AMD Reports Fourth Quarter and Annual Results

About AMD

Advanced Micro Devices (NYSE: AMD) is an innovative technology company dedicated to collaborating with customers and technology partners to ignite the next generation of computing and graphics solutions at work, home and play. For more information, visit http://www.amd.com

Cautionary Statement

This release contains forward-looking statements concerning AMD, including its first quarter 2010 revenue and anticipated future demand for its 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; global business and economic conditions will worsen resulting in lower than currently expected revenue in the first quarter of 2010 and beyond; 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; 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; 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 its products to advanced manufacturing process technologies in a timely and effective way; 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 commitment with respect to GLOBALFOUNDRIES’ 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 September 26, 2009.

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 owner.

1 For financial reporting purposes, AMD consolidated the operating results of GLOBALFOUNDRIES Inc. in its results from March 2, 2009 through December 26, 2009 and created the Foundry segment as of the start of fiscal 2009. References to “AMD” in this announcement include these consolidated operating results which are reported for GAAP purposes. “AMD Product Company” refers to AMD, excluding the operating results of the Foundry segment and Intersegment eliminations. Foundry segment includes the operating results attributable to the front end wafer manufacturing operations and related activities as of the beginning of the first quarter of 2009, which includes the operating results of GLOBALFOUNDRIES from March 2, 2009 through December 26, 2009. Intersegment eliminations consist of revenues, cost of sales and profits on inventory between AMD Product Company and the Foundry segment.

2 In this press release, in addition to GAAP financial results, the Company has provided non-GAAP financial measures for AMD net income (loss) attributable to AMD common stockholders and operating income (loss). These non-GAAP financial measures reflect certain adjustments as presented in the tables in this press release. Management believes this non-GAAP presentation makes it easier for investors to compare current and historical period operating results by, among other things, excluding items that are not indicative of ongoing operating performance.

3 The Company is providing non-GAAP financial measures for AMD Product Company such as a statement of operations and selected balance sheet items as reflected in this press release. In addition, for AMD Product Company, the Company is providing non-GAAP financial measures such as net income (loss), operating income (loss) and gross margin which exclude certain adjustments as reflected in the tables above. Adjusted EBITIDA is also provided as a non-GAAP financial measure and is defined in the selected corporate data tables. AMD is providing these financial measures because it believes it is important for investors to have visibility into AMD’s financial results excluding the Foundry segment, intersegment eliminations and certain adjustments as reflected in the tables in this press release and to better understand the Company’s financial results absent the requirement to consolidate the financial results of GLOBALFOUNDRIES.

4 Refer to corresponding tables at the end of this press release for additional AMD and AMD Product Company data.

ADVANCED MICRO DEVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Millions except per share amounts and percentages)
               
      Quarter Ended Year Ended
Dec. 26, Sept. 26, Dec. 27, Dec. 26, Dec. 27,
2009 2009

2008 (1)

2009

2008 (1)

      (Unaudited)   (Unaudited)   (Unaudited) (Unaudited)    
 
Net revenue $ 1,646 $ 1,396 $ 1,162 $ 5,403 $ 5,808
 
Cost of sales 911 811 890 3,131 3,488
                     
 
Gross margin 735 585 272 2,272 2,320
 
Gross margin % 45 % 42 % 23 % 42 % 40 %
 
Research and development 432 420 465 1,721 1,848
 
Marketing, general and administrative 239 221 317 994 1,304
 
Legal settlement (1,242 ) - - (1,242 ) -
 
Amortization of acquired intangible assets 18 17 30 70 137
 
Impairment of goodwill and acquired intangible assets - - 684 - 1,089
 
Restructuring charges - 4 50 65 90
 
Gain on sale of 200 millimeter equipment - - - - (193 )
                     
 
Operating income (loss) 1,288 (77 ) (1,274 ) 664 (1,955 )
 
Interest income 3 4 7 16 39
Interest expense (119 ) (114 ) (95 ) (438 ) (391 )
Other income (expense), net 19 47 11 166 (37 )
                     
 
Income (loss) before income taxes 1,191 (140 ) (1,351 ) 408 (2,344 )
 
Provision (benefit) for income taxes 11 (5 ) 69 112 68
                     
 
Income (loss) from continuing operations 1,180 (135 ) (1,420 ) 296 (2,412 )
 
Income (loss) from discontinued operations, net of tax (3 ) - (10 ) (3 ) (684 )
                     
 
Net income (loss) $ 1,177 $ (135 ) $ (1,430 ) $ 293 $ (3,096 )
 
