AMD (NYSE:AMD) today reported sales of $1.33 billion, operating
income of $119 million, and net income of $134 million, or $0.27 per
share, for the quarter ended October 1, 2006. These results include
$16.5 million of employee stock-based compensation expense.
In the third quarter of 2005, excluding the Memory Products
segment(1), AMD reported sales of $1.01 billion and operating income
of $129 million. In the second quarter of 2006, AMD reported sales of
$1.22 billion and operating income of $102 million.
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Change
----------------------------------------------------------------------
Q3-06 vs Q3-06 vs
Q3-06 Q2-06 Q3-05(1) Q2-06 Q3-05
----------------------------------------------------------------------
Net Sales
(billions) $1.33 $1.22 $1.01 9% 32%
----------------------------------------------------------------------
Operating
Income
(millions) $119 $102 $129 17% (8)%
----------------------------------------------------------------------
Gross Margin (5.4)% (4.0)%
51.4% 56.8% 55.4% points points
----------------------------------------------------------------------
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"Third quarter sales increased nine percent from the prior
quarter, and 32 percent year-over-year, due to strong demand for all
AMD processor brands," said Robert J. Rivet, AMD's chief financial
officer. "Microprocessor unit shipments grew 18 percent sequentially
as customers continued leveraging AMD's open platform approach. Demand
for AMD Turion(TM) 64 mobile processors was especially strong,
resulting in record mobile processor sales and unit shipments coupled
with increased average selling prices (ASPs). Record AMD Opteron(TM)
processor sales resulted from continued adoption of dual core
processors, record unit shipments and improved ASPs."
Desktop processor sales were flat sequentially with increased unit
shipments offset by decreased ASPs.
AMD continued to successfully ramp production in both Fab 36 and
Chartered Semiconductor. The conversion to 65 nanometer production in
Fab 36 is on track, with revenue shipments planned for the fourth
quarter.
Third quarter gross margin was 51.4 percent, compared to 56.8
percent in the second quarter of 2006 and 55.4 percent in the third
quarter of 2005. The gross margin decrease was largely due to lower
desktop processor ASPs which caused a decline in overall processor
ASPs.
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ADDITIONAL HIGHLIGHTS
-- AMD and ATI announced plans to join forces to create a processing
powerhouse. The transaction has received all of the required
regulatory and shareholder approvals necessary for close and is
expected to be completed the week of October 23rd.
-- Customer highlights in the third quarter included:
-- Dell launched its first AMD64 processor-based Dimension desktop
systems for consumers and small businesses.
-- Founder, China's second largest PC provider and the seventh
largest global desktop PC provider, announced plans to launch a
full range of AMD64-based desktop, notebook and server systems
throughout China.
-- IBM unveiled five new AMD Opteron-based mainstream server
platforms that are quad-core ready.
-- Commercial adoption of AMD Athlon(TM) 64 processor-based desktop
systems continued, with Acer, HP, Lenovo, and NEC Computers
announcing new AMD-powered platforms. The HP and Lenovo
solutions are their first AMD client systems targeted at large
enterprise customers.
-- More than 150 AMD Turion 64 platforms are shipping or in
development worldwide from the leading PC manufacturers.
-- AMD announced broad support for its Torrenza Initiative by leading
server manufacturers including Cray, Dell, Fujitsu Siemens
Computers, HP, IBM and Sun Microsystems. Torrenza is the
industry's first open x86 innovation platform, capitalizing on the
unique advantages of the AMD's Direct Connect Architecture and
HyperTransport(TM) technology to enable partners to innovate
within a common ecosystem.
-- AMD introduced its next-generation AMD Opteron processor family,
the only x86 server processor with planned upgradeability to
native quad-core within the same thermal design power envelope.
