<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2000
-------------
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-7882
------
ADVANCED MICRO DEVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-1692300
- ----------------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One AMD Place
Sunnyvale, California 94086
- ----------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 732-2400
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No_______
-------
The number of shares of $0.01 par value common stock outstanding as of April 14,
2000: 153,192,460
<PAGE>
ADVANCED MICRO DEVICES, INC.
- ----------------------------
INDEX
- -----
<TABLE>
<CAPTION>
Part I. Financial Information
---------------------
Page No.
-------------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Quarters Ended April 2, 2000 and March 28, 1999.......................................... 3
Condensed Consolidated Balance Sheets -
April 2, 2000 and December 26, 1999.......................................................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended April 2, 2000 and March 28, 1999.......................................... 5
Notes to Condensed Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk................................... 33
Part II. Other Information
-----------------
Item 1. Legal Proceedings............................................................................ 33
Item 6. Exhibits and Report on Form 8-K.............................................................. 33
Signature............................................................................................. 34
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ADVANCED MICRO DEVICES, INC.
----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
(Thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------
<S> <C> <C>
April 2, March 28,
2000 1999
------------------------- ------------------------
Net sales...................................................... $1,092,029 $ 631,593
Expenses:
Cost of sales.............................................. 605,757 450,431
Research and development................................... 161,297 159,946
Marketing, general and administrative...................... 144,306 127,310
Restructuring and other special charges.................... - 15,016
------------------------- ------------------------
911,360 752,703
------------------------- ------------------------
Operating income (loss)........................................ 180,669 (121,110)
Interest income and other, net................................. 21,128 10,768
Interest expense............................................... (11,479) (20,763)
------------------------- ------------------------
Income (loss) before income taxes and equity in joint
venture....................................................... 190,318 (131,105)
Benefit for income taxes....................................... - (5,473)
------------------------- ------------------------
Income (loss) before equity in joint venture................... 190,318 (125,632)
Equity in net loss of joint venture............................ (969) (2,735)
------------------------- ------------------------
Net income (loss).............................................. $ 189,349 $(128,367)
========================= ========================
Net income (loss) per common share:
Basic...................................................... $1.25 $(0.88)
========================= ========================
Diluted.................................................... $1.15 $(0.88)
========================= ========================
Shares used in per share calculation:
Basic...................................................... 150,880 145,909
========================= ========================
Diluted.................................................... 171,942 145,909
========================= ========================
</TABLE>
See accompanying notes
- ----------------------
3
<PAGE>
ADVANCED MICRO DEVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS*
(Thousands)
<TABLE>
<CAPTION>
April 2, December 26,
2000 1999
----------- -----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents ........................................................... $ 380,154 $ 294,125
Short-term investments .............................................................. 539,029 302,386
----------- -----------
Total cash, cash equivalents and short-term investments ......................... 919,183 596,511
Accounts receivable, net ............................................................ 408,148 429,809
Inventories:
Raw materials ................................................................... 9,285 10,236
Work-in-process ................................................................. 102,866 97,143
Finished goods .................................................................. 92,814 90,834
----------- -----------
Total inventories ........................................................... 204,965 198,213
Deferred income taxes ............................................................... 55,956 55,956
Prepaid expenses and other current assets ........................................... 144,621 129,389
----------- -----------
Total current assets ............................................................ 1,732,873 1,409,878
Property, plant and equipment, at cost ................................................... 5,003,634 4,938,302
Accumulated depreciation and amortization ................................................ (2,527,745) (2,415,066)
----------- -----------
Property, plant and equipment, net .............................................. 2,475,889 2,523,236
Investment in joint venture .............................................................. 265,871 273,608
Other assets ............................................................................. 163,594 170,976
----------- -----------
$ 4,638,227 $ 4,377,698
=========== ===========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Notes payable to bank ............................................................... $ 3,769 $ --
Accounts payable .................................................................... 317,302 387,193
Accrued compensation and benefits ................................................... 131,414 91,900
Accrued liabilities ................................................................. 266,324 273,689
Income tax payable .................................................................. 14,396 17,327
Deferred income on shipments to distributors ........................................ 108,666 92,917
Current portion of long-term debt, capital lease obligations and other .............. 68,209 47,626
----------- -----------
Total current liabilities ....................................................... 910,080 910,652
Deferred income taxes .................................................................... 59,976 60,491
Long-term debt, capital lease obligations and other, less current portion ................ 1,469,799 1,427,282
Commitments and contingencies
Stockholders' equity:
Common stock, par value ............................................................. 1,543 1,496
Capital in excess of par value ...................................................... 1,174,518 1,121,956
Retained earnings ................................................................... 1,062,584 873,235
Accumulated other comprehensive loss ................................................ (40,273) (17,414)
----------- -----------
Total stockholders' equity ...................................................... 2,198,372 1,979,273
----------- -----------
$ 4,638,227 $ 4,377,698
=========== ===========
</TABLE>
* Amounts as of April 2, 2000 are unaudited. Amounts as of December 26,
1999 were derived from the December 26, 1999 audited financial
statements.
See accompanying notes
----------------------
4
<PAGE>
ADVANCED MICRO DEVICES, INC.
----------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------
<S> <C> <C>
April 2, March 28,
2000 1999
----------- ------------
Cash flows from operating activities:
Net income (loss)............................................................. $ 189,349 $(128,367)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization............................................. 127,892 127,487
Restructuring and other special charges................................... - 15,016
Deferred foreign grant and subsidy income................................. (11,711) (12,989)
Net increase in net deferred income tax assets............................ (515) (7,344)
Net gain realized on sale of available-for-sale securities................ - (4,250)
Net (gain) loss on disposal of property, plant and equipment.............. (3,035) 3,179
Undistributed loss of joint venture....................................... 969 2,735
Compensation recognized under employee stock plans........................ 1,053 (1,102)
Deferred gain on sale of building......................................... (420) (384)
Changes in operating assets and liabilities:
Net decrease in receivables, inventories,
prepaid expenses and other assets.................................. 9,803 24,008
Decrease in income tax payable......................................... (2,931) (416)
Customer deposit under long-term purchase agreement.................... 100,000 -
Net increase (decrease) in payables and accrued liabilities............ (23,691) 4,298
--------- ---------
Net cash provided by operating activities......................................... 386,763 21,871
--------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment..................................... (129,027) (199,793)
Proceeds from sale of property, plant and equipment........................... 9,049 2,786
Purchase of available-for-sale securities..................................... (729,799) (496,774)
Proceeds from sale of available-for-sale securities........................... 495,666 511,390
--------- ---------
Net cash used in investing activities............................................. (354,111) (182,391)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings...................................................... 3,598 5,835
Payments on debt and capital lease obligations................................ (4,246) (43,229)
Proceeds from issuance of stock............................................... 51,557 10,253
--------- ---------
Net cash (used in) provided by financing activities............................... 50,909 (27,141)
--------- ---------
Effect of exchange rate changes on cash and cash equivalents...................... 2,468 (10,672)
--------- ---------
Net increase (decrease) in cash and cash equivalents.............................. 86,029 (198,333)
Cash and cash equivalents at beginning of period.................................. 294,125 361,908
--------- ---------
Cash and cash equivalents at end of period........................................ $ 380,154 $ 163,575
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the first three months for:
Interest.................................................................... $ 25,507 $ 34,893
========= =========
Income Taxes................................................................ $ 3,215 $ 314
========= =========
</TABLE>
See accompanying notes
- ----------------------
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Advanced Micro Devices, Inc. (the Company or AMD) have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. The results of operations for the interim periods shown in
this report are not necessarily indicative of results to be expected for the
full fiscal year ending December 31, 2000. In the opinion of the Company's
management, the information contained herein reflects all adjustments
necessary to make the results of operations for the interim periods a fair
statement of such operations. All such adjustments are of a normal recurring
nature. The interim financial statements should be read in conjunction with
the financial statements in the Company's Annual Report on Form 10-K for the
year ended December 26, 1999.
The Company uses a 52- to 53-week fiscal year ending on the last Sunday in
December. The quarters ended April 2, 2000 and March 28, 1999 included 14 and
13 weeks, respectively.
