AMD 2011 Annual Report Download - page 46

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approximately $200 million principal amount in 2011, and we generated non-GAAP adjusted free cash flow,
which we describe in more detail in the “Financial Condition – Liquidity” section below, of $528 million, a
significant improvement compared to non-GAAP adjusted free cash flow of $355 million in 2010.
However, our progress during 2011 was tempered by supply constraints related to our 32nm microprocessor
products. We took steps during the course of the year to better manage our relationships with our third-party
wafer foundries, and during the second half of 2011, 32nm yields and performance have improved.
Net revenue for 2011 was $6.6 billion, relatively flat compared to net revenue of $6.5 billion for 2010.
Gross margin, as a percentage of net revenue for 2011 was 45%, a 1% decrease compared to 46% in 2010. Gross
margin in 2011 included a $24 million charge recorded in connection with a payment to GF, primarily related to
certain GF manufacturing assets, and a charge of approximately $5 million related to a legal settlement. Gross
margin in 2010 included a $69 million benefit related to the deconsolidation of GF. Absent the effects of these
events, which we believe are not indicative of our ongoing operating performance, our gross margin would have
been 45% in each of 2011 and 2010. Beginning in the first quarter of 2011, we changed our method of
accounting for our ownership interest in GF from the equity method to the cost method of accounting. As a
result, we no longer recognize any share of GF’s net income or loss in our consolidated statements of operations.
GLOBALFOUNDRIES
Formation and Accounting in 2009
On March 2, 2009, we consummated the transactions contemplated by the Master Transaction Agreement
among us, ATIC, and WCH, pursuant to which we formed GF. At the closing of these transactions (the Closing),
we contributed certain assets and liabilities to GF, including, among other things, shares of the groups of German
subsidiaries owning our manufacturing facilities, certain manufacturing assets, real property, tangible personal
property, employees, inventories, books and records, a portion of our patent portfolio, intellectual property and
technology, rights under certain material contracts and authorizations necessary for GF to carry on its business.
In exchange we received GF securities consisting of one Class A Ordinary Share, 1,090,950 Class A Preferred
Shares and 700,000 Class B Preferred Shares, and the assumption of certain liabilities by GF. ATIC contributed
$1.4 billion of cash to GF in exchange for GF securities consisting of one Class A Ordinary Share, 218,190
Class A Preferred Shares, 172,760 Class B Preferred Shares, $202 million aggregate principal amount of 4%
Class A Subordinated Convertible Notes (the Class A Notes) and $807 million aggregate principal amount of
11% Class B Subordinated Convertible Notes (the Class B Notes), and transferred $700 million of cash to us in
exchange for the transfer by us of 700,000 GF Class B Preferred Shares.
At the Closing, we also issued to WCH, for an aggregate purchase price of $125 million, 58 million shares
of our common stock and warrants to purchase 35 million shares of our common stock at an exercise price of
$0.01 per share (the Warrants). The Warrants are currently exercisable and expire on March 2, 2019. The shares
issuable under these Warrants have been included in our basic and diluted earnings per share calculation since
the third quarter of 2009 when the Warrants became exercisable.
Under the Master Transaction Agreement, the cash consideration that WCH and ATIC paid and the
securities that they received are as follows:
• Cash paid by WCH to AMD for the purchase of 58 million shares of AMD common stock and
Warrants: $125 million;
• Cash paid by ATIC to GF for the aggregate principal amount of Class A Notes, which are convertible
into 201,810 Class A Preferred Shares: $202 million;
• Cash paid by ATIC to GF for the aggregate principal amount of Class B Notes, which are convertible
into 807,240 Class B Preferred Shares: $807 million;
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