Company Quick10K Filing
Advanced Micro Devices
Price46.20 EPS0
Shares1,188 P/E161
MCap54,889 P/FCF111
Net Debt-907 EBIT466
TEV53,982 TEV/EBIT116
TTM 2019-12-28, in MM, except price, ratios
10-Q 2020-06-27 Filed 2020-07-29
10-Q 2020-03-28 Filed 2020-04-29
10-K 2019-12-28 Filed 2020-02-04
10-Q 2019-09-28 Filed 2019-10-30
10-Q 2019-06-29 Filed 2019-07-31
10-Q 2019-03-30 Filed 2019-05-01
10-K 2018-12-29 Filed 2019-02-08
10-Q 2018-09-29 Filed 2018-10-31
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-30 Filed 2018-02-27
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-07-01 Filed 2017-08-03
10-Q 2017-04-01 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-02-21
10-Q 2016-09-24 Filed 2016-10-26
10-Q 2016-06-25 Filed 2016-07-26
10-Q 2016-03-26 Filed 2016-04-28
10-K 2015-12-26 Filed 2016-02-18
10-Q 2015-09-26 Filed 2015-11-03
10-Q 2015-06-27 Filed 2015-07-30
10-Q 2015-03-28 Filed 2015-04-29
10-K 2014-12-27 Filed 2015-02-19
10-Q 2014-09-27 Filed 2014-10-30
10-Q 2014-06-28 Filed 2014-07-31
10-Q 2014-03-29 Filed 2014-05-01
10-K 2013-12-28 Filed 2014-02-18
10-Q 2013-09-28 Filed 2013-10-30
10-Q 2013-06-29 Filed 2013-08-01
10-Q 2013-03-31 Filed 2013-05-06
10-K 2012-12-29 Filed 2013-02-21
10-Q 2012-09-29 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-02
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-10-01 Filed 2011-11-09
10-Q 2011-07-02 Filed 2011-08-10
10-Q 2011-04-02 Filed 2011-05-10
10-K 2010-12-25 Filed 2011-02-18
10-Q 2010-09-25 Filed 2010-11-03
10-Q 2010-06-26 Filed 2010-08-04
10-Q 2010-03-27 Filed 2010-05-04
10-K 2009-12-26 Filed 2010-02-19
8-K 2020-07-28 Earnings, Regulation FD, Exhibits
8-K 2020-05-07
8-K 2020-04-28
8-K 2020-03-06
8-K 2020-02-11
8-K 2020-01-28
8-K 2019-12-13
8-K 2019-11-25
8-K 2019-11-07
8-K 2019-10-29
8-K 2019-09-03
8-K 2019-08-05
8-K 2019-07-30
8-K 2019-06-21
8-K 2019-06-07
8-K 2019-05-15
8-K 2019-04-30
8-K 2019-02-19
8-K 2019-02-13
8-K 2019-01-28
8-K 2018-10-24
8-K 2018-08-22
8-K 2018-07-31
8-K 2018-07-25
8-K 2018-06-26
8-K 2018-05-08
8-K 2018-04-25
8-K 2018-03-05
8-K 2018-02-27
8-K 2018-02-12
8-K 2018-01-30

AMD 10Q Quarterly Report

Part I. Financial Information
Item 1.Condensed Consolidated Financial Statements
Note 1. Basis of Presentation and Significant Accounting Policies
Note 2. Supplemental Balance Sheet Information
Note 3. Related Parties - Equity Joint Ventures
Note 4. Debt and Secured Revolving Facility
Note 5. Financial Instruments
Note 6. Accumulated Other Comprehensive Loss
Note 7. Earnings per Share
Note 8. Common Stock and Employee Equity Plans
Note 9. Income Taxes
Note 10. Segment Reporting
Note 11. Contingencies
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures About Market Risk
Item 4.Controls and Procedures
Part II. Other Information
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 exh101formofprsuagtsvp.htm
EX-10.2 exh102formofstockoptio.htm
EX-10.3 exh103formofrsuagtsvpa.htm
EX-31.1 exh311302certofceo-q21.htm
EX-31.2 exh312302certofcfo-q21.htm
EX-32.1 exh321906certofceo-q21.htm
EX-32.2 exh322906certofcfo-q21.htm

