AMD 2007 Annual Report Download - page 109

Table of Contents
Trademarks and trade names have an estimated average useful life of seven years.
Customer backlog represents customer orders existing as of October 24, 2006 that had not been delivered and were estimated to have a useful life of 14
months.
The Company determined the fair value of other acquisition-related intangible assets using income approaches based on the most current financial forecast
available as of October 24, 2006. The discount rates the Company used to discount net cash flows to their present values ranged from 12 percent to 15 percent.
The Company determined these discount rates after consideration of the Company’s estimated weighted average cost of capital and the estimated internal rate of
return specific to the acquisition.
The Company based estimated useful lives for the other acquisition-related intangible assets on historical experience with technology life cycles, product
roadmaps and the Company’s intended future use of the intangible assets. The Company is amortizing the acquisition-related intangible assets using the
straight-line method over their estimated useful lives.
Integration
Concurrent with the acquisition, the Company implemented an integration plan which included the termination of some ATI employees, the relocation or
transfer to other sites of other ATI employees and the closure of duplicate facilities. The costs associated with employee severance and relocation totaled
approximately $7 million. The costs associated with the closure of duplicate facilities totaled approximately $1 million. These costs were included as a
component of net assets acquired. Additionally, the integration plan also included termination of some AMD employees, cancellation of some existing
contractual obligations, and other costs to integrate the operations of the two companies. The Company incurred costs of approximately $28 million and $32
million for the years ended December 29, 2007 and December 31, 2006, respectively, and they are included in the caption, “Amortization of acquired intangible
assets and integration charges,” on the Company’s consolidated statements of operations.
Unaudited Pro Forma Financial Information
The following unaudited pro forma statement of operations information gives effect to the ATI acquisition as if it had occurred at the beginning of each of
the fiscal years presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would
have been achieved if the acquisition and the $2.5 billion October 2006 Term Loan had taken place at the beginning of each of the periods presented nor is it
indicative of future financial performance. The pro forma financial information for each of the periods presented includes the nonrecurring 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 and increase in interest expense associated with
the October 2006 Term Loan.
The unaudited pro forma statement of operations for the year ended December 31, 2006 combined the historical results of AMD for the year ended
December 31, 2006, which includes post-acquisition ATI results for the period from October 25, 2006 to December 31, 2006, and the historical results of
pre-acquisition ATI for the period from January 1, 2006 to October 24, 2006. The unaudited pro forma statement of operations for the year ended December 25,
2005 combines the historical results of AMD for the year ended December 25, 2005 and, due to differences in our reporting periods, the historical results of ATI,
for the twelve months ended November 30, 2005.
104
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008