Net (income) loss attributable to noncontrolling interest 23 29 (6 ) 83 (33 )
 
Class B preferred accretion (22 ) (22 ) - (72 ) -
                     
 
Net Income (loss) attributable to AMD common stockholders $ 1,178 $ (128 ) $ (1,436 ) $ 304 $ (3,129 )
                     
 
Net income (loss) attributable to AMD common stockholders per common share
 
Basic
Continuing operations $ 1.68 $ (0.18 ) $ (2.34 ) $ 0.46 $ (4.03 )
  Discontinued operations     -       -       (0.02 )   -       (1.12 )
Basic net income (loss) attributable to AMD common stockholders per common share $ 1.68 $ (0.18 ) $ (2.36 ) $ 0.46 $ (5.15 )
                     
 
Diluted
Continuing operations $ 1.52 $ (0.18 ) $ (2.34 ) $ 0.45 $ (4.03 )
  Discontinued operations     -       -       (0.02 )   -     $ (1.12 )
Diluted net income (loss) attributable to AMD common stockholders per common share $ 1.52 $ (0.18 ) $ (2.36 ) $ 0.45 $ (5.15 )
                     
 
Shares used in per share calculation
 
Basic 705 694 609 673 607
 
Diluted 791 694 609 678 607
 
(1) Includes retrospective adoption of FASB Staff Position Accounting Principles Board No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) codified principally in Accounting Standards Codification (ASC) Topic 470, Debt (ASC 470) and FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51 (SFAS 160) now codified in ASC Topic 810, Consolidation (ASC 810) in the first quarter of 2009.
 
ADVANCED MICRO DEVICES, INC.
AMD NON-GAAP AND RECONCILIATIONS TO CONSOLIDATED STATEMENTS OF OPERATIONS (2)
(Millions except per share amounts and percentages)
                 
 
Quarter Ended Year Ended
      Dec. 26, 2009 Sept. 26, 2009 Dec. 26, 2009
      AMD Product Company (3)   Foundry segment and Intersegment Eliminations (4)   AMD AMD Product Company (3)   Foundry segment and Intersegment Eliminations (4)   AMD AMD Product Company (3)   Foundry segment and Intersegment Eliminations (4)   AMD
 
Net revenue $ 1,646 $ - $ 1,646 $ 1,396 $ - $ 1,396 $ 5,403 $ - $ 5,403
 
Cost of sales 967 (56 ) 911 860 (49 ) 811 3,290 (159 ) 3,131
                                   
 
Gross margin 679 56 735 536 49 585 2,113 159 2,272
 
Gross margin % 41 % 45 % 38 % 42 % 39 % 42 %
 
Research and development 301 131 432 285 135 420 1,197 524 1,721
 
Marketing, general and administrative 209 30 239 195 26 221 878 116 994
 
Legal settlement (1,242 ) - (1,242 ) - - - (1,242 ) - (1,242 )
 
Amortization of acquired intangible assets 18 - 18 17 - 17 70 - 70
 
Restructuring charges - - - 4 - 4 65 - 65
                                   
 
Operating income (loss) 1,393 (105 ) 1,288 35 (112 ) (77 ) 1,145 (481 ) 664
 
Interest income 3 - 3 3 1 4 15 1 16
Interest expense (71 ) (48 ) (119 ) (70 ) (44 ) (114 ) (286 ) (152 ) (438 )
Other income (expense), net 13 6 19 64 (17 ) 47 221 (55 ) 166
                                   
 
Income (loss) before income taxes 1,338 (147 ) 1,191 32 (172 ) (140 ) 1,095 (687 ) 408
 
Provision (benefit) for income taxes 20 (9 ) 11 (24 ) 19 (5 ) (24 ) 136 112
                                   
 
Income (loss) from continuing operations 1,318 (138 ) 1,180 56 (191 ) (135 ) 1,119 (823 ) 296
 
Income (loss) from discontinued operations, net of tax (3 ) - (3 ) - - - (3 ) - (3 )
                                   
 
Net income (loss) $ 1,315 $ (138 ) $ 1,177 $ 56 $ (191 ) $ (135 ) $ 1,116 $ (823 ) $ 293
 
Net (income) loss attributable to noncontrolling interest 23 29 83
 
Class B preferred accretion (22 ) (22 ) (72 )
                                   
 
Net income (loss) attributable to AMD common stockholders $ 1,178 $ (128 ) $ 304
                                   
 
(2) The Company believes this non-GAAP presentation makes it easier for investors to understand what AMD financial results would be if it were not required to consolidate the operations of GLOBALFOUNDRIES.
(3) Consists of the results of the Computing Solutions and Graphics segments and the All other category.
(4) See footnotes 3 and 5 in Selected Corporate Data
 
