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 AMD Reports First Quarter Results

  • AMD revenue $1.61 billion, 2 percent sequential decrease and 2 percent increase year-over-year
  • Net income $510 million, earnings per share $0.68, operating income $54 million
  • Non-GAAP1,2 net income $56 million, earnings per share $0.08, operating income $92 million
  • Gross margin 43 percent, non-GAAP gross margin 45 percent
SUNNYVALE, Calif. 4/21/2011

AMD (NYSE:AMD) today announced revenue for the first quarter of 2011 of $1.61 billion, net income of $510 million, or $0.68 per share, and operating income of $54 million. The company reported non-GAAP net income of $56 million, or $0.08 per share, and non-GAAP operating income of $92 million.

“First quarter operating results were highlighted by strong demand for our first generation of AMD Fusion Accelerated Processing Units (APUs),” said Thomas Seifert, CFO and interim CEO. “APU unit shipments greatly exceeded our expectations, and we are excited to build on that momentum now that we are shipping our ‘Llano’ APU.”

GAAP Financial Results

  Q1-11 Q4-10 Q1-10
Revenue $1.61B $1.65B $1.57B
Operating income $54M $413M $182M
Net income / Earnings per share $510M/$0.68 $375M/$0.50 $257M/$0.35


Non-GAAP Financial Results1

 

Q1-11 

Q4-10

Q1-10

Revenue

$1.61B

$1.65B

$1.57B

Operating income

$92M

$141M

$130M

Net income / Earnings per share

$56M/$0.08

$106M/$0.14

$63M/$0.09



Quarterly Summary

  • Gross margin was 43 percent.
    • Non-GAAP gross margin was 45 percent, flat sequentially.
  • Cash, cash equivalents and marketable securities balance at the end of the quarter was $1.75 billion.
  • Computing Solutions segment revenue decreased 2 percent sequentially and increased 3 percent year-over-year. The sequential decrease was driven primarily by lower average selling price (ASP) partially offset by higher desktop microprocessor sales. The year-over-year increase was primarily driven by strong microprocessor unit sales in the channel.
    • Operating income was $100 million, compared with $91 million in Q410 and $146 million in Q110.
    • Microprocessor ASP decreased sequentially and year-over-year.
    •  AMD commenced revenue shipments of AMD’s first Fusion APU for mainstream notebooks (codenamed “Llano”) that combines discrete-class graphics capabilities, personal supercomputing performance and AMD AllDay™ power.
    • Acer, Asus, Dell, Fujitsu, HP, Lenovo, MSI, Sony and Toshiba shipped sleek new thin-and-light notebooks based on AMD’s low-power APUs capable of delivering high definition visual experiences and extended battery life.
    • More than 50 applications from software companies including Adobe, ArcSoft, Corel, CyberLink and Microsoft take advantage of the incredible compute power found in AMD’s APUs and GPUs to dramatically improve application performance and power efficiency.
    • AMD launched the world’s first APU specifically designed for embedded systems with a record number of embedded partners for the company. Fujitsu, Kontron, Quixant and Congatec announced APU-based solutions for graphics-intensive markets like digital signage, Internet-ready set top boxes, casino gaming machines and point-of-sale kiosks. Acer, Cray, Dell, HP, SGI and other server manufacturers launched new or updated systems based on five newly introduced AMD Opteron™ 6100 series processors.
    • In the high performance computing market (HPC), AMD Opteron-based solutions continue to gain traction based on their greater scalability. New customer wins include Lockheed Martin’s cluster for the US Department of Defense and the University of Sao Paulo’s cluster to enable advanced scientific astronomical research.
    • AMD expanded its enthusiast desktop offerings with the introduction of its fastest four-core processor, the AMD Phenom™ II X4 975 Black Edition.
  • Graphics segment revenue decreased 3 percent sequentially and was flat year-over-year. The sequential decrease was driven primarily by a seasonal decline in royalties received in connection with the sale of game console systems.
    • Operating income was $19 million, compared with $68 million in Q410 and $47 million in Q110.
    • GPU ASP decreased sequentially and year-over-year.
    • AMD maintained its graphics performance leadership position with the launch of the world’s fastest graphics card, the AMD Radeon™ HD 6990.
    • Apple refreshed its Macbook Pro line-up with the new AMD Radeon HD 6490M and HD 6750M graphics chips. AMD now provides discrete graphics solutions across Apple’s iMac and Macbook Pro product lines.
    • Strong industry adoption of AMD’s mobile graphics continued, as HP and Dell launched new designs powered by the new AMD Radeon™ HD 6000M family of graphics processors.

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.

AMD expects revenue to be flat to slightly down sequentially for the second quarter of 2011.

