AMD 2008 Annual Report Download - page 123

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.
Spansion LLC 12.75% Senior Subordinated Notes Due 2016
On December 21, 2005, Spansion LLC, a wholly owned, indirect subsidiary of Spansion, issued to the
Company $175 million aggregate principal amount of its 12.75% Senior Subordinated Notes Due 2016 (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 included in the caption “Equity in net
loss of Spansion Inc., and other” on the Company’s 2006 consolidated statement of operations.
Summarized Financial Information
The following table presents summarized consolidated financial information for Spansion Inc
Nine Months
Ended
September 30,
2007(1)
Year
Ended
December 31,
2006
(In millions)
Consolidated statement of operations information
Revenue ............................................................. $1,848 $2,579
Gross profit .......................................................... 307 513
Operating income (loss) ................................................ (194) (91)
Net income (loss) ..................................................... $ (214) $ (148)
(1) The Company ceased using the equity method to account for its investment in Spansion as of September 20,
2007. The financial information for Spansion presented here includes the stub period from September 21,
2007 until September 30, 2007, the end of Spansion’s fiscal third quarter. The financial results during the
stub period were immaterial.
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