-- More than 60 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
Allianz Group, Linde Group, Merck KGAA, Schering AG, and Quest
Diagnostics. Additionally, government organizations that adopted
AMD64 technology in the quarter include the U.S. Air Force, the
U.S. Department of Census, the U.S. Navy SPAWAR, the Defense
Contract Management Agency, the National Institute of Health, and
the Defense Information Systems Agency (DISA).
-- AMD expanded its global research and development operations,
opening the Shanghai Research and Development Center to drive
next-generation platform innovation and an advanced microprocessor
development facility in Fort Collins, CO named the "Mile High
Design Center."
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CURRENT OUTLOOK
AMD's outlook statements are based on current expectations and
exclude ATI operations and ATI acquisition-related charges. The
following statements are forward looking, and actual results could
differ materially depending on market conditions and the factors set
forth under "Cautionary Statement" below.
AMD expects demand for its products to be seasonally strong in the
fourth quarter and 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 third 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 fourth quarter of 2006, AMD's technology and capacity
introduction schedule and the timing of the completion of the planned
acquisition of ATI Technologies, Inc, 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 competitors, customers and
suppliers of AMD or ATI may take actions that may negate the impact of
the anticipated benefits of AMD's acquisition of ATI; revenue, cost
savings, growth prospects and any or other synergies expected from the
planned acquisition will not be fully realized or will take longer to
realize than expected; the planned acquisition will not be accretive
as expected; the company will not achieve any year-end or longer-term
targeted gross margins, research and development expenses, selling,
general or administrative expenses, operating margins, capital
structure or debt-to-capitalization ratio; there will be delays
associated with integrating the companies, including employees and
operations, after the planned acquisition is completed; goodwill and
other long-lived assets resulting from the planned acquisition and the
resulting impact on the company's assets and earnings will be
impaired; global business and economic conditions will worsen,
resulting in lower than currently expected sales in the fourth quarter
of 2006 and beyond; Intel Corporation's pricing, marketing programs,
product bundling, new product introductions or other activities
targeting the company's business will prevent attainment of the
company's current sales plans; demand for computers and, in turn,
demand for the company's products will be lower than currently
expected; the company will not achieve its current product and
technology introduction schedules; the company will require additional
capital and will not be able to raise sufficient capital, on favorable
terms or at all; the company will not be able to obtain sufficient
manufacturing capacity or components to meet demand for its products;
solutions providers will not provide the infrastructure to support the
company's AMD64 technology in a timely fashion; and 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 From 10-K
for the year ended December 25, 2005 and AMD's quarterly report on
Form 10-Q for the quarter ended July 2, 2006.
AMD, the AMD Arrow logo, AMD Athlon, AMD Opteron, 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. In this press release, 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
---------------------------------------------------------------------
Oct. 1, Jul. 2, Sept. 25,
2006 2006 2005
(Unaudited) (Unaudited) (Unaudited)
---------------------------------------------------------------------
Net sales $1,327,622 $1,216,367 $1,522,755
Cost of sales (includes stock-