2. Available-For-Sale Securities
The following is a summary of available-for-sale securities:
April 2,
2000
--------
(Thousands)
Cash equivalents:
Money market funds $ 91,983
Commercial paper 198,152
Federal agency note 9,861
--------
Total cash equivalents $299,996
========
Short-term investments:
Federal agency notes 37,976
Money market auction rate preferred stocks 158,798
Certificates of deposit 9,989
Corporate notes 56,956
Commercial paper 275,310
--------
Total short-term investments $539,029
========
Long-term investments:
Equity investments $ 23,401
Commercial paper 9,999
Treasury notes 1,907
--------
Total long-term investments (included in other assets) $ 35,307
========
6
<PAGE>
3. Net Income (Loss) per Common Share
Basic net income (loss) per common share is computed using the weighted-
average common shares outstanding. Diluted net income (loss) per common share
is computed using the weighted-average common shares outstanding plus any
potential dilutive securities. Dilutive securities include stock options,
restricted stock and convertible debt. The following table sets forth the
computation of basic and diluted net income (loss) per common share:
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------
(Thousands except per share data) April 2, 2000 March 28, 1999
----------------------- ------------------------
<S> <C> <C>
Numerator:
Numerator for basic net income (loss) per common share..................... $189,349 $(128,367)
Effect of adding back interest expense associated with
convertible debentures................................................... 7,763 -
----------------------- ------------------------
Numerator for diluted net income (loss) per common share................... $197,112 $(128,367)
Denominator:
Denominator for basic net income (loss)
per common share - weighted-average shares............................... 150,880 145,909
Effect of dilutive securities:
Employee stock options................................................... 7,079 -
Restricted stock......................................................... 1 -
Convertible debentures................................................... 13,982 -
----------------------- ------------------------
Dilutive potential common shares........................................... 21,062
----------------------- ------------------------
Denominator for diluted net income (loss) per
common share - adjusted weighted-average shares.......................... 171,942 145,909
======================= ========================
Basic net income (loss) per common share..................................... $ 1.25 $ (0.88)
======================= ========================
Diluted net income (loss) per common share................................... $ 1.15 $ (0.88)
======================= ========================
</TABLE>
4. Investment in Joint Venture
In 1993, AMD and Fujitsu Limited formed a joint venture, Fujitsu AMD
Semiconductor Limited (FASL), for the development and manufacture of non-
volatile memory devices. FASL operates advanced integrated circuit
manufacturing facilities in Aizu-Wakamatsu, Japan, to produce Flash memory
devices. The Company's share of FASL is 49.992 percent, and the investment is
being accounted for under the equity method. At April 2, 2000, the cumulative
adjustment related to the translation of the FASL financial statements into
U.S. dollars resulted in an increase in the investment in FASL of $520,000.
The following are the significant FASL related-party transactions and
balances:
7
<PAGE>
Quarter Ended
-----------------------------
April 2, March 28,
(Thousands) 2000 1999
------------ --------------
Royalty income............. $ 6,542 $ 4,603
Purchases.................. 76,238 57,158
April 2, December 26,
(Thousands) 2000 1999
------------ --------------
Royalty receivable......... $ 12,402 $ 6,601
Accounts payable........... 43,614 35,701
The following is condensed unaudited financial data of FASL:
Quarter Ended
-----------------------------
April 2, March 28,
(Thousands) 2000 1999
------------ --------------
Net sales.................. $ 145,442 $ 97,272
Gross profit (loss)........ 813 (6,166)
Operating loss............. (129) (6,867)
Net loss................... (247) (4,154)
The Company's share of the above FASL net income differs from the equity in
net income of joint venture reported on the condensed consolidated statements
of operations. The difference is due to adjustments resulting from the
related party relationships between FASL and the Company which are reflected
on the Company's condensed consolidated statements of operations.
5. Segment Reporting
AMD operates in three reportable segments: the Core Products segment, the
Communications segment and the Other segment.
AMD revised its segments in the first quarter of fiscal 2000 to reflect the
sale of its former Vantis subsidiary and a change in senior management.
Prior period amounts have been restated.
The Core Products segment includes microprocessors, core logic products,
Flash memory devices and EPROM devices. The Communications segment includes
telecommunication and networking products. The Other segment includes results
of the company's former PLD subsidiary, Vantis Corporation. It also includes
service fees provided to Vantis subsequent to its sale.
8
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
------------------------------
<S> <C> <C>
(Thousands) April 2, March 28,
Net sales: 2000 1999
---------- ---------
Core Products segment
External customers....................................................... $ 971,006 $ 521,097
Intersegment sales....................................................... - 17,176
---------- ---------
971,006 538,273
Communications segment external customers................................ 101,159 63,339
Other segment external customers......................................... 19,864 47,157
Elimination of intersegment sales........................................ - (17,176)
---------- ---------
Total net sales.......................................... $1,092,029 $ 631,593
========== =========
Segment operating income (loss):
Core Products segment.................................................... $ 154,573 $(127,086)
Communications segment................................................... 20,862 (392)
Other Segment............................................................ 5,234 6,368
---------- ---------
Total operating income (loss)............................ 180,669 (121,110)
Interest income and other, net........................................... 21,128 10,768
Interest expense......................................................... (11,479) (20,763)
Benefit for income taxes................................................. - 5,473
Equity in net loss of FASL............................................... (969) (2,735)
---------- ---------
Net income (loss)........................................ $ 189,349 $(128,367)
========== =========
</TABLE>
6. Comprehensive Income (Loss)
Under Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," unrealized gains or losses on the Company's available-
for-sale securities and foreign currency translation adjustments are included
in other comprehensive income (loss).
The following are the components of comprehensive income (loss):
Quarter Ended
--------------------------
April 2, March 28,
(Thousands) 2000 1999
-------- ---------
Net income (loss)............................... $189,349 $(128,367)
Foreign currency translation adjustments........ (25,369) (10,311)
Unrealized gains on securities, net of
tax:
Unrealized gains on investments arising
during the period........................ 2,510 1,625
Less: Reclassification adjustment for
gains included in earnings............... - (3,453)
-------- ---------
Other comprehensive loss........................ (22,859) (12,139)
-------- ---------
Comprehensive income (loss)..................... $166,490 $(140,506)
======== =========
9
<PAGE>
The components of accumulated other comprehensive loss are as follows:
April 2, December 26,
(Thousands) 2000 1999
------------ --------------
Unrealized gain on investments, net of tax... $ 16,788 $ 14,278
Cumulative translation adjustments........... (57,061) (31,692)
------------ --------------
$ (40,273) $ (17,414)
============ ==============
7. Restructuring and Other Special Charges
Restructuring and other special charges were zero in the first quarter of
2000 and $38 million during the year ended December 26, 1999. These charges
were the result of the Company's efforts to better align its cost structure
with expected revenue growth rates.
10
<PAGE>
The charges against accruals of restructuring and other special charges
through the quarter ended April 2, 2000 are as follows:
<TABLE>
<CAPTION>
Severance
and Equipment Discontinued
Employee Disposal System
(Thousands) Benefits Facilities Equipment Costs Projects Total
--------------- --------------- --------------- --------------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Q1 99 charges................... $ 779 $ - $ 8,148 $ - $ 6,089 $ 15,016
Non-cash charges................ - - (8,148) - (6,089) (14,237)
--------------- --------------- --------------- --------------- ------------------ -----------
Accruals at March 28, 1999...... 779 - - - - 779
Q2 99 charges................... 2,245 968 10,801 3,500 - 17,514
Cash charges.................... (1,360) - - - - (1,360)
Non-cash charges................ - - (10,801) - - (10,801)
--------------- --------------- --------------- --------------- ------------------ -----------
Accruals at June 27, 1999....... 1,664 968 - 3,500 - 6,132
Cash charges.................... (1,664) (35) - (1,067) - (2,766)
--------------- --------------- --------------- --------------- ------------------ -----------
Accruals at September 26, 1999.. - 933 - 2,433 - 3,366
Q4 99 charges................... - - 4,820 880 - 5,700
Cash charges.................... - (21) - (870) - (891)
Non-cash charges................ - - (4,820) - - (4,820)
--------------- --------------- --------------- --------------- ------------------ -----------
Accruals at December 26, 1999... - 912 - 2,443 - 3,355
Cash charges.................... - (307) - (106) - (413)
--------------- --------------- --------------- --------------- ------------------ -----------
Accruals at April 2, 2000....... $ - $ 605 $ - $ 2,337 $ - $ 2,942
=============== =============== =============== =============== ================== ===========
</TABLE>
The Company anticipates that the remaining accruals for sales office
facilities will be utilized over the period through lease termination in the
second quarter of 2002. The remaining accruals for the disposal costs for
equipment that has been taken out of service will be fully discharged by the
end of the second quarter of 2000.
8. Contingencies
Ellis Investment Co., Ltd., et al v. AMD, et al. Between March 10, 1999 and
April 22, 1999, AMD and certain individual officers of AMD were named as
defendants in a number of lawsuits that have been consolidated under Ellis
Investment Co., Ltd., et al v. Advanced Micro Devices, Inc., et al. Following
appointment of lead counsel, the case was re-named Hall et al. v. Advanced
Micro Devices, Inc., et al The class action complaints allege various
violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder. Most of the complaints purportedly were filed on behalf of all
persons, other than the defendants, who purchased or otherwise acquired
common stock of AMD during the period from October 6, 1998 to March 8, 1999.
Two of the complaints allege a class period from July 13, 1998 to March 9,
1999. All of the complaints allege that materially misleading statements
and/or material omissions were made by AMD and certain individual officers of
AMD concerning design and production problems relating to high-speed versions
of the AMD-K6-2 and AMD-K6-III microprocessors. Based upon information
presently known to management, the Company does not believe that the ultimate
resolution of these lawsuits will have a material adverse effect on the
Company's financial condition.
