AMD 2008 Annual Report Download - page 78

Subordinated Notes due 2016 in 2006, a higher net charge of $2 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 $7 million in other income due primarily to impairment charges on an investment recorded in
2007.
Equity in net loss of Spansion Inc. and other
Following Spansion’s IPO in December 2005, 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 2006, we sold 21 million shares of Spansion Class A common stock and realized a gain of $6 million
from the sale. During 2007, we sold 13,491,493 shares of Spansion Class A common stock. We received $157
million in net proceeds and realized a loss of $1 million. We continued to use the equity method of accounting to
account for our investment in Spansion because, for accounting purposes, we were deemed to continue to have
the ability to exercise significant influence over Spansion.
On September 20, 2007, Dr. Ruiz, our Executive Chairman, resigned as Chairman of Spansion’s Board of
Directors. We also transferred our one share of Class B common stock to Spansion and, accordingly, relinquished
the right to appoint a director to Spansion’s Board of Directors. Therefore, we changed our accounting for our
investment from the equity method of accounting to accounting for this investment as “available-for-sale”
marketable securities.
During 2007, we recorded other than temporary impairment charges of $111 million on our investment in
Spansion after considering Spansion’s operating results, its stock price trends, and our intention to liquidate our
investment. As a result, as of December 29, 2007, our investment in Spansion was reflected at its then fair market
value of $56 million.
During 2008, we recorded other than temporary impairment charges of $53 million after giving consideration
to Spansion’s operating results and its stock price trends. As of December 27, 2008, we owned a total of 14,037,910
shares, or approximately 8.7 percent of Spansion’s outstanding common stock with a carrying value of $3 million,
which we included in the caption “Marketable securities” on our 2008 consolidated balance sheet.
Income Taxes
We recorded an income tax provision of $68 million in 2008, $27 million in 2007 and $23 million in 2006.
The income tax provision in 2008 primarily results from increases in net deferred tax liabilities in our German
subsidiaries reduced by net current tax benefits in other jurisdictions. The income tax provision in 2007 primarily
results from current foreign taxes reduced by the reversal of deferred U.S. taxes related to indefinite-lived
goodwill, resulting from the goodwill impairment charge we recorded during the year, and recognition of
previously unrecognized tax benefits for tax holidays. The income tax provision in 2006 primarily results from
current foreign taxes, plus deferred U.S. taxes related to indefinite-lived goodwill, and reduced by deferred
foreign benefits from removing part of the valuation allowance on German net operating loss carryovers of
Fab 36.
As of December 27, 2008 substantially all of our U.S. and foreign deferred tax assets other than German
deferred tax assets, net of deferred tax liabilities, continue to be subject to a valuation allowance. The realization
of these assets is dependent on substantial future taxable income which, at December 27, 2008 in management’s
estimate, is not more likely than not to be achieved.
Our gross unrecognized tax benefits increased by $31 million during the year ended December 27, 2008.
The amount of unrecognized tax benefits that will affect the effective tax rate increased by $12 million during the
year ended December 27, 2008, primarily due to a reduction in losses incurred in certain foreign jurisdictions net
of the expiration of the statute of limitations in certain foreign jurisdictions.
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