AMD Reports Third Quarter Results
- 18 Percent Sequential Revenue Increase Driven by Record Microprocessor Unit Shipments and Increased Graphics Segment Revenue -
SUNNYVALE, Calif.--(BUSINESS WIRE)--
AMD (NYSE:AMD) today reported third quarter 2007 revenue of $1.632 billion, an 18 percent increase compared to the second quarter of 2007 and a 23 percent improvement compared to the third quarter of 2006(1). In the third quarter, AMD reported an operating loss of $226 million, and a net loss of $396 million, or $0.71 per share. Third quarter results include a negative impact of $120 million, or $0.22 per share, due to ATI acquisition-related, integration and severance charges and impairment of assets. In the second quarter of 2007, AMD reported revenue of $1.378 billion and an operating loss of $457 million. In the third quarter of 2006, AMD reported revenue of $1.328 billion and operating income of $121 million.
"We are encouraged by the progress we made in our third quarter financial results. We delivered a strong revenue increase, gained 8 percentage points of gross margin and reduced our operating loss by more than half," said Robert J. Rivet, AMD's Chief Financial Officer. "We sold a record number of microprocessors through our distribution channel and began revenue shipments of Quad-core AMD Opteron(TM) processors in the quarter.
"Graphics segment revenue increased 29 percent sequentially, as customers increasingly adopted AMD's new ATI Radeon HD(TM) 2000 series of graphics processors."
Third quarter charges of $120 million consisted of ATI acquisition-related, integration and severance charges of $78 million and asset impairments of $42 million associated with our ownership of Spansion, Inc. common stock.
($ millions) Q3-07 Q2-07 Q3-06(1) -------------------------------------- ---------- ---------- --------- Revenue $ 1,632 $ 1,378 $ 1,328 -------------------------------------- ---------- ---------- --------- GAAP Operating income (loss) $ (226) $ (457) $ 121 -------------------------------------- ---------- ---------- --------- Acquisition-related, integration and severance charges (ARC) $ 78 $ 94 $ 6 -------------------------------------- ---------- ---------- --------- Non-GAAP Operating income (loss) (2) (3) $ (148) $ (363) $ 127 -------------------------------------- ---------- ---------- ---------
Third quarter 2007 gross margin was 41 percent, compared to 33 percent in the second quarter of 2007 and 51 percent in the third quarter of 2006. The increase from the prior quarter was due to increased microprocessor unit shipments, manufacturing efficiencies, improved inventory management, and a richer product mix in the Computing Solutions and Graphics segments.
Computing Solutions
Third quarter Computing Solutions segment revenue was $1.283 billion, a 17 percent sequential increase. The increase was driven primarily by a 19 percent increase in microprocessor revenue. Microprocessor unit shipments increased 16 percent sequentially. Mobile processor unit shipment growth remained strong, increasing 41 percent sequentially and 68 percent year-over-year.
Graphics
Graphics segment revenue of $252 million grew 29 percent from the second quarter of 2007. The success of the new ATI Radeon HD 2000 series of graphics processors led to increased unit shipments and revenue.
Consumer Electronics
Third quarter Consumer Electronics segment revenue was $97 million, compared with $85 million in the second quarter of 2007 driven by improved handheld unit sales and increased game console royalties.
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 and the factors set forth under "Cautionary Statement" below.
In the seasonally up fourth quarter, AMD expects revenue to increase in line with seasonality.
Additional Highlights
-- AMD introduced the world's most advanced x86 processor, the
Quad-Core AMD Opteron processor.
-- HP, Lenovo, NEC, Packard Bell, Samsung and Toshiba introduced
new AMD platforms featuring the combination of AMD processors
and the AMD690 chipset.
-- Dell, HP, Lenovo, and Toshiba, among others, began offering
desktop and notebook systems featuring the ATI Radeon HD 2000
series of graphics processors.
-- AMD was named Best-in-Class Supplier for Standard Silicon in
Sun Microsystems' 2007 Supplier Awards program, was also
awarded CMP Channel's VAR Business 2007 Tech Innovator of the
Year award for the server category, and AMD's quad-core
processor technology won 2007 Best of VMworld Awards for the
Green Computing category.
-- AMD licensed graphics technology to Freescale Semiconductor
and Qualcomm.
