inventory adjustment related to our second generation APU products. In 2008, we sold our Digital...

  • Page 47
    ... an accelerated processing unit (APU), chipsets, and discrete graphics processing units (GPUs) for the consumer, commercial and professional graphics markets; and (ii) server and embedded CPUs, GPUs and APUs, and semi-custom System-on-Chip (SoC) products and technology for game consoles. In this MD...

  • Page 48
    ... introduced a desktop A-series processor, the AMD A10-7870K APU. We also introduced the A8-7670K APU designed to support Windows® 10, mainstream workloads and online gaming. With respect to our graphics products, we introduced the new AMD Radeon™ R9 Fury X and R9 Fury graphics, the AMD Radeon R7...

  • Page 49
    ...The primary effect of the fourth amendment was to establish volume purchase commitments and fixed pricing for the 2014 calendar year as well as to modify certain other terms of the WSA applicable to wafers for some of our microprocessor, graphics processor and semi-custom game console products to be...

  • Page 50
    .... The primary effect of the fifth amendment was to establish volume purchase commitments and fixed pricing for the 2015 calendar year as well as to modify certain other terms of the WSA applicable to wafers for some of our microprocessor unit, graphics processor unit and semi-custom products to be...

  • Page 51
    ... sales returns and allowances on product sales for estimated future price reductions and other customer incentives in the same period that the related revenues are recorded. We base these estimates on actual historical sales returns, historical allowances, historical price reductions, market...

  • Page 52
    ... inability to successfully introduce new products in the marketplace or to achieve internal forecasts, and a decline in our stock price. If the estimated fair value of our reporting units declines due to any of these factors, we may be required to record future goodwill impairment. Income Taxes. In...

  • Page 53
    ... desktop and notebook processors and chipsets, discrete GPUs and professional graphics; and the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded processors, semi-custom SoC products, engineering services and royalties. In addition to these reportable...

  • Page 54
    ... anticipated demand for primarily older-generation APU products. Operating loss in 2014 included a $19 million benefit from technology licensing revenue. Research and development expenses and marketing, general and administrative expenses decreased for the reasons set forth under "Expenses," below...

  • Page 55
    ... in unit shipments of our semi-custom SoC products in 2014 compared to 2013. In addition, operating income in 2014 included an $8 million benefit from technology license revenue. Research and development expenses and marketing, general and administrative expenses increased for the reasons set forth...

  • Page 56
    .... 2015 2014 2013 (In millions, except for percentages) Cost of sales ...Gross margin ...Gross margin percentage ...Research and development ...Marketing, general and administrative ...Amortization of acquired intangible assets ...Restructuring and other special charges, net ...Goodwill impairment...

  • Page 57
    ...in other employee compensation and benefit expenses. Research and development expenses attributable to our Enterprise, Embedded and Semi-Custom segment increased primarily due to a $17 million increase in product engineering and design costs. Research and development expenses of $1.1 billion in 2014...

  • Page 58
    ... the impairment of intangible assets as a result of our exit from the dense server systems business in the first quarter of 2015. The decrease from 2013 to 2014 was due to the reduced amortization base amount of acquired intangible assets of ATI. Restructuring and Other Special Charges, Net Effects...

  • Page 59
    ... site closures, which were partially offset by the release of employee-related severance costs of $2 million and $5 million, respectively. The 2012 restructuring plan was substantially completed as of the end of the third quarter of 2013. Dense Server Systems Business Exit As a part of our strategy...

  • Page 60
    In September 2013, we also sold an office building in Austin, Texas. We received net cash proceeds of $10 million in connection with the sale and recorded a $5 million gain in the third quarter of 2013. In March 2013, we sold and leased back certain land and office buildings in Austin, Texas. We ...

  • Page 61
    ... of operations as follows: 2015 2014 2013 (In millions) Cost of sales ...Research and development ...Marketing, general and administrative ...Total stock-based compensation expense, net of tax of $0 ... $ 3 36 24 $63 $ 3 44 34 $81 $ 5 48 38 $91 During 2015, 2014 and 2013, we did not realize...

  • Page 62
    ... the Securities Act of 1933, as amended, or a combination of one or more of the foregoing. Uncertain global economic conditions have in the past adversely impacted, and may in the future adversely impact, our business. If market conditions deteriorate, we may be limited in our ability to access the...

  • Page 63
    ... our outstanding 6.00% Notes) in open market transactions and $5 million in payments for capital lease obligations. During 2015, 2014 and 2013, we did not realize any excess tax benefit related to stock-based compensation. Therefore, we did not record any effects relating to financing cash flows for...

