AMD 2011 Annual Report Download - page 118

Warranties and Indemnities
The Company generally warrants that its products sold to its customers will conform to the Company’s
approved specifications and be free from defects in material and workmanship under normal use and service for
one year. Subject to certain exceptions, the Company also offers a three-year limited warranty to end users for
only those CPU and AMD A-Series APU products that are commonly referred to as “processors in a box” and
has also offered extended limited warranties to certain customers of “tray” microprocessor products and/or
workstation graphics products who have written agreements with the Company and target their computer systems
at the commercial and/or embedded markets.
Changes in the Company’s potential liability for product warranty during the years ended December 31,
2011 and December 25, 2010 are as follows:
December 31,
2011
December 25,
2010
(In millions)
Beginning balance ................................... $19 $19
New warranties issued during the period .................. 35 34
Settlements during the period .......................... (36) (35)
Changes in liability for pre-existing warranties during the
period, including expirations ......................... 2 1
Ending balance ...................................... $20 $19
In addition to product warranties, the Company, from time to time in its normal course of business,
indemnifies other parties, with whom it enters into contractual relationships, including customers, lessors and
parties to other transactions with the Company, with respect to certain matters. In these limited matters, the
Company has agreed to hold certain third parties harmless against specific types of claims or losses, such as
those arising from a breach of representations or covenants, third-party claims that the Company’s products when
used for their intended purpose(s) and under specific conditions infringe the intellectual property rights of a third
party, or other specified claims made against the indemnified party. It is not possible to determine the maximum
potential amount of liability under these indemnification obligations due to the unique facts and circumstances
that are likely to be involved in each particular claim and indemnification provision. Historically, payments made
by the Company under these obligations have not been material.
NOTE 17: Contingencies
Environmental Matters
The Company is named as a responsible party on Superfund clean-up orders for three sites in Sunnyvale,
California that are on the National Priorities List. Since 1981, the Company has discovered hazardous material
releases to the groundwater from former underground tanks and proceeded to investigate and conduct
remediation at these three sites. The chemicals released into the groundwater were commonly used in the
semiconductor industry in the United States in the wafer fabrication process prior to 1979.
In 1991, the Company received Final Site Clean-up Requirements Orders from the California Regional
Water Quality Control Board relating to the three sites. The Company has entered into settlement agreements
with other responsible parties on two of the orders. During the term of such agreements other parties have agreed
to assume most of the foreseeable costs as well as the primary role in conducting remediation activities under the
orders. The Company remains responsible for additional costs beyond the scope of the agreements as well as all
remaining costs in the event that the other parties do not fulfill their obligations under the settlement agreements.
To address anticipated future remediation costs under the orders, the Company has computed and recorded
an estimated environmental liability of approximately $5.4 million and has not recorded any potential insurance
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