AMD 2006 Annual Report Download - page 72

Table of Contents
Interest expense of $126 million in 2006 increased from $105 million in 2005 primarily for the following reasons:
• Interest expense incurred on the October 2006 Term Loan and the Fab 36 Term Loan was $38 and $10 million, and these loans were not outstanding in
2005;
• Interest expense incurred on capital lease payments was approximately $11 million higher in 2006 due to increased assets acquired under capital leases;
and
• Capitalized interest expense which was primarily related to Fab 36 was $25 million lower in 2006 compared to 2005.
These factors were offset by the following factors:
• During 2006 we did not consolidate Spansion’s results of operations, and, therefore interest expense on Spansion’s third-party debt, which was $24
million for 2005, was not included in 2006;
• Interest expense incurred on our 4.75% Debentures decreased by $21 million in 2006 compared to 2005 because holders of the 4.75% Debentures
converted their debentures into shares of our common stock during the first quarter of 2006 whereas during 2005, $500 million of the aggregate
principal amount of our 4.75% Debentures was outstanding; and
• Interest expense incurred on our 7.75% Notes decreased by $13 million because we redeemed $210 million of the aggregate principal amount
outstanding during the first quarter of 2006.
We expect that interest expense will be significantly higher in 2007 due to additional interest incurred pursuant to the October 2006 Term Loan and the
Fab 36 Term Loan.
Interest expense of $105 million in 2005 decreased $7 million compared to $112 million in 2004 primarily for the following reasons:
• In 2004, interest expense included approximately $26 million of interest under the Fab 30 Term Loan. Because we prepaid this loan on November 2,
2004, we did not incur any interest in connection with this loan in 2005;
• Interest expense incurred on our 4.50% Convertible Senior Notes due 2007 was $9 million in 2005 compared with $19 million in 2004 because the
holders of an aggregate principal amount of $201.5 million of these notes converted their notes into our common stock during the fourth quarter of
2005, and we exchanged an aggregate principal amount of $200 million of these notes in a series of transactions during the fourth quarter of 2004 for
shares of our common stock, and
• During 2005, we capitalized interest of $35 million in connection with Fab 36 construction activities in Dresden, Germany compared with $9 million in
2004.
These factors were offset by the following:
• During 2005 we incurred higher interest expense of $48 million in connection with our 7.75% Notes, which we sold on October 29, 2004, compared
with $8 million in 2004; and
• Interest expense incurred pursuant to capital leases increased by approximately $10 million in 2005 compared with 2004.
Other Income (Expense), Net
Other income (expense), net of $13 million expense in the 2006 consisted primarily of a charge of $16 million related to a redemption premium and a
charge of $4 million related to unamortized issuance costs incurred in connection with our redemption of 35 percent of the principal outstanding amount, or $210
million, of our 7.75% Notes, and $12 million of finance charges related to the Fab 36 Term Loan, partially offset by a gain of $10 million associated with
Spansion LLC’s repurchase of its 12.75% Senior Subordinated Notes due 2016 and other miscellaneous items of income, net totaling $9 million.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007