AMD (NYSE:AMD) today reported sales of $1.22 billion,
operating income of $102 million, and net income of $89 million, or
$0.18 per share, for the quarter ended July 2, 2006. These results
include $18 million of employee stock-based compensation expense and a
net gain of $10 million associated with Spansion LLC.'s repurchase of
its 12.75 percent senior subordinated notes.
In the second quarter of 2005, excluding the Memory Products
segment(1), AMD reported sales of $797 million and operating income of
$83 million. In the first quarter of 2006, AMD reported sales of $1.33
billion and operating income of $259 million.
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Change
----------------------------------------------------------------------
Q2-06 Q1-06 Q2-05(1) Q2-06 vs Q1-06 Q2-06 vs Q2-05
----------------------------------------------------------------------
Net Sales
(billions) $1.22 $1.33 $.80 (8.7)% 52.6%
----------------------------------------------------------------------
Operating Income
(millions) $102 $259 $83 (60.6)% 22.9%
----------------------------------------------------------------------
Gross Margin 56.8% 58.5% 58.0% (1.7)% points (1.2)% points
----------------------------------------------------------------------
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"While we achieved 53 percent year-over-year sales growth and
recorded our twelfth consecutive quarter of greater than 20 percent
year-over-year microprocessor sales growth, we are dissatisfied by not
reaching our second quarter sales target," said Robert J. Rivet, AMD's
chief financial officer.
"We are particularly pleased with the continued adoption of AMD
solutions in the commercial segment. In particular, AMD Opteron
processor sales grew 26 percent sequentially and we believe we gained
server processor market share in the quarter. Sales to our largest
global customers grew quarter-over-quarter as we continued to
successfully execute our strategy. Sales through the distribution
channel were down, primarily because we chose not to participate in
certain deeply-discounted opportunities.
"Second quarter manufacturing execution was outstanding, with Fab
36 ramping 300mm capacity aggressively at mature yields. In addition,
Chartered Semiconductor is now in production of AMD products."
Second quarter sales were down from the prior quarter primarily
due to the challenging pricing environment for high-volume desktop
processors which negatively impacted average selling prices (ASPs).
Total microprocessor unit shipments were down four percent
sequentially.
Record AMD Opteron processor sales were driven by growing demand
for single- and multi-socket server and workstation solutions. AMD
Opteron processor unit shipments experienced double digit percentage
growth quarter-over-quarter, and the sequential ASP percentage
increase was in the single digits.
Second quarter gross margin was 56.8 percent, compared to 58.5
percent in the first quarter of 2006. The gross margin decrease was
largely due to lower desktop processor ASPs. Operating income was $102
million in the second quarter, up from $83 million in the second
quarter of 2005 and down from $259 million in the first quarter of
2006. The decline in operating income from the prior quarter was due
largely to lower sales and increased operating expenses related to an
extra week of operations in the quarter, and marketing expenses in
support of the company's long-term goals to acquire new customers,
expand business with existing customers, and increase commercial
sales.
ADDITIONAL HIGHLIGHTS
-- AMD expanded its footprint by adding new customers and
increasing the number of platforms with existing customers.
-- Dell announced plans to offer Dual-Core AMD Opteron
processor-based servers by the end of the year.
-- Lenovo announced plans to offer AMD-powered ThinkCentre
commercial desktops.
-- Fujitsu Siemens Computers launched two new commercial
offerings, an AMD Athlon 64 processor-based Esprimo
desktop system and a thin client powered by an AMD Geode
processor.
-- Sun Microsystems introduced a new AMD Geode
processor-based commercial thin client.
-- Semp Toshiba, the second largest OEM in Brazil, began
offering AMD-based desktop systems.
-- Tsinghua Tongfang, China's third largest computer
manufacturer and the second largest home PC brand in
China, launched its first AMD-powered mobile solutions in
China.
-- AMD continued its momentum in the mobile market, securing more
than twice the AMD Turion 64 X2 mobile design wins at launch
as compared to the original AMD Turion 64 launch.
