AMD 2003 Annual Report Download - page 75

Table of Contents
interest in the net assets contributed by Fujitsu and, accordingly, 60 percent of the carrying values of these net assets were recorded based on the net assets’ fair
value. The remaining 40 percent interest in these net assets was recorded at historical carrying value.
As part of the transaction, the Company and Fujitsu entered into various service contracts with FASL LLC. The Company will continue to provide, among
other things, certain information technology, facilities, logistics, legal, tax, finance, human resources, and environmental health and safety services to FASL
LLC. Under these contracts, Fujitsu will provide, among other things, certain information technology, research and development, quality assurance, insurance,
facilities, environmental, and human resources services primarily to FASL LLC’s manufacturing facilities in Japan. Fees earned by the Company and incurred by
FASL LLC for these services are eliminated in consolidation.
The Company also loaned FASL LLC $120 million pursuant to a promissory note. The note has a term of three years and bears interest at LIBOR plus
four percent but is eliminated in the Company’s financial statements upon consolidation of FASL LLC. Fujitsu also loaned FASL LLC $40 million pursuant to a
promissory note. The note has a term of three years and is repayable in four equal payments, including interest, on September 30, 2005, December 31, 2005,
March 31, 2006 and June 30, 2006. The note bears interest at LIBOR plus four percent (5.14 percent at December 28, 2003) to be repaid quarterly.
The following table summarizes the final purchase price allocation to the assets and liabilities of FASL LLC at June 30, 2003, the effective date of the
transaction, including the fair values of the assets and liabilities attributable to the Manufacturing Joint Venture, the Company’s contributions and Fujitsu’s
contributions. Upon consolidation, all amounts pertaining to Fujitsu’s interest in FASL LLC are reported as minority interest on the accompanying financial
statements. Management considered a number of factors, including independent appraisals and valuations, in determining the final purchase price allocation.
Manufacturing
Joint Venture
AMD’s
Contributions
Fujitsu’s
Contributions Total
(Dollars in millions)
Cash $ — $ 122 $ 189 $ 311
Inventory 55 220 128 403
Fixed assets 963 1,017 33 2,013
Intangible assets 46 24 1 71
Debt and capital lease obligations (148) (609) (40) (797)
Other assets (liabilities), net (100) (2) (1) (103)
Fair value of net assets exchanged/acquired on acquisition date 816 772 310 1,898
Percent of fair value recorded in the purchase business
combination 10.008% 40% 60%
Fair value recorded $ 82 $ 309 $ 186 $ 577
Net book value of contributions on acquisition date 762 629 293 1,684
Percent of book value recorded in the purchase business
combination 89.992% 60% 40%
Historical carrying value recorded $ 686 $ 377 $ 117 $ 1,180
Initial purchase combination basis of net assets acquired $ 768 $ 686 $ 303 $ 1,757
The intangible assets recorded consist of the estimated fair value of the manufacturing and product distribution contracts between FASL LLC and the
Company and FASL LLC and Fujitsu, which are determined to have an estimated useful life of four years, as well as the estimated fair value of the assembled
work force, which is reflected as goodwill. No value was assigned to in-process research and development because the Company and Fujitsu performed all
research and development activities for the Manufacturing Joint Venture,
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004