AMD 2015 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 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

Our reliance on third-party distributors and AIB partners subjects us to certain risks.
We market and sell our products directly and through third-party distributors and AIB partners pursuant to
agreements that can generally be terminated for convenience by either party upon prior notice to the other party.
These agreements are non-exclusive and permit both our distributors and AIBs to offer our competitors’
products. We are dependent on our distributors and AIBs to supplement our direct marketing and sales efforts. If
any significant distributor or AIB or a substantial number of our distributors or AIBs terminated their relationship
with us, decided to market our competitors’ products over our products or decided not to market our products at
all, our ability to bring our products to market would be impacted and we would be materially adversely affected.
If we are unable to manage the risks related to the use of our third-party distributors and AIB partners or offer
appropriate incentives to focus them on the sale of our products, our business could be materially adversely
affected.
Additionally, distributors and AIBs typically maintain an inventory of our products. In most instances, our
agreements with distributors protect their inventory of our products against price reductions, as well as provide
return rights for any product that we have removed from our price book and that is not more than 12 months
older than the manufacturing code date. Some agreements with our distributors also contain standard stock
rotation provisions permitting limited levels of product returns. Our agreements with AIBs protect their inventory
of our products against price reductions. We defer the gross margins on our sales to distributors and AIBs,
resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by
the distributors or the AIBs. However, in the event of a significant decline in the price of our products, the price
protection rights we offer would materially adversely affect us because 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 personnel. If we are not able to continue to attract, train and retain qualified
personnel necessary for our business, the progress of our product development programs could be hindered, and
we could be materially adversely affected. To help attract, retain and motivate qualified personnel, we use share-
based incentive awards such as employee stock options and non-vested share units (restricted stock units). If the
value of such stock awards does not appreciate as measured by the performance of the price of our common
stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to
attract, retain and motivate personnel could be weakened, which could harm our results of operations. In
addition, our current and any future restructuring plans may adversely impact our ability to attract and retain key
employees.
In the event of a change of control, we may not be able to repurchase our outstanding debt as required by the
applicable indentures and our Secured Revolving Line of Credit, which would result in a default under the
indentures and our Secured Revolving Line of Credit.
Upon a change of control, we will be required to offer to repurchase all of our 7.75% Notes, 7.50% Notes,
7.00% Notes and 6.75% Notes then outstanding at 101% of the principal amount thereof, plus accrued and
unpaid interest, if any, up to, but excluding, the repurchase date. In addition, a change of control would be an
event of default under our Secured Revolving Line of Credit. As of December 26, 2015, $230 million was
outstanding under our Secured Revolving Line of Credit and $2.03 billion was outstanding under our notes.
Future debt agreements may contain similar provisions. We may not have the financial resources to repurchase
our outstanding notes and prepay all of our outstanding obligations under our Secured Revolving Line of Credit.
25