-- AMD detailed its "Torrenza" initiative to accelerate
industry-wide innovation on the AMD64 platform. Torrenza
represents the industry's first open x86 innovation platform,
capitalizing on the unique advantages of the Direct Connect
Architecture and HyperTransport. Torrenza will enable partners
to innovate within a common ecosystem.
-- More than 90 percent of the top 100 and more than 55 percent
of the top 500 of the Forbes Global 2000 companies or their
subsidiaries are using AMD64 technology. Companies that have
recently joined these growing ranks include CDW Corporation,
Reliance Industries, Sanofi-Aventis, and Toyota, among others.
-- AMD Opteron processor-based systems represent the fastest
growing platform on the Top500 Supercomputing list, with 81
AMD Opteron(TM) processor-based systems now on the list as
reported by the TOP500 Organization.
-- AMD announced plans to flexibly expand its manufacturing
operations, including converting Fab 30 from 200mm to 300mm
production, expanding production capacity at Fab 36, and
accelerating the transition to 45nm production within 18
months of initial 65nm production. AMD also received a
non-binding $900 million cash incentive package consisting of
grants and tax credits from the State of New York to build its
next fabrication facility in Luther Forest, NY.
-- AMD, APC, Cadence Design Systems, Dell, Egenera, HP, IBM,
Rackable Systems, SprayCool, Sun Microsystems, VMWare and
other industry leaders initiated the formation of the Green
Grid(TM) Alliance to share best practices to reduce power
consumption in datacenters and raise awareness around critical
energy optimization of datacenter management.
-- AMD continued to enhance performance in the award-winning AMD
Athlon 64 processor family, including the launch of the AMD
Athlon 64 FX 62 and the AMD Athlon 64 X2 5000+. AMD also
announced a new line of energy-efficient desktop products
delivering smaller, quieter, and more innovative PC designs.
-- AMD and Microsoft announced an agreement to jointly support
flexible business models for emerging markets powered by
Microsoft(R) FlexGo(TM) technology. The pay-as-you-go
computing model allows customers to have a fully-featured PC
by paying only for the time they use it.
CURRENT OUTLOOK
AMD's outlook statements are based on current expectations. The
following statements are forward looking, and actual results could
differ materially depending on market conditions.
AMD expects demand for its products to be seasonally strong in the
second half of 2006, and we expect third quarter sales to increase
sequentially.
AMD TELECONFERENCE
AMD will hold a conference call for the financial community at
2:30 p.m. PDT today to discuss second quarter financial results. AMD
will provide a real-time audio broadcast of the teleconference on the
Investor Relations page of its Web site at www.amd.com. The webcast
will be available for 10 days after the conference call.
ABOUT AMD
Advanced Micro Devices (NYSE:AMD) is a leading global provider of
innovative microprocessor solutions for computing, communications and
consumer electronics markets. Founded in 1969, AMD is dedicated to
delivering superior computing solutions based on customer needs that
empower users worldwide. For more information visit www.amd.com.
CAUTIONARY STATEMENT
This release contains forward-looking statements concerning sales
for the third quarter of 2006, AMD's Torrenza initiative and AMD's
manufacturing capacity expansion plans, which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Investors are cautioned that forward-looking statements in
this release involve risks and uncertainties that could cause actual
results to differ materially from the company's current expectations.