For additional detail regarding AMD’s results and outlook please see the CFO commentary posted at quarterlyearnings.amd.com.

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 its first quarter financial results. AMD will provide a real-time audio broadcast of the teleconference on the Investor Relations page of its Web site at AMD. The webcast will be available for 10 days after the conference call.

Reconciliation of GAAP to Non-GAAP Net Income 1,3

(Millions except per share amounts)
Q1-11  Q4-10 Q1-10
GAAP net income / Earnings per share $ 510 $ 0.68 $ 375 $ 0.50 $ 257 $ 0.35
Gross margin benefit due to deconsolidation of GLOBALFOUNDRIES - - - - 69 0.09
Gain on the fair value assessment of investment in GLOBALFOUNDRIES - - - - 325 0.45
Equity income (loss) and dilution gain in investee, net 492 0.66 27 0.05 (183) (0.25)
Payment to GLOBALFOUNDRIES (24) (0.03) - - - -
Non-GAAP net income excluding GLOBALFOUNDRIES related items 42 0.06 348 0.47 46 0.06
Amortization of acquired intangible assets (9) (0.01) (11) (0.01) (17) (0.02)
Legal settlements (5) (0.01) 283 0.39 - -
Income tax related to legal settlements - - (47) (0.06) - -
Gain on investment sale - - 17 0.02 - -
Non-GAAP net income / Earnings per share $ 56 $ 0.08 $ 106 $ 0.14 $ 63 $ 0.09


Reconciliation of GAAP to Non-GAAP Operating Income 1,3

(Millions)
Q1-11  Q4-10 Q1-10
GAAP operating income $  54 $  413 $  182
Payment to GLOBALFOUNDRIES (24) - -
Gross margin benefit due to deconsolidation of GLOBALFOUNDRIES - - 69
Amortization of acquired intangible assets (9) (11) (17)
Legal settlements (5) 283 -
Non-GAAP operating income $ 92 $ 141 $ 130


Reconciliation of GAAP to Non-GAAP Gross Margin 1,3

(Millions except percentages)
Q1-11  Q4-10 Q1-10
GAAP Gross Margin $ 691 $ 743 $ 741
GAAP Gross Margin % 43% 45% 47%
Gross margin benefit due to deconsolidation of GLOBALFOUNDRIES - - 69
Legal settlements (5) - -
Payment to GLOBALFOUNDRIES (24) - -
Non-GAAP Gross Margin $ 720 $ 743 $ 672
Non-GAAP Gross Margin % 45% 45% 43%


About AMD

AMD (NYSE: AMD) is a semiconductor design innovator leading the next era of vivid digital experiences with its groundbreaking AMD Fusion Accelerated Processing Units (APUs) that power a wide range of computing devices. AMD’s server computing products are focused on driving industry-leading cloud computing and virtualization environments. AMD’s superior graphics technologies are found in a variety of solutions ranging from game consoles, PCs to supercomputers. For more information, visit http://www.amd.com.

Cautionary Statement

This release contains forward-looking statements concerning AMD, its second quarter 2011 revenue and demand for the Company’s products, which are 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 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; GLOBALFOUNDRIES will be unable to manufacture the company’s products on a timely basis in sufficient quantities and using competitive technologies; the company will be unable to obtain sufficient manufacturing capacity or components to meet demand for its products or will under-utilize its commitment with respect to GLOBALFOUNDRIES' microprocessor manufacturing facilities; the recent earthquake and tsunami in Japan may have significant impacts on the company’s supply chain or its customers; the company will be unable to transition its products to advanced manufacturing process technologies in a timely and effective way; global business and economic conditions will not continue to improve or will worsen resulting in lower than currently expected demand; demand for computers and consumer electronics products and, in turn, demand for the company's products will be lower than currently expected; customers stop buying the company's products or materially reduce their demand for its products; the company will require additional funding and may not be able to raise funds on favorable terms or at all; 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; and the company will be unable to maintain the level of investment in research and development that is required to remain competitive. 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 Annual Report on Form 10-K for the year ended December 25, 2010.

