10-QPeriod: Q3 FY2010

ADVANCED MICRO DEVICES INC Quarterly Report for Q3 Ended Sep 25, 2010

Filed November 3, 2010For Securities:AMD

Summary

Advanced Micro Devices, Inc. (AMD) reported its financial results for the quarter and nine months ended September 25, 2010. The company experienced revenue growth, with net revenue increasing by 16% year-over-year for the quarter to $1.618 billion, driven by improvements in both its Computing Solutions and Graphics segments. This growth, however, was tempered by weaker than expected consumer notebook demand. Operationally, AMD shifted from reporting a loss in the prior year to an operating income of $128 million for the quarter and $435 million for the nine-month period, a significant turnaround. This improvement was largely attributed to the deconsolidation of GLOBALFOUNDRIES (GF) and a more favorable product mix. The company also focused on improving its balance sheet, repurchasing a substantial amount of its convertible senior notes. Despite the positive operational trends, the company's net income attributable to common stockholders remained a loss of $118 million for the quarter, but showed a profit of $96 million for the nine-month period, highlighting the impact of non-recurring items and the ongoing challenges in certain aspects of its business.

Financial Highlights

52 data points
Beta

Revenue

$1.62B

45.7% Gross Margin

Net Income

-$118.00M

-7.3% Net Margin

EPS (Diluted)

$0.17

Total Assets

$4.59B

Cash & Equivalents

$620.00M

Free Cash Flow

-$155.00M

Financial Statements
Beta
Revenue$1.62B
Cost of Revenue$879.00M
Gross Profit$739.00M
R&D Expenses$359.00M
SG&A Expenses$236.00M
Operating Income$128.00M
Interest Expense$56.00M
Net Income-$118.00M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)713.00M
Shares Outstanding (Diluted)713.00M

Key Highlights

  • 1Net revenue for the quarter increased 16% year-over-year to $1.618 billion, driven by strong performance in both Computing Solutions and Graphics segments.
  • 2The company reported an operating income of $128 million for the quarter, a significant improvement from the $77 million operating loss in the same period last year.
  • 3For the nine months ended September 25, 2010, AMD generated a net income of $96 million, compared to a net loss of $884 million in the prior year period.
  • 4The deconsolidation of GLOBALFOUNDRIES (GF) significantly impacted the financial statements, resulting in a $325 million non-cash gain in "Other income (expense), net" for the nine-month period.
  • 5Cash and cash equivalents, along with marketable securities, decreased to $1.726 billion from $2.676 billion at the end of the previous fiscal year.
  • 6Long-term debt decreased to $2.185 billion from $4.252 billion as of December 26, 2009, partly due to the repurchase of $800 million in 6.00% Convertible Senior Notes.
  • 7Equity in net loss of investee was $186 million for the quarter, primarily related to AMD's share of GF's losses.
  • 8The company's gross margin percentage improved to 46% from 42% in the prior year quarter.

Frequently Asked Questions

The primary driver for the significant year-over-year improvement in operating income was the deconsolidation of GLOBALFOUNDRIES (GF). This change in accounting treatment, moving from consolidation to the equity method, removed GF's operating losses from AMD's consolidated statements and also resulted in a significant non-cash gain recognized in 'Other income (expense), net'.

AMD has significantly reduced its long-term debt. Long-term debt decreased to $2.185 billion from $4.252 billion at the end of the previous fiscal year. This reduction was partly due to the repurchase of $800 million of its 6.00% Convertible Senior Notes, funded by proceeds from issuing new 7.75% Senior Notes and existing cash.

Following the deconsolidation of GF, AMD accounts for its investment using the equity method. This resulted in a significant non-cash gain of $325 million recognized in the nine months ended September 25, 2010, related to the deconsolidation itself. However, AMD also recognized an 'Equity in net loss of investee' of $186 million for the quarter, reflecting its share of GF's losses. As of September 25, 2010, AMD's investment in GF was reflected as a liability of $29 million on the balance sheet, indicating accumulated losses recognized in excess of the investment's carrying amount.

No, the company used $199 million in net cash from operating activities during the nine months ended September 25, 2010. This was despite a net income of $96 million for the same period, largely due to adjustments for non-cash items and significant changes in operating assets and liabilities, including an increase in accounts receivable. The company did report positive 'non-GAAP adjusted free cash flow' of $344 million for this period, which adjusts for certain financing arrangements related to accounts receivable.