11
<PAGE>
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statement Regarding Forward-Looking Statements
The statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations that are forward-looking are based on
current expectations and beliefs and involve numerous risks and uncertainties
that could cause actual results to differ materially. The forward-looking
statements relate to, among other things, operating results; anticipated cash
flows; capital expenditures; adequacy of resources to fund operations and
capital investments; our ability to increase customer and market acceptance
of AMD Athlon microprocessors; our ability to maintain average selling prices
for AMD Athlon microprocessors; the effect of foreign currency hedging
transactions; our new submicron integrated circuit manufacturing and design
facility located in Dresden, Germany (Dresden Fab 30); our ability to ramp
production in Dresden Fab 30; and the Fujitsu AMD Semiconductor Limited (FASL)
manufacturing facilities. See "Financial Condition" and "Risk Factors" below,
as well as such other risks and uncertainties as are detailed in our other
Securities and Exchange Commission reports and filings for a discussion of the
factors that could cause actual results to differ materially from the forward-
looking statements.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes as of April 2, 2000, December 26, 1999,
and December 27, 1998, and for the quarter ended April 2, 2000 and each of the
three years in the period ended December 26, 1999.
AMD, the AMD logo, and combinations thereof, Advanced Micro Devices, K86, AMD-
K6, AMD-K6-2, AMD-K6-III, AMD Athlon and 3DNow! are either trademarks or
registered trademarks of Advanced Micro Devices, Inc. Vantis is a trademark of
Vantis Corporation. Microsoft and Windows are either registered trademarks or
trademarks of Microsoft Corporation. Pentium and Celeron are either registered
trademarks or trademarks of Intel Corporation. Other terms used to identify
companies and products may be trademarks of their respective owners.
12
<PAGE>
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
We participate in all three technology areas within the digital integrated
circuit market - memory circuits, logic circuits and microprocessors - through
our Core Products segment, our Communications segment, and our Other segment.
The Core Products segment includes microprocessors, core logic products,
embedded processors, Flash memory devices and Erasable Programmable Read-Only
Memory (EPROM) devices. Communications Group products include telecommunication
products and networking products. Vantis products consisted of complex and
simple high-performance complementary metal oxide semiconductor programmable
logic devices.
On June 15, 1999, we completed the sale of Vantis to Lattice Semiconductor
Corporation. As part of the sale of Vantis, we negotiated various service
contracts with Lattice to continue to provide, among other things, wafer
fabrication and assembly, test, mark and pack services to Vantis.
In October 1999, we announced our intention to sell certain assets of our
Communications Group. In March 2000, we announced that we will retain the
portion of our Communications Group that produces networking products, but we
still intend to sell certain assets of the portion that produces
telecommunication products. We expect to reach an agreement on the sale by the
end of the second quarter of 2000.
We use a 52- to 53-week fiscal year ending on the last Sunday in December. The
quarter ended April 2, 2000 included 14 weeks, and the quarters ended December
26, 1999 and March 28, 1999 included 13 weeks.
The following is a summary of our net sales by segment for the periods presented
below:
<TABLE>
<CAPTION>
Quarter Ended
--------------
April 2, December 26, March 28,
(Millions) 2000 1999 1999
----------- ------------- ------------
<S> <C> <C> <C>
Core Products segment:
CPG.............................. $ 644 $ 577 $ 395
Memory Group..................... 327 275 $ 126
Communications segment:
Communications Group............. 101 94 64
Other segment:
Lattice service fees............. 20 23 -
Vantis........................... - - 47
----------- ------------- ------------
$1,092 $ 969 $ 632
</TABLE>
Net Sales Comparison of Quarters Ended April 2, 2000 and December 26, 1999
13
<PAGE>
Net sales of $1,092 million for the first quarter of 2000 increased by 13
percent over net sales of $969 million for the fourth quarter of 1999.
CPG net sales of $644 million increased 12 percent in the first quarter of 2000
compared to the fourth quarter of 1999 primarily due to higher net sales of AMD
AthlonTM microprocessors. This increase was partially offset by lower net sales
of AMD-K6(R) microprocessors. Overall CPG sales growth in 2000 is dependent
upon a successful production ramp in Dresden Fab 30, availability of chipsets
and motherboards from third-party suppliers and continued market acceptance of
AMD Athlon microprocessors, as to which we cannot give any assurance.
Memory Group net sales of $327 million increased 19 percent in the first quarter
of 2000 compared to the fourth quarter of 1999 as a result of continued strong
demand for Flash memory devices which was slightly offset by a decrease in net
sales of EPROMs. Although demand for Flash memory devices has remained strong,
achieving further growth in net sales of Flash memory devices will depend upon
our ability to execute our plans to increase our Flash memory manufacturing
capacity, as to which we cannot give any assurance.
Communications Group net sales of $101 million increased seven percent in the
first quarter of 2000 compared to the fourth quarter of 1999 primarily due to
increased net sales of telecommunications line-card circuits and devices for
physical-layer Ethernet solutions. We intend to reach an agreement on the sale
of certain assets of the portion of the Communications Group that produces
telecommunication products by the end of the second quarter of 2000.
We received service fees of $20 million from Lattice in the first quarter of
2000 compared to $23 million in the fourth quarter of 1999.
Net Sales Comparison of Quarters Ended April 2, 2000 and March 28, 1999
Net sales of $1,092 million for the first quarter of 2000 increased by 73
percent compared to net sales of $632 million for the first quarter of 1999.
Excluding net sales from the Other segment, net sales for the first quarter of
2000 increased 83 percent compared to the first quarter of 1999.
CPG net sales of $644 million increased 63 percent in the first quarter of 2000
compared to the same quarter of 1999 primarily due to increased net sales of AMD
Athlon microprocessors, which were introduced at the end of the second quarter
of 1999. This increase was partially offset by decreased net sales of AMD-K6
microprocessors. Although unit sales of AMD-K6 microprocessors increased, net
sales decreased due to declines in average selling prices which were caused by
aggressive Intel pricing, including marketing rebates and product bundling of
microprocessors, motherboards, chipsets and combinations thereof. Overall CPG
sales growth in 2000 is dependent upon a successful production ramp in Dresden
Fab 30, availability of chipsets and motherboards from third-party suppliers and
increasing market acceptance of AMD Athlon microprocessors, as to which we
cannot give any assurance.
Memory Group net sales of $327 million increased by 159 percent in the first
quarter of 2000 compared to the first quarter of 1999 as a result of strong
growth in demand for Flash memory devices. This increase was slightly offset by
lower net sales of EPROMs. Although demand for Flash memory devices has
remained strong, achieving further growth in net sales of Flash
14
<PAGE>
memory devices will depend upon our ability to execute our plans to increase our
Flash memory manufacturing capacity, as to which we cannot give any assurance.
Communications Group net sales of $101 million increased 58 percent in the first
quarter of 2000 compared to the first quarter of 1999 primarily due to increased
net sales of telecommunications line-card circuits and devices for physical-
layer Ethernet solutions. We intend to reach an agreement on the sale of certain
assets of the portion of the Communications Group that produces
telecommunication products by the end of the second quarter of 2000.
We received service fees of $20 million from Lattice in the first quarter of
2000. Net sales from our former Vantis subsidiary in the first quarter of 1999
were $47 million. Due to the sale of Vantis on June 15, 1999, there were no
sales from Vantis in the first quarter of 2000.
Comparison of Expenses, Gross Margin Percentage and Interest
The following is a summary of expenses, gross margin percentage and interest
income and other, net for the periods presented below:
<TABLE>
<CAPTION>
Quarter Ended
--------------------
April 2, December 26, March 28,
<S> <C> <C> <C>
(Millions except for gross margin percentage) 2000 1999 1999
----------- ------------- -----------
Cost of sales................................... $ 606 $ 581 $ 450
Gross margin percentage......................... 45 % 40 % 29 %
Research and development........................ $ 161 $ 151 $ 160
Marketing, general and administrative........... 144 159 127
Restructuring and other special charges......... - 6 15
Interest income and other, net.................. 21 7 11
Interest expense................................ 11 12 21
</TABLE>
We operate in an industry characterized by high fixed costs due to the capital-
intensive manufacturing process, particularly the state-of-the-art production
facilities required for microprocessors. As a result, our gross margin
percentage is significantly affected by fluctuations in product sales. Gross
margin percentage growth depends on continually increasing sales because fixed
costs continue to rise due to the ongoing capital investments required to expand
production capacity and capability.
Gross margin percentage of 45 percent in the first quarter of 2000 increased
from 40 percent in the fourth quarter of 1999 and 29 percent in the first
quarter of 1999 due to higher net sales of microprocessors and Flash memory
devices, which more than offset the increases in fixed costs. Fixed costs will
continue to increase as we continue to facilitize Fab 25, our integrated circuit
manufacturing facility in Austin, Texas, for 0.18-micron process technology
capacity. As described in the paragraph immediately below, Dresden Fab 30 will
also contribute to a significant increase in cost of sales when it begins
producing units for sale, which we anticipate to be by the end of the second
quarter of 2000. Accordingly, absent significant increases in sales, we will
experience pressure on our gross margin percentage.