-- AMD completed a $1.5 billion convertible debt offering and
used the net proceeds, together with available cash, to repay
in full the $1.7 billion outstanding balance of the term loan
used to acquire ATI.
AMD Teleconference
AMD will hold a conference call for the financial community at 2:00 p.m. PT (5:00 p.m. ET) 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 processing solutions in the computing, graphics and consumer electronics markets. AMD is dedicated to driving open innovation, choice and industry growth by delivering superior customer-centric solutions that empower consumers and businesses worldwide. For more information, visit www.amd.com.
Cautionary Statement
This release contains a forward-looking statement concerning revenue for the fourth quarter of 2007 which is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are commonly identified by words such as "would," "may," "expects," "believes," "plans," "intends," "projects," and other terms with similar meaning. Investors are cautioned that the forward-looking statements in this release are based on current beliefs, assumptions and expectations, speak only as of the date of this release and involve risks and uncertainties that could cause actual results to differ materially from current expectations. Risks include the possibility that Intel Corporation's pricing, marketing and rebating programs, product bundling, standard setting, new product introductions or other activities targeting the company's business will prevent attainment of the company's current plans; the company will require additional funding and may not be able to raise funds on favorable terms or at all; the company's cost reduction efforts will not be effective; customers stop buying the company's products or materially reduce their operations or demand for its products; the company will be unable to develop, launch and ramp new products and technologies in the volumes and mix required by the market and at mature yields on a timely basis; the company's competitors, customers and suppliers may take actions that will negate the anticipated benefits of the company's acquisition of ATI; demand for computers and consumer electronics products and, in turn, demand for the company's products will be lower than currently expected; global business and economic conditions will worsen, resulting in lower than currently expected revenue in the fourth quarter of 2007 and beyond; there will be unexpected variations in market growth and demand for the company's products and technologies in light of the product mix that it may have available at any particular time or a decline in demand; the company will be unable to transition to advanced manufacturing process technologies in a timely and effective way, consistent with planned capital expenditures; the company will be unable to maintain the level of investment in research and development and capacity that is required to remain competitive; and the company will be unable to obtain sufficient manufacturing capacity or components to meet demand for its products or will under-utilize its microprocessor manufacturing facilities. Investors are urged to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007.
AMD, the AMD Arrow logo, AMD Opteron, and combinations thereof, and ATI, the ATI logo, and Radeon are trademarks of Advanced Micro Devices, Inc. Other names are for informational purposes only and used to identify companies and products and may be trademarks of their respective owners.
(1) As a result of the acquisition of ATI, 2006 financial results only include the results of the former ATI operations from October 25 through December 31, 2006. Therefore, financial results for the third quarter 2007 do not correlate directly to those for the third quarter 2006.
(2) In this press release, AMD has provided non-GAAP financial measures for operating income (loss) to reflect its financial results without acquisition-related, integration and severance charges. Management believes this non-GAAP presentation makes it easier for investors to compare current and historical period operating results.
(3) Includes stock-based compensation expense.
