10-QPeriod: Q2 FY2001

ADVANCED MICRO DEVICES INC Quarterly Report for Q2 Ended Apr 1, 2001

Filed May 15, 2001For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported its first quarter 2001 results, showing a year-over-year increase in net sales driven by its Core Products segment, particularly PC processors. However, net income saw a significant decrease compared to the prior year, primarily due to a substantial income tax provision recorded in the current quarter and a decline in gross margin percentage. The company continues to make significant investments in its manufacturing capabilities, notably the Dresden Fab 30 facility, and is managing substantial debt related to these expansions. Cash flow from operations remains positive, but investing activities show significant outflows for property, plant, and equipment. Investors should monitor the impact of competition, particularly from Intel, and the ongoing recovery of the communications sector on the Flash memory business.

Key Highlights

  • 1Net sales increased 9% year-over-year to $1.189 billion, primarily driven by a 17% increase in PC Processor sales.
  • 2Net income decreased significantly to $124.8 million in Q1 2001 from $189.3 million in Q1 2000, impacted by a $52.5 million income tax provision.
  • 3Gross margin percentage declined to 40% from 45% year-over-year, attributed to increased memory product inventories and higher fixed manufacturing costs.
  • 4Research and development expenses decreased slightly year-over-year, while marketing, general, and administrative expenses increased.
  • 5The company generated $146.8 million in cash from operating activities, though this was lower than the $386.8 million generated in the prior year.
  • 6Significant capital expenditures of $163 million were made in Q1 2001, primarily for Dresden Fab 30 and Asia manufacturing facilities, with plans for approximately $1 billion in capital investments for the full year 2001.
  • 7AMD announced a share repurchase program of up to $300 million, though no shares had been repurchased as of April 1, 2001.

Frequently Asked Questions

The primary driver for the 9% year-over-year increase in net sales was the strong performance in the PC Processors segment, which saw a 17% rise, largely due to higher unit and dollar sales of the company's seventh-generation microprocessors (AMD Athlon and AMD Duron).

The significant decrease in net income from $189.3 million in Q1 2000 to $124.8 million in Q1 2001 was primarily due to the recording of a $52.5 million income tax provision in the current quarter, which was absent in the prior year due to the utilization of net operating loss carryforwards. Additionally, a decline in the gross margin percentage also impacted profitability.

The company is experiencing a significant decline in Flash memory device sales due to the downturn in the communications and networking equipment industry. AMD anticipates another significant sales decline in this segment in the second quarter of 2001 and faces increased competition.

AMD plans approximately $1 billion in capital investments for 2001. These investments, including those for Dresden Fab 30, are being funded through a combination of cash flows from operations, existing cash balances, borrowings under loan agreements (including significant debt related to Dresden), and potential future external financing. The company also benefits from grants and subsidies related to the Dresden facility.