AMD 2006 Annual Report Download - page 116

Table of Contents
NOTE 5: Related-Party Transactions
The Company and Fujitsu Limited formed FASL LLC, later renamed Spansion LLC, effective June 30, 2003 by expanding an existing manufacturing joint
venture called Fujitsu AMD Semiconductor Limited, or FASL, that was formed in 1993 in which the Company’s ownership interest was slightly less than 50
percent. Upon formation of Spansion LLC, the Company increased its ownership interest to 60 percent. From the date of formation through December 20, 2005,
the Company held a 60 percent controlling equity interest in Spansion LLC and, therefore, consolidated the results of Spansion LLC’s operations. The Company
accounted for the Spansion LLC transaction as a partial step acquisition and purchase business combination under the provisions of SFAS 141, and EITF
Issue 01-2. As of December 21 2005, following the completion of Spansion’s IPO, the Company’s ownership interest was diluted to approximately 38 percent
and the Company no longer controlled Spansion’s operations. In November 2006, subsequent to the sale of shares in the Offering, the Company’s ownership
interest in Spansion was reduced to 21 percent. As a result, effective December 21, 2005, the Company started accounting for its investment in Spansion under
the equity method of accounting and continues to use the equity method as of December 31, 2006.
June 30, 2003 to December 20, 2005
As part of the formation of Spansion LLC, both the Company and Fujitsu contributed their respective investments in FASL. The Company and Fujitsu
entered into various service contracts separately with Spansion LLC. The Company provided, 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 provided, among
other things, certain information technology, research and development, quality assurance, insurance, facilities, environmental, and human resources services
primarily to Spansion LLC’s Japanese subsidiary, Spansion Japan. Fees earned by the Company and incurred by Spansion LLC or its subsidiaries for these
services were eliminated in consolidation.
In addition, prior to the formation of Spansion LLC, FASL provided a defined benefit pension plan and a lump-sum retirement benefit plan to certain
employees. These plans were administered by Fujitsu and covered employees formerly assigned from Fujitsu and employees hired directly by FASL, and after
the formation of Spansion LLC, Spansion Japan, the owner of FASL’s assets. In September 2005, Spansion Japan adopted a new pension plan and changed the
formula to a cash balance formula. Assets and obligations were transferred from the Fujitsu Group Employee Pension Fund to this new Spansion Japan pension
plan. The Company’s share of the pension cost and the unfunded pension liability related to these Spansion employees was not material to the Company’s
consolidated financial statements.
As a result of the Spansion LLC transaction, Fujitsu became a related party of the Company beginning as of June 30, 2003 and until December 20, 2005,
the date immediately preceding Spansion’s IPO (see Note 4). The following tables present the significant transactions and account balances between the
Company and Fujitsu for the years ended December 25, 2005 and December 26, 2004:
December 25,
2005(1)
December 26,
2004
(In millions)
Net revenue to Fujitsu(2) $ 876 $ 1,077
Commercial die purchases from Fujitsu 93 141
Subcontract manufacturing purchases from Fujitsu 35 75
Other purchases of goods and services from Fujitsu and rental expense to Fujitsu 68 67
Distributor commissions due to Fujitsu 43 68
Service fees due to Fujitsu 20 33
Royalty fees due to Fujitsu 14 18
(1) Reflects transactions through December 20, 2005.
(2) Includes net revenue of both Flash memory products and microprocessors to Fujitsu.
111
Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007