Final Recommendation

Final Recommendation

1. The purpose is to summarize all of your findings. 

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Type of Paper

When is it due?

How many pages is this assigment?

2. You can include a summary of what they do, its income performance, its cash flow ability, its overall financial position 

(balance sheet).

 3. Also include non-financial factors that you think impact the assigned investment decision. 

4. Conclude with your final recommendation. 

5.If the company is rated by one of the major risk rating agencies, Standard and Poor’s, Moody’s, or Fitch 

Ratings include the rating that has been assigned by those parties, or if you can find another 3rd party rating from an analyst on the stock include this. I know this may not be as easy to get, so just a marginal point total is earned here.

6. 6-8 sentences

AMD Advanced Micro Devices

Presented By:

Tio Bennett

Introduction

AMD – Advanced Micro Devices

With AMD facing a potential bankruptcy in October of 2014, previous Vice President, Lisa Su, became the CEO of the organization for a historic recovery.

Leading Global Innovation – worldwide leader in high performance graphics and compute technology.

Record breaking growth – over 2000% stock gain (2015-Current)

Stocks – 52-Week High: $58.90 | 52-Week Low: $22.82

Current Net Worth – $6.73B Company

Today’s Market Cap: $52.78 billion

AMD’s outstanding shares were, 1.120B as of Dec. 31st, 2019.

Headquarters is located in Santa Clara, CA

Founded on May 1st, 2069 in Sunnyvale, CA by Jerry Sanders, Jack Gifford, John Carey, Larry Stenger, Frank Botte, Edwin Turney, Sven Simonsen and Jim Giles.

Currently employs about 11,400 employees as of 2019

Invest in AMD

Innovations

Creators of the world’s 1st 7nm microprocessors. In both computing and graphics technologies.

World leader in high performance processors, surpassing sales of their main competitor, Intel.

Bringing enterprise level quality performance to the consumer market

Demand

High performance mobile processors with on-board graphics on high demand by many mainstream PC manufacturers, such as Lenovo, Asus, and Acer.

AMD’s “Zen” Core architecture, leads the market of top rated performance for gamers and content creators.

AMD – Current Events

2018

Press Release of the World’s first 7nm GPUs, to be featured in the next era of AI, High Performance Computing and Cloud Computing.

AMD is introduced into the Supercomputer industry with their new High Frequency AMD EPYC™ Processors. Leading for Discovery and Accelerating Innovation

2019

Professional level graphics performance introduced with AMD’s new 7nm discrete mobile GPUs in the new Apple MacBook Pro.

AMD Wins the “Best-in-Class” Performance aware from Supercomputers to HPC in the Cloud at SC19

2020

Next generation of AMD EPYC™ processors for high performance workstation, database, and commercial HPC

Competition & Environment

AMD’s Primary Competitor: Intel

In a computing environment, AMD’s competition would be Intel on the CPU market and NVidia in the GPU market.

The environment in both are within a race of dollar to performance ratios and frequency computing power.

 

AMD combats their competitors with leading innovation by being the first to implement and expand the new 7nm processors.

The environment is favorable as technology advances, virtual reality and AI being examples.

 

Profitability

Income Statement

AMD, Income Statement (USD $ in Millions) Year Ending Dec 2019 (Update) Year Ending Dec 2018 (Update) Year Ending Dec 2017 (Restated) Year Ending Dec 2016 (Update)
Net Sales 6,731.00 6,475.00 5,253.00 4,272.00
Revenue 6,731.00 6,475.00 5,253.00 4,272.00
Total Revenue 6,731.00 6,475.00 5,253.00 4,272.00
Cost of Revenue -3,863.00 -4,028.00 -3,466.00 3,274.00
Cost of Revenue, Total -3,863.00 -4,028.00 -3,466.00 3,274.00
Gross Profit 2,868.00 2,447.00 1,787.00 -998
Selling/General/Administrative Expense 471 344 322 294
Labor & Related Expense 62 42 38 35
Advertising Expense 217 176 156 131
Selling/General/Administrative Expenses, Total 750 562 516 460
Research & Development 1,547.00 1,434.00 1,196.00 1,008.00
Restructuring Charge 0 0 -10
Other Unusual Expense (Income) 116 12 -40 -20
Unusual Expense (Income) 116 12 -40 -30
Total Operating Expense 6,276.00 6,036.00 5,138.00 4,712.00
Operating Income 455 439 115 -440
Interest Expense – Non-Operating -94 -121 -126 -156
Interest Expense, Net Non-Operating -94 -121 -126 -156
Interest Income, Non-Operating 15 18 6
Investment Income, Non-Operating -1 -3 -3 3
Interest/Investment Income, Non-Operating 14 15 3 3
Interest Income (Expense), Net-Non-Operating, Total -80 -106 -123 -153
Other Non-Operating Income (Expense) -3 -3 0 145
Other, Net -3 -3 0 145
Net Income Before Taxes 372 330 -8 -448