Advanced Micro Devices Earnings 2020-06-27

Balance SheetIncome StatementCash Flow
10.07.95.83.61.5-0.62011201420172021
Assets, Equity
2.21.71.10.60.0-0.52011201420172021
Rev, G Profit, Net Income
0.50.30.20.0-0.1-0.32011201420172021
Ops, Inv, Fin

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 10-Q
 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 27, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number 001-07882
 
amd-20200627_g1.jpg
ADVANCED MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware94-1692300
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

2485 Augustine Drive
Santa Clara, California 95054
(Address of principal executive offices)

(408) 749-4000
Registrant’s telephone number, including area code

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
 Name of each exchange on which registered
Common Stock, $0.01 par value
AMD
The Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☑ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☑    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes    No ☑
Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of July 24, 2020: 1,174,056,713



INDEX
 
  Page No.
2


PART I. FINANCIAL INFORMATION
 
ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
 Three Months EndedSix Months Ended
 June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
 (In millions, except per share amounts)
Net revenue$1,932  $1,531  $3,718  $2,803  
Cost of sales1,084  910  2,052  1,661  
Gross profit848  621  1,666  1,142  
Research and development460  373  902  746  
Marketing, general and administrative215  189  414  359  
Licensing gain      (60) 
Operating income173  59  350  97  
Interest expense(14) (25) (27) (52) 
Other income (expense), net1  3  5  (4) 
Income before income taxes and equity income (loss)160  37  328  41  
Income tax provision (benefit) 4  2  10  (11) 
Equity income (loss) in investee1    1  (1) 
Net income$157  $35  $319  $51  
Earnings per share
Basic$0.13  $0.03  $0.27  $0.05  
Diluted$0.13  $0.03  $0.27  $0.05  
Shares used in per share calculation
Basic1,174  1,084  1,172  1,064  
Diluted1,227  1,109  1,225  1,102  
See accompanying notes.
3


Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 Three Months EndedSix Months Ended
 June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
 (In millions)
Net income $157  $35  $319  $51  
Other comprehensive income (loss), net of tax of zero:
       Net change in unrealized gains (losses) on cash flow hedges10  1  (4) 8  
Total comprehensive income $167  $36  $315  $59  
See accompanying notes.
4


Advanced Micro Devices, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
June 27,
2020
December 28,
2019
 (In millions, except par value amounts)
ASSETS
Current assets:
Cash and cash equivalents$1,775  $1,466  
Marketable securities  37  
Accounts receivable, net1,789  1,859  
Inventories1,324  982  
Receivables from related parties10  20  
Prepaid expenses and other current assets211  233  
Total current assets5,109  4,597  
Property and equipment, net585  500  
Operating lease right-of-use assets215  205  
Goodwill289  289  
Investment: equity method 59  58  
Other non-current assets326  379  
Total assets$6,583  $6,028  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt$200  $  
Accounts payable802  988  
Payables to related parties192  213  
Accrued liabilities1,172  1,084  
Other current liabilities68  74  
Total current liabilities2,434  2,359  
Long-term debt, net490  486  
Long-term operating lease liabilities204  199  
Other long-term liabilities150  157  
Contingencies (See Note 11)
Stockholders’ equity:
Capital stock:
Common stock, par value 0.01; shares authorized: 2,250; shares issued: 1,179 and 1,175; shares outstanding: 1,174 and 1,170
12  12  
Additional paid-in capital10,127  9,963  
Treasury stock, at cost (shares held: 5 and 5)
(54) (53) 
Accumulated deficit(6,776) (7,095) 
Accumulated other comprehensive loss(4)   
Total stockholders’ equity 3,305  2,827  
Total liabilities and stockholders’ equity $6,583  $6,028  

