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FORM 10-K
ADVANCED MICRO DEVICES INC - amd
Filed: February 26, 2008 (period: December 29, 2007)
Annual report which provides a comprehensive overview of the company for the past year

Table of contents

  • Page 1
    FORM 10-K ADVANCED MICRO DEVICES INC - amd Filed: February 26, 2008 (period: December 29, 2007) Annual report which provides a comprehensive overview of the company for the past year

  • Page 2
    ... ISSUER PURCHASES OF EQUITY SECURITIES SELECTED FINANCIAL DATA MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON...

  • Page 3
    ... DIRECTOR EQUITY COMPENSATION POLICY) EX-10.13(B) (FORM OF MANAGEMENT CONTINUITY AGREEMENT) EX-10.18 (ADVANCED MICRO DEVICES) EX-10.35(B) (PLAN TO REPLACE MOTOROLA RETIREMENT BENEFIT FOR ROBERT J. RIVET) EX-10.49(B) (AMENDMENT AGREEMENT NO. 2 TO THE AMD FAB 36 COST PLUS REIMBURSEMENT AGREEMENT...

  • Page 4
    ... One AMD Place, Sunnyvale, California (Address of principal executive offices) (Registrant's telephone number, including area code) (408) 749-4000 Securities registered pursuant to Section 12(b) of the Act: (Title of each class) (Name of each exchange on which registered) Common Stock per share...

  • Page 5
    ... ISSUER PURCHASES OF EQUITY SECURITIES SELECTED FINANCIAL DATA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON...

  • Page 6
    ..., without limitation, the following: (1) the expected rate of market growth and demand for our products and technologies (and the mix thereof); (2) our expected market share; (3) our expected product and manufacturing costs and average selling prices; (4) our overall competitive position and the...

  • Page 7
    ... workstations and servers; graphics, video and multimedia products for desktop and notebook computers, including home media PCs, professional workstations and servers; and products for consumer electronic devices such as mobile phone and digital televisions and technology for game consoles...

  • Page 8
    ... systems to access more memory. Moreover, as businesses and consumers require greater performance from their computer systems due to the exponential growth of digital data and increasingly sophisticated software applications, semiconductor manufacturers have transitioned from manufacturing single...

  • Page 9
    ... of our quad-core, dual-core and â„¢ single-core AMD Opteron processors. A server is a device that performs services for connected clients as part of a client-server architecture. They are designed to run an application or applications, often for extended periods of time with minimal human direction...

  • Page 10
    ... reducing hardware requirements, which can also reduce power, cooling and system management costs. In August 2007, we introduced our quad-core AMD Opteron processors. These processors incorporate four processor cores on a single die of silicon, add a 6MB shared L3 cache, and offer features designed...

  • Page 11
    ... an embedded integrated graphics chipset solution to be used in commercial client applications to address specialized needs within a variety of industries, including computer devices such as thin clients, single board computers, industrial controllers, digital signage, point of sale terminals...

  • Page 12
    ..., video and other capabilities of computer systems. Finally, chipsets control the access between the CPU and main memory. All desktop, notebook and server PCs incorporate a chipset. In many PCs, the chipset is integrated with additional functions such as a graphics processing unit, or GPU. A GPU is...

  • Page 13
    ... products developed for use in desktop and notebook PCs, including home media PCs, professional workstations and servers. With each of our graphics products, we provide drivers and supporting software packages that enable the effective use of these products under a ® ® variety of operating systems...

  • Page 14
    ... TVs; and (iii) game consoles. Our products for consumer electronics devices include media processors used in handheld devices such as mobile phones and video processors used in digital TVs. We also license graphics core technologies to other 9 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 15
    ... to certain exceptions, we generally offer a three-year limited warranty to end users for microprocessor products that are commonly referred to as "processors in a box," a one-year limited warranty to direct purchasers for all other 10 â„¢ Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 16
    ... and a one-year limited warranty to direct purchasers of embedded processor products. We have offered extended limited warranties to certain customers of "tray" microprocessor products who have written agreements with us and target their computer systems at the commercial and/or embedded markets. We...

  • Page 17
    ... market customers. Large multi-nationals and regional accounts are our core OEM customers. Our OEM customers include numerous foreign and domestic manufacturers of servers and workstations, desktop and notebook PCs, PC motherboards and consumer electronics products such as mobile phones and digital...

  • Page 18
    ..., PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system, or BIOS, suppliers and software companies as well as the graphics interface for Intel platforms; and marketing and advertising expenditures in support of positioning the Intel...

  • Page 19
    ... integrated chipsets, particularly for notebook computers, over discrete GPUs because integrated chipsets can cost significantly less than discrete GPUs while offering acceptable graphics performance for most mainstream PC users. Intel Corporation manufactures and sells integrated graphics chipsets...

  • Page 20
    ... develop products and technologies that meet the ever-changing demands of the PC and consumer electronics industries on a timely basis so as to meet market windows. We are also focusing on delivering a range of integrated platforms to serve key markets, including commercial clients, mobile computing...

  • Page 21
    ... design centers located throughout the world, including in the United States, Canada, India, Finland and China. Due to the rapid pace of technological change in the graphics industry, our strategy is to focus on developing the newest generation of products that meet market and customer requirements...

  • Page 22
    ...set forth below: Approximate Manufacturing Area Square Footage Penang, Malaysia Singapore Suzhou, China Facility Location 206,000 380,000 44,000 Assembly Test, Mark & Packaging Test, Mark & Packaging Activity Some assembly and final testing of our microprocessor and embedded processor products...

  • Page 23
    ... date we sell our entire equity interest in Spansion. The agreements may be terminated by a party on a change in control of the other party or its semiconductor group. In addition, as is typical in the semiconductor industry, we have numerous cross-licensing and technology exchange agreements with...

  • Page 24
    ..., computer manufacturers are increasingly using integrated graphics chipsets, particularly for notebooks, because they cost significantly less than traditional discrete graphics components while offering reasonably good graphics performance for most mainstream PCs. 19 Source: ADVANCED MICRO DEVIC...

  • Page 25
    ..., PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system, or BIOS, suppliers and software companies as well as the graphics interface for Intel platforms; and marketing and advertising expenditures in support of positioning the Intel...

  • Page 26
    .... The timing and amount of our capital requirements cannot be precisely determined at this time and will depend on a number of factors including future demand for products, product mix, changes in semiconductor industry conditions and market competition. We regularly assess markets for external...

  • Page 27
    ... is a complex, costly, and time-consuming process. The difficulties of combining the operations of the companies include, among others: • • retaining key employees; bridging possible differences in cultures and management philosophies; 22 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 28
    ... competitive. We make substantial investments in research and development for process technologies in an effort to design and manufacture leading-edge microprocessors. We also make substantial investments in research and development related to product designs, including new integrated platforms...

  • Page 29
    ... developing or qualifying new products or technologies, we may lose competitive positioning, which could cause us to lose market share and require us to discount the selling prices of our products. For example, in the third quarter of 2007, we commenced initial shipments of our quad core AMD Opteron...

  • Page 30
    ...materially adversely affected. The business we acquired from ATI is also dependent upon the market for mobile, desktop and workstation PCs, the consumer electronics market for digital TVs, handheld devices, such as multimedia-enabled mobile phones, and game consoles. A market decline in any of these...

  • Page 31
    ..., manufacturers and suppliers of graphics chips, motherboards, and other components decrease their support for our product offerings and increase their support for the product offerings of our competitors, our business could be materially adversely affected. 26 Source: ADVANCED MICRO DEVIC, 10...

  • Page 32
    ... a monopoly in the x86 microprocessor market by engaging in anti-competitive financial and exclusionary business practices that limit the ability and/or incentive of Intel's customers in dealing with AMD. Also, on June 30, 2005, our subsidiary in Japan, AMD Japan K.K., filed an action in Japan...

  • Page 33
    ... manufacturing services for our graphics and chipset products and products for consumer electronics devices on a purchase order basis and these manufacturers are not required to provide us with any specified minimum quantity of product. Accordingly, our graphics and consumer electronics businesses...

  • Page 34
    ...manufacturing facilities, which may result in write-downs or write-offs of inventories and losses on products for which demand is lower than we anticipate. In addition, during periods of industry overcapacity, customers do not generally order products as far in advance of the scheduled shipment date...

  • Page 35
    ...to reach planned production yields over time could result in us not having sufficient product supply to meet demand and/or higher production costs and lower gross margins. This could materially adversely affect us. The accounting method for convertible debt securities with net share settlement, like...

  • Page 36
    ...and develop its operating systems so that they work with our x86 instruction sets, independent software providers may forego designing their software applications to take advantage of our innovations and customers may not purchase PCs with our microprocessors. In addition, software drivers sold with...

  • Page 37
    ... will be directly related to the sales of these products. We anticipate royalties in future years resulting from our agreements with Nintendo and Microsoft. However, we have no control over the marketing efforts of Nintendo and Microsoft and 32 ® Source: ADVANCED MICRO DEVIC, 10-K, February...

  • Page 38
    ... of our manufacturing facilities. In addition, we rely on a third party in India to provide certain information technology services to us, including helpdesk support, desktop application services, business and software support applications, server and storage administration, data center operations...

  • Page 39
    ...code date. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to distributors, resulting from both our deferral of revenue and related product costs, until the applicable products...

