AMD 2003 Annual Report Download - page 99

Table of Contents
NOTE 14: Restructuring and Other Special Charges
2002 Restructuring Plan
In December 2002, the Company began implementing a restructuring plan (the 2002 Restructuring Plan) to further align its cost structure to industry
conditions resulting from weak customer demand and industry-wide excess inventory.
As part of this plan, and as a result of the Company’s agreement with IBM to jointly develop future generations of the Company’s logic process
technology, the Company ceased logic research and development in its Submicron Development Center (SDC) in Sunnyvale, California and eliminated most of
those related resources, including the sale or abandonment of certain equipment used in the SDC.
The 2002 Restructuring Plan resulted in the consolidation of facilities, primarily at the Company’s Sunnyvale, California site and at sales offices
worldwide. The Company vacated, and is attempting to sublease, certain facilities currently occupied under long-term operating leases through 2013. The
Company also terminated the implementation of certain partially completed enterprise resource planning (ERP) software and other information technology
implementation activities, resulting in the abandonment of certain software, hardware and capitalized development costs.
Pursuant to the 2002 Restructuring Plan, the Company recorded restructuring costs and other special charges of $330.6 million in the fourth quarter of
2002, consisting primarily of $68.8 million of anticipated severance and fringe benefit costs, an asset impairment charge of $32.5 million relating to a license that
has no future use because of its association with discontinued logic process development activities, asset impairment charges of $30.6 million resulting from the
abandonment of equipment previously used in logic process development and manufacturing activities, anticipated exit costs of $138.9 million almost wholly
related to vacating and consolidating the Company’s facilities and a charge of $55.5 million resulting from the abandonment of partially completed ERP and
other information technology implementation activities.
During 2003, management approved the sale of additional equipment, primarily equipment used in the SDC, that was identified as no longer useful in the
Company’s operations. As a result, the Company recorded approximately $11 million of asset impairment charges in the first quarter of 2003, including $3.3
million of charges for decommission costs necessary to complete the sale of the equipment.
During 2003, the Company revised its estimates of the number of positions to be eliminated pursuant to the 2002 Restructuring Plan from 2,000 to 1,800 in
response to the additional resources required due to the FASL LLC transaction. As a result, the Company reversed $8.9 million of the estimated severance and
fringe benefit accrual. As of December 28, 2003, 1,736 employees had been terminated pursuant to the 2002 Restructuring Plan resulting in cumulative cash
payments of $53 million in severance and employee benefit costs. The remaining accrual of approximately $6.7 million represents the severance benefit cost
obligations for individuals whose employments terminated but who elected to defer receipt of severance benefits until 2004 and for employees who were
pre-notified in 2003 of their employment terminations, which will occur in 2004.
With exception of the exit costs, which are payable through 2011, the Company has substantially completed the activities associated with the 2002
Restructuring Plan as of December 28, 2003.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004