ADVANCED MICRO DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

Quarter Ended
(Millions except per share amounts and percentages) Apr. 2, 2011 Dec. 25, 2010 Mar. 27, 2010
Net revenue $ 1,613 $ 1,649 $ 1,574
Cost of sales 922 906 833
Gross margin 691 743 741
Gross margin % 43% 45% 47%
Research and development 367 352 323
Marketing, general and administrative 261 250 219
Legal settlement - (283) -
Amortization of acquired intangible assets 9 11 17
Operating income 54 413 182
Interest income 3 2 3
Interest expense (48) (39) (49)
Other income (expense), net 11 14 304
Income before equity income (loss) and dilution gain in investee and income taxes 20 390 440
Provision for income taxes 2 42 -
Equity income (loss) and dilution gain in investee, net 492 27 (183)
Net income $ 510 $ 375 $ 257
Net income per common share

Basic

$ 0.71 $ 0.52 $ 0.36

Diluted

$ 0.68 $ 0.50 $ 0.35
Shares used in per share calculation

Basic

720 717 707

Diluted

764 758 754


ADVANCED MICRO DEVICES, INC.
CONSOLIDATED BALANCE SHEETS 
 
(Millions) Apr. 2, 2011 Dec. 25, 2010
Assets
Current assets:

Cash, cash equivalents and marketable securities

$ 1,745 $ 1,789

Accounts receivable, net

797 968

Inventories, net

648 632

Prepaid expenses and other current assets

221 205
Total current assets 3,411 3,594
Property, plant and equipment, net 676 700
Investment in GLOBALFOUNDRIES 486 -
Acquisition related intangible assets, net 28 37
Goodwill 323 323
Other assets 285 310
Total Assets $ 5,209 $ 4,964
Liabilities and Stockholders' Equity
Current liabilities:

Accounts payable

$ 411 $ 376

Accounts payable to GLOBALFOUNDRIES

127 205

Accrued liabilities

605 698

Deferred income on shipments to distributors

165 143

Other short-term obligations

34 229

Current portion of long-term debt and capital lease obligations

4 4

Other current liabilities

29 19
Total current liabilities 1,375 1,674
Long-term debt and capital lease obligations, less current portion 2,192 2,188
Other long-term liabilities 84 82
Accumulated loss in excess of investment in GLOBALFOUNDRIES - 7
Stockholders' equity:

Capital stock:

Common stock, par value

7 7

Additional paid-in capital

6,611 6,575

Treasury stock, at cost

(104) (102)

Accumulated deficit

(4,958) (5,468)

Accumulated other comprehensive income

2 1
Total stockholders' equity 1,558 1,013
Total Liabilities and Stockholders' Equity $ 5,209 $ 4,964


ADVANCED MICRO DEVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
 

Quarter Ended
(Millions) Apr. 2, 2011
Cash flows from operating activities:

Net income

$ 510

Adjustments to reconcile net income to net cash used in operating activities:

Equity income (loss) and dilution gain in investee

(492)

Depreciation and amortization

88

Compensation recognized under employee stock plans

27

Non-cash interest expense

5

Provision (benefit) for deferred income taxes

9

Other

11

Changes in operating assets and liabilities:

Accounts receivable

(195)

Inventories

(16)

Prepaid expenses and other current assets

(11)

Other assets

10

Accounts payable to GLOBALFOUNDRIES

(78)

Accounts payable, accrued liabilities and other

(36)
Net cash used in operating activities (168)
Cash flows from investing activities:
Purchases of property, plant and equipment (38)
Purchases of available-for-sale securities (393)
Proceeds from sale and maturity of available-for-sale securities 434
Other (17)
Net cash used in investing activities (14)
Cash flows from financing activities:
Proceeds from borrowings, net of issuance cost 165
Net proceeds from foreign grants 7
Proceeds from issuance of common stock 9
Repayments of debt and capital lease obligations (1)
Other (2)
Net cash provided by financing activities 178
Net decrease in cash and cash equivalents (4)
Cash and cash equivalents at beginning of period 606
Cash and cash equivalents at end of period $ 602

ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
 

Quarter Ended
(Millions except headcount) Apr. 2, 2011 Dec. 25, 2010 Mar. 27, 2010
Segment and Category Information
Computing Solutions (1)

Net revenue

$ 1,200 $ 1,219 $ 1,160

Operating income

$ 100 $ 91 $ 146
Graphics (2)

Net revenue

413 424 409

Operating income

19 68 47
All Other (3)

Net revenue

- 6 5

Operating income (loss)

(65) 254 (11)
Total

Net revenue

$ 1,613 $ 1,649 $ 1,574

Operating income

$ 54 $ 413 $ 182
Other Data
Depreciation and amortization

(excluding amortization of acquired intangible assets)

$ 79 $ 78 $ 83
Capital additions $ 38 $ 38 $ 48
Adjusted EBITDA (4) $ 198 $ 241 $ 302
Cash, cash equivalents and marketable securities $ 1,745 $ 1,789 $ 1,932
Adjusted free cash flow (5) $ 154 $ 11 $ 177
Total assets $ 5,209 $ 4,964 $ 5,232
Long-term debt and capital lease obligations, including the current portion $ 2,196 $ 2,192 $ 2,604
Headcount 11,256 11,068 10,365

(1) Computing Solutions segment includes microprocessors, chipsets and embedded processors.

