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Advanced Micro Devices (AMD)

Filed: 28 Oct 08, 8:00pm

EXHIBIT 99.1

Advanced Micro Devices, Inc.

Unaudited Pro Forma Condensed Consolidated Financial Statements

These unaudited pro forma condensed consolidated financial statements of the Company have been prepared to reflect the October 27, 2008 sale of certain assets of the Company’s digital television business (DTV) to Broadcom Corporation as described in Item 2.01 of this Current Report.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the years ended December 29, 2007 and December 31, 2006 are based on the Company’s historical condensed consolidated statements of operations, and give effect to the disposition transaction as if it had occurred on December 26, 2005, the first day of fiscal 2006. The Company purchased DTV as part of the acquisition of ATI Technologies Inc. on October 25, 2006. Since DTV was purchased on October 25, 2006, the Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2006 includes the results of operations for DTV for the period October 26, 2006 through December 31, 2006. For the six months ended June 28, 2008, DTV’s and the Company’s Hand-held Products Business (Hand-held) results of operations were presented as discontinued operations in the Company’s Quarterly Report on Form 10-Q for the period ended June 28, 2008, in accordance with FASB Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets; therefore, an unaudited pro forma condensed consolidated statement of operations is not necessary for that period. Also, these unaudited pro forma condensed consolidated financial statements present the Hand-held business as a discontinued operation for all periods presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 28, 2008 is based on the Company’s historical balance sheet as of that date, and gives effect to the disposition transaction as if it had occurred on June 28, 2008. The Unaudited Pro Forma Condensed Consolidated Statements of Operations are based on the assumptions and adjustments described in the accompanying notes and do not reflect any adjustments for non-recurring items or changes in operating strategies arising as a result of the disposition. These unaudited pro forma condensed consolidated financial statements include no assumptions regarding the use of proceeds from the sale of DTV, which are presented as additional cash on the Unaudited Pro Forma Condensed Consolidated Balance Sheet. Accordingly, the actual effect of the sale, due to this and other factors, could differ from the pro forma adjustments presented herein. However, management believes that the assumptions used and the adjustments made are reasonable under the circumstances and given the information available.

These unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the sale been consummated as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma condensed consolidated financial statements and the accompanying notes should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 29, 2007, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2007, as well as in conjunction with the Company’s unaudited condensed consolidated financial statements and accompanying notes as of and for the period ended June 28, 2008, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Quarterly Report on Form 10-Q for the six months ended June 28, 2008.

 

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Advanced Micro Devices, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 29, 2007

(in millions, except per share amounts)

 

   Historical
AMD
  Pro Forma
Adjustments (c)
  Pro Forma
AMD
 

Net revenue

  $6,013  $(319) $5,694 

Cost of sales

   3,751   (200)  3,551 
             

Gross margin

   2,262   (119)  2,143 

Research and development

   1,847   (147)  1,700 

Marketing, general and administrative

   1,373   (26)  1,347 

Impairment of goodwill and acquired intangible assets

   1,608   (1,003)  605 

Amortization of acquired intangible assets and integration charges

   299   (134)  165 
             

Operating income (loss)

   (2,865)  1,191   (1,674)

Interest income

   73   —     73 

Interest expense

   (367)  —     (367)

Other income (expense), net

   (7)  —     (7)
             

Income (loss) from continuing operations before minority interest, equity in net loss of Spansion Inc. and other and income taxes

   (3,166)  1,191   (1,975)

Minority interest in consolidated subsidiaries

   (35)  —     (35)

Equity in net loss of Spansion Inc. and other

   (155)  —     (155)
             

Income (loss) from continuing operations before income taxes

   (3,356)  1,191   (2,165)

Provision (benefit) for income taxes

   23   8(f)  31 
             

Income (loss) from continuing operations

  $(3,379) $1,183  $(2,196)
             

Income (loss) per common share

    

Basic and Diluted:

  $(6.06)  $(3.94)
          

Shares used in per share calculation

    

Basic and diluted

   558    558 

 

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Advanced Micro Devices, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2006

(in millions, except per share amounts)

 

   Historical
AMD
  Pro Forma
Adjustments (c)
  Pro Forma
AMD
 

Net revenue

  $5,649  $(97) $5,552 

Cost of sales

   2,856   (86)  2,770 
             

Gross margin

   2,793   (11)  2,782 

Research and development

   1,205   (27)  1,178 

Marketing, general and administrative

   1,140   (4)  1,136 

In-process research and development

   416   (221)  195 

Amortization of acquired intangible assets and integration charges

   79   (25)  54 
             

Operating income (loss)

   (47)  266   219 

Interest income

   116   —     116 

Interest expense

   (126)  —     (126)

Other income (expense), net

   (13)  —     (13)
             

Income (loss) from continuing operations before minority interest, equity in net loss of Spansion Inc. and other and income taxes

   (70)  266   196 

Minority interest in consolidated subsidiaries

   (28)  —     (28)

Equity in net loss of Spansion Inc. and other

   (45)  —     (45)
             

