AMD 1999 Annual Report Download - page 124

The $38 million in restructuring and other special charges consisted of the
following:
. $25 million for the closure of a submicron development laboratory facility
in the SDC, the write-off of certain equipment in the SDC and the write-off of
equipment taken out of service in Fab 25 related to the 0.35-micron wafer
fabrication process;
. $6 million for the write-off of capitalized costs related to discontinued
system projects;
. $3 million for the disposal of equipment taken out of service in the SDC;
. $3 million for severance and employee benefits for 178 terminated employees
in the Information Technology department, the SDC and certain sales offices; and
. $1 million for costs of leases for vacated and unused sales offices.
As of December 26, 1999, the total cash outlay for restructuring and other
special charges was approximately $5 million. We anticipate that accruals of $1
million for sales office facilities will be utilized over the period through
lease terminations in the second quarter of 2002. Accruals of $2 million for the
disconnection and removal costs for equipment that has been taken out of service
will be fully discharged by the end of the first quarter of 2000. The payments
of the accruals are expected to be funded by cash from operations.
The remaining $30 million of restructuring and other special charges
consisted of non-cash charges primarily for asset write-offs. As a result of the
restructuring and other special charges, we expect to save a total of $30
million in depreciation expense over the next three to five years.
On June 15, 1999, we completed the sale of Vantis to Lattice Semiconductor
Corporation for approximately $500 million in cash. The actual cash received was
net of Vantis' cash and cash equivalent balance of approximately $46 million as
of the closing of the sale. Our pretax gain on the sale of Vantis was $432
million. The gain was computed based on Vantis' net assets as of June 15, 1999
and other direct expenses related to the sale. The applicable tax rate on the
gain was 40 percent, resulting in an after-tax gain of $259 million.
A litigation settlement of approximately $12 million was recorded in the
first quarter of 1998 for the settlement of a class action securities lawsuit
against us and certain of our current and former officers and directors. We paid
the settlement during the third quarter of 1998.
Interest income and other, net of $32 million in 1999 decreased seven
percent compared to 1998 primarily as a result of lower interest income from
lower invested cash balances during 1999. Interest expense of $69 million in
1999 increased four percent compared to 1998 due to a full year of interest
expense in 1999 on the $517.5 million of Convertible Subordinated Notes sold in
May 1998 (the Convertible Subordinated Notes). This increase was partially
offset by lower interest expense on the $250 million secured term loan received
under the 1996 syndicated bank loan agreement (the Credit Agreement), which was
paid in full in July 1999, as well as higher capitalized interest related to the
facilitization of Fab 25 and Dresden Fab 30.
Interest expense of $66 million in 1998 increased 47 percent compared to
1997 due to the increase in debt balances, including the Convertible
Subordinated Notes. There was no significant change in interest income and
other, net in 1998 compared to 1997.
Income Tax
We recorded an income tax provision of $167 million in 1999, and tax benefits of
$92 million in 1998 and $55 million in 1997. Excluding the gain on the sale of
Vantis and restructuring charges, the effective tax rate for the year ended
December 26, 1999 was zero. The effective tax benefit rate was approximately 44
percent for 1998 and 55 percent for 1997. No tax benefits were recorded for the
operating losses incurred during 1999 because the deferred tax assets arising
from such losses were offset by a valuation allowance. The tax benefit rates in
1998 and 1997 were greater than the federal statutory rate due to fixed tax
benefits that increase the benefit rate in a loss year.
We had net deferred tax liabilities of $5 million as of December 26, 1999
representing certain foreign deferred taxes.
Other Items
International sales as a percent of net sales were 60 percent in 1999, 55
percent in 1998 and 57 percent in 1997. During 1999, approximately eight percent
of our net sales were denominated in foreign currencies. We do not have sales
denominated in local currencies in those countries which have highly
inflationary economies (as defined by generally accepted accounting principles).
The impact on our operating results from changes in foreign currency rates
individually and in the aggregate has not been material.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000