Risks include the possibility that global business and economic
conditions will worsen, resulting in lower than currently expected
sales in the third quarter of 2006 and beyond; that Intel
Corporation's pricing, marketing programs, product bundling, new
product introductions or other activities targeting the company's
microprocessor business will prevent attainment of the company's
current microprocessor sales plans; that demand for computers and, in
turn, demand for the company's microprocessors will be lower than
currently expected; that adoption of AMD64 products by OEMs will not
continue to occur as expected; that the company may not achieve its
current product and technology introduction schedules; that the
company will not be able to raise sufficient capital to enable it to
establish leading-edge capacity to maintain its market leadership
positions; that the company will not be able to obtain sufficient
manufacturing capacity or components to meet demand for its products;
that solutions providers will not provide the infrastructure to
support the company's AMD64 technology in a timely fashion; and that
unfavorable results of operations of Spansion will adversely impact
the company's results of operations. We urge investors to review in
detail the risks and uncertainties in the company's Securities and
Exchange Commission filings, including but not limited to the Annual
Report on Form 10-K for the year ended December 25, 2005 and the
Quarterly Report on Form 10-Q for the quarter ended March 26, 2006.
AMD, the AMD Arrow logo, AMD Athlon, AMD Opteron, AMD Geode, AMD
Turion, and combinations thereof are trademarks of Advanced Micro
Devices, Inc. Spansion is a trademark of Spansion, Inc. Other names
used are for identification purposes only and may be trademarks of
their respective owners.
(1) As a result of Spansion Inc.'s initial public offering (IPO)
in December 2005, financial results for periods in 2006 compared to
periods in 2005 do not correlate directly. All references to and
comparisons with periods in 2005 exclude the results of the Company's
former Memory Products segment.
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Advanced Micro Devices, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands except per share amounts)
Quarter Ended
----------------------------------------------------------------------
Jul. 2, Mar. 26, Jun. 26,
2006 2006 2005
(Unaudited)(Unaudited)(Unaudited)
------------------------------------ ---------- ---------- -----------
Net sales $1,216,367 $1,332,158 $1,259,918
Cost of sales (includes stock-based
compensation expense of $2,200 for
Q2 FY'06; $1,789 for Q1 FY'06 and $0
for Q2 FY'05; $3,989 for six months
ended Jul. 2,06 and $0 for six
months ended Jun. 26,05) 526,059 553,340 765,954
------------------------------------ ---------- ---------- -----------
Gross margin 690,308 778,818 493,964
Gross margin % 56.8% 58.5% 39.2%
Research and development (includes
stock-based compensation expense of
$6,834 for Q2 FY'06; $4,094 for Q1
FY'06 and $0 for Q2 FY'05; $10,928
for six months ended Jul. 2,06 and
$0 for six months ended Jun. 26,05) 278,674 264,176 272,584
Marketing, general and administrative
(includes stock-based compensation
expense of $9,020 for Q2 FY'06;
$9,162 for Q1 FY'06; $313 for Q2
FY'05; $18,182 for six months ended
Jul. 2,06 and $456 for six months
ended Jun. 26,05) 309,525 256,042 228,511
------------------------------------ ---------- ---------- -----------
Operating income (loss) 102,109 258,600 (7,131)
Interest income 35,308 28,162 7,194
Interest expense (17,859) (23,247) (25,653)
Other income (expense), net 7,240 (19,128) (4,096)
------------------------------------ ---------- ---------- -----------
Income (loss) before minority
interest, equity in net loss of
Spansion Inc. and income taxes 126,798 244,387 (29,686)
Minority interest of consolidated
subsidiaries (7,183) (6,347) 37,905
Equity in net loss of Spansion Inc. (12,467) (18,243) -
Provision (benefit) for income taxes 18,301 35,273 (3,100)
------------------------------------ ---------- ---------- -----------
Net income (loss) $ 88,847 $ 184,524 $ 11,319
------------------------------------ ---------- ---------- -----------
Net income (loss) per common share
Basic $ 0.18 $ 0.40 $ 0.03
Diluted $ 0.18 $ 0.38 $ 0.03
------------------------------------ ---------- ---------- -----------
Shares used in per share calculation
Basic 484,541 464,080 395,414
Diluted 500,176 495,326 405,739
