AMD 2004 Annual Report Download - page 85

Table of Contents
NOTE 3: Related-Party Transactions
The Company and Fujitsu Limited formed FASL LLC, later renamed Spansion LLC, effective June 30, 2003. Spansion LLC is headquartered in
Sunnyvale, California, and its manufacturing, research and assembly operations are in the United States and Asia. As the Company has a 60 percent controlling
equity interest in Spansion LLC, it began consolidating the results of Spansion LLC’s operations on June 30, 2003, the effective date of the transaction. The
Company is accounting for the Spansion LLC transaction as a partial step acquisition and purchase business combination under the provision for SFAS 141,
Business Combinations, and EITF Consensus No. 01-02, “Interpretations of APB Opinion No. 29.”
As part of the formation of Spansion LLC, both the Company and Fujitsu contributed their respective investments in Fujitsu AMD Semiconductor
Limited, their former Manufacturing Joint Venture, (formerly referred to as FASL) to the new venture. As a result of this transaction, the Company acquired an
incremental 10.008 percent controlling interest in the net assets of the Manufacturing Joint Venture (the difference between the Company’s 60 percent ownership
of these net assets after their contribution to Spansion LLC and its previous 49.992 percent ownership in these same net assets prior to their contribution to
Spansion LLC). Accordingly, the Company recorded its acquired incremental 10.008 percent interest in the Manufacturing Joint Venture’s contributed net assets
based on the assets’ fair value on the effective date of the transaction. The remaining 89.992 percent interest in the Manufacturing Joint Venture’s net assets was
recorded at historical carrying value.
The Company also contributed its Flash memory inventory, its manufacturing facility located in Austin, Texas (Fab 25), its Flash memory research and
development facility in Sunnyvale, California, and its Flash memory assembly and test facilities in Thailand, Malaysia and Suzhou, China to Spansion LLC. The
Company recorded its continuing 60 percent interest in these net assets at their historical carrying values. The remaining 40 percent interest in these net assets
was treated as being sold to Fujitsu and, accordingly, 40 percent of the carrying values of these net assets were adjusted to and recorded based on the net assets’
fair value on the effective date of the transaction. During the fourth quarter of 2003, the Company completed its determination of the fair value of the assets and
liabilities of Spansion LLC. The excess of the fair value of the net assets treated as sold over their historical carrying value was approximately $57 million.
However, the gain of approximately six million dollars recognized by the Company and recorded in interest income and other, net, was limited to the excess of
the fair value of the consideration received by the Company in the form of the Company’s 60 percent equity interest in Fujitsu’s contributions and the
incremental 10.008 percent interest in the former Manufacturing Joint Venture’s net assets less direct costs of the transaction, over the 40 percent interest in the
book value of the net assets contributed by the Company to Spansion LLC.
Fujitsu also contributed its Flash memory division to Spansion LLC, including related inventory, cash, and its Flash memory assembly and test facility in
Malaysia. The Company is deemed to have acquired a 60 percent interest in the net assets contributed by Fujitsu and, accordingly, 60 percent of the carrying
values of these net assets were recorded based on the net assets’ fair value. The remaining 40 percent interest in these net assets was recorded at historical
carrying value.
As part of the transaction, the Company and Fujitsu entered into various service contracts with Spansion LLC. The Company will continue to provide,
among other things, certain information technology, facilities, logistics, legal, tax, finance, human resources, and environmental health and safety services to
Spansion LLC. Under these contracts, Fujitsu will provide, among other things, certain information technology, research and development, quality assurance,
insurance, facilities, environmental, and human resources services primarily to Spansion LLC’s manufacturing facilities in Japan. Fees earned by the Company
and incurred by Spansion LLC for these services are eliminated in consolidation.
In connection with the above transaction, Fujitsu loaned Spansion LLC $40 million pursuant to a promissory note. The note has a term of three years and
is repayable in four equal payments, on September 30, 2005, December 31, 2005, March 31, 2006 and June 30, 2006. The note bears interest at LIBOR plus four
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005