Research and development expenses of $161 million in the first quarter of 2000
increased seven percent compared to the immediate-prior quarter primarily due to
increases in spending for facilitization and pre-production process development
in Dresden Fab 30. Research and
15
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development expenses in the first quarter of 2000 were flat compared to the
same quarter in 1999. This was a result of increased expenses for
facilitization and pre-production process development in Dresden Fab 30 and
research and development activities for the AMD Athlon microprocessor, which
were offset by savings from the absence of Vantis expenses in the first
quarter of 2000, savings in our Submicron Development Center (SDC) as a result
of restructuring activities in 1999 and a decrease in expenses related to the
technology development alliance we have with Motorola.
Included in research and development are the recognition of deferred credits on
foreign capital grants and interest subsidies that were received for Dresden Fab
30. These credits of approximately $11 million per quarter (denominated in
deutsche marks) will continue to be offset against Dresden Fab 30 expenses in
future quarters until June 2007. Beginning at the end of the second quarter of
2000, we expect Dresden Fab 30 to begin producing units for sale. At that time,
a significant portion of Dresden Fab 30 expenses, including the deferred credits
referred to above, will shift from research and development expense to cost of
sales.
Marketing, general and administrative expenses of $144 million in the first
quarter of 2000 decreased nine percent compared to the fourth quarter of 1999 as
a result of reduced advertising and marketing expenses related to our
microprocessors. This decrease was partially offset by higher expenses
associated with employee bonuses. Marketing, general and administrative expenses
in the first quarter of 2000 increased 13 percent compared to the first quarter
of 1999 due to increased advertising and marketing for the AMD Athlon
microprocessor, which was partially offset by savings related to the absence of
Vantis expenses in the first quarter of 2000.
In the first quarter of 1999, we initiated a review of our cost structure.
Based upon this review, we recorded restructuring and other special charges of
$38 million during 1999, $15 million of which was recorded in the first quarter
of 1999 and $6 million of which was recorded in the fourth quarter of 1999, as a
result of certain of our actions to better align our cost structure with
expected revenue growth rates.
The $38 million in restructuring and other special charges consisted of the
following:
. $25 million for the closure of a submicron development laboratory facility in
the SDC, the write-off of certain equipment in the SDC and the write-off of
equipment taken out of service in Fab 25 related to the 0.35-micron wafer
fabrication process;
. $6 million for the write-off of capitalized costs related to discontinued
system projects;
. $3 million for the disposal of equipment taken out of service in the SDC;
. $3 million for severance and employee benefits for 178 terminated employees
in the Information Technology department, the SDC and certain sales offices;
and
. $1 million for costs of leases for vacated and unused sales offices.
As of April 2, 2000, the total cash outlay for restructuring and other special
charges was approximately $5 million. We anticipate that accruals of $600,000
for sales office facilities will be utilized over the period through lease
terminations in the second quarter of 2002. Accruals of $2 million for the
disconnection and removal costs for equipment that has been taken out of service
will be fully discharged by the end of the second quarter of 2000. The payments
of the accruals are expected to be funded by cash from operations.
The remaining $30 million of restructuring and other special charges consisted
of non-cash charges primarily for asset write-offs. As a result of the
restructuring and other special charges,
16
<PAGE>
we expect that depreciation otherwise incurred will be reduced by $30 million
over the next five years.
Interest income and other, net of $21 million in the first quarter of 2000
increased 200 percent compared to the fourth quarter of 1999 and 91 percent
compared to the same quarter of 1999 primarily due to gains of $9 million on the
sale of real property as well as higher average cash balances. Interest expense
of $11 million in the first quarter of 2000 was relatively flat compared to the
immediate-prior quarter. Interest expense in the first quarter of 2000
decreased 48 percent as compared to the same quarter in 1999 primarily due to
lower average debt balances resulting from of our repayment in July 1999 of the
outstanding principal balance on our $250 million four-year secured term loan.
Income Tax
The Company recorded no income tax provision in the first quarter of 2000 and a
$5 million income tax benefit in the first quarter of 1999. No income tax
provision was recorded for pre-tax income in the current quarter due to the
utilization of net operating loss carryforwards.
We had net deferred tax liabilities of $4 million as of April 2, 2000
representing certain foreign deferred taxes.
Other Items
International sales as a percent of net sales were 59 percent in the first
quarter of 2000 compared to 63 percent in the fourth quarter of 1999 and 58
percent in the first quarter of 1999. During the first quarter of 2000,
approximately six percent of our net sales were denominated in foreign
currencies. We do not have sales denominated in local currencies in countries
that have highly inflationary economies, as defined by generally accepted
accounting principles. The impact on our operating results from changes in
foreign currency rates individually and in the aggregate has not been material.
Comparison of Segment Income (Loss)
For a comparison of segment net sales, refer to the previous discussions on net
sales by product group.
The following is a summary of operating income (loss) by segment for the periods
presented below:
17
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended
-----------------
April 2, December 26, March 28,
(Millions) 2000 1999 1999
------------ ------------- ------------
<S> <C> <C> <C>
Core Products segment.................. $ 155 $ 52 $(127)
Communications segment................. 21 17 -
Other segment.......................... 5 3 6
------------ ------------- ------------
Total............................... $ 181 $ 72 $(121)
============ ============= ============
</TABLE>
The Core Products segment incurred a significant increase in operating income in
the first quarter of 2000 compared to the fourth quarter of 1999 due to an
increase in net sales of AMD Athlon microprocessors and Flash memory devices on
relatively fixed costs. The Core Products segment had operating income of $155
million in the first quarter of 2000 compared to a loss of $127 million in the
same quarter in 1999 mainly due to higher net sales in 2000 and restructuring
expenses in the first quarter of 1999 only.
- --------------------------------------------------------------------------------
FINANCIAL CONDITION
Cash and cash equivalents in the first quarter of 2000 increased by $86 million
from the fourth quarter of 1999 and by $217 million from the first quarter of
1999.
Operating activities provided $387 million in the first quarter of 2000 compared
to $22 million in the same period of 1999. Net operating cash flows in the
first quarter of 2000 increased $365 million over the same period in 1999
primarily due to an increase in net income of $318 million and an increase in
the net change in operating assets and liabilities of $47 million. The increase
in net changes in operating assets and liabilities consisted of a decrease in
restructuring charges, a large increase in customer deposit under long-term
purchase agreement, a decrease in payables and accrued liabilities as well as a
decrease in receivables, inventories, prepaid expenses and other assets in the
first quarter of 2000.
Net investing activities consumed a net $354 million during the first quarter of
2000 compared to $182 million during the first quarter of 1999. The increase in
cash used for investing activities of $172 million was primarily due to an
increase in the purchases of available-for-sale securities of $233 million which
was partially offset by a decrease in the purchases of properties, plant and
equipment of $71 million. During the current quarter, we incurred approximately
$129 million in capital expenditures for the continued facilitization of Dresden
Fab 30 and Fab 25. This is compared to capital expenditures of approximately
$200 million in the same period of 1999.
Financing activities generated $51 million during the first quarter of 2000
primarily as a result of the exercise of stock options. Financing activities
consumed $27 million in the same period of 1999 due to payment of $43 million in
debt which was offset by $6 million from the proceeds from borrowings and $10
million from issuance of stock.
Under our Loan and Security Agreement (the Loan Agreement), which provides for a
four-year secured revolving line of credit of up to $200 million, we can borrow,
subject to amounts which may be set aside by the lenders, up to 85 percent of
our eligible accounts receivable from Original Equipment Manufacturers (OEMs)
and 50 percent of our eligible accounts receivable
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<PAGE>
from distributors. We must comply with certain financial covenants if the level
of domestic cash we hold declines to certain levels, or the amount of borrowings
under the Loan Agreement rises to certain levels. Our obligations under the Loan
Agreement are secured by a pledge of most of our accounts receivable, inventory,
general intangibles and the related proceeds. As of April 2, 2000, no funds were
drawn under the Loan Agreement, and we had available unsecured, uncommitted bank
lines of credit in the amount of $71 million, of which $3.8 million was
outstanding.
We plan to make capital investments aggregating $800 million during 2000. These
investments include those relating to the continued facilitization of Dresden
Fab 30 and Fab 25.
AMD Saxony, an indirect wholly owned German subsidiary of AMD, has constructed
and is installing equipment in Dresden Fab 30. AMD, the Federal Republic of
Germany, the State of Saxony and a consortium of banks are supporting the
project. We currently estimate construction and facilitization costs of Dresden
Fab 30 to be $2.2 billion. In March 1997, AMD Saxony entered into a loan
agreement and other related agreements (the Dresden Loan Agreements) with a
consortium of banks led by Dresdner Bank AG. The Dresden Loan Agreements
provide for the funding of the construction and facilitization of Dresden Fab
30. The funding consists of:
. equity, subordinated loans and loan guarantees from AMD;
. loans from a consortium of banks; and
. grants, subsidies and loan guarantees from the Federal Republic of Germany
and the State of Saxony.