Six Months Ended
----------------------------------------------------------------------
Jul. 2, Jun. 26,
2006 2005
(Unaudited)(Unaudited)
----------------------------------------------- ---------- -----------
Net sales $2,548,525 $2,486,546
Cost of sales (includes stock-based compensation
expense of $2,200 for Q2 FY'06; $1,789 for Q1
FY'06 and $0 for Q2 FY'05; $3,989 for six
months ended Jul. 2,06 and $0 for six months
ended Jun. 26,05) 1,079,399 1,573,403
----------------------------------------------- ---------- -----------
Gross margin 1,469,126 913,143
Gross margin % 57.6% 36.7%
Research and development (includes stock-based
compensation expense of $6,834 for Q2 FY'06;
$4,094 for Q1 FY'06 and $0 for Q2 FY'05;
$10,928 for six months ended Jul. 2,06 and $0
for six months ended Jun. 26,05) 542,850 525,706
Marketing, general and administrative (includes
stock-based compensation expense of $9,020 for
Q2 FY'06; $9,162 for Q1 FY'06; $313 for Q2
FY'05; $18,182 for six months ended Jul. 2,06
and $456 for six months ended Jun. 26,05) 565,567 440,225
----------------------------------------------- ---------- -----------
Operating income (loss) 360,709 (52,788)
Interest income 63,470 14,079
Interest expense (41,106) (49,898)
Other income (expense), net (11,888) (7,007)
----------------------------------------------- ---------- -----------
Income (loss) before minority interest, equity
in net loss of Spansion Inc. and income taxes 371,185 (95,614)
Minority interest of consolidated subsidiaries (13,530) 84,758
Equity in net loss of Spansion Inc. (30,710) -
Provision (benefit) for income taxes 53,574 (4,752)
----------------------------------------------- ---------- -----------
Net income (loss) $ 273,371 $ (6,104)
----------------------------------------------- ---------- -----------
Net income (loss) per common share
Basic $ 0.58 $ (0.02)
Diluted $ 0.55 $ (0.02)
----------------------------------------------- ---------- -----------
Shares used in per share calculation
Basic 474,311 394,245
Diluted 497,542 394,245
Advanced Micro Devices, Inc.
CONSOLIDATED BALANCE SHEETS
(Thousands)
Jul. 2, Mar. 26, Dec. 25,
2006 2006 2005(a)
(Unaudited) (Unaudited)
---------------------------------- ----------- ----------- -----------
Assets
Current assets:
Cash, cash equivalents and
short-term investments $2,530,062 $2,632,663 $1,794,766
Accounts receivable, net 571,539 819,963 805,531
Inventories 405,285 337,216 388,631
Prepaid expenses and other
current assets 308,323 322,031 477,302
Deferred income taxes 90,323 104,980 92,606
---------------------------------- ----------- ----------- -----------
Total current assets 3,905,532 4,216,853 3,558,836
Property, plant and equipment, net 3,163,181 2,874,887 2,701,000
Net investment in Spansion Inc. 686,984 700,329 721,342
Other assets 306,198 259,976 306,601
---------------------------------- ----------- ----------- -----------
Total Assets $8,061,895 $8,052,045 $7,287,779
================================== =========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 706,454 847,178 855,834
Accrued compensation and benefits 161,547 258,791 226,874
Accrued liabilities 429,843 403,116 388,998
Income taxes payable 45,567 33,871 3,326
Deferred income on shipments to
distributors 189,992 194,940 141,898
Current portion of long-term
debt and capital lease
obligations 45,139 42,408 43,224
Other current liabilities 175,947 168,220 161,807
---------------------------------- ----------- ----------- -----------
Total current liabilities 1,754,489 1,948,524 1,821,961
Deferred income taxes 90,323 104,980 92,606
Long-term debt and capital lease
obligations 647,109 615,874 1,327,065
Other long-term liabilities 450,289 428,074 459,322
Minority interest in consolidated
subsidiaries 267,095 244,672 234,988
Stockholders' equity:
Capital stock:
Common stock, par value 4,854 4,832 4,355
Capital in excess of par value 3,921,786 3,869,620 2,710,168
Retained earnings 747,160 658,262 473,678
Accumulated other comprehensive
income 178,790 177,207 163,636
---------------------------------- ----------- ----------- -----------
Total stockholders' equity 4,852,590 4,709,921 3,351,837
---------------------------------- ----------- ----------- -----------
Total Liabilities and
Stockholders' Equity $8,061,895 $8,052,045 $7,287,779
================================== =========== =========== ===========
(a) Derived from the December 25, 2005 audited financial statements of
Advanced Micro Devices, Inc.