  • Page 40
    ...; changes in tax laws, trade protection measures and import or export licensing requirements; difficulties in protecting our intellectual property; difficulties in achieving headcount reductions; changes in foreign currency exchange rates; restrictions on transfers of funds and other assets of...

  • Page 41
    ...and cash flow. In addition, the majority of our product sales are denominated in U.S. dollars. Fluctuations in the exchange rate between the U.S. dollar and the local currency can cause increases or decreases in the cost of our products in the local currency of such customers. An appreciation of the...

  • Page 42
    ... for our operations, including the discharge of air pollutants and wastewater. Although our management systems are designed to maintain compliance, we cannot assure you that we have been or will be at all times in complete compliance with 37 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 43
    ... of our microprocessor products is performed at manufacturing facilities in China, Malaysia and Singapore. The independent foundries we use to manufacture our graphics and chipset products and products for consumer electronics devices are located in the Asia-Pacific region and inventory is stored...

  • Page 44
    ... to our graphics and chipset products and products for consumer electronics devices is located in Markham, Ontario, Canada. This facility consists of approximately 240,000 square feet of office and research and development space. We have a 50 percent interest in the joint venture company that owns...

  • Page 45
    ... and market development funds on customers' agreement to severely limit or forego entirely purchases from AMD; Establishing a system of discriminatory and retroactive incentives triggered by purchases at such high levels as to have the intended effect of denying customers the freedom to purchase any...

  • Page 46
    ... California Business and Professions Code; An award to AMD of such other, further and different relief as may be necessary or appropriate to restore and maintain competitive conditions in the x86 microprocessor market; and An award of attorneys' fees and costs. • • • Intel filed its answer...

  • Page 47
    ... AMD acquired from ATI on October 26, 2006. AMD entered the graphics processor business following our acquisition of ATI on October 25, 2006. The DOJ has not made any specific allegations against AMD or ATI. AMD is cooperating with the investigation. GPU Class Actions Currently over fifty related...

  • Page 48
    ... on our financial condition or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 43 No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 49
    ... registered holders of our common stock. The following table sets forth on a per share basis the high and low intra-day sales prices on the New York Stock Exchange for our common stock for the periods indicated: High Low Fiscal year ended December 29, 2007 First quarter Second quarter Third quarter...

  • Page 50
    ... of our common stock is no indication of future performance. Comparison of Five Year Total Return This graph was plotted using the following data: Base Period 12/27/02 Years Ending 12/25/05 Company / Index 12/28/03 12/26/04 12/31/06 12/29/07 Advanced Micro Devices, Inc. S&P 500 Index...

  • Page 51
    ... former Memory Products segment through December 20, 2005. From December 21, 2005, the date that Spansion Inc., our former majority-owned subsidiary, closed its IPO through December 25, 2005 and all of 2006, we used the equity method of accounting to reflect our share of Spansion's net income (loss...

  • Page 52
    ... in the manufacturing joint venture under the equity method. Therefore, consolidated statement of operations data for 2003 is not comparable to 2004. Represents a write off of in-process research and development in connection with the ATI acquisition. Represents amortization of acquisition related...

  • Page 53
    ...; graphics, video and multimedia products for desktop and notebook computers, including home media PCs, professional workstations and servers; and products for consumer electronic devices such as mobile phones and digital televisions and technology for game consoles. • • Prior to the closing...

  • Page 54
    ...our AMD Opteron quad-core processors for servers and AMD Phenom 9000 series of quad-core processors for desktop PCs. We also secured a new OEM customer, Toshiba Corporation. In the Graphics segment, we introduced the ATI Radeon HD 2000 and 3800 series of products. We also introduced the ATI Mobility...

  • Page 55
    ... Cash and marketable securities Accounts receivable Inventories Goodwill Developed product technology Game console royalty agreement Customer relationships Trademarks and trade names Customer backlog In-process research and development Property, plant and equipment Other assets Accounts payable and...

  • Page 56
    ... quarter of 2006. Projects that qualify as IPR&D represent those that have not reached technological feasibility and had no alternative future use at the time of the acquisition. These projects include development of next generation GPU, chipset, handheld and digital TV products. As of the date...

  • Page 57
    ... capital and the estimated internal rate of return specific to the acquisition. We based estimated useful lives for the other acquisition-related intangible assets on historical experience with technology life cycles, product roadmaps and our intended future use of the intangible assets. Integration...

  • Page 58
    ... in cost of sales in the period the revision is made. This would have a negative impact on our gross margin in that period. If in any period we are able to sell inventories that were not valued or that had been written off in a previous period, related revenues 53 Source: ADVANCED MICRO DEVIC, 10...

  • Page 59
    ... to cost of sales, resulting in a net benefit to our gross margin in that period. Business Combinations. In accordance with business combination accounting, we have allocated the purchase price of ATI to tangible and acquisition related intangible assets acquired, including in-process research and...

  • Page 60
    ... products for desktop and mobile PCs, servers and workstations and AMD chipset products; the Memory Products segment, which included Spansion Flash memory products; and the Personal Connectivity Solutions segment, which included embedded processors for global commercial and consumer markets...

  • Page 61
    .... Under the equity method of accounting, our share of Spansion's net loss impacts our net income (loss). On September 20, 2007, we changed the accounting for our investment in Spansion from the equity method to accounting for this investment as "available-for-sale" marketable securities pursuant to...

  • Page 62
    ... of sales of processors for desktop and notebook PCs in 2007, which generally carry lower average selling prices than our processors for servers. In particular, our competitor first offered quad-core multi-chip module processors for servers and desktop PCs in November 2006, and these products were...

  • Page 63
    .... In light of the timing of our quad-core product introductions and their lack of broad availability during 2007, we discounted the selling price of certain competing processor products. Unit shipments increased primarily due to the inclusion of ATI chipset sales, which accounted for 76 percent of...

  • Page 64
    ... associated with the integration of ATI's operations, which included termination of some AMD employees, cancellation of some existing contractual obligations and other costs that we incurred to integrate the operations of the two companies. 59 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 65
    ... related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $138 million in 2007, $116 million in 2006, and $72 million in 2005. The fluctuations in the recognition of these credits have not significantly impacted our gross margins. 60 Source: ADVANCED MICRO...

  • Page 66
    ... product design costs for our next generation microprocessor products. In addition, research and development expenses attributable to ATI's chipset business were included for the full year in 2007 compared to only nine weeks in 2006. Research and development expenses attributable to our Graphics...

  • Page 67
    ... to 2005 and a 54 percent increase in weighted-average interest rates. Interest Expense 2007 Total interest charges Less: interest capitalized Interest expense 62 $ 390 (23) $ 367 2006 (In millions) 2005 $ 136 (10) $ 126 $ 140 (35) $ 105 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 68
    ... paid-in-capital portion of stockholders' equity on our balance sheet and the value of the equity component would be treated as an original issue discount for purposes of accounting for the debt component of the 6.00% Notes. Higher interest 63 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 69
    ... the formation of Spansion LLC. In November 2006, we sold 21,000,000 shares of Spansion Class A common stock in an underwritten public offering. We received $278 million in net proceeds from the offering and realized a gain of six million from the 64 Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 70
    ...share of Class B common stock to Spansion and, accordingly, relinquished the right to appoint a director to Spansion's Board of Directors. Therefore, we changed our accounting for our investment from the equity method of accounting to accounting for this investment as "available-for-sale" marketable...

  • Page 71
    ... Revenue Service. However, an IRS audit of AMD's tax years 2004 and 2005 is scheduled to commence in March 2008. AMD and its subsidiaries have several foreign, foreign provincial, and U.S. state audits in process at any one point in time. We have provided for uncertain tax positions that require...

  • Page 72
    ... options outstanding under the 2004 Equity Incentive Plan and our prior equity compensation plans that had exercise prices per share higher than the closing price of our stock on April 27, 2005, which was $14.51. Options to purchase approximately 12 million shares of 67 Source: ADVANCED MICRO DEVIC...

  • Page 73
    ...was attributable to the inclusion of sales of our graphics and chipsets products to contract manufacturers and add-in-board manufacturers based outside the United States, principally in China and Taiwan, for the full year in 2007 compared to nine weeks in 2006. In 2007 and 2006, primarily all of our...

  • Page 74
    ... deposits on assets to be sold. Net cash used in investing activities was approximately $4.3 billion in 2006. We used $3.9 billion, net of cash and cash equivalents acquired, to acquire ATI, and $1.9 billion to purchase property, plant and equipment, 69 Source: ADVANCED MICRO DEVIC, 10-K, February...

  • Page 75
    ... the October 2006 Term Loan and the Fab 36 Term Loan; proceeds of $495 million from the sale of our common stock in an equity offering; $231 million from the sale of stock under our Employee Stock Purchase Plan and the exercise of employee stock options; and capital investment grants and allowances...

  • Page 76
    ... not repurchase any of our equity securities pursuant to this Board authorized program. At this point in time we believe the current credit market difficulties do not have a material impact on our financial position or liquidity. However, a future degradation in credit market conditions could have...

  • Page 77
    ...75% Notes, which is equivalent to an initial conversion price of approximately $20.13 per share. This initial conversion price represents a premium of 50% relative to the last reported sale price of our common stock on August 8, 2007 (the trading date preceding the date of pricing of the 5.75% Notes...

