Equity Interest Purchase Agreement - ATMP Joint Venture |
6 Months Ended |
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Jun. 25, 2016 | |
| Discontinued Operations and Disposal Groups [Abstract] | |
| Equity Interest Purchase Agreement - ATMP Joint Venture |
Equity Interest Purchase Agreement - ATMP Joint Venture
On April 29, 2016, the Company and certain of its subsidiaries completed the sale of a majority of the equity interests in AMD Technologies (China) Co., Ltd., a wholly-foreign owned enterprise incorporated as a limited liability company, and Advanced Micro Devices Export Sdn. Bhd., a Malaysian limited liability company, to affiliates of Nantong Fujitsu Microelectronics Co., Ltd., a Chinese joint stock company (NFME), to form two joint ventures (collectively, the ATMP JV), pursuant to the terms of an Equity Interest Purchase Agreement, dated as of October 15, 2015 (the Equity Interest Purchase Agreement), between the Company and NFME. As a result of the sale, NFME’s affiliates own 85% of the equity interests in each ATMP JV while certain of the Company’s subsidiaries own the remaining 15%. The Company has no obligations to fund the ATMP JV.
As the result of the transaction, the Company received approximately $351 million, including purchase price adjustments, in net cash proceeds in the second quarter of 2016 for selling 85% of the equity interest in each of AMD Technologies (China) Co., Ltd. and Advanced Micro Devices Export Sdn. Bhd. These proceeds, net of certain transaction costs, were included in investing activities on the Company's condensed consolidated statements of cash flows for the six months ended June 25, 2016. The Company estimates final net cash proceeds, excluding final purchase price adjustments which the Company expects will be settled in upcoming quarters, after payment of taxes and customary expenses in the current and future quarters, of approximately $320 million.
In connection with the divestiture, the Company recognized a pre-tax gain of $150 million within Other income (expense), net on its condensed consolidated statements of operations during the quarter and six months ended June 25, 2016. The pre-tax gain reflects the excess of the sum of net cash proceeds and fair value of the Company's retained 15% equity interests in the ATMP JV over the sum of the net book values of the Company's former subsidiaries and other closing costs directly attributed to the divestiture. The above gain includes $12 million of excess of fair value of the Company's retained interest over the corresponding net book values.
In determining the fair value of the Company's retained 15% equity interests in the ATMP JV, the Company used quoted prices from comparable bids for this transaction. The Company also considered other factors including the control premium and the amount of consideration received for the portion sold.
The Company accounts for its equity interests in the ATMP JV under the equity method of accounting due to its significant influence over the ATMP JV. As of June 25, 2016, the carrying value of the Company's investment in the ATMP JV was approximately $62 million. Opening balances of ATMP JV are currently undergoing a valuation analysis which may result in adjustment to the carrying value of the investment in ATMP JV, adjustment to the recognized gain on sale of the 85% equity interest or equity method income (loss) in ATMP JV.
Following the deconsolidation, the ATMP JV is a related party of the Company. The ATMP JV provides assembly, test, mark and pack (ATMP) services to the Company. The Company currently pays the ATMP JV for ATMP services on a cost-plus basis. The Company's total purchases from the ATMP JV in the second quarter of 2016 amounted to approximately $66 million. The Company’s payable to the ATMP JV, as of June 25, 2016 was $150 million also included amounts payable to the former subsidiaries, AMD Technologies (China) Co., Ltd. and Advanced Micro Devices Export Sdn. Bhd., arising from the transactions prior to the sale.
The Company recorded a loss of $3 million in Equity in income (loss) of ATMP JV on its condensed consolidated statements of operations for the quarter and six months ended June 25, 2016, which includes certain expenses incurred by the Company on behalf of the ATMP JV.
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