AMD 2011 Annual Report Download - page 90

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During 2010, ATIC contributed $930 million of cash to GF in exchange for GF securities consisting of
444,313 Class A Preferred shares and 617,695 Class B Preferred shares. The Company did not participate in the
fundings. As a result, its ownership interest in GF’s Class A Preferred shares decreased from approximately 83%
as of December 26, 2009 to approximately 62% as of December 25, 2010, and the Company’s ownership interest
in GF was approximately 23% on a fully diluted basis. These contributions resulted in an aggregate gain on the
Company’s ownership interest dilution of $232 million, which was recorded as part of the equity in net loss of
investee line item on the consolidated statement of operations.
Equity Method
In applying the equity method of accounting for 2010, the equity in net loss of investee primarily consists of
the Company’s proportionate share of GF’s losses for the period based on the Company’s ownership percentage
of GF’s Class A Preferred Shares, the Company’s portion of the non-cash accretion on GF’s Class B Preferred
Shares, the elimination of intercompany profit, reflecting the mark-up on inventory that remains on the
Company’s consolidated balance sheet at the end of the period, the amortization of basis differences identified
from the purchase price allocation process based on the fair value of GF upon deconsolidation, and, to the extent
applicable, the gain or loss on dilution of the Company’s ownership interest as a result of capital infusions into
GF by ATIC.
GF consolidated Chartered in 2010 because it was deemed to be the primary beneficiary of Chartered
(GLOBALFOUNDRIES Singapore Pte. Ltd. or GFS). For the purposes of the Company’s application of the
equity method of accounting, the Company recorded its share of the GF results excluding the results of Chartered
because GF did not have an equity ownership interest in Chartered in 2010.
As of December 25, 2010, the Company’s investment in GF was reflected as a liability in the consolidated
balance sheet with a balance of $7 million. This amount primarily reflects the accumulated loss that the Company
has recognized in excess of the value of its investment in GF since the Company began accounting for GF under
the equity method of accounting. Based on the current structure of the Company’s Wafer Supply Agreement, its
guarantee of certain GF indebtedness, its ownership interest in GF and governance relationship with GF, the
Company concluded that it was required to continue to record its share of the equity loss in excess of the carrying
amount of its investment balance throughout 2010.
Contribution Agreement, Funding and Accounting in 2011; Amended Shareholders’, Funding and Wafer
Supply Agreements
GLOBALFOUNDRIES Singapore Pte. Ltd. (GFS, formerly Chartered) Contribution in Fiscal 2011
On December 27, 2010, pursuant to the Contribution Agreement, ATIC II, contributed all of the outstanding
Ordinary Shares of GFS to GF in exchange for 2,808,981 newly issued shares of GF Class A Preferred Shares.
The issuance of Class A Preferred Shares to ATIC International diluted the Company’s ownership interest in GF
from 23% to 14% on a fully diluted basis and from 34% to 18% on a voting basis. As the result of this dilution,
during the first quarter of 2011 and the year ended December 31, 2011, the Company recognized a non-cash gain
of approximately $492 million, net of certain transaction related charges, in Equity income (loss) and dilution
gain in investee, net. In connection with the Company’s reduced ownership interest in GF, the number of
AMD-designated directors on GF’s board decreased from two to one.
In connection with this contribution, the Company amended and restated the Shareholders’ Agreement and
the Funding Agreement.
Amended Shareholders’ Agreement
On December 27, 2010, the Company amended the Shareholders’ Agreement. Under the Amended and
Restated Shareholders’ Agreement, subject to certain exceptions set forth in the agreement, the Company has the
right to designate one representative to the GF board of directors, which continues for two years following the
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