  • Page 78
    ... of 6.00% Notes, which is equivalent to an initial conversion price of $28.08 per share. This initial conversion price represents a premium of 100% relative to the last reported sale price of our common stock on April 23, 2007 (the trading date preceding the date of pricing of the 6.00% Notes) of...

  • Page 79
    ... would be higher than previously reported due to retrospective application. We may elect to purchase or otherwise retire our 6.00% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries, or by tender...

  • Page 80
    ... Term Loan Facility Agreement among AMD Fab 36 KG, as borrower, and a consortium of banks led by Dresdner Bank AG, as lenders, dated April 21, 2004 (Fab 36 Term Loan) and other related agreements (collectively, the Fab 36 Loan Agreements) to finance the purchase of equipment and tools required to...

  • Page 81
    .... Our credit rating was B1 with Moody's and B with Standard and Poor's as of December 29, 2007. AMD Fab 36 KG pledged substantially all of its current and future assets as security under the Fab 36 Loan Agreements, we pledged our equity interest in AMD Fab 36 Holding and AMD Fab 36 LLC, AMD Fab 36...

  • Page 82
    ... at the end of the year following the year during which the notice is given. However, other than for good cause, a partner's termination will not be effective before December 31, 2015. The partnership agreements set forth each limited partner's aggregate capital contribution to AMD Fab 36 KG and the...

  • Page 83
    ... beyond those required by the partnership agreements, investments significantly in excess of the business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put option is the partner's capital account balance...

  • Page 84
    ...December 2004 through December 2013. Initially, we amortized the grant amounts as a reduction to research and development expenses. Beginning in the first quarter of 2006 when Fab 36 began producing revenue generating products, we started amortizing these amounts as a reduction to cost of sales. For...

  • Page 85
    ... to pay dividends or make other distributions to us; using the proceeds from sales of assets; entering into certain types of transactions with affiliates; and consolidating, merging or selling our assets as an entirety or substantially as an entirety. 80 Source: ADVANCED MICRO DEVIC, 10-K, February...

  • Page 86
    ... energy supply contracts which AMD entered into with local energy suppliers to provide our Dresden, Germany wafer fabrication facilities with utilities (gas, electricity, heating and cooling) to meet the energy demands for our manufacturing requirements. We account for certain fixed payments due...

  • Page 87
    ... of commercial activities for a period of five years; and nominate a Canadian for election to our Board of Directors over the next five years. Our minimum required Canadian capital expenditures and research and development commitments are included in our aggregate unconditional purchase commitments...

  • Page 88
    ... exchange price in an orderly transaction between market participants to sell the asset or transfer the liability in the market. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to 83 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 89
    ... of equity securities issued for purchase at the date of close of the transaction and capitalization of in-process research and development, all of which represent modifications to current accounting for business combinations. SFAS 141R is effective for fiscal years beginning after December 15, 2008...

  • Page 90
    ... that should be reported as equity in the consolidated financial statements. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. This Statement establishes a single method of accounting for changes in...

  • Page 91
    ... loss and strive to preserve our invested funds by limiting default risk and market risk. At this point in time, we believe the current credit market difficulties do not have a material impact on our financial position. However, a future degradation in credit market conditions, could have a material...

  • Page 92
    ..., AMD Saxony and AMD Fab 36 KG, are denominated in euros while sales of products are denominated in U.S. dollars. Additionally, as a result of our acquisition of ATI in October 2006, some of our expenses and debt are denominated in Canadian dollars. As a consequence, movements in exchange rates...

  • Page 93
    ... DATA Advanced Micro Devices, Inc. and Subsidiaries Consolidated Statements of Operations Three Years Ended December 29, 2007 2007 2006 2005 (In millions, except per share amounts) Net revenue Net revenue from related party (see Note 5) Total net revenue Cost of sales Gross margin Research...

  • Page 94
    ...and equipment, net Acquisition related intangible assets, net (see Note 3) Goodwill (see Note 3) Investment in Spansion (see Note 4) Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued compensation and benefits Accrued liabilities Income taxes...

  • Page 95
    ...Conversion of 4.75% Senior Debentures due 2022 Compensation recognized under employee stock plans December 31, 2006 Comprehensive loss: Net loss Other comprehensive income: Net change in unrealized gains on investments, net of taxes of $0 Net change due to reduction in Spansion investment Net change...

  • Page 96
    ... of property, plant and equipment Compensation recognized under employee stock plans Other Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and other current assets Other assets Tax refund receivable Income taxes payable Refund of customer deposits...

  • Page 97
    ... of common stock, net of issuance costs Proceeds from issuance of common stock under stock-based compensation plans Repayment of silent partner contribution Other Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease...

  • Page 98
    ... graphic, video and multimedia products and chipsets for personal computers, or PCs, including desktop and notebook PCs, professional workstations, and servers and products for consumer electronic devices such as mobile phones, digital TVs and game consoles. NOTE 2: Summary of Significant Accounting...

  • Page 99
    ... months older than the manufacturing code date. In addition, some agreements with distributors may contain standard stock rotation provisions permitting limited levels of product returns. Accordingly, the Company defers the gross margin resulting from the deferral of both revenue and related product...

  • Page 100
    ... all of the Company's investments in marketable debt and equity securities are classified as available-for-sale. These securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), net of tax, a component of stockholders...

  • Page 101
    ...a one-year limited warranty to direct purchasers of embedded processor products. The Company has offered extended limited warranties to certain customers of "tray" microprocessor products who have written agreements with the Company and target their computer systems at the commercial and/or embedded...

  • Page 102
    ...proportionate share of the translation adjustments relating to Spansion Japan in accumulated other comprehensive income (loss) until September 20, 2007, when the Company changed its method of accounting for Spansion from the equity method to treating this investment as an available-for-sale security...

  • Page 103
    ... the net loss per common share calculation, as their inclusion would have been antidilutive. Potential common shares of approximately 55 million and 21 million for the years ended December 31, 2006 and December 25, 2005, which were associated 98 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 104
    ... 2004), Share-Based Payment (SFAS 123R), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases pursuant to the Company's Employee Stock Purchase Plan...

  • Page 105
    ...12 for a further discussion on stock-based compensation). The Company's determination of the fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company's stock price as well as assumptions regarding a number of highly complex and subjective...

  • Page 106
    ... of equity securities issued for purchase at the date of close of the transaction and capitalization of in-process research and development, all of which represent modifications to current accounting for business combinations. SFAS 141R is effective for fiscal years beginning after December 15, 2008...

  • Page 107
    ... Cash and marketable securities Accounts receivable Inventories Goodwill Developed product technology Game console royalty agreement Customer relationships Trademarks and trade names Customer backlog In-process research and development Property, plant and equipment Other assets Accounts payable and...

  • Page 108
    ... five years. However, as discussed below, the Company has revised the estimate of the average useful life of the developed technology to be 50 months from the acquisition date. Game console royalty agreements represent agreements existing as of October 24, 2006 with video game console manufacturers...

  • Page 109
    ... business combination accounting effect on ATI inventories acquired, write off of in-process research and development and integration charges as well as the recurring effect from amortization of acquired intangible assets, stock-based compensation charges for unvested stock awards assumed...

  • Page 110
    ... from the sale of ATI's chipsets, which was included in the Graphics and Chipset segment in the fourth quarter of 2006, in the Computing Solutions segment. As a result of this change, the Company reclassified $166 million of goodwill associated with the ATI chipset products from the Graphics segment...

  • Page 111
    ... follows: December 29, 2007 Weighted Average Amortization Period (in months) Cost of ATI Acquisition Related Intangible Assets Developed product technology Game console royalty agreements Customer relationships Trademark and trade name Customer backlog Total 50 60 48 84 14 $ $ 752 147 257 62...

  • Page 112
    ...of Spansion's outstanding common stock. The Company continued to use the equity method of accounting for its investment in Spansion. During the first quarter of 2007, the Company sold 984,799 shares of Spansion Class A common stock. The Company received $13 million in net proceeds from the sales and...

  • Page 113
    ... in the caption "Marketable Securities" on the Company's consolidated balance sheet dated December 29, 2007. To the extent that the fair value of the Company's investment in Spansion changes in the future due to fluctuations in Spansion's common stock price, the Company would record either an...

  • Page 114
    ...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...

  • Page 115
    ...establishing the pricing and determining product specifications. Spansion also assumed credit and inventory risk related to these product sales. In the second quarter of 2006, Spansion began to ship its products and invoice its customers directly. The Company no longer ships and invoices products on...

  • Page 116
    ... deposit Spansion Class A common stock Total marketable securities Long-term investments: Equity investments (included in other assets) Grand total 2006 Cash equivalents: Commercial paper Money market funds Time deposits Total cash equivalents Marketable securities: Auction rate preferred stock Time...

  • Page 117
    .... The Spansion Senior Notes were not investment grade. The Company believes that concentrations of credit risk with respect to trade receivables are limited because a large number of geographically diverse customers make up the Company's customer base, thus spreading the trade credit risk. Accounts...

  • Page 118
    ... costs Foreign research and development ITC credits Other Total deferred tax assets Less: valuation allowance Deferred tax liabilities: Property, plant and equipment Capitalized interest Acquired intangibles Tax deductible goodwill Unrealized translation gain Other Total deferred tax liabilities Net...