The Dresden Loan Agreements require that we partially fund Dresden Fab 30
project costs in the form of subordinated loans to, or equity investments in,
AMD Saxony. In accordance with the terms of the Dresden Loan Agreements, we
have invested $430 million to date in the form of subordinated loans to and
equity in AMD Saxony. In addition to support from AMD, the consortium of banks
referred to above has made available $814 million in loans to AMD Saxony to
help fund Dresden Fab 30 project costs. AMD Saxony had $259 million of such
loans outstanding as of April 2, 2000.
Finally, the Federal Republic of Germany and the State of Saxony are supporting
the Dresden Fab 30 project, in accordance with the Dresden Loan Agreements, in
the form of:
. guarantees of 65 percent of AMD Saxony bank debt up to a maximum amount of
$814 million;
. capital investment grants and allowances totaling $287 million; and
. interest subsidies totaling $150 million.
Of these amounts, AMD Saxony had received $284 million in capital investment
grants and allowances and $22 million in interest subsidies as of April 2, 2000.
The grants and subsidies are subject to conditions, including meeting specified
levels of employment in December 2001 and maintaining those levels until June
2007. Noncompliance with the conditions of the grants and subsidies could
result in the forfeiture of all or a portion of the future amounts to be
received as well as the repayment of all or a portion of amounts received to
date. As of April 2, 2000, we were in compliance with all of the conditions of
the grants and subsidies.
19
<PAGE>
The Dresden Loan Agreements also require that we:
. provide interim funding to AMD Saxony if either the remaining capital
investment allowances or the remaining interest subsidies are delayed, such
funding to be repaid to AMD as AMD Saxony receives the grants or subsidies
from the State of Saxony;
. fund shortfalls in government subsidies resulting from any default under the
subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreements up to a maximum of $107 million until Dresden Fab 30 has been
completed;
. fund certain contingent obligations including obligations to fund project
cost overruns, if any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30, up to
approximately $72 million if AMD Saxony does not meet its fixed charge
coverage ratio covenant.
Because most of the amounts under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth above are subject to change based
on applicable conversion rates. We used the exchange rate at the end of the
first quarter of 2000, which was approximately 2.03 deutsche marks to 1 U.S.
dollar, to value the amounts denominated in deutsche marks.
The definition of defaults under the Dresden Loan Agreements includes the
failure of AMD, AMD Saxony or AMD Holding, the parent company of AMD Saxony and
a wholly owned subsidiary of AMD, to comply with obligations in connection with
the Dresden Loan Agreements, including:
. material variances from the approved schedule and budget;
. our failure to fund equity contributions or shareholder loans or otherwise
comply with our obligations relating to the Dresden Loan Agreements;
. the sale of shares in AMD Saxony or AMD Holding;
. the failure to pay material obligations;
. the occurrence of a material adverse change or filings or proceedings in
bankruptcy or insolvency with respect to us, AMD Saxony or AMD Holding; and
. the occurrence of default under the indenture dated August 1, 1996 between
AMD and the United States Trust Company of New York (the Indenture) pursuant
to which our $400 million aggregate principal amount of 11% Senior Secured
Notes due 2003 (the Senior Secured Notes) were issued or the Loan Agreement.
Generally, any default with respect to borrowings made or guaranteed by AMD that
results in recourse to us of more than $10 million and is not cured by us, would
result in a cross-default under the Dresden Loan Agreements, the Indenture and
the Loan Agreement. Under certain circumstances, cross-defaults result under
the Convertible Subordinated Notes, the Indenture and the Dresden Loan
Agreements.
In the event we are unable to meet our obligation to make loans to, or equity
investments in, AMD Saxony as required under the Dresden Loan Agreements, AMD
Saxony will be unable to complete Dresden Fab 30 and we will be in default under
the Dresden Loan Agreements, the
20
<PAGE>
Indenture and the Loan Agreement, which would permit acceleration of certain
indebtedness, which would have a material adverse effect on us. We cannot assure
that we will be able to obtain the funds necessary to fulfill these obligations.
Any such failure would have a material adverse effect on us.
FASL, a joint venture formed by AMD and Fujitsu Limited in 1993, is continuing
the facilitization of its second Flash memory device wafer fabrication facility,
FASL II, in Aizu-Wakamatsu, Japan. The facility, including equipment, is
expected to cost approximately $1 billion when fully equipped. As of April 2,
2000, approximately $439 million (denominated in yen) of this cost had been
funded. Capital expenditures for FASL II construction to date have been funded
by cash generated from FASL operations and local borrowings by FASL.
FASL capital expenditures in 2000 will continue to be funded by cash generated
from FASL operations and local borrowings by FASL. However, to the extent that
FASL is unable to secure the necessary funds for FASL II, we may be required to
contribute cash or guarantee third-party loans in proportion to our 49.992
percent interest in FASL. As of April 2, 2000, we had no loan guarantees
outstanding with respect to these loans. These planned costs are denominated in
yen and are, therefore, subject to change due to foreign exchange rate
fluctuations. At the end of the first quarter of 2000, the exchange rate was
approximately 106.14 yen to 1 U.S. dollar, which we used to calculate the
amounts denominated in yen.
We believe that cash flows from operations and current cash balances, together
with external financing activities, will be sufficient to fund operations and
capital investments for the next 12 months.
RISK FACTORS
Our business, results of operations and financial condition are subject to a
number of risk factors, including the following:
Microprocessor Products
Future Dependence on the AMD Athlon Microprocessor. We will need to successfully
market the AMD Athlon microprocessor, our seventh-generation Microsoft Windows
compatible microprocessor, in order to increase our microprocessor product
revenues in 2000 and beyond, and to benefit fully from the substantial financial
investments and commitments we have made and continue to make related to
microprocessors. We commenced initial shipments of AMD Athlon microprocessors in
June 1999 and began volume shipments in the second half of 1999. Our production
and sales plans for AMD Athlon microprocessors are subject to numerous risks and
uncertainties, including:
. our ability to produce AMD Athlon microprocessors in the volume and with the
feature set required by customers on a timely basis;
. our ability to design, manufacture and deliver processor modules through
subcontractors;
. the availability and acceptance of motherboards and chipsets designed for AMD
Athlon microprocessors;
. market acceptance of AMD Athlon microprocessors;
21
<PAGE>
. our ability to maintain average selling prices of AMD Athlon microprocessors
despite aggressive Intel pricing, including market rebates and product
bundling of microprocessors, motherboards, chipsets and combinations thereof;
. the successful development and installation of 0.18-micron process technology
and copper interconnect technology;
. our ability to ramp production in Dresden Fab 30;
. the pace at which we are able to transition production in Fab 25 from 0.25-
to 0.18-micron process technology and to ramp production in Dresden Fab 30 on
0.18-micron copper interconnect process technology;
. the use and market acceptance of a non-Intel processor bus (adapted by us
from Digital Equipment Corporation's EV6 bus) in the design of the AMD Athlon
microprocessor, and the availability of chipsets from vendors who will
develop, manufacture and sell chipsets with the EV6 interface in volumes
required by us;
. our ability to expand our chipset and system design capabilities;
. our ability to successfully offer new higher performance versions of the AMD
Athlon microprocessor; and
. the availability to our customers of cost and performance competitive Static
Random Access Memories (SRAMs) (including Tag chips) if Intel controls the
market for SRAM production capacity through its relationships with SRAM
manufacturers.
If we fail to achieve market acceptance of AMD Athlon microprocessors, if our
subcontractors are unable to provide the processor modules we require or if
chipsets and motherboards which are compatible with AMD Athlon microprocessors
are not made available, our business will be materially and adversely affected.
Investment in and Dependence on K86(TM) AMD Microprocessor Products. Our
microprocessor product revenues have significantly impacted, and will continue
in 2000 and 2001 to significantly impact, our overall revenues, profit margins
and operating results. We plan to continue to make significant capital
expenditures to support our microprocessor products both in the near and long
term. These capital expenditures will be a substantial drain on our cash flow
and cash balances.
Our ability to increase microprocessor product revenues, and benefit fully from
the substantial financial investments and commitments we have made and continue
to make related to microprocessors, depends upon success of the AMD Athlon
microprocessor, which is our seventh-generation Microsoft Windows compatible
microprocessor, the AMD-K6 microprocessors with 3DNow! technology and future
generations of K86 microprocessors. The microprocessor market is characterized
by short product life cycles and migration to ever-higher performance
microprocessors. To compete successfully against Intel in this market, we must
transition to new process technologies at a faster pace than before and offer
higher performance microprocessors in significantly greater volumes. We must
achieve acceptable yields while producing microprocessors at higher speeds. In
the past, we have experienced significant difficulty in achieving microprocessor
yield and volume plans. Such difficulties have in the past, and may in the
future, adversely affect our results of operations and liquidity. If we fail to
offer higher performance microprocessors in significant volume on a timely basis
in the future, our business could be materially and adversely affected. We may
not achieve the production ramp necessary to meet our customers' volume
requirements for higher performance AMD Athlon and
22
<PAGE>
AMD-K6 microprocessors. It is also possible that we may not increase our
microprocessor revenues enough to achieve sustained profitability.
To sell the volume of AMD Athlon and AMD-K6 microprocessors we currently plan to
make in 2000 and 2001, we must increase sales to existing customers and develop
new customers in both consumer and commercial markets. If we lose any current
top tier OEM customer, or if we fail to attract additional customers through
direct sales and through our distributors, we may not be able to sell the volume
of units planned. This result could have a material adverse effect on our
business.
