AMD 2009 Annual Report Download - page 54

current or future senior indebtedness of GF. The Class B Notes are not redeemable by GF without the note
holder’s consent. The Class B Notes are convertible, in whole or in part, in multiples of $1,000, into GF Class B
Preferred Shares at the option of the holder at any time prior to the close of business on the business day
immediately preceding the maturity date at the conversion ratio in effect on the date of conversion. The Class B
Notes mature on March 2, 2019; however they automatically convert into GF Class B Preferred Shares upon the
earlier of (i) a GF IPO, (ii) certain change of control transactions of GF or (iii) the close of business on the
business day immediately preceding the maturity date. As of December 26, 2009, the aggregate principal amount
of Class B Notes was $1,015 million.
AMD, ATIC and GF are also parties to a Shareholders’ Agreement, a Funding Agreement and a Wafer
Supply Agreement, certain terms of each of which are summarized in Part I, Item 1—Business, above.
Based on the structure of the GF transaction and the guidance on accounting for interests in variable interest
entities during 2009, GF was deemed a variable-interest entity, and we were deemed to be the primary
beneficiary. Therefore, we were required to consolidate the accounts of GF from March 2, 2009 through
December 26, 2009. For this period, ATIC’s noncontrolling interest, represented by its equity interests in GF, is
presented outside of stockholders’ equity in the consolidated balance sheet due to ATIC’s right to put those
securities back to us in the event of a change of control of AMD during the two years following the Closing. Our
net income (loss) attributable to common stockholders per share consists of consolidated net income (loss), as
adjusted for (i) the portion of GF’s earnings or losses attributable to ATIC, which is based on ATIC’s
proportional ownership interest in GF’s Class A Preferred Shares (16.7 percent as of December 26, 2009), and
(ii) the non-cash accretion on GF’s Class B Preferred Shares attributable to us, based on the proportional
ownership interest of GF’s Class A Preferred Shares (83.3 percent as of December 26, 2009).
On December 18, 2009, ATIC II, an affiliate of ATIC, acquired Chartered Semiconductor Manufacturing
Ltd. (Chartered). On December 28, 2009, with our consent, ATIC II, Chartered and GF entered into a
Management and Operating Agreement (the MOA), which provides for the joint management and operation of
GF and Chartered, thereby allowing GF and Chartered to share costs, take advantage of operating synergies and
market wafer fabrication services on a collective basis. In order to allow for the signing of the MOA on
December 28, 2009 prior to obtaining any required regulatory approvals, we agreed to irrevocably waive rights
under the Shareholders Agreement with respect to certain matters that require unanimous GF board approval.
Additionally, if any such matters come before the GF board, we agreed that our designated GF directors will vote
in the same manner as the majority of ATIC-designated GF board members voting on any such matters. As a
result of waiving these approval rights, as of December 28, 2009, for financial reporting purposes we no longer
shared the control with ATIC over GF.
In June 2009, the FASB issued an amendment to improve financial reporting by enterprises involved with
variable interest entities. This new guidance became effective for us beginning the first day of fiscal 2010. Under
the new guidance, the investor who is deemed to both (i) have the power to direct the activities of the variable
interest entity that most significantly impacts the variable interest entity’s economic performance and (ii) be
exposed to losses and returns, will be the primary beneficiary who should then consolidate the variable interest
entity. We evaluated whether the governance changes described above would, pursuant to the new guidance,
affect our consolidation of GF. We considered the purpose and design of GF, the activities of GF that most
significantly affect the economic performance of GF and the concept of “who has the power,” as contemplated
by the new guidance. Based on the results of this evaluation and in light of the governance changes referenced
above whereby we now only have protective rights relative to the operations of GF, we concluded that ATIC is
the party who has the power to direct the activities of GF that most significantly impact GF’s performance and is,
therefore, the primary beneficiary of GF. Accordingly, beginning fiscal 2010, we will deconsolidate GF and
account for GF under the equity method of accounting. We will continue applying the equity method of
accounting until we are deemed to no longer have the ability to significantly influence the operations of GF.
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