AMD 2007 Annual Report Download - page 115

Table of Contents
Subsequent to December 20, 2005
On December 21, 2005, Spansion became an unconsolidated equity investee of the Company. There were no significant transactions between the
Company and Spansion relating to service agreements during the five day period, December 21 to December 25, 2005. The following table represents the
significant account balances receivable from or payable to Spansion at December 31, 2006 and December 25, 2005:
As of
December 31,
2006
As of
December 25,
2005
(In millions)
Investment in Spansion Senior Notes $ — $ 159
Receivable from Spansion (short-term) 10 143
Receivable from Spansion (long-term) 5 3
Accounts payable to Spansion 2 233
In connection with Spansion’s IPO, the Company entered into various amended and restated service agreements, a non-compete agreement and a patent
cross-license agreement with Spansion. Under the amended services agreements, the Company agreed to provide, among other things, information technology,
facilities, logistics, tax, finance and human resources services to Spansion for a specified period. All significant service level agreement activities had concluded
as of December 29, 2007. Under the amended patent cross-license agreement, Spansion pays royalties to the Company based on a percentage of Spansion’s net
revenue.
In addition, the Company entered into an agency agreement with Spansion pursuant to which the Company agreed to ship products to and invoice
Spansion’s customers in the Company’s name on behalf of Spansion until Spansion had the capability to do so on its own. Prior to shipping the product to
Spansion’s customers, the Company purchased the applicable product from Spansion and paid Spansion the same amount that it invoiced Spansion’s customers.
In performing these services, the Company acted as Spansion’s agent for the sale of Spansion’s Flash memory products, and the Company did not receive a
commission or fees for these services. Under the agreement, Spansion assumed full responsibility for its products and these transactions, including 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 behalf of Spansion.
Pursuant to the agency agreement and in accordance with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the
Company recorded sales of Spansion’s Flash memory products sold by the Company on behalf of Spansion and the related cost of sales on a net basis on its
condensed consolidated statements of operations. As a result, the net impact to the Company’s net revenue and cost of sales was zero.
On December 21, 2005, Spansion LLC, a wholly owned subsidiary of Spansion issued to the Company the Spansion Senior Notes for $158.9 million or
90.828 percent of face value. In June 2006, Spansion LLC repurchased the Spansion Senior Notes for aggregate cash proceeds of $175 million. Upon repurchase,
the Company recognized a gain of $16 million, of which $10 million was recorded as other income and $6 million (representing the elimination of approximately
38 percent of the gain) was recorded as a reduction to the equity in net income (loss) of Spansion.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008