  • Page 119
    ... purchase transactions. Utilization of German losses is limited to 60 percent of taxable income in any one year. The Company also had other aggregate foreign loss carry-forwards totaling approximately $21 million in other countries with various expiration dates. 114 Source: ADVANCED MICRO DEVIC...

  • Page 120
    ... Internal Revenue Service, but may result in the utilization of deferred tax assets that are currently subject to a valuation allowance. The Company's operations in Singapore, China and Malaysia currently operate under tax holidays, which will expire in whole or in part at various dates through 2014...

  • Page 121
    ... of the application of FIN 48, the Company has recognized $61 million of current and long-term deferred tax assets, previously under a valuation allowance with $61 million of liabilities for unrecognized tax benefits as of December 29, 2007. 116 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 122
    ... Notes, which is equivalent to an initial conversion price of approximately $20.13 per share. This initial conversion price represents a premium of 50% relative to the last reported sale price of the Company's common stock on August 8, 2007 (the trading date preceding the date of pricing of the 5.75...

  • Page 123
    ... 6.00% Notes, which is equivalent to an initial conversion price of $28.08 per share. This initial conversion price represents a premium of 100% relative to the last reported sale price of the Company's common stock on April 23, 2007 (the trading date preceding the date of pricing of the 6.00% Notes...

  • Page 124
    ...equity transaction. As a result, the Company has recorded the purchase of the capped call as a reduction in additional paid-in capital and will not recognize subsequent changes in its fair value. The net proceeds from the offering, after deducting discounts, commissions and offering expenses payable...

  • Page 125
    ... higher than previously reported interest expense due to retrospective application. The Company may elect to purchase or otherwise retire the 6.00% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries...

  • Page 126
    ... Term Loan Facility Agreement among AMD Fab 36 KG, as borrower, and a consortium of banks led by Dresdner Bank AG, as lenders, dated April 21, 2004 (Fab 36 Term Loan) and other related agreements (collectively, the Fab 36 Loan Agreements) to finance the purchase of equipment and tools required to...

  • Page 127
    ... total outstanding amounts. The Company's credit rating was B1 with Moody's and B with Standard and Poor's as of December 29, 2007. AMD Fab 36 KG pledged substantially all of its current and future assets as security under the Fab 36 Loan Agreements, the Company pledged the Company's equity interest...

  • Page 128
    ... at the end of the year following the year during which the notice is given. However, other than for good cause, a partner's termination will not be effective before December 31, 2015. The partnership agreements set forth each limited partner's aggregate capital contribution to AMD Fab 36 KG and the...

  • Page 129
    ... beyond those required by the partnership agreements, investments significantly in excess of the business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put option is the partner's capital account balance...

  • Page 130
    ... made in 2003 through 2006 as well as cash grants of $221 million for capital investments made in 2003 through 2007 and a prepayment for capital investments planned for the first half of 2008. The Fab 36 Loan Agreements also require that the Company: • provide funding to AMD Fab 36 KG if...

  • Page 131
    ... of the Company's 7.75% Notes in the event that the Company undergoes a change of control, as defined in the indenture governing the 7.75% Notes at a repurchase price of 101 percent of the principal amount plus accrued and unpaid interest. 126 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 132
    ...are payable in monthly installments through 2020. The gross amount of assets recorded under capital leases totaled approximately $215 million and $157 million as of December 29, 2007 and December 31, 2006, and are included in the related property, plant and equipment category. Amortization of assets...

  • Page 133
    ... interest, other income (expense), equity in net loss of Spansion Inc. and other, income taxes and minority interest. These performance measures include the allocation of expenses to the operating segments based on management's judgment. 128 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 134
    ... products for desktop and mobile PCs, servers and workstations and AMD chipset products; the Memory Products segment, which included Spansion Flash memory products; and the Personal Connectivity Solutions segment, which consisted of embedded processors for global commercial and consumer markets...

  • Page 135
    ... States include both manufacturing and sales activities. The Company's manufacturing subsidiaries are located in Germany, Malaysia, Singapore and China. Its sales subsidiaries are located in the United States, Europe, Asia and Latin America. 130 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 136
    ... of grant. Stock options expire at the times established by the Company's Compensation Committee of the Board of Directors, but not later than ten years after the grant date. In addition, unvested shares that are released from or reacquired by the Company from outstanding awards under the 2004 Plan...

  • Page 137
    ...fixed period of time. Under the 2004 Plan, nonstatutory and incentive stock options may be granted. The exercise price of the shares subject to each nonstatutory stock option and incentive stock option cannot be less than 100 percent of the fair market value of the Company's common stock on the date...

  • Page 138
    ... 2006 Stock-based compensation included as a component of: Cost of sales Research and development Marketing, general, and administrative Total stock-based compensation expense related to employee stock options, restricted stock, restricted stock units, and employee stock purchases Tax benefit Stock...

  • Page 139
    ...performance-based restricted stock units. The number of shares ultimately received under these awards depends on actual performance against specified performance goals. The performance period is generally one to three years from the date of grant. 134 Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 140
    ... has an employee stock purchase plan (ESPP) that allows eligible and participating employees to purchase, through payroll deductions, shares of the Company's common stock at 85 percent of the lower of the fair market value on the first or the last business day of the three-month offering period. As...

  • Page 141
    ... exercise price and weighted-average fair value of these awards were $18.42 and $8.07. The Company did not grant any stock options with exercise prices greater than or less than the closing price of its common stock on the grant date during 2005. In addition, 136 Source: ADVANCED MICRO DEVIC, 10...

  • Page 142
    ... restricted stock awards) under the 2004 Plan, its prior equity compensation plans and the assumed ATI plans. NOTE 13: Other Employee Benefit Plans Profit Sharing Program. The Company has a profit sharing program to which the Company may authorize quarterly contributions. All employees, other...

  • Page 143
    ... in Canada via a variety of commercial activities for a period of five years; and nominate a Canadian for election to the Company's Board of Directors over the next five years. The Company's minimum required Canadian capital expenditures and research and development commitments are included in its...

  • Page 144
    ...Warranties and Indemnities The Company generally warrants that microprocessor products sold to its customers will, at the time of shipment, be free from defects in workmanship and materials and conform to its approved specifications. Subject 139 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 145
    ...a one-year limited warranty to direct purchasers of embedded processor products. The Company has offered extended limited warranties to certain customers of "tray" microprocessor products who have written agreements with the Company and target their computer systems at the commercial and/or embedded...

  • Page 146
    ... Plan to further align its cost structure to industry conditions resulting from weak customer demand and industry-wide excess inventory. The 2002 Restructuring Plan resulted in the consolidation of facilities, primarily at its Sunnyvale, California site and at sales offices worldwide. The Company...

  • Page 147
    ... AMD acquired from ATI on October 26, 2006. AMD entered the graphics processor business following our acquisition of ATI on October 25, 2006. The DOJ has not made any specific allegations against AMD or ATI. AMD is cooperating with the investigation. GPU Class Actions Currently over fifty related...

  • Page 148
    ...the consolidated financial statements, in fiscal year 2006, Advanced Micro Devices, Inc. changed its method of accounting for stock-based compensation in accordance with guidance provided in Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment. We also have audited...

  • Page 149
    ... 29, 2007, which is included immediately following this report. /s/ Hector de J. Ruiz Chairman of the Board and Chief Executive Officer February 25, 2008 /s/ Robert J. Rivet Executive Vice President, Chief Financial Officer February 25, 2008 144 Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 150
    ... Advanced Micro Devices, Inc. and Subsidiaries as of December 29, 2007 and December 31, 2006, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 29, 2007 and our report dated February 20, 2008 expressed...

  • Page 151
    .... 2 Mar. 26 Net revenue Cost of sales Gross margin Research and development Marketing, general and administrative In-process research and development (4) Amortization of intangible assets and integration charges Impairment of goodwill and acquired intangible assets Operating income (loss) Interest...

  • Page 152
    ... 31, 2006 included in Exhibit 99.1 and as of September 30, 2007 and for the three and nine months ended September 30, 2007 and October 1, 2006 included in Exhibit 99.2 to this Annual Report (Form 10-K) are incorporated herein by reference. 147 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 153
    ... Incentive Plan (2005 LTIP). Bonus payments to the Executives consisted of vesting of previously granted performance-vesting restricted stock units for the 2005-2007 performance period and were based on the three-year cumulative performance. 148 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 154
    ... a cash payment of $178,875 under the 2005 LTIP for the 2005-2007 performance period. Mr. Rivas was promoted to an executive officer in December 2006. Therefore, he did not receive an LTIP equity grant for the 2005-2007 performance period. 149 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 155
    ... this report. Without limiting the foregoing, the information under the captions, "Compensation Committee Report on Executive Compensation" and "Audit Committee Report" in our 2008 Proxy Statement is not incorporated by reference in this Annual Report on Form 10-K. 150 Source: ADVANCED MICRO DEVIC...

  • Page 156
    ...75% Senior Notes due 2012, dated October 29, 2004, between Advanced Micro Devices, Inc. and Wells Fargo Bank, N.A., filed as Exhibit 4.1 to AMD's Form 8-K dated November 2, 2004, is hereby incorporated by reference. 151 Description of Exhibits Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 157
    ... 26, 2004, is hereby incorporated by reference. Form of Management Continuity Agreement, as amended and restated. AMD's Stock Option Program for Employees Outside the U.S. for options granted after April 25, 2000, filed as Exhibit 10.24 to AMD's Annual Report on Form 10-K for the fiscal year ended...