  • Page 64
    ...included in the table above obligations for software technology and licenses where payments are fixed and non-cancelable. Includes our purchase obligations to GF for wafer manufacturing and research and development activities and reflects the impact of wafer receipts under the fifth amendment to the...

  • Page 65
    ... and a "make whole" premium (as set forth in the 7.50% Indenture). As of December 26, 2015, the outstanding aggregate principal amount of our 7.50% Notes was $475 million. See Note 10 of "Notes to Consolidated Financial Statements" below, for additional information regarding our 7.50% Notes. 7.00...

  • Page 66
    ... in open market or privately negotiated transactions, either directly or through intermediaries, or by tender offer when we believe the market conditions are favorable to do so. Secured Revolving Line of Credit Loan and Security Agreement We and our subsidiary, AMD International Sales & Service, Ltd...

  • Page 67
    ...Secured Revolving Line of Credit is utilized. The Borrowers will pay (i) a monthly fee on all letters of credit outstanding under the Secured Revolving Line of Credit equal to the applicable LIBOR margin... plans and a change of control. When a Payment Condition has not been satisfied, additional ...

  • Page 68
    ...into certain supply chain finance arrangements, as well as the addition of certain definitions related thereto. At December 26, 2015 and December 27, 2014, the Secured Revolving Line of Credit had an outstanding loan balance of $230 million and $130 million, respectively, at an interest rate of 4.00...

  • Page 69
    ... million of future lease payments and estimated operating costs related to real estate transactions that occurred in Austin, Texas, Sunnyvale, California, Markham, Canada and Singapore. Purchase Obligations Our purchase obligations primarily include our obligations to purchase wafers and substrates...

  • Page 70
    ...default risk and market risk. We actively monitor market conditions and developments specific to the securities and security classes in which we invest. We believe that we take a conservative approach to investing our funds in that we invest only in highly-rated debt securities with relatively short...

  • Page 71
    ... in foreign currencies, while sales of products are primarily denominated in U.S. dollars. We maintain a foreign currency hedging strategy, which uses derivative financial instruments to mitigate the risks associated with changes in foreign currency exchange rates. This strategy takes into...

  • Page 72
    ... 28, 2015 2014 2013 (In millions, except per share amounts) Net revenue ...Cost of sales ...Gross margin ...Research and development ...Marketing, general and administrative ...Amortization of acquired intangible assets ...Restructuring and other special charges, net ...Goodwill impairment charge...

  • Page 73
    Advanced Micro Devices, Inc. Consolidated Statements of Comprehensive Loss December 26, 2015 Year Ended December 27, 2014 (In millions) December 28, 2013 Net loss ...Other comprehensive income (loss): Unrealized gains (losses) on available-for-sale securities: Unrealized gains (losses) arising ...

  • Page 74
    Advanced Micro Devices, Inc. Consolidated Balance Sheets December 26, December 27, 2015 2014 (In millions, except par value amounts) ASSETS Current assets: Cash and cash equivalents ...Marketable securities ...Accounts receivable, net ...Inventories, net ...Prepayments and other-GLOBALFOUNDRIES ......

  • Page 75
    Advanced Micro Devices, Inc. Consolidated Statements of Stockholders' Equity (Deficit) Three Years Ended December 26, 2015 (In millions) Number Additional of Common paid-in Treasury shares Stock capital stock Accumulated other comprehensive income (loss) Total stockholders' equity (deficit) ...

  • Page 76
    ... net loss to net cash used in operating activities: Depreciation and amortization ...Net loss on disposal of property, plant and equipment ...Stock-based compensation expense ...Non-cash interest expense ...Goodwill impairment charge ...Restructuring and other special charges, net ...Net loss on...

  • Page 77
    ...) server and embedded CPUs, GPUs and APUs, and semi-custom System-on-Chip (SoC) products and technology for game consoles. NOTE 2: Summary of Significant Accounting Policies Fiscal Year. The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December. Fiscal 2015, 2014 and 2013...

  • Page 78
    ... prices and latest product costs. The Company records estimated reductions to revenue under distributor and customer incentive programs, including certain cooperative advertising and marketing promotions and volume based incentives and special pricing arrangements, at the time the related revenues...

  • Page 79
    ...Securities. The Company classifies its investments in debt and marketable equity securities at the date of acquisition as available-for-sale. Available-for-sale securities are reported at fair value with the related unrealized gains and losses included, net of tax, in accumulated other comprehensive...

  • Page 80
    ... customers of "tray" microprocessor products and/or professional graphics products who have written agreements with the Company and target their computer systems at the commercial and/or embedded markets. The Company accrues warranty costs at the time of sale of warranted products. Foreign Currency...