ADVANCED MICRO DEVICES, INC.
CONSOLIDATED BALANCE SHEETS
(Millions)
  Dec. 26,   Dec. 27,
2009

2008 (5)

        (Unaudited)    
 
Assets
 
Current assets:
Cash, cash equivalents and marketable securities $ 2,676 $ 1,096
Accounts receivable, net 745 320
Inventories 567 656
Deferred income taxes 9 28
Prepaid expenses and other current assets 278 279
             
 
Total current assets 4,275

 

2,379
 
Property, plant and equipment, net 3,809 4,296
Acquisition related intangible assets, net 98 168
Goodwill 323 323
Other assets 573 506
             
 
Total Assets $ 9,078  

 

$ 7,672  
 
Liabilities and Stockholders' Equity
 
Current liabilities:
Accounts payable $ 647 $ 631
Accrued compensation and benefits 179 162
Accrued liabilities 612 785
Deferred income on shipments to distributors 138 50
Other short-term obligations 171 86
Current portion of long-term debt and capital lease obligations 308 286
Other current liabilities 155 226
             
 
Total current liabilities 2,210

 

2,226
 
Deferred income taxes 197 91
Long-term debt and capital lease obligations, less current portion 4,252 4,490
Other long-term liabilities 695 569
Noncontrolling interest 1,076 169
 
Stockholders' equity:
Capital stock:
Common stock, par value 7 6
Capital in excess of par value 6,426 6,257
Retained earnings (deficit) (5,939 ) (6,244 )
  Accumulated other comprehensive income   154       108  
 
Total stockholders' equity 648

 

127
             
 
Total Liabilities and Stockholders' Equity $ 9,078  

 

$ 7,672  
 
(5) Amounts for the year ended December 27, 2008 were derived from the December 27, 2008 audited financial statements, including retrospective adoption of FSP APB 14-1 (now codified in ASC 470) and SFAS 160 (now codified in ASC 810) implemented in the first quarter of 2009.
 
ADVANCED MICRO DEVICES, INC.
SELECTED CORPORATE DATA
(Unaudited)
(Millions except headcount and percentages)
           
 
      Quarter Ended Year Ended
Dec. 26, Sept. 26, Dec. 27, Dec. 26, Dec. 27,

Segment and Category Information from Continuing Operations

2009 2009 2008 2009 2008
                     
 
Computing Solutions (1)
Net revenue $ 1,214 $ 1,069 $ 873 $ 4,131 $ 4,559
Operating income (loss) $ 158 $ 76 $ (431 ) $ 127 $ (461 )
 
Graphics (2)
Net revenue 427 306 270 1,206 1,165
Operating income (loss) 53 8 (10 ) 50 12
 
Foundry (3)
Net revenue 309 256 1,101
Operating income (loss) (99 ) (101 ) (433 )
 
All Other (4)
Net revenue 5 21 19 66 84
Operating income (loss) 1,182 (49 ) (833 ) 968 (1,506 )
 
Intersegment Eliminations (5)
Net revenue (309 ) (256 ) (1,101 )
Operating income (loss) (6 ) (11 ) (48 )
 
Total from Continuing Operations
Net revenue $ 1,646 $ 1,396 $ 1,162 $ 5,403 $ 5,808
Operating income (loss) $ 1,288 $ (77 ) $ (1,274 ) $ 664 $ (1,955 )
                     
 

Other Data

 
AMD Product Company (excludes Foundry segment and Intersegment Eliminations)
Depreciation and amortization
(excluding amortization of acquired intangible assets) $ 95 $ 96 $ 398
Capital additions $ 37 $ 19 $ 88
Adjusted EBITDA (6) $ 282 $ 169 $ 527
Cash, cash equivalents and marketable securities (7) $ 1,772 $ 1,536 $ 1,772
Total assets (7) $ 4,846 $ 4,376 $ 4,846
Long-term debt (7) $ 2,607 $ 3,541 $ 2,607
Headcount 10,352 10,412 10,352
 
AMD
Depreciation and amortization
(excluding amortization of acquired intangible assets) $ 266 $ 265 $ 271 $ 1,058 $ 1,068
Capital additions $ 173 $ 97 $ 112 $ 466 $ 621
Adjusted EBITDA (6) $ 348 $ 227 $ (219 ) $ 711 $ 531
Headcount 13,395 13,379 14,652 13,395 14,652
                     
(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) Foundry segment includes the operating results attributable to the front end wafer manufacturing operations and related activities as of the beginning of the first quarter of 2009, which includes the operating results of GLOBALFOUNDRIES from March 2, 2009 onward. Prior periods have not been recast.
(4)

All Other category includes non-Foundry segment employee stock-based compensation expense and certain operating expenses and credits that are not allocated to the operating segments. Also included in this category is a gain for a legal settlement, charges for the impairment of goodwill and acquired intangible assets, amortization of acquired intangible assets, restructuring and AMD Product Company formation costs associated with GLOBALFOUNDRIES. Details of these significant items are shown below. The All Other category also includes the results of our Handheld business unit.

