AMD 2008 Annual Report Download - page 77

silent partnership contributions (which we classify as debt) from the unaffiliated partners of AMD Fab 36 KG. In
addition, we did not incur any interest on the October 2006 Term Loan in 2008 whereas in 2007 we incurred
interest through August 2007. These factors were partially offset by the increased interest incurred on our 6.00%
Notes and 5.75% Notes, which were outstanding for all of 2008 but only for a portion of 2007.
Capitalized interest expense of $9 million in 2008 decreased by $14 million from $23 million in 2007.
Capitalized interest expense decreased by an aggregate of $17 million from 2007 to 2008 because we
discontinued capitalizing interest for Fab 36 in the first quarter of 2008 when it was in full production and we
discontinued capitalizing interest for our campus in Austin, Texas in the fourth quarter of 2007 upon completion
of construction. This was partially offset by a $3 million increase in capitalized interest expense related to the
conversion of our Fab 38 facility in Dresden, Germany.
Total interest charges of $390 million in 2007 increased by $254 million from $136 million in 2006
primarily due to an additional $128 million interest expense incurred on our 6.00% Notes and 5.75% Notes,
which we issued in 2007. In addition, we incurred $117 million higher interest expense on our Fab 36 Term Loan
and October 2006 Term Loan because these facilities were outstanding for all of 2007 but only for a portion of
2006. Capitalized interest expense of $23 million in 2007 increased by $13 million from $10 million in 2006
because we incurred higher capitalized interest expenses for Fab 36 and we were capitalizing interest in
connection with our campus in Austin, Texas through the fourth quarter of 2007.
In May 2008, the FASB issued FSP APB No. 14-1, Accounting for Convertible Debt Instruments That May
Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1). This FSP requires
issuers of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to
separately account for the liability (debt) and equity (conversion option) components of the instrument in a
manner that reflects the issuer’s nonconvertible debt borrowing rate. The effective date of this FSP is for
financial statements issued for fiscal years beginning after December 15, 2008 and interim periods within those
fiscal years and it does not permit earlier application. However, the transition guidance requires retroactive
application to all periods presented. This FSP will impact our accounting for our 6.00% Notes whereby the equity
component will be included in the paid-in-capital portion of stockholders’ equity on the balance sheet and the
value of the equity component will be treated as an original issue discount for purposes of accounting for the debt
component. Higher interest expense will 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. We will adopt FSP APB
14-1 beginning in first quarter of 2009 and expect that the interest expense associated with our 6.00% Notes will
be approximately $16 million, $25 million and $27 million higher for fiscal years 2007, 2008 and 2009,
respectively.
Other Income (Expense), Net
Other income, net of $22 million in 2008 changed from other expense, net of $7 million in 2007. In the
fourth quarter of 2008, we repurchased $60 million principal amount of our 6.00% Notes for $20 million in cash
consideration. As a result, we recognized a gain of $39 million. In addition, we recognized a gain of $11 million
on acquiring the put option related to our holdings of UBS ARS, representing the fair value of this financial
instrument. These gains were partially offset by a $24 million other than temporary impairment charge related to
our portfolio of ARS in 2008. In 2007, we incurred a charge of $22 million for the write-off of unamortized debt
issuance costs incurred in connection with out repayment of the October 2006 Term Loan, which was partially
offset by a gain of $19 million on the sale of vacant land in Sunnyvale, California.
Other expense, net of $7 million in 2007 decreased by $6 million from an other expense, net 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 $6
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
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