AMD 2006 Annual Report Download - page 110

Table of Contents
The fair value of the Company’s common stock issued was determined in accordance with EITF Issue No. 99-12, Determination of the Measurement Date
for the Market Price of Acquirer Securities Issued in a Purchase Business Combination, which reflected the average of the closing prices of the Company’s
common stock on the NYSE for the three trading days prior to October 25, 2006. The fair value of the Company’s options and restricted stock units was
determined under SFAS 123R. The vested portion of these options and restricted stock units was valued at approximately $144 million. The unvested portion
valued at approximately $69 million will be amortized over the future remaining vesting periods. The stock compensation expense for 2006 related to these stock
options and restricted stock units was approximately $10 million.
Preliminary Purchase Price Allocation
The Company accounted for the acquisition using the purchase method of accounting in accordance with the provisions of SFAS No. 141, Business
Combinations (SFAS141). The Company included the operations of ATI in its consolidated financial statements from October 25, 2006 through December 31,
2006. The total purchase price was preliminarily allocated to ATI’s tangible and identifiable intangible assets and liabilities based on their estimated fair values
as of October 24, 2006 as set forth below:
(In millions)
Cash and marketable securities $ 500
Accounts receivable 290
Inventories 431
Goodwill 3,217
Developed product technology 752
Game console royalty agreement 147
Customer relationships 257
Trademarks and trade names 62
Customer backlog 36
In-process research and development 416
Property, plant and equipment 143
Other assets 25
Accounts payable and other liabilities (631)
Reserves for exit costs (8)
Debt and capital lease obligations (31)
Deferred revenues (2)
Total purchase price $ 5,604
The primary areas of purchase price allocation that are not yet finalized consist of ATI-related exit costs, certain liabilities assumed, certain legal matters
as discussed in Note 17 and tax-related contingencies. Resolution of ATI tax-related contingencies for amounts different than amounts recorded as of the close of
the acquisition will result in adjustments to goodwill. Adjustments to amounts recorded as of the close of the acquisition related to the finalization of ATI-related
exit costs and resolution of certain ATI legal contingencies will result in adjustments to goodwill or will be recorded in post-acquisition operating results,
depending on the nature and timing of such adjustments.
Management performed an analysis to determine the fair value of each tangible and identifiable intangible asset, including the portion of the purchase price
attributable to acquired in-process research and development projects.
In-Process Research and Development
Of the total purchase price, approximately $416 million was allocated to in-process research and development (IPR&D) and was expensed in the fourth
quarter of fiscal year of 2006. Projects that qualify as
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007