  • Page 158
    ... year ended December 30, 2001, is hereby incorporated by reference. 2004 Equity Incentive Plan, as amended, filed as Exhibit 10.16 to AMD's Quarterly Report on Form 10-Q for the period ended July 2, 2006, is hereby incorporated by reference. Advanced Micro Devices, Inc. Executive Investment Account...

  • Page 159
    ... Advanced Micro Devices, Inc. and International Business Machines Corp. filed as Exhibit 10.36(b) to AMD's Quarterly Report on Form 10-Q for the period ended September 26, 2004, is hereby incorporated by reference. Design and Build Agreement dated November 15, 1996, between AMD Saxony Manufacturing...

  • Page 160
    ... Saxony Limited Liability and Co. KG, filed as Exhibit 10.38(l-5) to AMD's Annual Report on Form 10-K for the fiscal year ended December 28, 2003, is hereby incorporated by reference. AMD Saxonia Research, Design and Development Agreement, dated as of March 11, 1997, between AMD Saxony Manufacturing...

  • Page 161
    ...Micro Devices, Inc. effective as of December 28, 2002 filed as Exhibit 10.36 to AMD's Annual Report on Form 10-K for the year ended December 31, 2006 is hereby incorporated by reference. Agreement between SI Investment Limited Liability Company & Co KG and M+W Zander Facility Engineering GmbH, dated...

  • Page 162
    ...18, 2008. Management Service Agreement dated October 31, 2003, between AMD Saxony Limited Liability Company & Co. KG, SI Investment Limited Liability Company & Co. KG, SI Investment Holding GmbH and AMD, filed as Exhibit 10.71 to AMD's Quarterly Report on Form 10-Q for the period ended June 27, 2004...

  • Page 163
    ... by reference. Amended and Restated Non-Competition Agreement by and among Advanced Micro Devices, Inc., AMD Investments, Inc., Fujitsu Limited, and Spansion Inc. dated as of December 21, 2005 filed as Exhibit 10.8 to AMD's Current Report on Form 8-K dated December 15, 2005, is hereby incorporated...

  • Page 164
    ... Stock Unit Award (2004 Equity Incentive Plan) filed as Exhibit 10.4 to AMD's Quarterly Report on Form 10-Q for the period ended October 1, 2006, is hereby incorporated by reference Underwriting Agreement by and between Spansion Inc., AMD Investments, Inc. and Fujitsu Limited dated November 15, 2006...

  • Page 165
    ... Exhibit Number Description of Exhibits 21 23-a 23-b 24 31.1 31.2 32.1 32.2 99.1 99.2 List of AMD subsidiaries. Consent of Ernst & Young LLP, independent registered public accounting firm for Advanced Micro Devices, Inc. Consent of Ernst & Young LLP, independent registered public accounting firm...

  • Page 166
    ..., thereunto duly authorized. February 25, 2008 ADVANCED MICRO DEVICES, INC. By: /s/ ROBERT J. RIVET Robert J. Rivet Executive Vice President, Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons, on...

  • Page 167
    ...$ 39 8 1 $ $ $ (42) (8) (4) $ $ $ (2) - - $ $ $ 13 13 10 Accounts (written off) recovered, net. Reduction due to change in status of Spansion from consolidated subsidiary to unconsolidated investee as a result of Spansion's IPO. 162 (2) Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 168
    ... November 1, 2007 1.General. This Outside Director Equity Compensation Policy (the "Policy") is adopted by the Board of Directors (the "Board") in accordance with Section 12 of the Advanced Micro Devices, Inc. 2004 Equity Incentive Plan (the "Plan"). Capitalized but undefined terms used herein shall...

  • Page 169
    ... Fair Market Value" means the average of the closing stock prices for the Shares for the 180 day period immediately preceding and ending with the date of grant of an Initial RSU Grant or Annual RSU Grant. 4.Insufficient Shares. Further, if there are insufficient Shares available under the Plan for...

  • Page 170
    ... and until an Award is actually granted. Without limiting the generality of the foregoing, the Board hereby expressly reserves the authority to terminate this Policy during any year up and until the election of directors at a given annual meeting of stockholders. 3 Source: ADVANCED MICRO DEVIC, 10...

  • Page 171
    ... or deferral election agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of such Outside' Directors Shares shall not be issued prior to the earlier of (a) the expiration of the six-month period measured from the date of the his...

  • Page 172
    ... 10.13(b) ADVANCED MICRO DEVICES, INC. Form of Amended and Restated Management Continuity Agreement Dear : Advanced Micro Devices, Inc. (the "Company") considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the...

  • Page 173
    ...an employee benefit plan now or hereafter established by the Company. As used herein, the term "beneficial owner" shall have the same meaning as under Section 13(d) of the Exchange Act, and related case law. 2. Term. This Agreement shall become effective immediately on the delivery of fully executed...

  • Page 174
    ... three times the sum of (A) your Base Compensation (as defined below), plus (B) the average of the two highest annual bonuses paid to you during the last five full calendar years immediately prior to the Change of Control. For purposes of this 3 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 175
    ... be determined by annualizing the bonus earned during your period of employment as determined by the Company. (2) Equity Compensation. All unvested stock options, stock appreciation rights, restricted stock unit and restricted stock awards held by you at the time of your Date of Termination shall be...

  • Page 176
    ... plan, stock ownership plan, stock purchase plan, life insurance plan, health plan, disability plan or similar plan. 6. Section 409A. Notwithstanding any provision to the contrary in the Agreement, if you are deemed by the Company at the time of your Date of Termination to be a "specified employee...

  • Page 177
    ... at least equivalent to, those the Company carried prior to the Change of Control. 11. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of...

  • Page 178
    ...of or failure to provide any other benefits upon a Change of Control pursuant to any other employment agreement, bonus or compensation plans, stock option plan, stock ownership plan, stock purchase plan, life insurance plan or similar plan or agreement with the Company and/or any of its subsidiaries...

  • Page 179
    ... plan. This Agreement shall not limit in any way any obligation Executive may have under any other agreement with or promise to the Company relating to confidentiality, proprietary rights in technology or the assignment of interests in any intellectual property 8 Source: ADVANCED MICRO DEVIC...

  • Page 180
    ... on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely, ADVANCED MICRO DEVICES, INC. By: Chairman of the Compensation Committee of the Board of Directors day 20 Agreed to this of...

  • Page 181
    Exhibit 10.18 ADVANCED MICRO DEVICES INC. DEFERRED INCOME ACCOUNT PLAN AMENDED EFFECTIVE AS AND OF RESTATED JANUARY 1, 2008 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 182
    ...Devices Inc. Executive Investment Account Plan, effective July 1, 2000 (the "Prior Plan"), to provide deferred compensation benefits to the Company's U.S. employees; and WHEREAS, the Company has determined that it is required to amend and restate the Prior Plan's terms to comply with certain changes...

  • Page 183
    ... fiduciary, last designated in writing by a Participant in accordance with Section 8.4. Board: The Board of Directors of Advanced Micro Devices, Inc. Where applicable, the Board shall refer to the Compensation Committee of the Board to which authority to oversee this Plan has been delegated by prior...

  • Page 184
    .... Effective Date: January 1, 2008, except as otherwise provided herein. Election Period: The period prior to each Plan Year during which the Committee will accept election to defer compensation under this Plan's terms. Eligible Employee: An Employee of the Company whose position is at the director...

  • Page 185
    ... Income Account Plan, as amended from time to time. Plan Year: Shall mean initially the twelve (12) consecutive month period commencing January 1 of each year. (x) (y) (z) (aa) Prior Plan: The term Prior Plan shall refer to the Advanced Micro Devices Executive Investment Account Plan, as such plan...

  • Page 186
    ... census on st December 31 of the calendar year preceding the determination year; and (ii) the compensation for each such employee as determined under the Company's 401(k) plan (without application of the compensation limit under Code Section 401(a)(17)). (ee) Unforeseeable Financial Emergency: An...

  • Page 187
    ... Eligible Employee's incentive sales commissions and Bonuses, provided that the total amount deferred by a Participant shall be limited in any calendar year, if necessary, to satisfy Social Security Tax (including Medicare), income tax and employee benefit plan withholding requirements as determined...

  • Page 188
    ... Deferrals shall be credited to the Participant's Deferral Account. Amounts attributable to Company Matching Contributions or Company Discretionary Contributions shall be credited to the Participant's Company Compensation Account. - 7- Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 189
    ...Company Compensation for the applicable Plan Year. (2) 4.2 Investment of Account. The Committee shall credit allocable earnings and losses to each Participant's Individual Account according to the hypothetical investments made by a Participant pursuant to the terms of Article V. Allocation of Net...

  • Page 190
    ... select from time to time, in its sole and absolute discretion, commercially available investments of each of the types communicated by the Committee to the Participant pursuant to 5.2(a) above to be the Investment Funds. - 9- 5.2 (b) (c) Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 191
    ... the deferral of Compensation and investment gains and losses associated with such Plan Year's deferral of compensation. (2) (3) (4) (5) (b) In-Service Distribution Without Scheduled Withdrawal Date. A Participant shall be permitted to elect an Early Distribution from his Account prior to the...

