AMD 2007 Annual Report Download - page 69

Table of Contents
expense would result by recognizing accretion of the discounted carrying value of the 6.00% Notes to their face amount as interest expense over the term of the
6.00% Notes. If issued as proposed, the final FSP would provide final guidance effective for the fiscal years beginning after December 15, 2007, would not
permit early application, and would be applied retrospectively to all periods presented.
In November 2007, the FASB announced that it expected to begin its redeliberations of the proposed FSP in January 2008. Therefore, it is highly unlikely
the proposed effective date for fiscal years beginning after December 15, 2007 will be retained.
We cannot predict the exact accounting treatment that will be imposed (which may differ from the foregoing description) or when any change will be
finally implemented. However, if the final FSP is issued as exposed, we expect to have higher interest expense starting in the period of adoption due to the
interest expense accretion and, if the retrospective application provisions of the proposed FSP are retained in the final FSP, the prior period interest expense
associated with the 6.00% Notes would be higher than previously reported due to the retrospective application.
Other Income (Expense), Net
Other income (expense), net, of an expense of seven million in 2007 decreased six million from an expense of $13 million in 2006 primarily due to a gain
of $19 million on the sale of vacant land in Sunnyvale, California in 2007 and six million less in finance charges related to the Fab 36 Term Loan as compared to
2006. This decrease was offset by a non-recurring gain of $10 million associated with Spansion LLC’s repurchase of its 12.75% Senior Subordinated Notes due
2016 in 2006, a higher net charge of two million in 2007 due to charges for the write-off of unamortized debt issuance costs incurred in connection with our
repayment of the October 2006 Term Loan and a reduction of seven million in other income due primarily to impairment charges on an investment recorded in
2007.
Other income (expense), net, of an expense of $13 million in 2006 decreased by $11 million as compared with an expense of $24 million in 2005 primarily
due to: a non-recurring loss of approximately $10 million during the fourth quarter of 2005 resulting from the mark-to-market to earnings of certain foreign
currency forward contracts which became ineffective in hedging against certain forecasted foreign currency transactions; a gain of $10 million associated with
Spansion LLC’s repurchase of its 12.75% Senior Subordinated Notes due 2016 in 2006; an increase in other income of nine million primarily related to a gain on
an investment and lower finance charges related to the Fab 36 Term Loan of two million in 2006 as compared to 2005. The decrease was offset by a charge of
$16 million related to a debt redemption premium and a charge of four million related to unamortized issuance costs incurred in connection with our redemption
of 35 percent of the principal outstanding amount, or $210 million, of our 7.75% Notes in 2006.
Equity in net loss of Spansion Inc. and other
Prior to Spansion’s IPO, we held a 60 percent controlling ownership interest in Spansion. Consequently, Spansion’s financial position, results of
operations and cash flows through December 20, 2005 were included in our consolidated statements of operations and cash flows. Following the IPO, our
ownership interest was diluted from 60 percent to approximately 38 percent, and we no longer exercised control over Spansion’s operations. Therefore, starting
from December 21, 2005, we used the equity method of accounting to account for our investment in Spansion. In connection with the reduction in our ownership
interest in Spansion, we recorded a loss of $110 million in 2005, which represents the difference between Spansion’s book value per share before and after the
IPO multiplied by the number of shares we owned. In addition, in 2005 we also wrote off approximately $16 million in goodwill which was originally recorded
in June 30, 2003 as a result of 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
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008