ADVANCED MICRO DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)
Quarter Ended Nine Months Ended
---------------------------------------------- -----------------------
Sept. 29, June 30, Oct. 1, Sept. 29, Oct. 1,
2007 2007 2006 2007 2006
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------------------------------------------- -----------------------
Net
revenue $ 1,632 $ 1,378 $ 1,328 $ 4,243 $ 3,876
Cost of
sales 963 917 645 2,766 1,724
---------------------------------------------- -----------------------
Gross
margin 669 461 683 1,477 2,152
Gross
margin % 41% 33% 51% 35% 56%
Research
and
devel-
opment 467 475 277 1,374 820
Marketing,
general
and
adminis-
trative 352 365 279 1,052 844
Amort-
ization of
acquired
intan-
gible
assets
and inte-
gration
charges 76 78 6 238 6
---------------------------------------------- -----------------------
Operating
income
(loss) (226) (457) 121 (1,187) 482
Interest
income 19 19 31 54 94
Interest
expense (95) (99) (18) (272) (59)
Other
income
(ex-
pense),
net (1) (9) (2) (8) (15)
---------------------------------------------- -----------------------
Income
(loss)
before
minority
interest,
equity in
net loss
of
Spansion
Inc. and
other and
income
taxes (303) (546) 132 (1,413) 502
Minority
interest
in
consol-
idated
subsid-
iaries (9) (9) (7) (26) (20)
Equity in
net loss
of
Spansion
Inc. and
other (57) (13) (10) (86) (40)
---------------------------------------------- -----------------------
Income
(loss)
before
income
taxes (369) (568) 115 (1,525) 442
Provision
(benefit)
for
income
taxes 27 32 (21) 82 32
---------------------------------------------- -----------------------
Net income
(loss) $ (396) $ (600) $ 136 $ (1,607) $ 410
---------------------------------------------- -----------------------
Net income
(loss)
per
common
share
Basic $ (0.71) $ (1.09) $ 0.28 $ (2.92) $ 0.86
Diluted $ (0.71) $ (1.09) $ 0.27 $ (2.92) $ 0.82
---------------------------------------------- -----------------------
Shares
used in
per share
calcu-
lation
Basic 554 552 486 551 478
Diluted 554 552 497 551 497
ADVANCED MICRO DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
Sept. 29, June 30, Dec. 31,
2007 2007 2006(a)
(Unaudited) (Unaudited)
----------------------------------------------------------------------
Assets
Current assets:
Cash, cash equivalents and
marketable securities $ 1,528 $ 1,594 $ 1,541
Accounts receivable, net 682 648 1,140
Inventories 839 892 814
Prepaid expenses and other
current assets 432 410 443
Deferred income taxes 62 54 25
----------------------------------------------------------------------
Total current assets 3,543 3,598 3,963
Property, plant and equipment, net 4,725 4,575 3,987
Goodwill 3,165 3,180 3,217
Investment in Spansion Inc. - 326 371
Acquisition related intangible
assets, net 994 1,065 1,207
Other assets 507 480 402
----------------------------------------------------------------------
Total Assets $ 12,934 $ 13,224 $ 13,147
======================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,064 $ 985 $ 1,338
Accrued compensation and benefits 198 192 177
Accrued liabilities 833 768 716
Deferred income on shipments to
distributors 106 92 169
Current portion of long-term debt
and capital lease obligations 218 219 125
Other current liabilities 283 220 327
----------------------------------------------------------------------
Total current liabilities 2,702 2,476 2,852
Deferred income taxes 32 56 31
Long-term debt and capital lease
obligations, less current portion 5,117 5,318 3,672
Other long-term liabilities 650 610 517
Minority interest in consolidated
subsidiaries 308 292 290
Stockholders' equity:
Capital stock:
Common stock, par value 6 6 5
Capital in excess of par value 5,280 5,237 5,316
Retained earnings (deficit) (1,328) (932) 308
Accumulated other comprehensive
income 167 161 156
----------------------------------------------------------------------
Total stockholders' equity 4,125 4,472 5,785
----------------------------------------------------------------------
Total Liabilities and Stockholders'
Equity $ 12,934 $ 13,224 $ 13,147
======================================================================
(a)Amounts as of December 31, 2006 were derived from the December 31,
2006 audited financial statements.
ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
(Unaudited)
(Millions except headcount and percentages)
Quarter Ended Nine Months Ended
----------------------------------------------------------------------
Sept. 29, June 30, Oct. 1, Sept. 29, Oct. 1,
Segment Information (1) 2007 2007 2006 2007 2006
-----------------------
--------------------------------------------------- ------------------
Computing Solutions (2)
Net revenue $ 1,283 $ 1,098 $ 1,328 $ 3,299 $ 3,880
Operating income
(loss) $ (112) $ (258) $ 167 $ (691) $ 615
Graphics (3)
Net revenue 252 195 - 644 -
Operating income
(loss) (3) (50) - (88) -
Consumer Electronics
(4)
Net revenue 97 85 - 300 -
Operating income
(loss) (3) (22) - (29) -
All Other (5)
Net revenue - - - - (4)
Operating income
(loss) (108) (127) (46) (379) (133)
Total AMD
Net revenue $ 1,632 $ 1,378 $ 1,328 $ 4,243 $ 3,876
Operating income
(loss) $ (226) $ (457) $ 121 $(1,187) $ 482
--------------------------------------------------- ------------------
Other Data
-----------------------
Depreciation &
amortization
(excluding
amortization of
acquired intangible
assets) $ 263 $ 255 $ 200 $ 761 $ 567
Capital additions $ 419 $ 414 $ 425 $ 1,419 $ 1,191
Headcount 16,498 16,719 11,609 16,498 11,609
--------------------------------------------------- ------------------
Adjusted EBITDA (6) $ 60 $ (143) $ 333 $ (279) $ 1,068
-----------------------
--------------------------------------------------- ------------------
(1) Starting in Q406, the Company no longer allocates employee stock-
based compensation and profit sharing expenses to its segments.