  • Page 81
    ...of tax effects ...Total other comprehensive income (loss) ...Ending balance ... $ 1 $ (6) $ (5) $1 $(3) $(2) (2) (22) (24) - (9) (9) - (2) $ (1) 21 (1) $ (7) 21 (3) $ (8) - - $1 6 (3) $(6) 6 (3) $(5) Stock-Based Compensation. The Company estimates stock-based compensation cost for...

  • Page 82
    ...ASU 2015-03 will be effective for annual reporting periods beginning after December 15, 2015 and interim periods within fiscal years beginning after December 15, 2016, with early adoption permitted. The new guidance will be applied retrospectively to each prior period presented. The Company plans to...

  • Page 83
    ... with customers, including significant judgments and estimates used. In July 2015, FASB announced a decision to defer the effective date for this ASU. ASU 2014-09 will be effective for the Company in the first quarter of 2018 with early adoption permitted (for annual reporting periods beginning...

  • Page 84
    ... microprocessor unit, graphics processor unit and semi-custom game console products to be delivered by GF to the Company during the 2014 calendar year. Fifth Amendment to Wafer Supply Agreement. On April 16, 2015, the Company entered into a fifth amendment to the WSA. The primary effect of the fifth...

  • Page 85
    ...Chinese joint stock company (JV Party), under which the Company will sell to JV Party a majority of the equity interests in AMD Technologies (China) Co. Ltd., a wholly-foreign owned enterprise incorporated as a limited liability company (the Chinese Target Company), and Advanced Micro Devices Export...

  • Page 86
    ... $344 December 26, December 27, 2015 2014 (In millions) Accrued compensation and benefits ...Marketing programs and advertising expenses ...Software technology and licenses payable ...Other accrued and current liabilities ...Total accrued liabilities ...Other current liabilities $ 95 109 50 218...

  • Page 87
    ...based on future discounted cash flows. The Company determined that each reporting unit's estimated fair value exceeded its carrying value, indicating that there was no goodwill impairment. During the fourth quarter of 2014, the Company conducted its annual impairment test of goodwill. In step one of...

  • Page 88
    ... there was no goodwill impairment in 2015 and 2013. Acquisition-related intangible assets As a part of the Company's strategy to simplify and sharpen its investment focus, the Company decided to exit the dense server systems business, formerly SeaMicro, in the first quarter of 2015. As a result, the...

  • Page 89
    ...-for-sale securities held by the Company as of December 26, 2015 consisted of commercial paper and as of December 27, 2014 also consisted of money market funds and corporate bonds. The amortized cost of available-for-sale securities approximates the fair value for all periods presented. In addition...

  • Page 90
    ... statements of operations: 2015 2014 (In millions) Foreign Currency Forward Contracts-gains (losses) Contracts designated as cash flow hedging instruments ...Other comprehensive income (loss) ...Cost of sales ...Research and development ...Marketing, general and administrative ...Contracts not...

  • Page 91
    ... in Other long-term liabilities should these contracts be in a loss position. These amounts were recorded in the Company's consolidated balance sheets as follows: December 26, December 27, 2015 2014 (In millions) Interest Rate Swap Contracts-gains (losses) Contracts designated as fair value hedging...

  • Page 92
    ..., 2014. However, the Company does not believe the receivable balance from these customers represents a significant credit risk based on past collection experience, and review of their current credit quality. The Company manages its exposure to customer credit risk through credit limits, credit lines...

  • Page 93
    ...2015 2014 (In millions) Deferred tax assets: Net operating loss carryovers ...Deferred distributor income ...Inventory valuation ...Accrued expenses not currently deductible ...Acquired intangibles ...Tax deductible goodwill ...Federal and state tax credit carryovers ...Foreign capitalized research...

  • Page 94
    ...of net operating losses due to pre-tax book income in Canada. As of December 26, 2015 and December 27, 2014, the Company had $118 million and $127 million, respectively, of deferred tax assets subject to a valuation allowance that related to excess stock option deductions, which are not presented in...

  • Page 95
    ... total provision (benefit) for income taxes. 2015 2014 (In millions) 2013 Statutory federal income tax benefit at 35% rate ...State taxes, net of federal benefit ...Foreign (income) expense at other than U.S. rates ...U.S. valuation allowance generated ...Credit monetization ...Provision for income...

  • Page 96
    ... open audits are highly uncertain. As of December 27, 2014, the Canada Revenue Agency, or CRA, had completed its audit of ATI for the years 2005 through 2010 and issued its final Notice of Assessment, which the Company has reviewed and agreed to. As of December 26, 2015, the Italian tax authorities...