Growth

AMD’s growth is a result of the initiation and innovation to become a high-performance leader.

The introduction to AMD’s product line of Ryzen and new Radeon products were quickly adopted by the industry.

 

 

Increasing manufacture output and fulfilling the supply and demand of the market, AMD saw drastic double digit percentage increases year by year over a 4 year span.

Strong demands beginning in 2016 for computing and graphics drew in large growths.

REVENUE

$ Millions

Leadership Products Drive Revenue Growth

2016 2017 2018 2019 4.3 5.3 6.5 6.7

 

 

 

 

 

Premium Products Drive Margin Expansion

2016 2017 2018 2019 0.23 0.34 0.38 0.43

 

 

 

 

Operating Margin

Solid Growth With OpEx Investments

[VALUE] 2016 2017 2018 2019 -0.09 0.02 7.0000000000000007E-2 0.09 NET INCOME $ Millions Significant Growth In Profitability 2016 2017 2018 2019 -498 -33 337 341

AMD & Intel Processor Sales Sales figures from one of the largest retailers of computer parts

AMD dominated the market over its top competitor, Intel.

 

AMD introducing their back to back new generation lineups of processors

~

Very competitively priced, further highlighting their high-performance per dollar lead

~

AMD Ryzen 3000 Series was a major improvement from previous generations, and the expected 4000 Series set to release in 2020, we should expect the same result

Cash Flow & Liquidity

Cash Flow & Liquidity

Cash Flow ($ in In millions of USD except for per share items) Year Ending Dec 2019 (Update) Year Ending Dec 2018 (Update) Year Ending Dec 2017 (Restated) Year Ending Dec 2016 (Update)
Net Income/Starting Line 341 337 -33 -497
Depreciation – Supplemental 222 170 144 133
Depreciation/Depletion 222 170 144.00 133
Deferred Taxes -4 -4 11
Unusual Items 218 84 12.00 68
Equity in Net Earnings (Loss) -3.00 -144
Other Non-Cash Items 258 174 136 339
Non-Cash Items 476 258 145 263
Accounts Receivable -623 -806 -103 222
Inventories -137 -151 -3.00 -73
Prepaid Expenses -162 -98 -173 -165
Accounts Payable 7 121 29 138
Payable/Accrued 373 207 6 58
Changes in Working Capital -542 -727 -244 180

AMD Cash Flow has an overall positive cash flow. Recovering from a predicted bankruptcy at the time, AMD was able to secure their climb in net income once the company made huge strides with their Ryzen Processors and next generation Radeon graphics cards. From 2017 to 2018, there was a surge in Accounts Receivables by $703M as manufacturers demanded for their next generation Ryzen desktop and mobile processors.

AMD has a continued drive to lead into the next years and with another generation of Ryzen, processors coming to release by end of 2020, a similar trend is expected as through projected costs to performance exceeds what Intel has planned on their next release. AMD has re-entered the datacenter computing industry with their next line-up of EPYC processors to reach the professional market. In the event that AMD, fails to account for Nvidia’s drive to continue their lead in graphics computing, AMD could fall short of delivering top tier performance numbers for the second largest of their technology field.