Our production and sales plans for AMD Athlon and AMD-K6 microprocessors are
subject to other risks and uncertainties, including:
. market acceptance of AMD Athlon microprocessors, including the timely
availability of processor modules as well as motherboards and chipsets
designed for these processors;
. whether we can successfully fabricate higher performance AMD Athlon and AMD-
K6 microprocessors in planned volume and speed mixes;
. the effects of Intel's new product introductions, marketing strategies and
pricing;
. the continued market acceptance for AMD-K6 microprocessors and systems based
on them;
. whether we will have the financial and other resources necessary to continue
to invest in the microprocessor products, including leading-edge wafer
fabrication equipment and advanced process technologies;
. the possibility that our newly introduced products may be defective;
. adverse market conditions in the personal computer (PC) market and consequent
diminished demand for our microprocessors; and
. unexpected interruptions in our manufacturing operations.
Because Intel has dominated the microprocessor market for many years and has
brand strength, we have in the past priced AMD-K6 microprocessors below the
published price of Intel processors offering comparable performance. Thus,
Intel's processor marketing and pricing can impact and have impacted the average
selling prices of the AMD-K6 and AMD Athlon microprocessors, and consequently
can impact and have impacted our overall margins. Our business could be
materially and adversely affected if we are unable to:
. achieve the product performance improvements necessary to meet customer
needs;
. continue to achieve market acceptance of our AMD-K6 and AMD Athlon
microprocessors and increase market share;
. maintain revenues of AMD-K6 microprocessors; and
. successfully ramp production and sales of AMD Athlon microprocessors.
See also the discussions below regarding Intel Dominance and Process Technology.
Intel Dominance. Intel has dominated the market for microprocessors used in PCs
for many years. Because of its dominant market position, Intel has historically
set and controlled x86 microprocessor and PC system standards and, thus,
dictated the type of product the market requires of Intel's competitors. In
addition, Intel may vary prices on its microprocessors and other products at
will and thereby affect the margins and profitability of its competitors due to
its financial strength and dominant position. Intel exerts substantial influence
over PC
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<PAGE>
manufacturers and their channels of distribution through the Intel Inside
advertising rebate program and other marketing programs. Intel invests billions
of dollars in, and as a result exerts influence over, many other technology
companies. We expect Intel to continue to invest heavily in research and
development, new manufacturing facilities and other technology companies, and to
remain dominant:
. through the Intel Inside and other marketing programs;
. through other contractual constraints on customers, retailers, industry
suppliers and other third parties;
. by controlling industry standards; and
. by controlling supply and demand of motherboards, chipsets and other system
components.
As an extension of its dominant microprocessor market share, Intel also
dominates the PC platform. As a result, it is difficult for PC manufacturers to
innovate and differentiate their product offerings. We do not have the financial
resources to compete with Intel on such a large scale. As long as Intel remains
in this dominant position, we may be materially and adversely affected by its:
. product mix and introduction schedules;
. product bundling and pricing strategies;
. control over industry standards, PC manufacturers and other PC industry
participants, including motherboard, chipset and basic input/output system
(BIOS) suppliers; and
. customer brand loyalty.
As Intel expanded its dominance over the PC system platform, many PC
manufacturers reduced their system development expenditures and now purchase
microprocessors together with chipsets or in assembled motherboards. PC OEMs are
increasingly dependent on Intel, less innovative on their own and, to a large
extent, distributors of Intel technology. In marketing our microprocessors to
these OEMs and dealers, we depend on companies other than Intel for the design
and manufacture of core-logic chipsets, motherboards, BIOS software and other
components. In recent years, many of these third-party designers and
manufacturers have lost significant market share to Intel. In addition, these
companies produce chipsets, motherboards, BIOS software and other components to
support each new generation of Intel's microprocessors only if Intel makes
information about its products available to them in time to address market
opportunities. Delay in the availability of such information makes, and will
continue to make, it increasingly difficult for these third parties to retain or
regain market share.
To compete with Intel in the microprocessor market in the future, we intend to
continue to form closer relationships with third-party designers and
manufacturers of chipsets, motherboards, BIOS software and other components.
Similarly, we intend to expand our chipset and system design capabilities, and
to offer OEMs licensed system designs incorporating our microprocessors and
companion products. We cannot be certain, however, that our efforts will be
successful. We expect that, as Intel introduces future generations of
microprocessors, chipsets and motherboards, the design of chipsets, memory and
other semiconductor devices, and higher level board products which support Intel
microprocessors, will become increasingly dependent on the Intel microprocessor
design and may become incompatible with non-Intel processor-based PC systems.
24
<PAGE>
Intel's Pentium(R) III and Celeron(TM) microprocessors are sold only in form
factors that are not physically or interface protocol compatible with "Socket 7"
motherboards currently used with AMD-K6 microprocessors. Thus, Intel no longer
supports the Socket 7 infrastructure as it did when it was selling its fifth-
generation Pentium processors. Because AMD-K6 microprocessors are designed to be
Socket 7 compatible, and will not work with motherboards designed for Pentium
II, III and Celeron processors, we intend to continue to work with third-party
designers and manufacturers of motherboards, chipsets and other products to
ensure the continued availability of Socket 7 infrastructure support for AMD-K6
microprocessors, including support for enhancements and features we add to our
microprocessors. Socket 7 infrastructure support for AMD-K6 microprocessors may
not endure over time as Intel moves the market to its infrastructure choices.
We do not currently plan to develop microprocessors that are bus interface
protocol compatible with the Pentium III and Celeron processors because our
patent cross-license agreement with Intel does not extend to microprocessors
that are bus interface protocol compatible with Intel's sixth and subsequent
generation processors. Thus, the AMD Athlon microprocessor is not designed to
function with motherboards and chipsets designed to work with Intel
microprocessors. Our ability to compete with Intel in the market for AMD Athlon
seventh-generation and future generation microprocessors will depend on our:
. success in designing and developing the microprocessors; and
. ability to ensure that the microprocessors can be used in PC platforms
designed to support Intel's microprocessors and our microprocessors, or that
alternative platforms are available which are competitive with those used
with Intel processors.
A failure for any reason of the designers and producers of motherboards,
chipsets, processor modules and other system components to support our K86
microprocessor offerings would have a material adverse effect on our business.
Dependence on Microsoft and Logo License. Our ability to innovate beyond the x86
instruction set controlled by Intel depends on support from Microsoft in its
operating systems. If Microsoft does not provide support in its operating
systems for the x86 instructions that we innovate and design into our
processors, independent software providers may forego designing their software
applications to take advantage of our innovations. This would adversely affect
our ability to market our processors. In addition, we have entered into logo
license agreements with Microsoft that allow us to label our products as
"Designed for Microsoft Windows." We have also obtained appropriate
certifications from recognized testing organizations for our K86
microprocessors. If we fail to maintain the logo license agreements with
Microsoft, we may lose our ability to label our K86 microprocessors with the
Microsoft Windows logo. This could impair our ability to market the products and
could have a material adverse effect on our business.
Fluctuations in PC Market. Since most of our microprocessor products are used in
PCs and related peripherals, our future growth is closely tied to the growth of
the PC industry. Industry-wide fluctuations in the PC marketplace have in the
past and may in the future materially and adversely affect our business.
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<PAGE>
Financing Requirements
We will have significant capital requirements over the next 12 months. To the
extent that we cannot generate the required capital internally or obtain such
capital externally, our business could be materially adversely affected. We
cannot assure the availability of such capital on terms favorable to us, or at
all. We currently plan to make capital investments of approximately $800
million in 2000 although the actual expenditures may vary. These investments
include those relating to the continued facilitization of Dresden Fab 30 and Fab
25.
In March 1997, our indirect wholly owned subsidiary, AMD Saxony, entered into
the Dresden Loan Agreements with a consortium of banks led by Dresdner Bank AG.
The terms of the Dresden Loan Agreements required us to make subordinated loans
to, or equity investments in, AMD Saxony totaling $100 million in 1999. The
Dresden Loan Agreements require that we partially fund Dresden Fab 30 project
costs in the form of subordinated loans to, or equity investments in, AMD
Saxony. In accordance with the terms of the Dresden Loan Agreements, we have
invested $430 million as of April 2, 2000 in the form of subordinated loans and
equity in AMD Saxony. If we are unable to meet our obligation to make loans to,
or equity investments in, AMD Saxony as required under the Dresden Loan
Agreements, AMD Saxony will be unable to complete Dresden Fab 30 and we will be
in default under the Dresden Loan Agreement, the Loan Agreement and the
Indenture, which would permit acceleration of indebtedness, which would have a
material adverse effect on our business.
In 1999, the building construction of FASL II was completed, equipment was
installed and production was initiated. We expect the facility, including
equipment, to cost approximately $1 billion when fully equipped. Capital
expenditures for FASL II construction to date have been funded by cash generated
from FASL operations and borrowings by FASL. If FASL is unable to secure the
necessary funds for FASL II, we may be required to contribute cash or guarantee
third-party loans in proportion to our 49.992 percent interest in FASL.