  • Page 97
    ... financial conditions are not satisfied; create or permit certain liens; create or permit restrictions on the ability of its subsidiaries to pay dividends or make other distributions to the Company; use the proceeds from sales of assets; enter into certain types of transactions with affiliates; and...

  • Page 98
    ...conditions are not satisfied; creating or permitting certain liens; creating or permitting restrictions on the ability of its subsidiaries to pay dividends or make other distributions to the Company; using the proceeds from sales of assets; entering into certain types of transactions with affiliates...

  • Page 99
    ...pay dividends or make other distributions to the Company; use the proceeds from sales of assets; enter into certain types of transactions with affiliates; and consolidate, merge or sell its assets as entirety or substantially as an entirety. 7.00% Senior Notes Due 2024 On June 16, 2014, the Company...

  • Page 100
    ... market conditions are favorable to do so. Secured Revolving Line of Credit Loan and Security Agreement The Company and its subsidiary, AMD International Sales & Service, Ltd. (together, the Borrowers), entered into a loan and security agreement on November 12, 2013, as amended on December 11, 2014...

  • Page 101
    ... to 0.25% per annum when 35% or more of the Secured Revolving Line of Credit is utilized. The Borrowers will pay (i) a monthly fee on all letters of credit outstanding under the Secured Revolving Line of Credit equal to the applicable LIBOR margin and (ii) a fronting fee to the Agent equal to 0.125...

  • Page 102
    ...into certain supply chain finance arrangements, as well as the addition of certain definitions related thereto. At December 26, 2015 and December 27, 2014, the Secured Revolving Line of Credit had an outstanding loan balance of $230 million and $130 million, respectively, at an interest rate of 4.00...

  • Page 103
    ... includes desktop and notebook processors and chipsets, discrete graphics processing units (GPUs) and professional graphics; and the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded processors, semi-custom System-on-Chip (SoC) products, engineering services...

  • Page 104
    ... activities; and sales, marketing and administrative activities. The Company conducts product and system research and development activities for its products in the United States, with additional design and development engineering teams located in China, Canada, India, Singapore, Taiwan, and...

  • Page 105
    ... qualified employees. On April 29, 2004, the Company's stockholders approved the 2004 Equity Incentive Plan (the 2004 Plan). As of December 26, 2015, the Company also has stock options outstanding under equity compensation plans that the Company assumed as part of its SeaMicro acquisition. Shares...

  • Page 106
    ... as follows: 2015 2014 2013 (In millions) Cost of sales ...Research and development ...Marketing, general, and administrative ...Total stock-based compensation expense, net of tax of $0 ... $ 3 36 24 $ 3 44 34 $ 5 48 38 $ 63 $ 81 $ 91 During 2015, 2014 and 2013, the Company did not realize...

  • Page 107
    ...cost of restricted stock and RSUs is determined using the fair value of the Company's common stock on the date of the grant, and the compensation expense is recognized over the service period. The summary of the changes in restricted stock and RSUs outstanding, including the PRSUs, during 2015, 2014...

  • Page 108
    ...-tax salary subject to Internal Revenue Service limits. The Company matched 75% of employees' contributions up to 6% of their compensation, to a maximum per employee match of $11,925, $11,700 and $11,475 for 2015, 2014 and 2013, respectively. The Company's contributions to the 401(k) plan for 2015...

  • Page 109
    ... expense for 2015, 2014 and 2013 was $47 million, $59 million and $64 million, respectively. In December 1998, the Company arranged for the sale of its marketing, general and administrative facility in Sunnyvale, California and leased it back for a period of 20 years. The Company recorded a deferred...

  • Page 110
    ... 16: Contingencies Securities Class Action On January 15, 2014, a class action lawsuit captioned Hatamian v. AMD, et al., C.A. No. 3:14-cv-00226 (the "Hatamian Lawsuit") was filed against the Company in the United States District Court for the Northern District of California. The complaint purports...

  • Page 111
    ... 2014, a purported shareholder derivative lawsuit captioned Wessels v. Read, et al., Case No. 1:14-cv-262486 ("Wessels") was filed against the Company (as a nominal defendant only) and certain of the Company's directors and officers in the Santa Clara County Superior Court of the State of California...

  • Page 112
    ... around its priorities and business outlook. The 2015 Restructuring Plan involves a reduction of global headcount by approximately 5% and includes organizational actions such as outsourcing certain IT services and application development. During 2015, the Company recorded a $37 million restructuring...