Cash Flow & Liquidity

Cash Flow ($ in In millions of USD except for per share items) Year Ending Dec 2019 (Update) Year Ending Dec 2018 (Update) Year Ending Dec 2017 (Restated) Year Ending Dec 2016 (Update)
Cash from Operating Activities 493.00 34.00 12 90
Purchase of Fixed Assets -217 -163 -113 -77
Capital Expenditures -217 -163 -113 -77
Sale/Maturity of Investment 325 45 223 342
Purchase of Investments -284 -123 -222
Other Investing Cash Flow 27 71 58 2
Other Investing Cash Flow Items, Total 68 -7 59 344
Cash from Investing Activities -149 -170 -54 267
Other Financing Cash Flow -7 -1 -13 -4
Financing Cash Flow Items -7 -1 -13.00 -4
Issuance (Retirement) of Stock, Net 523 70 20 687
Issuance (Retirement) of Debt, Net -473 -41 -40 -561
Cash from Financing Activities 43 28 -33 122
Net Change in Cash 387 -108 -75 479
Net Cash – Beginning Balance 1.08M 1.19M 1.27M 785
Net Cash – Ending Balance 1.47M 1.08M 1.19M 1.26M
Liquidity Ratio: Current 1.95 1.78 1.76 1.88
Liquidity Ratio: Quick 1.43 1.21 1.07 1.17
Liquidity Ratio: Cash 0.64 0.58 0.8 0.94

(Has your company generated cash and will it continue to generate cash going forward?)

 

Capital Structure & Financial Leverage

AMD – Capital Structure

AMD’s capital structure comes primarily from a combination of bonds and common stock

 

At the end of 2019, AMD had a total of 6.028 Billion in total liabilities and stockholder equity.  In their annual statement they reported the use of $473 Million for debt reduction in order to continue the path towards strengthening their net cash position.

 

Common stock shareholders own $9.975 Billion of the equity in AMD.  The company has 53 Million in treasury stock.  As of December 28, 2019, 2,250 shares have been authorized, 1,175 shares issued, and 1,170 shares are outstanding.

 

The company posted a negative retained earnings of $7.095 Billion as of the end of 2019, with no additional outstanding accumulated other comprehensive income.  With this retained earnings, AMD reported a total of 2.827 Billion in total stockholders’ equity at the end of 2019.

 

 

AMD – Debt Structuring

As of December 2019, AMD had no short-term debt, but it does have 2,359 Million in current liabilities from accounts payable, accrued, and other current liabilities.

AMD has a secured revolving credit account with Wells Fargo Bank for up to $500 Million in financing.  At the end of 2019, there were no borrowings outstanding under their Credit Agreement

The company has a combined long-term debt and other long-term liabilities totaling 8.42 Million with 3,397 Million coming from contractual obligations as depicted in the chart.

AMD has $563 Million in term senior notes and $102 Million in interest obligation from aggregate convertible senior notes.

The company sustains 287 Million in operating leases, 2,290 Million in purchase obligations, and an additional 155 Million in other long-term liabilities.

 

Consolidated Contractual Cash Obligations as of December 28, 2019

 

Cash Obligations ($ in In millions ) Total
Term Debt 563
Aggregate Interest Obligation 102
Other Long-Term Liabilities 155
Operating Leases 287
Purchase Obligations 2290
Total Contractual Obligations 3,397

 

AMD’s Financial Leverage

•Debt Ratio= (6,028,000 -2,827,000)/6,028,000 –> 0.531 or 53.1% (2019)

•Debt Ratio=(3,540,000 -1,266,000)/3,540,000 –> 0.642 or 64.2% (2018)

•All dollar amounts are in thousands

•In 2019, AMD’s debt ratio shows that for every dollar of its assets, there are around 53 cents of debt.

•In 2018, AMD’s debt ratio shows that for every dollar of its assets, there are around 64 cents of debt.

•A debt ratio of .53 is conceived to be less risky since AMD has three times as many assets as liabilities.

•A debt ratio of .64 is considered less risky since AMD has three times as many assets as liabilities.

•Consequently, Advanced Micro Devices’ creditors own just a bit less than half of the company and the shareholders own the remainder of the assets.