See accompanying notes.
5


Advanced Micro Devices, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six Months Ended
 June 27,
2020
June 29,
2019
 (In millions)
Cash flows from operating activities:
Net income$319  $51  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization140  98  
Stock-based compensation 119  86  
Amortization of debt discount and issuance costs8  18  
Amortization of operating lease right-of-use assets20  18  
Loss on debt redemption  8  
Loss on sale/disposal of property and equipment26  8  
Other8  (4) 
Changes in operating assets and liabilities:
Accounts receivable, net64  (98) 
Inventories(342) (170) 
Receivables from related parties10  4  
Prepaid expenses and other assets(12) (9) 
Payables to related parties(21) (6) 
Accounts payable, accrued liabilities and other(161) (187) 
Net cash provided by (used in) operating activities178  (183) 
Cash flows from investing activities:
Purchases of property and equipment(146) (120) 
Purchases of available-for-sale debt securities(55) (231) 
Proceeds from maturity of available-for-sale debt securities92  144  
Collection of deferred proceeds on sale of receivables  25  
Other  2  
Net cash used in investing activities(109) (180) 
Cash flows from financing activities:
Proceeds from short-term debt borrowing200    
Repayment of debt  (234) 
Proceeds from warrant exercise  449  
Proceeds from sales of common stock through employee equity plans42  35  
Other(2) (2) 
Net cash provided by financing activities240  248  
Net increase (decrease) in cash, cash equivalents, and restricted cash309  (115) 
Cash, cash equivalents, and restricted cash at beginning of period1,470  1,083  
Cash, cash equivalents, and restricted cash at end of period$1,779  $968  
Supplemental cash flow information:
Non-cash investing and financing activities:
Purchases of property and equipment, accrued but not paid$52  $119  
Transfer of assets for the acquisition of property and equipment$41  $  
Issuance of treasury stock to partially settle debt$  $7  
Non-cash activities for leases:
Operating lease right-of-use assets acquired by assuming related liabilities$30  $10  
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents$1,775  $963  
Restricted cash included in Prepaid expenses and other current assets4  5  
Total cash, cash equivalents, and restricted cash$1,779  $968  
See accompanying notes.
6


Advanced Micro Devices
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
Three Months EndedSix Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(In millions)
Capital stock:
Common stock
     Balance, beginning of period$12  $11  $12  $10  
     Issuance of common stock upon warrant exercise—  —  —  1  
     Balance, end of period$12  $11  $12  $11  
Additional paid-in capital
     Balance, beginning of period$10,026  $9,246  $9,963  $8,750  
     Common stock issued under employee equity plans39  34  42  35  
     Stock-based compensation60  45  119  86  
     Issuance of common stock upon warrant exercise—  —  —  449  
     Issuance of treasury stock to partially settle debt —  —  —  4  
     Issuance of common stock warrant2  —  3  1  
     Balance, end of period$10,127  $9,325  $10,127  $9,325  
Treasury stock
     Balance, beginning of period$(54) $(48) $(53) $(50) 
     Issuance of treasury stock to partially settle debt —  —  —  3  
     Other  (2) (1) (3) 
     Balance, end of period$(54) $(50) $(54) $(50) 
Accumulated deficit:
     Balance, beginning of period$(6,933) $(7,420) $(7,095) $(7,436) 
     Net income 157  35  319  51  
     Balance, end of period$(6,776) $(7,385) $(6,776) $(7,385) 
Accumulated other comprehensive loss:
     Balance, beginning of period$(14) $(1) $  $(8) 
     Other comprehensive income (loss)10  1  (4) 8  
     Balance, end of period$(4) $  $(4) $  
Total stockholders' equity$3,305  $1,901  $3,305  $1,901  
See accompanying notes.

7


Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE 1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation. The accompanying unaudited condensed consolidated financial statements of Advanced Micro Devices, Inc. and its subsidiaries (the Company or AMD) have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the three and six months ended June 27, 2020 shown in this report are not necessarily indicative of results to be expected for the full year ending December 26, 2020 or any other future period. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary for a fair presentation of the Company’s results of operations, financial position, cash flows and stockholders’ equity. All such adjustments are of a normal, recurring nature. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2019. Certain prior period amounts have been reclassified to conform to current period presentation.
The Company uses a 52 or 53 week fiscal year ending on the last Saturday in December. The three and six months ended June 27, 2020 and June 29, 2019 each consisted of 13 weeks and 26 weeks, respectively.
Significant Accounting Policies. There have been no material changes to the Company’s significant accounting policies in Note 2—Summary of Significant Accounting Policies, of the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019.
Recently Adopted Accounting Standards
Financial Instruments. In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial InstrumentsCredit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This standard changes the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The Company adopted this standard in the first quarter of 2020 using the modified retrospective adoption method. This standard did not have an impact on the condensed consolidated financial statements upon adoption.
Recently Issued Accounting Standards
Income Taxes. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company will adopt this standard in the first quarter of 2021 and the adoption is not expected to have a material impact on the consolidated financial statements.
Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its condensed consolidated financial statements.
NOTE 2. Supplemental Balance Sheet Information
Accounts Receivable, net
As of June 27, 2020 and December 28, 2019, Accounts receivable, net included unbilled accounts receivable of $222 million and $197 million, respectively. Unbilled receivables primarily represent work completed on semi-custom products under non-cancellable purchase orders that have no alternative use to the Company at contract inception, for which revenue has been recognized but not yet invoiced to customers. All unbilled accounts receivable are expected to be billed and collected within twelve months.
8