Advanced Micro Devices, Inc.
SELECTED CORPORATE DATA
(Unaudited)
(Millions except headcount and percentages)
Quarter Ended Six Months Ended
----------------------- ---------------------------- -----------------
Jul. 2, Mar. 26, Jun. 26, Jul. 2, Jun. 26,
Segment Information (6) 2006 2006 2005 2006 2005
----------------------- -------- --------- --------- -------- --------
Computation Products (2)
Net sales $ 1,172 $ 1,299 $ 767 $ 2,471 $1,517
Operating income 113 284 99 398 181
Embedded Products (3)
Net sales 44 38 30 82 60
Operating loss (6) (11) (12) (17) (26)
All Other (4)
Net sales - (5) - (5) -
Operating loss (5) (14) (4) (20) (8)
Subtotal (excluding Memory
Products segment)
Net sales 1,216 1,332 797 2,548 1,577
Operating income 102 259 83 361 147
Memory Products (5)
Net sales - - 462 - 910
Operating loss - - (90) - (199)
Total AMD
Net sales 1,216 1,332 1,260 2,548 2,487
Operating income
(loss) 102 259 (7) 361 (53)
----------------------- -------- --------- --------- -------- --------
Other Data (AMD excluding Memory Products segment)
Gross margin % 56.8% 58.5% 58.0% 57.6% 55.4%
Research and
development expenses $ 279 $ 264 $ 199 $ 543 $382
Marketing, general and
administrative
expenses $ 310 $ 256 $ 181 $ 566 $345
Depreciation &
amortization $ 193 $ 174 $ 174 $ 367 $361
Capital additions $ 455 $ 310 $ 232 $ 765 $682
Headcount 10,967 10,246 8,843 10,967 8,843
International sales % 70.2% 69.5% 68.6% 69.8% 69.5%
----------------------- -------- --------- --------- -------- --------
EBITDA (1) $ 318 $ 417 $ 352 $ 735 $690
----------------------- -------- --------- --------- -------- --------
(1) RECONCILIATION OF NET INCOME (LOSS) TO EBITDA(a)
Net income (loss) $ 89 $ 185 $ 11 $ 273 $ (6)
Depreciation and
amortization 193 174 318 367 651
Interest expense 18 23 26 41 50
Provision (benefit)
for income taxes 18 35 (3) 54 (5)
----------------------- -------- --------- --------- -------- --------
EBITDA $ 318 $ 417 $ 352 $ 735 $ 690
(a) Starting Q106, the Company defines EBITDA as net income (loss)
adjusted for interest expense, tax, depreciation and amortization.
Prior period information has been restated to conform to current
period presentation.
(2) Computation Products segment includes PC processors and Chipsets.
(3) Embedded Products segment, formerly known as Personal Connectivity
Solution Products, includes Embedded Processors and Products for
global commercial and consumer markets.
(4) The All Other category includes certain operating expenses and
credits that are not allocated to the operating segments and,
starting Q305, includes Personal Internet Communicator (PIC)
products.
(5) Memory Products segment included Flash memory products of AMD and
Spansion. Spansion closed its IPO on Dec 21, 2005. Since that
time, AMD uses the equity method of accounting to reflect its
proportionate share of Spansion's net income (loss).
(6) Starting Q405, the Company has allocated bonus and profit sharing
expenses to the segments. Prior period information has been
restated to conform to current period presentation.
Note: Figures may not foot due to rounding
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