Income (loss) from continuing operations before income taxes

   (143)  266   123 

Provision (benefit) for income taxes

   23   (8)(f)  15 
             

Income (loss) from continuing operations

  $(166) $274  $108 
             

Income (loss) per common share

    

Basic

  $(0.34)  $0.22 

Diluted

  $(0.34)  $0.21 
          

Shares used in per share calculation

    

Basic

   492    492 

Diluted

   492    509 

 

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Advanced Micro Devices, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of June 28, 2008

(in millions, except par value amounts)

 

   Historical
AMD
  Pro Forma
Adjustments
  Pro Forma
AMD
 

Assets

    

Current assets:

    

Cash, cash equivalents and marketable securities

  $1,567  $ 102(a) $1,669 

Accounts receivable, net

   437   9(g)  446 

Inventories

   791   —     791 

Prepaid expenses and other current assets

   244   16(g)(i)  260 

Deferred income taxes

   20   —     20 

Assets of discontinued operations

   372   (277)(b)  95(h)
             

Total current assets

   3,431   (150)  3,281 

Property, plant and equipment, net

   4,599   3(g)  4,602 

Goodwill

   945   —     945 

Acquisition related intangible assets, net

   253   —     253 

Other assets

   556   14(d)  570 
             

Total Assets

  $9,784  $(133) $9,651 
             

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

  $800  $ 9(g) $809 

Accrued compensation and benefits

   160   3(g)  163 

Accrued liabilities

   730   2(g)  732 

Deferred income on shipments to distributors

   80   1(g)  81 

Current portion of long-term debt and capital lease obligations

   246   —     246 

Other short-term obligations

   60   —     60 

Other current liabilities

   369   —     369 

Liabilities of discontinued operations

   23   (15)(b)  8(h)
             

Total current liabilities

   2,468   —     2,468 

Deferred income taxes

   3   —     3 

Long-term debt and capital lease obligations, less current portion

   4,955   —     4,955 

Other long-term liabilities

   695   —     695 

Minority interest in consolidated subsidiaries

   189   —     189 

Stockholders’ equity:

    

Capital stock:

    

Common stock, par value

   6   —     6 

Capital in excess of par value

   5,962   —     5,962 

Retained earnings (deficit)

   (4,647)  (133)(e)  (4,780)

Accumulated other comprehensive income

   153    153 
             

Total stockholders’ equity

   1,474   (133)  1,341 
             

Total Liabilities and Stockholders’ Equity

  $9,784  $(133) $9,651 
             

 

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Advanced Micro Devices, Inc.

Notes to the Unaudited Pro Forma Condensed Financial Statements

 

(a)Represents sales proceeds less certain direct transaction costs.

 

(b)Reflects the elimination of assets and liabilities associated with discontinued operations of the Company’s digital television business (DTV) in accordance with FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

 

(c)Reflects the elimination of the results of operations of the discontinued operations of the Company’s digital television business (DTV) and Hand-held Products Business (Hand-held) in accordance with FASB Statement No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, as follows:

 

   For the year ended 
   December 29, 2007  December 31, 2006 
   DTV  Hand-held  Total  DTV  Hand-held  Total 
   (In millions) 

Net revenue

  $155  $164  $319  $22  $75  $97 

Cost of sales

   82   118   200   23   63   86 
                         

Gross margin

   73   46  $119   (1)  12  $11 

Research and development

   76   71   147   13   14   27 

Marketing, general and administrative

   13   13   26   2   2   4 

In-process research and development

   —     —     —     82   139   221 

Impairment of goodwill and acquired intangible assets

   476   527   1,003   —     —     —   

Amortization of acquired intangible assets and integration charges

   63   71   134   12   13   25 
                         

Income (loss) from discontinuing operations before income taxes

   (555)  (636)  (1,191)  (110)  (156)  (266)

Provision (benefit) for income taxes

   (4)  (4)  (8)  4   4   8 
                         

Income (loss) from discontinuing operations, net of tax

  $(551) $(632) $(1,183) $(114) $(160) $(274)
                         

 

(d)Represents the portion of the sales proceeds to be held in escrow, for an 18-month period, to reimburse the buyer for potential indemnification obligations of the Company under the Asset Purchase Agreement.

 

(e)Represents recognition of the loss, which would have been realized upon the disposition of DTV, had the transaction closed on June 28, 2008.

 

(f)Reflects 2006 charge for deferred tax liability related to tax deductible goodwill for discontinued operations, and the reversal of amount in 2007 due to goodwill impairment charge.

 

(g)Represents adjustments to reclassify assets and liabilities presented in discontinued operations as of June 28, 2008, which, in the final Asset Purchase Agreement, were not sold to or assumed by Broadcom.

 

(h)Represents assets and liabilities of the Company’s Hand-held business, which are classified as discontinued operations for all periods presented. The Company’s plans with respect to this business are disclosed in its Quarterly Report on Form 10-Q for the period ended June 28, 2008.

 

(i)Includes the $15 million portion of sales proceeds to be held in escrow until certain audited 2008 financial statements have been delivered to Broadcom.

 

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