Inventories
June 27,
2020
December 28,
2019
 (In millions)
Raw materials$102  $94  
Work in process936  691  
Finished goods286  197  
Total inventories$1,324  $982  
Property and Equipment, net
June 27,
2020
December 28,
2019
 (In millions)
Leasehold improvements$201  $203  
Equipment1,073  951  
Construction in progress148  114  
Property and equipment, gross1,422  1,268  
Accumulated depreciation(837) (768) 
Total property and equipment, net$585  $500  
Other Non-Current Assets
June 27,
2020
December 28,
2019
(In millions)
Software technology and licenses, net$174  $210  
Other152  169  
Total other non-current assets$326  $379  
Accrued Liabilities
June 27,
2020
December 28,
2019
 (In millions)
Accrued compensation and benefits$260  $285  
Marketing programs and advertising expenses603  454  
Other309  345  
Total accrued liabilities$1,172  $1,084  
Remaining Performance Obligations
Revenue allocated to remaining performance obligations that are unsatisfied (or partially unsatisfied) as of June 27, 2020 is $417 million, which may include amounts received from customers but not yet earned and amounts that will be invoiced and recognized as revenue in future periods associated with any combination of development services, IP licensing and product revenue. The Company expects to recognize $180 million of such amounts as revenue in the next 12 months.
The revenue allocated to remaining performance obligations does not include amounts which have an original expected contractual duration of one year or less.
9


NOTE 3. Related Parties — Equity Joint Ventures
ATMP Joint Ventures
The Company holds a 15% equity interest in two joint ventures (collectively, the ATMP JV) with affiliates of Tongfu Microelectronics Co., Ltd, a Chinese joint stock company. The Company has no obligation to fund the ATMP JV. The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV. As of June 27, 2020 and December 28, 2019, the carrying value of the Company’s investment in the ATMP JV was $59 million and $58 million, respectively.
The ATMP JV provides assembly, test, mark and packaging (ATMP) services to the Company. The Company assists the ATMP JV in its management of certain raw material inventory. The purchases from and resales to the ATMP JV of inventory under the Company’s inventory management program are reported within purchases and resales with the ATMP JV and do not impact the Company’s condensed consolidated statement of operations.
The Company’s purchases from the ATMP JV during the three and six months ended June 27, 2020 amounted to $204 million and $355 million, respectively. The Company’s purchases from the ATMP JV during the three and six months ended June 29, 2019 amounted to $172 million and $304 million, respectively. As of June 27, 2020 and December 28, 2019, the amounts payable to the ATMP JV were $192 million and $213 million, respectively, and are included in Payables to related parties on the Company’s condensed consolidated balance sheets. The Company’s resales to the ATMP JV during the three and six months ended June 27, 2020 amounted to $8 million and $15 million, respectively. The Company’s resales to the ATMP JV during the three and six months ended June 29, 2019 amounted to $17 million and $43 million, respectively. As of June 27, 2020 and December 28, 2019, the Company’s receivable from the ATMP JV was $7 million for both periods, and was included in Receivables from related parties on the Company’s condensed consolidated balance sheets.
THATIC Joint Ventures
The Company holds equity interests in two joint ventures (collectively, the THATIC JV) with Higon Information Technology Co., Ltd. (THATIC), a third party Chinese entity. The Company holds a majority interest in one of the joint ventures and a minority interest in the other. The Company is not a primary beneficiary of the THATIC JV and, as such, the Company does not consolidate either of these entities and accounts for its equity interests in the THATIC JV under the equity method of accounting. The Company’s share in the net losses of the THATIC JV is not recorded in the Company’s condensed consolidated statements of operations since the Company is not obligated to fund the THATIC JV’s losses in excess of the Company’s investment in the THATIC JV, which was zero as of both June 27, 2020 and December 28, 2019.
In February 2016, the Company licensed certain of its intellectual property (Licensed IP) to the THATIC JV for a total of $293 million in license fees payable over several years upon achievement of certain milestones. The Company also expects to receive a royalty based on the sales of the THATIC JV’s products to be developed on the basis of such Licensed IP. The Company classifies Licensed IP income and royalty income, associated with the February 2016 agreement, as licensing gain within operating income.
The Company recognized $60 million as licensing gain associated with the Licensed IP during the six months ended June 29, 2019. The Company’s receivable from the THATIC JV was $3 million and $13 million as of June 27, 2020 and December 28, 2019, respectively, and was included in Receivables from related parties on the Company’s condensed consolidated balance sheets.
In June 2019, the Bureau of Industry and Security of the United States Department of Commerce added certain Chinese entities to the Entity List, including THATIC and the THATIC JV. The Company is complying with U.S. law pertaining to the Entity List designation.
10