If we are unable to obtain the funds necessary to fulfill our obligations to AMD
Saxony or FASL, our business will be materially and adversely affected.
Manufacturing
Capacity. We underutilize our manufacturing facilities from time to time as a
result of reduced demand for certain of our products. Our operations related to
microprocessors have been particularly affected by this situation. If we
underutilize our manufacturing facilities in the future, our gross margins may
suffer. We are substantially increasing our manufacturing capacity by making
significant capital investments in Fab 25 and Dresden Fab 30. In addition, in
1999, the building construction of FASL II, a second Flash memory device
manufacturing facility, was completed, equipment was installed and production
was initiated. We have also built a new test and assembly facility in Suzhou,
China. We are basing our strategy of increasing our manufacturing capacity on
industry projections for future growth. If these industry projections are
inaccurate, or if demand for our products does not increase consistent with our
plans and expectations, we will likely underutilize our manufacturing facilities
and our business could be materially and adversely affected.
In contrast to the above, there also have been situations in the past in which
our manufacturing facilities were inadequate to meet the demand for certain of
our products. Our inability to obtain sufficient manufacturing capacities to
meet demand, either in our own facilities or through foundry or similar
arrangements with others, could have a material adverse effect on our
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business. At this time, the risk is that we will have insufficient capacity to
meet demand for Flash memory products and significant underutilized capacity
relative to demand for our microprocessor offerings.
Process Technology. In order to remain competitive, we must make continuing
substantial investments in improving our process technologies. In particular, we
have made and continue to make significant research and development investments
in the technologies and equipment used to fabricate our microprocessor products
and our Flash memory devices. Portions of these investments might not be fully
recovered if we fail to continue to gain market acceptance or if the market for
our Flash memory products should significantly deteriorate. Likewise, we are
making a substantial investment in Dresden Fab 30. The business plan for Dresden
Fab 30 calls for the successful development and installation of 0.18-micron
process technology and copper interconnect technology in order to manufacture
AMD Athlon microprocessors in Dresden Fab 30. We have entered into a strategic
alliance with Motorola to co-develop logic process and embedded Flash
technologies. The logic process technology which is the subject of the alliance
includes the copper interconnect technology that is required for AMD Athlon
microprocessors and subsequent generations of microprocessors. We cannot be
certain that the strategic alliance will be successful or that we will be able
to develop or obtain the leading-edge process technologies that will be required
in Fab 25 or Dresden Fab 30 to fabricate AMD Athlon microprocessors
successfully.
Manufacturing Interruptions and Yields. Any substantial interruption of our
manufacturing operations, either as a result of a labor dispute, equipment
failure or other cause, could materially and adversely affect our business
operations. We also have been and may in the future be materially and adversely
affected by fluctuations in manufacturing yields. For example, our results in
the past have been negatively affected by disappointing AMD-K6 microprocessor
yields. The design and manufacture of integrated circuits is a complex process.
Normal manufacturing risks include errors and interruptions in the fabrication
process and defects in raw materials, as well as other risks, all of which can
affect yields. Additional manufacturing risks incurred in ramping up new
fabrication areas and/or new manufacturing processes include equipment
performance and process controls, as well as other risks, all of which can
affect yields.
Product Incompatibility. Our products may possibly be incompatible with some or
all industry-standard software and hardware. If our customers are unable to
achieve compatibility with software or hardware after our products are shipped
in volume, we could be materially adversely affected. It is also possible that
we may be unsuccessful in correcting any such compatibility problems that are
discovered or that corrections will be unacceptable to customers or made in an
untimely manner. In addition, the mere announcement of an incompatibility
problem relating to our products could have a material adverse effect on our
business.
Product Defects. One or more of our products may possibly be found to be
defective after we have already shipped such products in volume, requiring a
product replacement, recall or a software fix which would cure such defect but
impede performance. We may also be subject to product returns which could impose
substantial costs on us and have a material and adverse effect on our business.
Essential Manufacturing Materials. Certain raw materials we use in the
manufacture of our products are available from a limited number of suppliers.
For example, a few foreign companies
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principally supply several types of the integrated circuit packages purchased by
us, as well as by the majority of other companies in the semiconductor industry.
Interruption of supply or increased demand in the industry could cause shortages
in various essential materials. We would have to reduce our manufacturing
operations if we were unable to procure certain of these materials. This
reduction in our manufacturing operations could have a material adverse effect
on our business.
International Manufacturing and Foundries. Nearly all product assembly and final
testing of our products are performed at our manufacturing facilities in Penang,
Malaysia; Bangkok, Thailand; Suzhou, China; and Singapore; or by subcontractors
in the United States and Asia. We also depend on foreign foundry suppliers and
joint ventures for the manufacture of a portion of our finished silicon wafers.
Foreign manufacturing and construction of foreign facilities entail political
and economic risks, including political instability, expropriation, currency
controls and fluctuations, changes in freight and interest rates, and loss or
modification of exemptions for taxes and tariffs. For example, if we were unable
to assemble and test our products abroad, or if air transportation between the
United States and our overseas facilities were disrupted, there could be a
material adverse effect on our business.
Flash Memory Products
The demand for Flash memory devices has recently increased due to the increasing
use of equipment and other devices requiring non-volatile memory such as:
. cellular telephones;
. routers which transfer data between local area networks; and
. PC cards which are inserted into notebook and subnotebook computers or
personal digital assistants.
As a result, the demand for Flash memory devices currently exceeds the available
supply. In order to meet this demand, we must increase our production of Flash
memory devices through FASL and FASL II or through foundry or similar
arrangements with others. We cannot be certain that the demand for Flash memory
products will remain at current or greater levels, or that we will have
sufficient capacity to meet the demand for Flash memory devices. Our inability
to meet the demand for Flash memory devices could have a material adverse effect
on our business.
Competition in the market for Flash memory devices will increase as existing
manufacturers introduce new products and industry-wide production capacity
increases, and as Intel continues to aggressively price its Flash memory
products. We expect competition in the marketplace for Flash memory devices to
continue to increase in 2000 and beyond. It is possible that we will be unable
to maintain or increase our market share in Flash memory devices as the market
develops and as existing and potential new competitors introduce competitive
products. A decline in our Flash memory device business or decline in the gross
margin percentage in this product line could have a material adverse effect on
our business.
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Key Personnel
Our future success depends upon the continued service of numerous key
engineering, manufacturing, marketing, sales and executive personnel. We may or
may not be able to continue to attract, retain and motivate qualified personnel
necessary for our business. Loss of the service of, or failure to recruit, key
engineering design personnel could be significantly detrimental to our product
development programs or otherwise have a material adverse effect on our
business.
Demand for Our Products Affected by Asian and Other Domestic and International
Economic Conditions
While general industry demand is currently strengthening, the demand for our
products during the last few years has been weak due to the general downturn in
the worldwide semiconductor market and an economic crisis in Asia. A renewed
decline of the worldwide semiconductor market or economic condition in Asia
could decrease the demand for microprocessors and other ICs. A significant
decline in economic conditions in any significant geographic area, either
domestically or internationally, could decrease the overall demand for our
products which could have a material adverse effect on our business.
Fluctuations in Operating Results
Our operating results are subject to substantial quarterly and annual
fluctuations due to a variety of factors, including:
. the effects of competition with Intel in microprocessor and Flash memory
device markets;
. competitive pricing pressures;
. decreases in unit average selling prices of our products;
. production capacity levels and fluctuations in manufacturing yields,
particularly in the early stages of production at new facilities, such as
Dresden Fab 30;
. availability and cost of products from our suppliers;
. the gain or loss of significant customers;
. new product introductions by us or our competitors;
. changes in the mix of products produced and sold and in the mix of sales by
distribution channels;
. market acceptance of new or enhanced versions of our products;
. seasonal customer demand; and
. the timing of significant orders and the timing and extent of product
development costs.
Our operating results also tend to vary seasonally due to vacation and holiday
schedules. Our revenues are generally lower in the first, second and third
quarters of each year than in the fourth quarter. This seasonal pattern is
largely a result of decreased demand in Europe during the summer months and
higher demand in the retail sector of the personal computer market during the
winter holiday season.
In addition, operating results have recently been, and may in the future be,
adversely affected by general economic and other conditions causing a downturn
in the market for semiconductor devices, or otherwise affecting the timing of
customer orders or causing order cancellations or rescheduling. Our customers
may change delivery schedules or cancel orders without significant penalty. Many
of the factors listed above are outside of our control. These factors are
difficult to
29
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forecast, and these or other factors could materially and adversely affect our
quarterly or annual operating results.
Other Risk Factors
Debt Restrictions. The Loan Agreement and the Indenture contain significant
covenants that limit our ability and our subsidiaries' ability to engage in
various transactions and require satisfaction of specified financial performance
criteria. In addition, the occurrence of certain events, including, among other
things, failure to comply with the foregoing covenants, material inaccuracies of
representations and warranties, certain defaults under or acceleration of other
indebtedness and events of bankruptcy or insolvency, would in certain cases
after notice and grace periods, constitute events of default permitting
acceleration of indebtedness. The limitations imposed by the Loan Agreement and
the Indenture are substantial, and failure to comply with such limitations could
have a material adverse effect on our business.
