AMD 2004 Annual Report Download - page 35

Table of Contents
Interest Income and Other, Net
We recorded a net charge of interest income and other, net of $31 million in 2004 compared to interest income and other, net of approximately $21 million
in 2003. This charge was due primarily to a charge of approximately $32 million related to a series of transactions pursuant to which we exchanged $201 million
of our 4.50% Convertible Senior Notes due 2007 (the 4.50% Notes) for our common stock. The charge represented the difference between the fair value of the
common stock issued in the transactions and the fair value of common stock issuable pursuant to the original conversion terms of the 4.50% Notes. In addition,
interest income and other, net, in 2004 included a charge of approximately $14 million in connection with our prepayment of the Dresden Term Loan, and a loss
of approximately $6 million during the second quarter of 2004 resulting from the mark-to-market of certain foreign currency forward contracts that we used as
economic hedges of forecasted capital contributions to AMD Fab 36 KG, which do not qualify as accounting hedges.
Interest income and other, net, of approximately $21 million in 2003 decreased 34 percent from $32 million in 2002. The decrease was primarily due to a
decrease in investment income of $16 million caused by lower cash equivalents and short-term investment balances and a charge of $2.3 million in 2003 for
other-than-temporary declines in our equity investments. This decrease was offset by a gain of approximately $6 million based on the difference between the
carrying value and fair value of assets contributed by us to Spansion. Fujitsu now owns a 40 percent interest in these assets. The gain on the deemed sale of these
assets to Spansion was limited to the difference in carrying value of our interest in the assets following the completion of the transaction and the carrying value of
the assets immediately prior to the transaction.
Interest Expense
Interest expense of $112 million in 2004 was flat compared to $110 million in 2003. On October 29, 2004, we sold $600 million of 7.75% Senior Notes
due 2012 (the 7.75% Notes). Interest accrued on the 7.75% Notes was partially offset by the absence of interest expense, as of November 2, 2004, for amounts
outstanding under the Dresden Term Loan, which we prepaid on November 2, 2004, and the absence of interest expense with respect to $201 million of our
4.50% Notes, which we exchanged for our common stock in a series of transactions during the fourth quarter of 2004. We also capitalized interest during 2004 of
$9 million in connection with our Fab 36 construction activities in Dresden, Germany.
Interest expense of $110 million in 2003 increased 55 percent compared to $71 million in 2002. The increase was due primarily to annual interest charges
of $18 million on our 4.50% Notes sold in November 2002, $5 million of interest on $110 million outstanding under our revolving credit facility, and the
Spansion transaction, which resulted in additional interest expense of approximately $9 million in 2003. In addition, in 2002 we capitalized interest of $10.7
million on continued expansion and facilitization of Fabs 25 and 30 compared to $1.5 million in 2003.
Income Taxes
We recorded an income tax provision of $6 million in 2004, $3 million in 2003 and $45 million in 2002. The income tax provision in 2004 primarily
reflects U.S. income taxes, including taxes on the dividends repatriated from controlled foreign corporations, partially offset by foreign tax benefits because of
losses in certain foreign jurisdictions. The income tax provision in 2003 primarily reflected income tax expense generated in certain foreign jurisdictions, offset
by a benefit of a U.S. federal tax refund from a carryback claim we filed in 2003. The 2002 income tax provision was recorded primarily for taxes due on income
generated in certain foreign tax jurisdictions and the establishment of a valuation allowance against the remainder of our U.S. deferred tax assets, net of U.S.
deferred tax liabilities in the fourth quarter, due to continuing substantial operating losses in the United States.
As of December 26, 2004, we had federal and state net operating loss carryforwards of approximately $930 million and $45 million. We also had foreign
loss carryforwards of approximately $88 million. We also had
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005