AMD 2006 Annual Report Download - page 114

Table of Contents
In November 2006, the Company sold 21,000,000 shares of its Spansion Inc. Class A common stock in an underwritten public offering (the “Offering”).
The Company received $278 million in net proceeds from the Offering. The Company realized a gain of $6 million from the sale, which was included in the
caption, “Equity in net loss of Spansion, Inc. and other,” on the Company’s consolidated statements of operations. As a result of the Offering, the Company
owned a total of 27,529,403 shares, or approximately 21 percent, of Spansion’s outstanding common stock. The Company continues to use the equity method of
accounting to reflect its share of Spansion’s results of operations.
To the extent that the Company’s ownership in Spansion decreases in the future whether it is caused by disposal of its ownership interest or by Spansion’s
issuance of additional common stock, the Company would record either a gain or a loss on such further dilution depending on Spansion’s book value and fair
value at that time, which could have a material effect on the Company’s results of operations in the period in which this ownership dilution occurs.
In addition, prior to Spansion’s IPO, as required by SFAS 142 the Company performed its annual goodwill impairment analysis associated with Spansion
related goodwill during the fourth quarter of 2005. Goodwill in the amount of approximately $16 million was originally recorded in June 30, 2003 as a result of
the formation of Spansion LLC which was accounted for as a partial step acquisition and purchase business combination under SFAS 141 and EITF Issue
No. 01-2, Interpretations of APB Opinion No. 29 (EITF 01-2). After considering the fact that the estimated fair value of Spansion was less than its net book value
and after comparing the estimated fair value of Spansion’s assets (other than goodwill) to their carrying value, the Company concluded that the implied fair value
of goodwill was zero and therefore the entire $16 million was written off. This impairment charge was included in the Memory Products segment and is included
in the caption, “Marketing, general and administrative,” on the Company’s consolidated statements of operations.
As of December 31, 2006, the carrying net book value of the Company’s net equity investment in Spansion, which includes the Company’s proportionate
share of Spansion’s accumulated other comprehensive income (loss), amounted to approximately $361 million. The fair value of this investment was
approximately $409 million based on closing market price of Spansion’s common stock on December 29, 2006, the last trading day of the fiscal year.
Purchase of Spansion LLC 12.75% Senior Subordinated Notes Due 2016
On December 21, 2005, Spansion LLC, a wholly-owned, indirect subsidiary of Spansion Inc., issued to the Company $175 million aggregate principal
amount of its 12.75% Senior Subordinated Notes Due 2016 (Spansion Senior Notes). In June 2006, Spansion LLC repurchased the Spansion Senior Notes for
aggregate cash proceeds of $175 million. Upon repurchase, the Company recognized a gain of $16 million, of which $10 million was recorded as other income
and $6 million (representing the elimination of approximately 38 percent of the gain), was included in the caption, “Equity in net loss of Spansion Inc., and
other,” on the Company’s consolidated statements of operations.
Acceleration of AMD Stock Options and Restricted Stock Units held by Spansion Employees
On December 15, 2005, the Company accelerated the vesting of all outstanding AMD stock options and restricted stock units held by Spansion employees
that would otherwise have vested from December 16, 2005 to December 31, 2006. In connection with the modification of the terms of these options to accelerate
their vesting, $1.2 million was recorded as non-cash compensation expense on a pro forma basis in accordance with SFAS 123, and this amount was included in
the pro forma stock compensation expense for the year ended December 25, 2005.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007