AMD 2014 Annual Report Download - page 49

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The WSA terminates no later than March 2, 2024. GF has agreed to use commercially reasonable efforts to
assist us to transition the supply of products to another provider and to continue to fulfill purchase orders for up
to two years following the termination or expiration of the WSA. During the transition period, pricing for
microprocessor and APU products will remain as set forth in the WSA, but our purchase commitments to GF will
no longer apply.
On April 2, 2011, we entered into a first amendment to the WSA. The primary effect of the first amendment
was to change the pricing methodology applicable to wafers delivered in 2011 for our microprocessors and APU
products. The first amendment also modified our existing commitments regarding the production of certain GPU
and chipset products at GF.
On March 4, 2012, we entered into a second amendment to the WSA. The primary effect of the second
amendment was to modify certain pricing and other terms of the WSA applicable to wafers for our
microprocessor and APU products, to be delivered by GF to us during 2012. Under the terms of the second
amendment to the WSA, GF granted us rights to contract with another wafer foundry supplier with respect to
specified 28nm products for a specified period of time (the limited waiver of exclusivity). In consideration for the
limited waiver of exclusivity, we recorded a charge of $703 million in the first quarter of 2012 consisting of a
$425 million cash payment and a $278 million non-cash charge representing the transfer to GF of our remaining
investment in GF at fair value.
On December 6, 2012, we entered into a third amendment to the WSA. Pursuant to the third amendment, we
modified our wafer purchase commitments for the fourth quarter of 2012 made pursuant to the second
amendment to the WSA. In addition, we agreed to certain pricing and other terms of the WSA applicable to
wafers for our microprocessor and APU products, to be delivered by GF to us from the fourth quarter of 2012
through December 31, 2013. Pursuant to the third amendment, GF agreed to waive a portion of our wafer
purchase commitments for the fourth quarter of 2012. In consideration for this waiver, we agreed to pay GF a fee
of $320 million. As a result, we recorded a lower of cost or market charge of $273 million for the write-down of
inventory to its market value in the fourth quarter of 2012. The cash impact of this $320 million fee was paid
over several quarters, with $80 million paid on December 28, 2012, $40 million paid on April 1, 2013 and $200
million paid on December 31, 2013.
On March 30, 2014, we entered into a fourth amendment to the WSA. The primary effect of the fourth
amendment was to establish volume purchase commitments and fixed pricing for the 2014 calendar year as well
as to modify certain other terms of the WSA applicable to wafers for some of our microprocessor, graphics
processor and semi-custom game console products to be delivered by GF to us during the 2014 calendar year.
We are currently in the process of negotiating a fifth amendment to the WSA, and we expect that our future
purchases from GF will continue to be material.
Our total purchases from GF related to wafer manufacturing and research and development activities for
2014, 2013 and 2012 were $1.0 billion, $1.0 billion and $1.2 billion, respectively.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of
our financial statements requires us to make estimates and judgments that affect the reported amounts in our
consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our
revenue, inventories, goodwill impairments and income taxes. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities. Although actual results
have historically been reasonably consistent with management’s expectations, the actual results may differ from
these estimates or our estimates may be affected by different assumptions or conditions.
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