 

 

 

 

AMD’s Financial Leverage

 

•Advanced’s times interest earned

= EBIT/(Interest Expense)=724,000/94,000→7.702 (2019)

•Advanced’s times interest earned

= EBIT/(Interest Expense)=621,000/121,000→5.132 (2018)

All dollar amounts are in thousands

In 2019, Advanced covered around two times over its interest obligation by its earnings before it payed its interest expense and taxes.

In 2019, Advanced’s TIE ratio is a lesser risk to its creditors because the company could afford to pay its interest payments to lenders when they are due.

In 2018, Advanced’s TIE is considered less risky to its creditors because the company was able to pay their interest payments to lenders when they were due. Furthermore, there is no long-term concern for ADM’s solvency.

 

SELECTED FINANCIAL DATA

In addition to the information presented above, you will provide the following slides. The

first slide, titled

SELECTED FINANCIAL DATA

, which has the most important

financial numbers from the last two years. This could be information from the main

financial statements. From IS you could include revenue, gross profit, operating profit,

interest expense, EBITDA, and net income. From SOCF you include operating cash flow,

investing cash flow, financing cash flow, and change in cash. From the BS, assets, cash

and cash equivalents, liabilities, total debt, shareholder’s equity. If you feel other numbers

are significant for your particular company, feel free to include them as well.

KEY RATIOS

The second slide, titled

KEY RATIOS

, should have all relevant financial ratios for the

last two fiscal years that you have calculated for the purpose of the project.

To earn the

max points, apply 10 relevant ratios we learned in chapter 14 to support your

conclusion.

Conclusion

Final Recommendation

The purpose is to summarize all of your findings. You can include a summary of what

they do, its income performance, its cash flow ability, its overall financial position

(balance sheet). Also include non-financial factors that you think impacts the assigned

investment decision. Conclude with your final recommendation.

If the company is rated

by one of the major risk rating agencies, Standard and Poor’s, Moody’s, or Fitch

Ratings, include the rating that has been assigned by those parties, or if you can find

another 3

rd

party rating from an analyst on the stock include this. I know this may

not be as easy to get, so just a marginal point total is earned here.

The last slide

should list your references where you retrieved the financial statements.

References

New AMD-Powered Supercomputers Unleash Discovery and Accelerate Innovation https://ir.amd.com/news-releases/news-release-details/new-amd-powered-supercomputers-unleash-discovery-and-accelerate

AMD Unveils World’s First 7nm Datacenter GPUs — Powering the Next Era of Artificial Intelligence, Cloud Computing and High Performance Computing (HPC) https://ir.amd.com/news-releases/news-release-details/amd-unveils-worlds-first-7nm-datacenter-gpus-powering-next-era

AMD Delivers Best-in-Class Performance from Supercomputers to HPC in the Cloud at SC19 https://ir.amd.com/news-releases/news-release-details/amd-delivers-best-class-performance-supercomputers-hpc-cloud

News Releases https://ir.amd.com/news-releases?field_nir_news_date_value%5Bmin%5D=2020&items_per_page=10#views-exposed-form-widget-news-widget-news-ul

AMD Ryzen 3000 Sales Hit All-Time High, Ryzen 7 3700X & Ryzen 5 3600 Sales Reach 2x Total Number of Intel CPUs Sold https://wccftech.com/amd-ryzen-3000-cpu-sales-all-time-high-versus-intel-9th-gen-core/

AMD Balance Sheet https://finance.yahoo.com/quote/AMD/balance-sheet/

AMD Cash Flow https://finance.yahoo.com/quote/AMD/cash-flow?p=AMD

AMD Income Statement https://finance.yahoo.com/quote/AMD/financials?p=AMD

AMD 2019 Annual Report on Form 10-K https://ir.amd.com/static-files/480b482b-79ee-4b43-bcda-0d86dedfeb04

AMD 2018 ANNUAL REPORT ON FORM 10-K https://ir.amd.com/static-files/a388f1a0-6bbd-4218-96ec-d9cf41544e6b