  • Page 192
    ... Individual Accounts for such Plan Year paid directly to him: A. B. In a single lump sum cash payment on a designated date; or In annual cash payments extending over a period of three (3) to ten (10) years, which the Participant shall specify in his election. - 11- Source: ADVANCED MICRO DEVIC, 10...

  • Page 193
    ... specify whether the distribution is for a fixed dollar amount or the entire amount credited to the Participant's Account for such Plan Year. This election shall be irrevocable as of the date the election is made. Distribution made pursuant to an election filed under this subsection may not commence...

  • Page 194
    ...'s designated beneficiary as provided in Section 8.4. Form of Payment. A Participant's Individual Account attributable to Grandfathered Benefits shall be paid in cash in a single lump sum payment on the Participant's Payment Date. - 13- (b) Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 195
    ... 8.3(a) shall apply only if any of the Company's stock is publicly traded on an established securities market upon the date of Separation from Service. The portion of a Participant's Account attributable to 409A Benefits shall be paid directly to the Participant, unless the Triggering Event is...

  • Page 196
    ... (12) months prior to the date of the first otherwise scheduled payment. A modified election shall not accelerate the time or schedule of any payment under the Plan, except as may be permitted pursuant to applicable Treasury Regulations. - 15- (d) (2) (3) (4) Source: ADVANCED MICRO DEVIC, 10...

  • Page 197
    ... or beneficiaries to receive such benefit shall be as follows and in the same priority: (1) If a Participant has a surviving spouse at the time of such Participant's death, his designated beneficiary shall be such surviving spouse; - 16- (b) Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 198
    ...Domestic Relations Order, as defined in ERISA Section 206(d) if it were issued with regard to a retirement plan qualified under Code Section 401(a) (a "QDRO"), the "alternate payee's" benefits shall be paid in cash, in a single lump sum, as soon as administratively practicable following the date the...

  • Page 199
    ...the issuance of Final Treasury Regulations under Code Section 409A, this Plan was administered in the following manner: (a) Participants were required to make elections to defer Compensation related to services performed during the calendar year commencing on January 1, 2006 before December 31, 2005...

  • Page 200
    ...on or after January 1, 2005, and (ii) limit its application to the subaccount(s) holding contributions for one or more designated Plan Years. Elections made under this subsection shall be applicable for periods on or after January 1, 2008. Payment dates and methods permitted under this Section shall...

  • Page 201
    ... and interpret the Plan in compliance with Code Section 409A and all related guidance issued pursuant to such Code Section. 10.5 Account Statements. The Committee shall provide a Participant with a statement of Accounts on a frequency of no less than annually. - 20- Source: ADVANCED MICRO DEVIC, 10...

  • Page 202
    ... "Claimant") must file a written request for such benefit with the Committee, setting forth his claim. The request must be addressed to the Administrative Committee, c/o AMD Benefits Manager, One AMD Place, PO Box 3453, M/S 181, Sunnyvale, CA 94099. In any case in which a claim for Plan benefits of...

  • Page 203
    ... of the Plan to recognize the value to the Company of the past and present services of employees covered by the Plan and to encourage and ensure their continued service with the Company by making more adequate provision for their future retirement security. - 22- Source: ADVANCED MICRO DEVIC, 10...

  • Page 204
    .... (a) Amendment and Termination with Respect to Grandfathered Benefits. This paragraph applies solely with respect to Grandfathered Benefits. The Directors have the absolute and unconditional right to amend the portion of the Plan that - 23- Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 205
    ..., in whole or in part, any or all of the provisions of the Plan relating to 409A Benefits; provided, however, that such amendments shall not violate the requirements of Code Section 409A. In addition, the Company, acting through the Directors, may terminate the portion of the Plan that is subject to...

  • Page 206
    ... to such payment, to execute a receipt and release to such effect. 12.7 Governing Laws. All provisions of the Plan shall be construed in accordance with the laws of the State of California except to the extent preempted by federal law. - 25- Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 207
    ..., 2007. ADVANCED MICRO DEVICES INC. By: Name: Title: /s/ Kelly Smales Kelly Smales Corp VP Finance By: /s/ Matt Martin Name: Matt Martin Title VP, Compensation & Benefits By: /s/ Michel Cadieux Name: Michel Cadieux Title: SVP HR & CTO - 26- Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 208
    ... Retirement Plan for Officers Participation & Services Your participation in this Plan began on your date of employment with Advanced Micro Devices, Inc. ("AMD"); however, your years of service with Motorola will be taken into account with respect to calculating your benefit under this Plan. Except...

  • Page 209
    ...you are entitled to receive from any AMD qualified or nonqualified pension plan (not including income from your AMD Retirement Savings and Deferred Profit Sharing Plan account or Executive Investment Account Plan), in the U.S. or elsewhere, and (ii) the benefit you received from the Motorola Pension...

  • Page 210
    ... of AMD (three times annual salary, to a maximum of $2,000,000, unless otherwise modified by AMD for all executives). Tax Treatment for You You will be taxed on the value of the benefit you receive under this Plan. The amount or amounts will be taxable in the year any payment is made. In order to...

  • Page 211
    ... you are deemed by AMD at the time of your separation from service to be a "specified employee" for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the benefits to which you are entitled under this Plan is required in order to avoid a prohibited...

  • Page 212
    ... 2008 2007 2006 2005 2004 2003 2002 2001 * All numbers from 2003 on are estimated only. Average Bonus as a % of Pay** 80% ** Highest five of the last 8 years Sample Calculation Annualized Salary at Age 55 Average Bonus Earned Normal Benefit = The Lesser of: Total or Estimated Actuarial Equivalent...

  • Page 213
    ...Tax Gross Up Gross Benefit $4,334,060 [ 1- 0.43751 33.00% 9.30% 1.45% 43.75% 0.4375 0.5625 ] x $ 4,334,060 = $3,370,936 $7,704,996 All tax rates specified above are current estimates of rates that might apply at the maximum marginal rate. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 214
    Exhibit 10.49(b) AMENDMENT AGREEMENT NO. 2 OF 18 JANUARY 2008 TO THE AMD FAB 36 COST PLUS AGREEMENT OF 21 APRIL 2004 BY AND BETWEEN AMD FAB 36 HOLDING GMBH AND AMD FAB 36 LIMITED LIABILITY COMPANY & CO. KG Fab 36 Cost Plus Amendment No. 2 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 215
    ...36 Holding GmbH, Wilschdorfer Landstr. 101, 01109 Dresden - hereinafter: "AMD Fab 36 Holding" and AMD Fab 36 Limited Liability Company & Co. KG Wilschdorfer Landstr. 101, 01109 Dresden - hereinafter: "AMD Fab 36" Fab 36 Cost Plus Amendment No. 2 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 216
    ... present Agreement and its implementation, including all questions concerning its existence, validity, termination or performance, or in connection with agreements relating to the performance of this Agreement. Fab 36 Cost Plus Amendment No. 2 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 217
    ...set period, date) laid down herein; in such cases the agreed standards shall be replaced by permissible performance standards or deadlines (set period, date) coming as close as possible to what was intended. 5. Fab 36 Cost Plus Amendment No. 2 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 218
    ...provisions of the AMD Fab 36 Cost Plus Agreement that are not amended pursuant to Art. I of this Agreement shall remain unchanged. This Agreement shall take effect on 01 January 2008. [Signature page to follow] 7. 8. Fab 36 Cost Plus Amendment No. 2 Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 219
    /s/ Dr. Hans-Raimund Deppe AMD Fab 36 Limited Liability Company & Co. KG, represented by AMD Fab 36 LLC Dr. Hans-Raimund Deppe Manager Acknowledged and consent given: /s/ Faina Medzonsky Advanced Micro Devices, Inc. Name: Faina Medzonsky Title: Assistant General Counsel and Assistant Secretary Fab ...

  • Page 220
    ... 21 ADVANCED MICRO DEVICES, INC. LIST OF SUBSIDIARIES As of December 29, 2007 Name of Subsidiary Domestic Subsidiaries Advanced Micro Ltd.* AMD Corporation* ATI Technologies Systems Corp. AMD (EMEA) LTD. AMD Far East Ltd. AMD International Sales & Service, Ltd. AMD Texas Properties, LLC AMD Latin...

  • Page 221
    ... (16) ATI Technologies Singapore Pte. Ltd. ATI Technologies (Europe) GmbH ATI International SRL (16) (15) ATI Technologies (Hungary) Ltd. AMD Research & Development Center India Private Limited ATI Technologies (L) Inc. (17) (18) India Malaysia Malaysia Hong Kong Advanced Micro Devices Malaysia...

  • Page 222
    ... by AMD International Sales & Service, Ltd., 0.1% owned by AMD Far East Ltd. Subsidiary of AMD US Finance, Inc. Subsidiary of Advanced Micro Devices (China) Co., Ltd. 51% owned by Advanced Micro Devices, Inc., 49% owned by AMD Technologies (China) Co., Ltd. Partnership in which AMD Fab 36 LLC is...

  • Page 223
    ... ATI Technologies Inc. Share Option Plan, as amended, and ARTX, Inc. 1997 Equity Incentive Plan, as amended; Registration Statement on Form S-8 (No. 333-134853) pertaining to the Advanced Micro Devices, Inc. 2004 Equity Incentive Plan and the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase...