NOTE 4. Debt and Secured Revolving Facility
Debt
The Company’s total debt as of June 27, 2020 and December 28, 2019 consisted of the following:

June 27,
2020
December 28,
2019
(In millions)
2.125% Convertible Senior Notes Due 2026 (2.125% Notes)
$251  $251  
7.50% Senior Notes Due 2022 (7.50% Notes)
312  312  
Borrowing under Secured Revolving Facility200    
Total debt (principal amount)763  563  
Unamortized debt discount for 2.125% Notes
(69) (73) 
Unamortized debt issuance costs for 2.125% Notes
(3) (3) 
Unamortized debt issuance costs for 7.50% Notes
(1) (1) 
Total debt (net)690  486  
Less: short term debt(200)   
Total long-term debt (net)$490  $486  

2.125% Convertible Senior Notes Due 2026
In September 2016, the Company issued $805 million in aggregate principal amount of 2.125% Convertible Senior Notes which mature on September 1, 2026. The 2.125% Notes are general unsecured senior obligations of the Company.
Holders of the 2.125% Notes may convert them at their option during certain time periods and upon the occurrence of certain events, including, during any calendar quarter, if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day (equivalent to an initial conversion price of approximately $8.00 per share of common stock). The above event was met during the second calendar quarter of 2020 and as a result, the 2.125% Notes are convertible at the option of the holder from July 1, 2020 until September 30, 2020.
The Company’s current intent is to deliver shares of its common stock upon conversion of the 2.125% Notes. The Company continued to classify the carrying value of the liability component of the 2.125% Notes as long-term debt and the equity component of the 2.125% Notes as permanent equity on its condensed consolidated balance sheet as of June 27, 2020. The effective interest rate of the liability component of the 2.125% Notes is 8%. This interest rate was based on the interest rates of similar liabilities at the time of issuance that did not have associated conversion features. The carrying amount of the equity component of the 2.125% Notes was $95 million as of both June 27, 2020 and December 28, 2019.
7.50% Senior Notes Due 2022
On August 15, 2012, the Company issued $500 million of its 7.50% Senior Notes due 2022. As of June 27, 2020, the outstanding aggregate principal amount of the 7.50% Notes was $312 million.
Secured Revolving Facility
On June 7, 2019, the Company entered into a secured revolving credit facility for up to $500 million (the Secured Revolving Facility) pursuant to a credit agreement by and among the Company, as borrower, the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent (the Credit Agreement). The Secured Revolving Facility consists of a $500 million, five-year secured revolving loan facility, including a $50 million swingline subfacility and a $75 million sublimit for letters of credit. The Company’s obligations under the Credit Agreement are secured by a lien on substantially all the Company’s property, other than intellectual property.
The Credit Agreement also provides the ability to increase the Secured Revolving Facility or incur incremental term loans or other incremental equivalent debt by an amount not to exceed certain amounts as set forth in the
11