based compensation expense of
$1,932 for Q3 FY'06; $2,200 for
Q2 FY'06 and $0 for Q3 FY'05;
$5,920 for nine months ended
Oct. 1, 2006 and $0 for nine
months ended Sept. 25, 2005) 645,264 526,059 896,261
---------------------------------------------------------------------
Gross margin 682,358 690,308 626,494
Gross margin % 51.4% 56.8% 41.1%
Research and development
(includes stock-based
compensation expense of $6,110
for Q3 FY'06; $6,834 for Q2
FY'06 and $0 for Q3 FY'05;
$17,039 for nine months ended
Oct. 1, 2006 and $0 for nine
months ended Sept. 25, 2005) 277,380 278,674 289,018
Marketing, general and
administrative (includes stock-
based compensation expense of
$8,468 for Q3 FY'06; $9,020 for
Q2 FY'06; $ 277 for Q3 FY'05;
$26,650 for nine months ended
Oct. 1, 2006 and $743 for nine
months ended Sept. 25, 2005) 285,806 309,525 258,748
---------------------------------------------------------------------
Operating income 119,172 102,109 78,728
Interest income 31,188 35,308 9,510
Interest expense (17,637) (17,859) (30,615)
Other income (expense), net (1,975) 7,240 (3,456)
---------------------------------------------------------------------
Income (loss) before minority
interest, equity in net loss of
Spansion Inc. and income taxes 130,748 126,798 54,167
Minority interest of consolidated
subsidiaries (6,941) (7,183) 21,227
Equity in net loss of Spansion
Inc. (10,204) (12,467) -
Provision (benefit) for income
taxes (20,852) 18,301 (606)
---------------------------------------------------------------------
Net income $ 134,455 $ 88,847 $ 76,000
---------------------------------------------------------------------
Net income per common share
Basic $ 0.28 $ 0.18 $ 0.19
Diluted $ 0.27 $ 0.18 $ 0.18
---------------------------------------------------------------------
Shares used in per share
calculation
Basic 486,331 484,541 399,025
Diluted 496,772 500,176 443,681
Nine Months Ended
----------------------------------------------------------------------
Oct. 1, Sept. 25,
2006 2005
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Net sales $3,876,147 $4,009,301
Cost of sales (includes stock-based
compensation expense of $1,932 for Q3 FY'06;
$2,200 for Q2 FY'06 and $0 for Q3 FY'05;
$5,920 for nine months ended Oct. 1, 2006 and
$0 for nine months ended Sept. 25, 2005) 1,724,663 2,469,663
----------------------------------------------------------------------
Gross margin 2,151,484 1,539,638
Gross margin % 55.5% 38.4%
Research and development (includes stock-based
compensation expense of $6,110 for Q3 FY'06;
$6,834 for Q2 FY'06 and $0 for Q3 FY'05;
$17,039 for nine months ended Oct. 1, 2006
and $0 for nine months ended Sept. 25, 2005) 820,230 814,724
Marketing, general and administrative
(includes stock-based compensation expense of
$8,468 for Q3 FY'06; $9,020 for Q2 FY'06; $
277 for Q3 FY'05; $26,650 for nine months
ended Oct. 1, 2006 and $743 for nine months
ended Sept. 25, 2005) 851,373 698,974
----------------------------------------------------------------------
Operating income 479,881 25,940
Interest income 94,658 23,589
Interest expense (58,743) (80,513)
Other income (expense), net (13,863) (10,463)
----------------------------------------------------------------------
Income (loss) before minority interest, equity
in net loss of Spansion Inc. and income taxes 501,933 (41,447)
Minority interest of consolidated subsidiaries (20,471) 105,985
Equity in net loss of Spansion Inc. (40,914) -
Provision (benefit) for income taxes 32,722 (5,358)
----------------------------------------------------------------------
Net income $ 407,826 $ 69,896
----------------------------------------------------------------------
Net income per common share
Basic $ 0.85 $ 0.18
Diluted $ 0.82 $ 0.17
----------------------------------------------------------------------
Shares used in per share calculation
Basic 478,318 395,839
Diluted 497,332 409,586
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Advanced Micro Devices, Inc.