  • Page 224
    ... ATI Technologies Inc. Share Option Plan, as amended, and ARTX, Inc. 1997 Equity Incentive Plan, as amended; Registration Statement on Form S-8 (No. 333-134853) pertaining to the Advanced Micro Devices, Inc. 2004 Equity Incentive Plan and the Advanced Micro Devices, Inc. 2000 Employee Stock Purchase...

  • Page 225
    ... to sign Advanced Micro Devices, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 29, 2007, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto...

  • Page 226
    ... company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 227
    ... or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: February 25, 2008 /s/ Hector de J. Ruiz Hector de J. Ruiz Chairman and Chief Executive Officer Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 228
    ... company's most recent fiscal quarter (the company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 229
    ... material, that involves management or other employees who have a significant role in the company's internal control over financial reporting. Date: February 25, 2008 /s/ Robert J. Rivet Robert J. Rivet Executive Vice President, Chief Financial Officer Source: ADVANCED MICRO DEVIC, 10-K, February...

  • Page 230
    ... of Advanced Micro Devices, Inc. (the "Company") hereby certifies, to such officer's knowledge, that: (i.) the Annual Report on Form 10-K of the Company for the annual period ended December 29, 2007 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable...

  • Page 231
    ... of Advanced Micro Devices, Inc. (the "Company") hereby certifies, to such officer's knowledge, that: (i.) the Annual Report on Form 10-K of the Company for the annual period ended December 29, 2007 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable...

  • Page 232
    ... 26, 2005, the Company's losses before income taxes and net losses for the year ended December 31, 2006 was $3.4 million higher than if it had continued to account for its stock options under APB Opinion No. 25. Basic and diluted loss per share for the year ended December 31, 2006 were $0.03 higher...

  • Page 233
    ... for related parties) Trade accounts receivable, net Other receivables from related parties Inventories: Raw materials Work-in-process Finished goods Total inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Property, plant and equipment: Land Buildings...

  • Page 234
    ...' equity: Capital stock: Preferred stock, $0.001 par value per share, 50,000,000 shares authorized, no shares issued and outstanding Class A common stock, $0.001 par value per share, 714,999,998 shares authorized; 134,219,224 and 95,793,402 shares issued and outstanding as of December 31, 2006 and...

  • Page 235
    ...on early extinguishment of debt Provision for doubtful accounts Benefit for deferred income taxes Gain on equipment sale-leaseback transactions Gain on sale and disposal of property, plant, and equipment Gain on sale of marketable securities Compensation recognized under employee stock plans Changes...

  • Page 236
    ...Payments on loans from related parties/members Payments on debt and capital lease obligations Proceeds from issuance of common stock, net of offering costs Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash...

  • Page 237
    ... payable to AMD (Note 4) Issuance of shares: Vesting of RSUs Issuance of common stock in secondary offering, net of issuance costs of $2,133 Compensation recognized under employee stock plans Balance at December 31, 2006 Total Stockholders' Accumulated Equity/ Other Members' Comprehensive Capital...

  • Page 238
    ... manufacturing finished Flash memory devices which through the first fiscal quarter of fiscal 2006 were exclusively sold to AMD and Fujitsu. In the second quarter of fiscal 2006, the Company began selling its products directly to customers previously served by AMD (See Note 5). Source: ADVANCED...

  • Page 239
    ... at the time of purchase. Investments The Company's investments in marketable securities consist of money market funds, commercial paper, auction rate securities and publicly traded equity securities. These securities are designated as available-for-sale and are reported at fair market value with...

  • Page 240
    .... In the second quarter of fiscal 2006, the Company began to sell directly to such distributors and to provide similar rights of return, stock rotation and price protection previously offered by AMD. The Company defers the recognition of revenue and related product costs on these sales as deferred...

  • Page 241
    ... sale, impairment losses are measured as their carrying amount less salvage value, if any, at the time the assets cease to be used. Impairment losses were not material in any of the periods presented. Product Warranties The Company offers a one-year limited warranty for Spansion Flash memory devices...

  • Page 242
    ...the issuance of common stock that then shared in the net income of the Company. In connection with the IPO, certain employees have been awarded initial stock option and restricted stock unit grants to purchase Class A common stock of the Company. For the years ended December 31, 2006 and December 25...

  • Page 243
    ... of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. Statement 123(R) supersedes the Company's previous accounting under Opinion 25 for periods beginning in fiscal 2006. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 244
    ... 123(R). The Company estimated the fair value of its stock-based awards to employees using Black-Scholes-Merton option pricing model. Stock-based compensation expense recognized during a period is based on the higher of the grant-date fair value of the portion of share-based payment awards that is...

  • Page 245
    ...equity, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, the measurement date, the date at which plan assets and the benefit obligation are measured, is required to be the company's fiscal year end. Statement 158's provisions regarding the change...

  • Page 246
    ... options granted under the 2005 Equity Incentive Plan may only be granted to employees of the Company or its subsidiaries. The exercise price of each incentive stock option is required to be not less than 100 percent of the fair market value of the Company's Class A common stock on the date of grant...

  • Page 247
    ... were accounted for under EITF Issue Nos. 96-18 and 00-12. There is no income tax benefit relating to stock option expenses because all of the Company's U.S. deferred tax assets, net of U.S. deferred tax liabilities continue to be subject to a full valuation allowance. Source: ADVANCED MICRO DEVIC...

  • Page 248
    ... 123 to options granted under the Company's stock option plan for fiscal 2005 and 2004. The pro forma stock-based compensation includes the impact for AMD stock options awarded to Spansion employees. Year Ended Year Ended Dec. 25, 2005 Dec. 26, 2004 (in thousands, except per share amounts) Net loss...

  • Page 249
    ... of Class A common stock on the first business date of an offering period, or (2) the fair market value per share of Class A common stock on the last business date of that offering period. The Company has reserved 2,250,000 shares of Class A common stock available for Source: ADVANCED MICRO DEVIC...

  • Page 250
    ... 6,384 17,434 In the second quarter of fiscal 2006, the Company began selling its products directly to the customers previously served by AMD. Service fees to AMD are net of reimbursements from AMD for services provided to AMD by the Company. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 251
    ... Company's wholly-owned subsidiary, entered into an asset purchase agreement with Fujitsu, pursuant to which Spansion Japan will sell two wafer fabrication facilities located in Aizu-Wakamatsu, Japan, which the Company refers to as the JV1/JV2 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 252
    ... Statements-(Continued) Facilities, and certain assets located in the JV1/JV2 Facilities, to Fujitsu for a purchase price of approximately $150 million plus the value of the inventory at the time of closing. Concurrently with the execution of the asset purchase agreement, Spansion Japan and Fujitsu...

  • Page 253
    ... unrealized gain of approximately $7.3 million in other comprehensive loss on its investment in certain publicly-traded equity securities. In fiscal 2006 the Company sold this investment in its entirety and realized a gain on the sale of $6.9 million. Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 254
    ... values of the Company's foreign currency forward contracts were not significant. 8. Warranties and Indemnities The Company offers a one-year limited warranty for its Flash memory products. Changes in the Company's liability for product warranty during the years ended December 31, 2006 and December...

  • Page 255
    ... $ As part of the reorganization in 2005, the Company assumed $60 million of unsecured debt, payable by the Company's subsidiary in the People's Republic of China, Spansion China Limited, to AMD and its subsidiary in Singapore, Advanced Micro Devices (Singapore) Pte., or AMD Singapore. On February...

  • Page 256
    ... every six months at a rate equal to the six-month LIBOR plus one percent. The U.S. dollar denominated revolving loan agreements are unsecured. Under the terms of the agreements, Spansion China is prohibited from encumbering any of its assets. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 257
    ...), which may remain outstanding for up to three months. Amounts borrowed under the credit facility bear interest at a rate equal to the Tokyo Interbank Offered Rate, or TIBOR, at the time of the drawdown, plus a margin of 0.5 percent per annum. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 258
    ... based on the exchange rate as of January 29, 2004) from AMD to fund the purchase of manufacturing equipment. In January 2006, this loan was transferred from AMD to a third-party financial institution. The loan bears a fixed annual interest rate of 5.9 percent and is payable in equal, consecutive...

  • Page 259
    ... 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, is greater than or equal to 120 percent of the conversion price per share of the Spansion Inc. Class A common stock; Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 260
    ... 98 percent of the product of the sale price of the Spansion Inc. Class A common stock and the number of shares issuable upon exchange of $1,000 principal amount of the debentures; or Upon the occurrence of specified corporate events that constitute a fundamental change of the Company under certain...

  • Page 261
    ... margin or 1.75 percent margin depending upon the Company's credit rating. The senior secured term loan facility will terminate and all outstanding borrowings must be repaid no later than November 3, 2012. In connection with the senior secured term loan facility, the Company and each of Spansion LLC...

  • Page 262
    ... credit facility. Obligations under Capital Leases On September 29, 2006, the Company entered into a sale-leaseback transaction with a third-party financial institution for certain equipment in the amount of $29.1 million of cash proceeds. Upon execution of the agreements, the equipment had a net...