  • Page 113
    ...site closures, which were partially offset by the release of employee severance costs of $2 million and $5 million, respectively. The 2012 restructuring plan was substantially completed as of the end of the third quarter of 2013. Dense Server Systems Business Exit As a part of the Company's strategy...

  • Page 114
    ... information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Advanced Micro Devices, Inc.'s internal control over financial reporting as of December 26, 2015, based on criteria established in Internal Control...

  • Page 115
    .... In our opinion, Advanced Micro Devices, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 26, 2015 based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United...

  • Page 116
    ... write-down of $65 million in the third quarter. During the fourth quarter of 2014, the Company recorded a lower of cost or market charge of $58 million related to our second-generation APU products. Under the 2014 restructuring plan, the Company recorded restructuring and other special charges...

  • Page 117
    ...our reports filed under the Exchange Act, such as this Annual Report on Form 10-K is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive...

  • Page 118
    ... reporting was effective as of December 26, 2015 at the reasonable assurance level. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company's internal control over financial reporting as of December 26, 2015, which is included in Part...

  • Page 119
    .... See also, "Part 1, Item 1-Web Site Access to Company Reports and Corporate Governance Documents," above. ITEM 11. EXECUTIVE COMPENSATION The information under the captions "Directors' Compensation and Benefits" (including "2015 NonEmployee Director Compensation"), "Compensation Discussion and...

  • Page 120
    ...dated August 15, 2012, is hereby incorporated by reference. Indenture governing the 6.75% Senior Notes due 2019, including the form of the 6.75% Note, between Advanced Micro Devices, Inc. and Wells Fargo, N.A., as Trustee, dated February 26, 2014, filed as Exhibit 4.1 to AMD's Current Report on Form...

  • Page 121
    ... governing 6.75% Senior Notes due 2019, between Advanced Micro Devices, Inc. and Wells Fargo Bank, N.A., dated June 16, 2014, filed as Exhibit 4.1 to AMD's Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2014, is hereby incorporated by reference. 1996 Stock Incentive Plan...

  • Page 122
    ... 10.11 to AMD's Annual Report on Form 10-K for the fiscal year ended December 26, 2009, is hereby incorporated by reference. Amended and Restated Management Continuity Agreement, between Advanced Micro Devices, Inc. and Devinder Kumar, filed as Exhibit 10.3 to AMD's Quarterly Report on Form 10...

  • Page 123
    ...Micro Devices, Inc., its subsidiaries, joint ventures or other affiliates and Emilio Ghilardi, filed as Exhibit 10.1 to AMD's Current Report on Form 8-K/A dated April 30, 2012, is hereby incorporated by reference. Employment Agreement, between Rory P. Read and Advanced Micro Devices, Inc., effective...

  • Page 124
    ...by reference. Wafer Supply Agreement Amendment No. 2, among Advanced Micro Devices, Inc., GLOBALFOUNDRIES Inc., GLOBALFOUNDRIES U.S. Inc., Advanced Technology Investment Company LLC and ATIC International Investment Company LLC, dated March 4, 2012, filed as Exhibit 10.1 to AMD's Quarterly Report on...

  • Page 125
    ... Su and Advanced Micro Devices, Inc. effective October 8, 2014, filed as Exhibit 10.2 to AMD's Current Report on Form 8-K/A dated October 14, 2014, is hereby incorporated by reference. Form of Stock Option Agreement for Senior Vice Presidents and Above under the 2004 Equity Incentive Plan, filed as...

  • Page 126
    ... Loan and Security Agreement dated as of June 10, 2015, among Advanced Micro Devices, Inc., AMD International Sales & Service, Ltd., ATI Technologies ULC, and Bank of America, N.A., filed as Exhibit 10.2 to AMD's Quarterly Report on Form 10-Q for the fiscal quarter ended June 27, 2015, is hereby...

  • Page 127
    ... of the Principal Financial Officer pursuant to Section 906 ...Management contracts and compensatory plans or arrangements. Portions of this exhibit have been omitted pursuant to a request for confidential treatment, which has been granted. These portions have been filed separately with the SEC. AMD...

  • Page 128
    ... duly authorized. February 18, 2016 ADVANCED MICRO DEVICES, INC. By: /S/ DEVINDER KUMAR Devinder Kumar Senior Vice President, Chief Financial Officer, and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons...

  • Page 129
    SCHEDULE II ADVANCED MICRO DEVICES, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 26, 2015, December 27, 2014 and December 28, 2013 (In millions) Additions Charged (Reductions Credited) To Operations Balance Beginning of Period Deductions(1) Balance End of Period Allowance for ...

  • Page 130
    AMD-55714-A