In addition, the Dresden Loan Agreements substantially prohibit AMD Saxony from
transferring assets to us, which will prevent us from using current or future
assets of AMD Saxony other than to satisfy obligations of AMD Saxony.
Technological Change and Industry Standards. The market for our products is
generally characterized by rapid technological developments, evolving industry
standards, changes in customer requirements, frequent new product introductions
and enhancements, short product life cycles and severe price competition.
Currently accepted industry standards may change. Our success depends
substantially on our ability, on a cost-effective and timely basis, to continue
to enhance our existing products and to develop and introduce new products that
take advantage of technological advances and adhere to evolving industry
standards. An unexpected change in one or more of the technologies related to
our products, in market demand for products based on a particular technology or
of accepted industry standards could materially and adversely affect our
business. We may or may not be able to develop new products in a timely and
satisfactory manner to address new industry standards and technological changes,
or to respond to new product announcements by others. In addition, new products
may or may not achieve market acceptance.
Competition. The integrated circuit industry is intensely competitive and,
historically, has experienced rapid technological advances in product and system
technologies. After a product is introduced, prices normally decrease over time
as production efficiency and competition increase, and as successive generations
of products are developed and introduced for sale. Technological advances in the
industry result in frequent product introductions, regular price reductions,
short product life cycles and increased product capabilities that may result in
significant performance improvements. Competition in the sale of integrated
circuits is based on:
. performance;
. product quality and reliability;
. price;
. adherence to industry standards;
. software and hardware compatibility;
. marketing and distribution capability;
. brand recognition;
30
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. financial strength; and
. ability to deliver in large volumes on a timely basis.
Order Revision and Cancellation Policies. We manufacture and market standard
lines of products. Sales are made primarily pursuant to purchase orders for
current delivery or agreements covering purchases over a period of time, which
may be revised or canceled without penalty. As a result, we must commit
resources to the production of products without any advance purchase commitments
from customers. Our inability to sell products after we devoted significant
resources to them could have a material adverse effect on our business.
Distributors typically maintain an inventory of our products. In most instances,
our agreements with distributors protect their inventory of our products against
price reductions, as well as products that are slow moving or have been
discontinued. These agreements, which may be canceled by either party on a
specified notice, generally allow for the return of our products if the
agreement with the distributor is terminated. The market for our products is
generally characterized by, among other things, severe price competition. The
price protection and return rights we offer to our distributors could materially
and adversely affect us if there is an unexpected significant decline in the
price of our products.
Intellectual Property Rights; Potential Litigation. It is possible that:
. we will be unable to protect our technology or other intellectual property
adequately through patents, copyrights, trade secrets, trademarks and other
measures;
. patent applications that we may file will not be issued;
. foreign intellectual property laws will not protect our intellectual property
rights;
. any patent licensed by or issued to us will be challenged, invalidated or
circumvented or that the rights granted thereunder will not provide
competitive advantages to us; and
. others will independently develop similar products, duplicate our products or
design around our patents and other rights.
From time to time, we have been notified that we may be infringing intellectual
property rights of others. If any such claims are asserted against us, we may
seek to obtain a license under the third party's intellectual property rights.
We could decide, in the alternative, to resort to litigation to challenge such
claims. Such challenges could be extremely expensive and time-consuming and
could have a material adverse effect on our business. We cannot give any
assurance that all necessary licenses can be obtained on satisfactory terms, or
whether litigation may always be avoided or successfully concluded.
Environmental Regulations. We could possibly be subject to fines, suspension of
production, alteration of our manufacturing processes or cessation of our
operations if we fail to comply with present or future governmental regulations
related to the use, storage, handling, discharge or disposal of toxic, volatile
or otherwise hazardous chemicals used in the manufacturing process. Such
regulations could require us to acquire expensive remediation equipment or to
incur other expenses to comply with environmental regulations. Our failure to
control the use of, disposal or storage of, or adequately restrict the discharge
of, hazardous substances could subject us to future liabilities and could have a
material adverse effect on our business.
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Year 2000. We have not experienced any material system failures, disruptions of
operations or interruptions of our ability to process transactions, send
invoices or engage in other normal business activities as a result of Year 2000
issues. In addition, we are not aware of any material problems resulting from
Year 2000 issues with our products and services. Although we have not
experienced any material problems related to the Year 2000, we cannot give any
assurance that issues will not arise in the future or that we will be able to
adequately address any issues that may arise. The actual costs incurred as of
April 2, 2000 in connection with our Year 2000 readiness plan were approximately
$18 million, the majority of which was expensed.
International Sales. Our international sales operations entail political and
economic risks, including expropriation, currency controls, exchange rate
fluctuations, changes in freight rates and changes in rates and exemptions for
taxes and tariffs.
Volatility of Stock Price; Ability to Access Capital. Based on the trading
history of our stock, we believe that the following factors have caused and are
likely to continue to cause the market price of our common stock to fluctuate
substantially:
. quarterly fluctuations in our operating and financial results;
. announcements of new products and/or pricing by us or our competitors;
. the pace of new process technology and product manufacturing ramps;
. production yields of key products; and
. general conditions in the semiconductor industry.
In addition, an actual or anticipated shortfall in revenue, gross margins or
earnings from securities analysts' expectations could have an immediate effect
on the trading price of our common stock in any given period. Technology company
stocks in general have experienced extreme price and volume fluctuations that
are often unrelated to the operating performance of the companies. This market
volatility may adversely affect the market price of our common stock and
consequently limit our ability to raise capital or to make acquisitions. Our
current business plan envisions substantial cash outlays which may require
external capital financing. It is possible that capital and/or long-term
financing will be unavailable on terms favorable to us or in sufficient amounts
to enable us to implement our current plan.
Earthquake Danger. Our corporate headquarters, a portion of our manufacturing
facilities, assembly and research and development activities and certain other
critical business operations are located near major earthquake fault lines. We
could be materially and adversely affected in the event of a major earthquake.
Euro Conversion. On January 1, 1999, eleven of the fifteen member countries of
the European Union established fixed conversion rates between their existing
currencies and the euro. The participating countries adopted the euro as their
common legal currency on that date. The transition period will last through
January 1, 2002. We are assessing the potential impact to us that may result
from the euro conversion. We do not expect the introduction and use of the euro
to materially affect our foreign exchange activities, to affect our use of
derivatives and other financial instruments or to result in any material
increase in costs to us. We will continue to assess the impact of the
introduction of the euro currency over the transition period, as well as the
period subsequent to the transition, as applicable.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
On March 22, 2000, we entered into an interest rate swap agreement to reduce
interest expense of our $400 million of 11% Senior Secured Notes due 2003. The
swap converts our 11% fixed rate notes into a floating rate instrument. The
variable rate component of the swap will be fixed from inception through August
1, 2001. The notes are cancelable at the option of the counter-party (Bank of
America) on August 1, 2001. After August 1, 2001, the swap will be marked-to-
market to determine on-going effectiveness.
For additional Quantitative and Qualitative Disclosures about Market Risk,
including other foreign exchange risks associated with Dresden Fab 30, reference
is made to Part II, Item 7A, Quantitative and Qualitative Disclosures about
Market Risk, in our Annual Report on Form 10-K for the year ended December 26,
1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SECURITIES CLASS ACTION LITIGATION. Between March 10, 1999 and April 22, 1999,
AMD and certain individual officers of AMD were named as defendants in a number
of lawsuits that have been consolidated under Ellis Investment Co., Ltd., et al
v. Advanced Micro Devices, Inc., et al. Following appointment of lead counsel,
the case was re-named Hall et al. v. Advanced Micro Devices, Inc., et al. The
class action complaints allege various violations of federal securities law,
including violations of Section 10(b) of the Exchange Act and Rule 10b-5
promulgated thereunder. Most of the complaints purportedly were filed on behalf
of all persons, other than the defendants, who purchased or otherwise acquired
common stock of AMD during the period from October 6, 1998 to March 8, 1999.
Two of the complaints allege a class period from July 13, 1998 to March 9, 1999.
All of the complaints allege that materially misleading statements and/or
material omissions were made by AMD and certain individual officers of AMD
concerning design and production problems relating to high-speed versions of the
AMD-K6(R)-2 and AMD-K6-III microprocessors. Based upon information presently
known to management, we do not believe that the ultimate resolution of these
lawsuits will have a material adverse effect on our business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
1. A Current Report on Form 8-K dated January 19, 2000 reporting under
Item 5- Other Events was filed announcing AMD's fourth quarter earnings.
2. A Current Report on Form 8-K dated February 11, 2000 reporting under
Item 5- Other Events was filed announcing expected sales in the first
quarter.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCED MICRO DEVICES, INC.
Date: May 12, 2000 By: /s/ Francis P. Barton
----------------------
Francis P. Barton
Senior Vice President, Chief Financial Officer
Signing on behalf of the registrant and as
the principal accounting officer
34
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