These expenses are recorded in the All Other category. Prior
period information has been restated to conform to current period
presentation.
(2) Computing Solutions segment includes what was formerly the
Computation Products segment and the Embedded Products segment as
well as revenue from sales of chipsets sold by ATI prior to AMD's
acquisition of ATI.
(3) Graphics segment includes graphics, video and multimedia products
developed for use in desktop and notebook computers, including
home media PCs, professional workstations and servers.
(4) Consumer Electronics segment includes products and revenue related
to mobile phones and PDAs, digital televisions and other consumer
electronics and revenue for royalties received in connection with
sales of game console systems that incorporate the Company's
products.
(5) All Other category includes employee stock-based compensation
expense, profit sharing expense, certain operating expenses and
credits that are not allocated to the operating segments, and
Personal Internet Communicator (PIC) related activities in Q306
and for nine months ended Q306. Also included in this category
are the ATI acquisition-related, integration, and severance
charges. Details of the ATI acquisition-related, integration and
severance charges and employee stock-based compensation expense
are shown below.
ATI acquisition-related, integration and severance charges:
Quarter Ended Nine Months
Ended
Q307 Q207 Q306 Q307 Q306
------ ------ ------ ------ ------
Amortization of acquired
intangible assets $ 71 $ 71 $ - $ 213 $ -
Integration charges 5 7 6 25 6
------ ------ ------ ------ ------
ATI acquisition-related and
integration charges $ 76 $ 78 $ 6 $ 238 $ 6
Severance 2 16 - 18 -
------ ------ ------ ------ ------
Total $ 78 $ 94 $ 6 $ 256 $ 6
====== ====== ====== ====== ======
Employee stock-based compensation expense:
Quarter Ended Nine Months
Ended
Q307 Q207 Q306 Q307 Q306
------- ------- ------ ------ -----
Cost of sales $ 2 $ 2 $ 2 $ 6 $ 6
Research and development 14 14 6 42 17
Marketing, general and
administrative 11 15 9 38 27
------- ------- ------ ------ -----
$ 27 $ 31 $ 17 $ 86 $ 50
======= ======= ====== ====== =====
(6) Reconciliation of Net income (loss) to Adjusted EBITDA(b)
Quarter Ended Nine Months
Ended
Q307 Q207 Q306 Q307 Q306
------- ------- ------ -------- ------
Net income (loss) $ (396) $ (600) $ 136 $(1,607) $ 410
Depreciation and
amortization 263 255 200 761 567
Amortization of acquired
intangible assets 71 71 - 213 -
Interest expense 95 99 18 272 59
Provision (benefit) for
income taxes 27 32 (21) 82 32
-------------------------- ------- ------- ------ -------- ------
Adjusted EBITDA $ 60 $ (143) $ 333 $ (279) $1,068
======= ======= ====== ======== ======
(b) The Company defines Adjusted EBITDA as net income (loss) adjusted
for depreciation and amortization, amortization of acquired
intangible assets, interest expense and taxes. The Company
calculated and communicated Adjusted EBITDA because management
believes it is of interest to investors and lenders in relation
to its overall capital structure and its ability to borrow
additional funds. The Company's calculation of Adjusted EBITDA
may or may not be consistent with the calculation of this
measure by other companies in the same industry. Investors
should not view Adjusted EBITDA as an alternative to the U.S.
GAAP operating measure of net income or U.S. GAAP liquidity
measures of cash flows from operating, investing and financing
activities. In addition, Adjusted EBITDA does not take into
account changes in certain assets and liabilities as well as
interest and income taxes that can affect cash flows.
Source: Advanced Micro Devices
Released October 18, 2007