Credit Agreement. The Company’s available borrowings under the Secured Revolving Facility are also subject to reduction by an amount equal to the net cash proceeds of (i) any debt issuances not permitted by the Secured Revolving Facility and (ii) any non-ordinary course asset sales, in excess of $250 million, if such net cash proceeds are not reinvested by the Company within twelve months of receipt.
On April 6, 2020, the Company borrowed $200 million under the Credit Agreement via the LIBOR rate loan option at an annual interest rate of 2.37% through the maturity date of July 6, 2020. As of June 27, 2020, the Company had $13 million of letters of credit outstanding under the Credit Agreement and the Company was in compliance with all required covenants under the Credit Agreement.
Subsequent to quarter end, the Company repaid the $200 million borrowing plus interest upon maturity on July 6, 2020.
NOTE 5. Financial Instruments
Fair Value Measurements
Financial Instruments Recorded at Fair Value on a Recurring Basis
The Company did not have material financial instruments measured and recorded at fair value on a recurring basis as of June 27, 2020. As of December 28, 2019, the Company had $37 million of commercial paper included in Marketable securities on the Company’s condensed consolidated balance sheets, which was classified within Level 2 as their fair value estimates were based on quoted prices for comparable instruments.
In addition, as of June 27, 2020 and December 28, 2019, the Company also had $36 million and $30 million, respectively, of investments in mutual funds held in a Rabbi trust established for the Company’s deferred compensation plan, which were included in Other non-current assets on the Company’s condensed consolidated balance sheets. These money market funds and mutual funds are classified within Level 1 as their fair value estimates are based on quoted prices for identical instruments in active markets. The Company is restricted from accessing these investments.
Financial Instruments Not Recorded at Fair Value
The Company carries its financial instruments at fair value with the exception of its long-term debt. The carrying amounts and estimated fair values of the Company’s long-term debt are as follows:
 June 27, 2020December 28, 2019
 Carrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
 (In millions)
Long-term debt, net$490  $1,932  $486  $1,823  

The estimated fair value of the Company’s long-term debt is based on Level 2 inputs as the fair value is based on quoted prices for the Company’s debt or comparable instruments in inactive markets. The Company’s 2.125% Notes, included in Long-term debt, net above, were convertible at the option of the holder as of June 27, 2020. The estimated fair value of the 2.125% Notes considers the relationship between the Company’s stock price of $50.10 as of June 26, 2020, the last trading day of the three months ended June 27, 2020 and the equivalent initial conversion price of approximately $8.00 per share of common stock.
The fair value of the Company’s accounts receivable, accounts payable and other short-term obligations, including short-term debt, approximate their carrying value based on existing payment terms.
Hedging Transactions and Derivative Financial Instruments
Cash Flow Hedges Designated as Accounting Hedges and Foreign Currency Forward Contracts Not Designated as Accounting Hedges
The Company enters into foreign currency forward contracts to hedge its exposure to foreign currency exchange rate risk related to future forecasted transactions denominated in currencies other than the U.S. Dollar. These contracts generally mature within 12 months. These cash flow hedges are designated as accounting hedges and the gains or losses on these contracts are initially deferred in other comprehensive income (loss) and reclassified to earnings in the period during which the hedged transaction affects earnings.
12


The Company also enters into foreign currency forward contracts to reduce the short-term effects of foreign currency fluctuations on certain receivables or payables denominated in currencies other than the U.S. Dollar. These forward contracts generally mature within 3 months. These contracts are not designated as accounting hedges and the gains or losses on these contracts are recognized in other income (expense), net in the condensed consolidated statements of operations based on the changes in fair value.
As of June 27, 2020 and December 28, 2019, the notional values of the Company’s outstanding foreign currency forward contracts were $599 million and $739 million, respectively. The fair value of these contracts was not material as of June 27, 2020 and December 28, 2019.
NOTE 6. Accumulated Other Comprehensive Loss
The table below summarizes the changes in accumulated other comprehensive loss for the three and six months ended June 27, 2020 and June 29, 2019:
Three Months EndedSix Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
Gains (losses) on cash flow hedges:(In millions)
Beginning balance$(14) $(1) $  $(8) 
     Net unrealized gains (losses) arising during the period5  (1) (12) 4  
 Net losses reclassified into income during the period5  2  8  4  
Total other comprehensive income (loss)10  1  (4) 8  
Ending balance$(4) $  $(4) $  
NOTE 7. Earnings Per Share
The following table sets forth the components of basic and diluted earnings per share:
Three Months EndedSix Months Ended
June 27,
2020
June 29,
2019
June 27,
2020
June 29,
2019
(In millions, except per share amounts)
Numerator
Net income for basic earnings per share$157  $35  $319  $51  
Effect of potentially dilutive shares:
        Interest expense related to the 2.125% Notes3    7    
Net income for diluted earnings per share$160