  • Page 263
    ... Company: Liabilities Guaranteed by AMD As of As of Dec. 31, 2006 Dec. 25, 2005 (in thousands) Spansion capital lease guarantees Spansion operating lease guarantees Total debt guaranteed by AMD $ $ 2,708 3,977 6,685 $ $ 35,851 7,071 42,922 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 264
    ... Company as of September 1, 2003. Royalty related to the sale of products containing this license was not significant in fiscal 2006 and fiscal 2005. The Company did not meet the minimum requirements to trigger royalty payments in fiscal 2004. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 265
    ...) Pre-tax profit from foreign operations was $10 million for the year ended December 31, 2006. Pre-tax losses from foreign operations were $41 million for the year ended December 25, 2005 and $0.7 million for the year ended December 26, 2004. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 266
    ..., 2006 Dec. 25, 2005 Deferred tax assets: Net operating loss carryovers Deferred distributor income Inventory valuation Accrued expenses not currently deductible Pension benefits Property, plant and equipment Federal and state tax credit carryovers Stock-based compensation Other Total deferred tax...

  • Page 267
    ... utilization of deferred tax assets that are currently subject to a valuation allowance. During fiscal year 2006, the Company resolved audits in Japan and Thailand that resulted in the reversal of the tax reserves of approximately $6.4 million. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 268
    ... benefit pension plan and/or a lump-sum retirement benefit plan sponsored by Fujitsu. The Company, by agreement with Fujitsu, is required to fund those proportional benefit obligations attributable to the Company's employees enrolled in these plans. Until September 1, 2005, the Company accounted...

  • Page 269
    ... currency exchange rate changes Fair value of plan assets at December 31, 2006 Dec. 31, Dec. 25, 2006 2005 (in thousands) $ $ 63,705 4,566 11,448 (628) (1,827) 77,264 $ $ 48,736 3,247 14,468 (526) (2,220) 63,705 Funded status Unrecognized net actuarial loss Unrecognized prior service cost...

  • Page 270
    ... million for the years ended December 25, 2005 and December 26, 2004, respectively. The estimated amount of prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2007 is $724,000. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 271
    ...securities and no future benefits are currently covered by insurance contracts issued by the insurer or related parties. The Company expects to contribute $8.2 million to the Spansion Japan pension plan during the fiscal year ending December 30, 2007. Source: ADVANCED MICRO DEVIC, 10-K, February 26...

  • Page 272
    ... and tracks its results in one reportable segment. The Company primarily designs, develops, manufactures, markets and sells Flash memory products for the wireless and embedded applications in the integrated category of the Flash memory market. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 273
    ... quarter of fiscal 2006, the Company began to sell directly to AMD's former customers and customers not served solely by Fujitsu (end customers). Among those customers, Nokia Corporation accounted for approximately 12 percent of the Company's net sales in fiscal 2006. Long-lived assets information...

  • Page 274
    ... Company falls below ten percent of the outstanding shares of the Company's capital stock, as calculated on an as-converted to common stock basis; or AMD transfers its share of Class B common stock to any person other than an AMD affiliate. • Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 275
    ... dividends on the common stock; diluting the voting power of the common stock; impairing the liquidation rights of the common stock; or delaying or preventing a change of control of Spansion Inc. without further action by the stockholders. Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 276
    ... Treadway Commission and our report dated February 26, 2007 expressed an unqualified opinion thereon. As discussed in Note 4 to the consolidated financial statements, in the year ended December 31, 2006, Spansion, Inc. changed its method of accounting for stock-based compensation in accordance with...

  • Page 277
    ... Exhibit 99.2 Nine Months Ended Sep. 30, 2007 Oct. 1, 2006 Net sales Net sales to related parties (Note 6) Total net sales Operating expenses: Cost of sales (including $64,590, $50,911, $169,063 and $164,234 of expenses charged by related parties) Research and development (including $322, $3,551...

  • Page 278
    ... current assets Property, plant and equipment, net Deferred income taxes Other assets Total assets Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks under revolving loans Accounts payable Accounts payable to related parties (Note 6) Accrued compensation and benefits...

  • Page 279
    ... early extinguishment of debt Provision for doubtful accounts (Benefit) Provision for deferred income taxes Net gain on sale and disposal of property, plant and equipment Gain on sale of marketable securities Compensation recognized under employee stock plans Amortization of premium on floating rate...

  • Page 280
    ... features, which primarily address the integrated Flash memory market. The Company's Flash memory devices are incorporated into a broad range of electronic products, including mobile phones, consumer electronics, automotive electronics, networking and telecommunications equipment, personal computers...

  • Page 281
    ... seven years of service. With the adoption of Issue 06-2, the Company accounts for the programs by recording the estimated total program payouts upon attaining the requisite service conditions as compensation expense ratably over each employee's requisite service period. Income Taxes In July 2006...

  • Page 282
    ... tax benefits will significantly increase or decrease within the next twelve months. 3. Stock-Based Compensation Plan Descriptions On May 29, 2007, the Company's stockholders approved the Spansion Inc. 2007 Equity Incentive Plan (the "2007 Plan"). The maximum number of shares of the Company's Class...

  • Page 283
    ... per share, respectively. The fair value of each stock option was estimated at the date of grant using a Black-Scholes-Merton option pricing model, with the following assumptions for grants in the three and nine months ended September 30, 2007 and October 1, 2006: 7 Source: ADVANCED MICRO DEVIC, 10...

  • Page 284
    ... were the shares granted upon the Company's initial public offering (IPO) on December 15, 2005. There were 698,412 shares vested and exercisable as of September 30, 2007, with a total grant date fair value of approximately $8.6 million. 8 (2) Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 285
    ... LLC's 2.25% Exchangeable Senior Secured Debentures from the calculation of diluted earnings per share for the three and nine months ended October 1, 2006 because they had an antidilutive effect due to the net losses recorded in those periods. 9 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 286
    ... Research and development Sales, general and administrative Total service fees to AMD (2) $ 1,739 $ 553 2,984 3,005 $ 6,542 $ 2,352 $ (1,100) 177 356 $ (566) 3,272 10,273 18,163 $ 31,708 (1) In the second quarter of fiscal 2006, the Company began selling its products directly to the customers...

  • Page 287
    ...) Trade accounts receivable from AMD, net of allowance for doubtful accounts Other receivables from AMD Accounts payable to AMD Royalties payable to AMD Accrued liabilities to AMD 11 $ 2,906 $ 5,338 $ 3,323 $ 797 $ 213 $ $ $ $ $ 3,400 2,325 1,513 3,130 43 Source: ADVANCED MICRO DEVIC, 10...

  • Page 288
    ...) $ 190,328 $ - $ 13,046 $ 3,130 $ 4,970 The Company licenses certain intellectual property from AMD and Fujitsu in exchange for the payment of royalties to both AMD and Fujitsu. These royalty expenses are recognized in cost of sales. 12 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 289
    ... Agreement dated as of September 28, 2006 (the "JV1/JV2 Closing"). Under the terms of the Asset Purchase Agreement, Spansion Japan sold two wafer fabrication facilities located in Aizu-Wakamatsu, Japan ("JV1/JV2 Facilities") to Fujitsu, together with selected manufacturing equipment, inventory...

  • Page 290
    ... early lease termination or if any equipment is not returned in its proper condition, for a purchase price equal to the fair market value of the equipment at the time of purchase or any other purchase price as may be set forth in the applicable schedule. Wafer Processing Services Agreement Spansion...

  • Page 291
    ...until March 31, 2009. Fujitsu may terminate all or a part of any individual Service at any time with six months' advance notice to Spansion Japan. The total gain from the Transaction, which was the difference between the sales proceeds and the net book value of the assets sold under the terms of the...

  • Page 292
    ... and Indemnities The Company generally offers a one-year limited warranty for its Flash memory products. Changes in the Company's liability for product warranty during the three and nine months ended September 30, 2007 and October 1, 2006 are as follows: Three Months Ended Nine Months Ended Sep. 30...

  • Page 293
    ... Note payable to AMD Total debt obligations to related parties Debt obligations to third parties: Spansion China Bank Enterprise Cooperation Revolver Senior Notes Spansion Japan 2006 Revolving Credit Facility Spansion Penang Loan Spansion Japan 2006 Merged Revolving Credit Facility Exchangeable...

  • Page 294
    ... on all of Spansion LLC's inventory (excluding returned inventory), equipment and real property and proceeds thereof (excluding receivables or proceeds arising from sales of inventory in the ordinary course of business), presently owned or 18 Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008

  • Page 295
    ...sales of inventory in the ordinary course of business presently owned or acquired in the future by the Company and by each of the current and any future guarantors. The Notes are further secured by certain deeds of trust related to real property owned by Spansion LLC in California and Texas. Holders...

  • Page 296
    ... recognized in the current year as part of the effective tax rate. The income tax expense recorded in the nine months ended October 1, 2006 was primarily due to tax provisions of the Company's foreign subsidiaries of $4.3 million and the write-off of U.S. deferred tax assets of $1.5 million that the...

  • Page 297
    ..., Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, the Company recorded a curtailment loss, which was included in the amortization of prior service cost, of approximately $2.0 million relating to the Spansion Japan Pension Plan as...

  • Page 298
    ..., business combination, reorganization, recapitalization, liquidation or sale or transfer of any material assets of the Company or its subsidiaries not permitted pursuant to the Merger Agreement. Pursuant to the Voting Undertakings, the signing shareholders also agreed that if Saifun terminates the...