(2) Graphics segment includes graphics, video and multimedia products developed for use in desktop and notebook computers, including home media PCs, professional workstations, servers and also includes royalties received in connection with the sale of game console systems that incorporate the Company’s graphics technology.

(3) All Other category includes certain operating expenses and credits that are not allocated to the operating segments. Also included in this category are amortization of acquired intangible assets and restructuring charges. It also includes the results of the Handheld business unit because the operating results of this business unit were not material.

(4) AMD reconciliation of GAAP operating income to Adjusted EBITDA*

Quarter Ended
  Apr. 2,
2011
Dec. 25,
2010
Mar. 27,
2010
GAAP operating income $54 $413 $182

Payment to GLOBALFOUNDRIES

24 - -

Legal settlement

5 (283)  -

Depreciation and amortization

79 78 83

Employee stock-based compensation expense

27 22 20

Amortization of acquired intangible assets

9 11 17
Adjusted EBITDA $198 $241 $302

 (5) Non-GAAP adjusted free cash flow reconciliation**

Quarter Ended
  Apr. 2,
2011
Dec. 25,
2010
Mar. 27,
2010
GAAP net cash provided by (used in) operating activities $(168) $(213) $23
Non-GAAP adjustment
360 262 202

Non-GAAP net cash provided by operating activities

192 49 225
Purchases of property, plant and equipment
(38) (38) (48)
Non-GAAP adjusted free Cash Flow $154 $11 $177

*Starting with the quarter ended December 26, 2009, the Company presented “Adjusted EBITDA” as a supplemental measure of its performance. Adjusted EBITDA for the Company was determined by adjusting operating income (loss) for depreciation and amortization, employee stock-based compensation expense and amortization of acquired intangible assets. In addition, for the first quarter of 2011, the Company included an adjustment related to a payment to GLOBALFOUNDRIES and a legal settlement with a third party; and for the fourth quarter of 2010, the Company included an adjustment related to its legal settlement with a third party. The Company calculates and communicates Adjusted EBITDA in the financial schedules because the Company’s management believes it is of importance to investors and lenders in relation to its overall capital structure and its ability to borrow additional funds. In addition, the Company presents Adjusted EBITDA because it believes this measure assists investors in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. 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 GAAP operating measure of operating income (loss) or 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.

** Starting in the first quarter of 2010, the Company presents non-GAAP adjusted free cash flow as a supplemental measure of its performance. In 2008 and 2009 the Company and certain of its subsidiaries (collectively, the “AMD Parties”) entered into supplier agreements with IBM Credit LLC and certain of its subsidiaries, (collectively, the “IBM Parties”). Pursuant to these supplier agreements, the AMD Parties sold to the IBM Parties invoices of selected distributor customers. Because the Company does not recognize revenue until its distributors sell its products to their customers, under U.S. GAAP, the Company classifies funds received from the IBM Parties as debt on the balance sheet. Moreover, for cash flow purposes, these funds are classified as cash flows from financing activities. When a distributor pays the applicable IBM Party, the Company reduces the distributor’s accounts receivable and the corresponding debt resulting in a non-cash accounting entry. Because the Company does not receive the cash from the distributor to reduce the accounts receivable, the distributor’s payment is never reflected in the Company’s cash flows from operating activities. Non-GAAP adjusted free cash flow for the Company was determined by adjusting GAAP net cash provided by (used in) operating activities by adding the distributors’ payments to the IBM Parties to GAAP net cash provided by (used in) operating activities. This amount is then further adjusted by subtracting capital expenditures. Generally, under U.S. GAAP, the reduction in accounts receivable is assumed to be a source of operating cash flows. Therefore, the Company believes that treating the payments from its distributor customers to the IBM Parties as if the Company actually received the cash from the distributor and then used that cash to pay down the debt is more reflective of the economic substance of the transaction. On February 11, 2011, the Company terminated its supplier agreements with the IBM Parties. The Company calculates and communicates non-GAAP adjusted free cash flow in the financial schedules because the Company’s management believes it is of importance to investors to understand the nature of these cash flows. The Company’s calculation of non-GAAP Adjusted free cash flow may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view non-GAAP Adjusted Free Cash Flow as an alternative to GAAP liquidity measures of cash flows from operating or financing activities.

Contact Information
Drew Prairie
Media Contact
512-602-4425
drew.prairie@amd.com

Contact Information
Ruth Cotter
Investor Contact
408-749-3887
ruth.cotter@amd.com

Footnotes