                 
Legal settlement gain, employee stock-based compensation expense, ATI acquisition-related charges, restructuring charges and AMD Product Company formation costs associated with GLOBALFOUNDRIES:
 
Quarter Ended Year Ended
Q409   Q309   Q408 2009   2008
Legal settlement $ (1,242 ) $ - $ - $ (1,242 ) $ -
Employee stock-based compensation expense 18 17 20 70 79
Impairment of goodwill and acquired intangible assets - - 684 - 1,089
Amortization of acquired intangible assets 18 17 30 70 137
Restructuring charges - 4 50 65 90
AMD Product Company formation costs associated with GLOBALFOUNDRIES   -       -       23     21       23  
$ (1,206 )   $ 38     $ 807   $ (1,016 )   $ 1,418  
 
 
(5) Represents intersegment eliminations in revenue and in cost of sales and profits on inventory between AMD Product Company and the Foundry segment. For the quarters ended December 26, 2009 and September 26, 2009, and year ended December 26, 2009, intersegment eliminations of revenue was $309 million, $256 million and $1,101 million, respectively. For the quarters ended December 26, 2009 and September 26, 2009, and year ended December 26, 2009, intersegment eliminations of cost of sales and profits on inventory was $303 million, $245 million and $1,053 million, respectively.
 
(6) AMD reconciliation of operating income (loss) to AMD Product Company (excluding Foundry segment and Intersegment Eliminations) Adjusted EBITDA*
 
Quarter Ended Year Ended
Q409   Q309 2009
Operating income (loss) $ 1,288 $ (77 ) $ 664
Foundry segment and Intersegment Eliminations operating loss 105 112 481
AMD Product Company net income (loss) $ 1,393 $ 35 $ 1,145
Legal settlement (1,242 ) - (1,242 )
Depreciation and amortization 95 96 398
Employee stock-based compensation expense 18 17 70
Amortization of acquired intangible assets 18 17 70
Restructuring charges - 4 65
AMD Product Company formation costs associated with GLOBALFOUNDRIES   -       -     21  
Adjusted EBITDA $ 282     $ 169   $ 527  
 
AMD reconciliation of operating income (loss) to Adjusted EBITDA*
 
Quarter Ended Year Ended
Q409   Q309   Q408 2009   2008
Operating income (loss) $ 1,288 $ (77 ) $ (1,274 ) $ 664 $ (1,955 )
Legal settlement (1,242 ) - - (1,242 ) -
Impairment of goodwill and acquired intangible assets - - 684 - 1,089
Depreciation and amortization 266 265 271 1,058 1,068
Employee stock-based compensation expense 18 18 20 75 79
Amortization of acquired intangible assets 18 17 30 70 137
Restructuring charges - 4 50 65 90
AMD Product Company formation costs associated with GLOBALFOUNDRIES   -       -       -     21       23  
Adjusted EBITDA $ 348     $ 227     $ (219 ) $ 711     $ 531  
 
(7) Reconciliation of select balance sheet items
Q409 Q309
Cash, cash equivalents and marketable securities Total Assets Long-term debt** Cash, cash equivalents and marketable securities Total Assets Long-term debt**
AMD Product Company $ 1,772 $ 4,846 $ 2,607 $ 1,536 $ 4,376 $ 3,541
Foundry segment and intersegment eliminations   904     4,232       1,953   975     4,371     2,029
AMD $ 2,676   $ 9,078     $ 4,560 $ 2,511   $ 8,747   $ 5,570
 
 

* Starting with the quarter ended December 26, 2009, the Company defines Adjusted EBITDA as operating income (loss) adjusted for a legal settlement gain, impairment of goodwill and acquired intangible assets, depreciation & amortization, employee stock-based compensation expense, amortization of acquired intangible assets, restructuring charges, and AMD Product Company formation costs associated with GLOBALFOUDNRIES.  The Company calculates and communicates 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 operating 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.  

** Long-term debt also includes the current portion of long-term debt and capital lease obligations.

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