CONSOLIDATED BALANCE SHEETS
(Thousands)
Oct. 1, Jul. 2, Dec. 25,
2006 2006 2005(a)
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Assets
Current assets:
Cash, cash equivalents and
marketable securities $2,356,903 $2,530,062 $1,794,766
Accounts receivable, net 688,023 571,539 805,531
Inventories 465,716 405,285 388,631
Prepaid expenses and other
current assets 326,238 308,323 477,302
Deferred income taxes 74,981 90,323 92,606
----------------------------------------------------------------------
Total current assets 3,911,861 3,905,532 3,558,836
Property, plant and equipment, net 3,403,878 3,163,181 2,701,000
Net investment in Spansion Inc. 671,249 686,984 721,342
Other assets 392,255 306,198 306,601
----------------------------------------------------------------------
Total Assets $8,379,243 $8,061,895 $7,287,779
======================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 901,349 706,454 855,834
Accrued compensation and benefits 147,250 161,547 226,874
Accrued liabilities 473,477 429,843 388,998
Income taxes payable 17,790 45,567 3,326
Deferred income on shipments to
distributors 115,571 189,992 141,898
Current portion of long-term debt
and capital lease obligations 44,950 45,139 43,224
Other current liabilities 191,824 175,947 161,807
----------------------------------------------------------------------
Total current liabilities 1,892,211 1,754,489 1,821,961
Deferred income taxes 75,861 90,323 92,606
Long-term debt and capital lease
obligations 644,357 647,109 1,327,065
Other long-term liabilities 482,204 450,289 459,322
Minority interest in consolidated
subsidiaries 272,116 267,095 234,988
Stockholders' equity:
Capital stock:
Common stock, par value 4,870 4,856 4,355
Capital in excess of par value 3,958,680 3,921,784 2,710,168
Retained earnings 881,631 747,160 473,678
Accumulated other comprehensive
income 167,313 178,790 163,636
----------------------------------------------------------------------
Total stockholders' equity 5,012,494 4,852,590 3,351,837
----------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity $8,379,243 $8,061,895 $7,287,779
======================================================================
(a)Derived from the December 25, 2005 audited financial statements of
Advanced Micro Devices, Inc.
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Advanced Micro Devices, Inc.
SELECTED CORPORATE DATA
(Unaudited)
(Millions except headcount and percentages)
Quarter Ended Nine Months Ended
--------------------------------------------------- ------------------
Oct. 1, Jul. 2, Sept. 25, Oct. 1, Sept. 25,
Segment Information (6) 2006 2006 2005 2006 2005
-----------------------
--------------------------------------------------- ------------------
Computation Products
(2)
Net sales $ 1,290 $ 1,172 $ 969 $ 3,761 $ 2,486
Operating income 133 113 149 531 331
Embedded Products (3)
Net sales 38 44 35 120 95
Operating loss (1) (6) (14) (18) (40)
All Other (4)
Net sales - - 3 (5) 3
Operating loss (13) (5) (6) (33) (16)
Subtotal (excluding
Memory Products
segment)
Net sales 1,328 1,216 1,007 3,876 2,584
Operating income 119 102 129 480 275
Memory Products (5)
Net sales - - 516 - 1,425
Operating loss - - (50) - (249)
Total AMD
Net sales 1,328 1,216 1,523 3,876 4,009
Operating income 119 102 79 480 26
--------------------------------------------------- ------------------
Other Data (AMD excluding Memory
Products segment)
---------------------------------
Gross margin % 51.4% 56.8% 55.4% 55.5% 55.4%
Research and
development expenses $ 277 $ 279 $ 216 $ 820 $ 598
Marketing, general and
administrative
expenses $ 286 $ 310 $ 214 $ 851 $ 559
Depreciation &
amortization $ 200 $ 193 $ 154 $ 567 $ 515
Capital additions $ 425 $ 455 $ 177 $ 1,190 $ 859
Headcount 11,609 10,967 9,530 11,609 9,530
International sales % 70.9% 70.2% 72.5% 70.2% 70.7%
--------------------------------------------------- ------------------
EBITDA (1) $ 331 $ 318 $ 397 $ 1,066 $ 1,087
-----------------------
--------------------------------------------------- ------------------
(1)RECONCILIATION OF NET INCOME TO EBITDA(a)
Net income $ 134 $ 89 $ 76 $ 408 $ 70
Depreciation and
amortization 200 193 291 567 942
Interest expense 18 18 31 59 81
Provision (benefit)
for income taxes (21) 18 (1) 33 (5)
------------------------------------------------ ------------------
EBITDA $ 331 $ 318 $ 397 $ 1,066 $ 1,087
(a)Starting Q106, the Company defines EBITDA as net income 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 allocates 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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