AMD 2001 Annual Report Download - page 204

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
We anticipate that the remaining accrual related to sales office facilities will
be utilized over the period through lease terminations in the second quarter of
2002.
We sold 90 percent of Legerity to Francisco Partners, L.P. for approximately
$375 million in cash, effective July 31, 2000. Prior to the sale, Legerity was a
wholly owned subsidiary of AMD, selling voice communications products. Our
pre-tax gain on the sale of Legerity was $337 million. The gain was computed
based on the excess of the consideration received for Legerity's net assets as
of July 31, 2000, less direct expenses related to the sale. The applicable tax
rate on the gain was 37 percent, resulting in an after-tax gain of $212 million.
On June 15, 1999, we sold Vantis to Lattice for approximately $500 million in
cash. Our pre-tax gain on the sale of Vantis was $432 million. The gain was
computed based on the excess of the consideration received for Vantis' net
assets as of June 15, 1999, less 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.
Interest and other income, net, decreased $60 million or 70 percent in 2001
compared to 2000 primarily due to $27 million in charges for
other-than-temporary declines in our equity investments, a $14 million decrease
in interest income due to a decrease in short-term investments and a $9 million
decrease due to the absence of a gain on the sale of real property.
Interest expense increased slightly in 2001 compared to 2000 due to a decrease
in capitalized interest expense attributable to the substantial completion of
Dresden Fab 30 and increased borrowings by AMD Saxony Manufacturing GmbH (AMD
Saxony) under the Dresden Loan Agreements, offset by the effect of redeeming our
6% convertible subordinated notes in May 2001.
Interest and other income, net, increased $54 million or 168 percent in 2000
compared to 1999 primarily due to higher average cash and short- and long-term
investment balances.
Interest expense decreased $9 million or 13 percent in 2000 compared to 1999
primarily due to lower average debt balances resulting from retirement of a
portion of our 11% Senior Secured Notes due 2003 (Senior Secured Notes) in
August 2000, offset by a reduction of capitalized interest as a result of the
completion of the initial phase of Dresden Fab 30.
Income Tax
We recorded an income tax benefit of $14 million in 2001 and income tax
provisions of $257 million in 2000 and $167 million 1999. The effective benefit
rate of 15.4 percent for the year ended December 30, 2001 was less than the
statutory rate because of a 24 percent tax benefit rate on the restructuring
charges, reflecting the allocation of the charges between U.S. and foreign
low-taxed jurisdictions, and a provision for U.S. taxes on certain previously
undistributed earnings of low-taxed foreign subsidiaries. The effective tax rate
was 20.5 percent for the year ended December 31, 2000. The effective tax rate,
excluding the gain on the sale of Legerity, was 14.5 percent reflecting the
benefit of realizing previously reserved deferred tax assets. The tax rate
recorded in 2000 attributable to the gain on the sale of Legerity was 37
percent. The effective tax rate was 227 percent for the year ended December 26,
1999. The effective tax rate, excluding the gain on the sale of Vantis and
restructuring charges, was zero. This reflected the establishment of reserves
against our deferred tax assets due to current and prior operating losses. The
tax rate recorded in 1999 attributable to the gain on the sale of Vantis net of
restructuring charges was 39 percent.
We had net deferred tax assets of $51 million as of December 30, 2001.
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002