content: <PAGE>
   
                                   UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549
  
                                     FORM 8-K
  
                 Current Report Pursuant to Section 13 or 15(d) of
                        The Securities Exchange Act of 1934
  
  
                           Date of Report:  June 19, 1996
  
  
                           ADVANCED MICRO DEVICES, INC.
            ----------------------------------------------------------
              (Exact name of registrant as specified in its charter)
  
  
  
  
                  DELAWARE                1-7882             94-1692300
       ----------------------------    -------------    -------------------
       (State or other jurisdiction    (Commission      (I.R.S. Employer
        of incorporation)               File Number)     Identification No.)
  
  
  
                  One AMD Place,
                  P.O. Box 3453
                  Sunnyvale, CA                             94088-3453
      ----------------------------------------              ----------
      (address of principal executive offices)              (Zip Code)
  
  
  
       Registrant's telephone number,
       including area code:                               (408) 732-2400
                                                          --------------
  
  
                                   Page 1 of 34
  <PAGE>
   
  Item 5.  Other Events.
  - ------   ------------ 
  
           This Current Report on Form 8-K includes the Supplemental Consolidated 
  Financial Statements which have been prepared to give retroactive effect to the 
  merger of NexGen, Inc. with and into Advanced Micro Devices, Inc. (the 
  "company" or "AMD") on January 17, 1996.
  
  SUPPLEMENTAL SELECTED FINANCIAL DATA
  
  
  <TABLE>
  <CAPTION>
  Five Years Ended December 31, 1995 
  (Dollars in thousands except per share amounts)           91             92              93              94             95
                                                        ----------     ----------      ----------     ----------      ---------- 
  <S>                                                   <C>            <C>             <C>            <C>             <C>  
  Net sales                                             $1,226,649     $1,514,489      $1,648,280     $2,155,453      $2,468,379
  Operating income                                          97,756        257,362         282,392        469,035         222,200
  Net income                                               133,171        233,619         208,356        270,942         216,326
  Net income per common share:
     Primary                                                  1.20           2.02            1.65           2.06            1.59
     Fully diluted                                            1.20           1.99            1.64           2.02            1.57
  Long-term debt and capital lease obligations,
     less current portion                                   48,238         22,213          90,066         75,752         214,965
  Total assets                                           1,304,773      1,453,768       1,944,953      2,525,721       3,078,467
  </TABLE>
  
  The company has never paid cash dividends on common stock and has no present
  plans to do so.
  
  Note:  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a
         transaction accounted for as a pooling-of-interests. All financial data
         of the company, for the periods presented, has been supplementally
         prepared to give retroactive effect to the merger with NexGen.
  
                                         2
  
  <PAGE>
   
  SUPPLEMENTARY FINANCIAL DATA
  
  <TABLE>
  <CAPTION>
  1995 and 1994 by Quarter (Unaudited)                           Dec. 31,        Oct. 1,        July 2,        Apr. 2, 
  (Thousands except per share amounts)                             1995           1995           1995           1995     
                                                                 --------       --------       --------       -------- 
  <S>                                                          <C>            <C>            <C>            <C>        
  Net sales                                                      $595,178       $606,953       $638,867       $627,381
  Expenses:                                                                                                            
   Cost of sales(1)                                               427,058        368,359        315,905        305,685 
   Research and development                                       107,715        106,237        105,695         96,874 
   Marketing, general, and administrative                         100,766        102,549        106,602        102,734 
                                                                 --------       --------       --------       -------- 
                                                                  635,539        577,145        528,202        505,293 
                                                                 --------       --------       --------       -------- 
  Operating income (loss)                                         (40,361)        29,808        110,665        122,088 
                                                                                                                       
  Litigation settlement                                                 -              -              -              - 
  Interest income and other, net                                    8,024         10,408          6,975          7,058 
  Interest expense                                                 (1,665)          (315)          (501)          (578)
                                                                 --------       --------       --------       -------- 
  Income (loss) before income taxes and equity in joint venture   (34,002)        39,901        117,139        128,568
  Provision (credit) for income taxes                             (21,846)        10,212         39,016         42,824
                                                                 --------       --------       --------       -------- 
  Income (loss) before equity in joint venture                    (12,156)        29,689         78,123         85,744
  Equity in net income (loss) of joint venture                     21,500         12,311          2,529         (1,414)
                                                                 --------       --------       --------       -------- 
  Net income                                                        9,344         42,000         80,652         84,330
                                                                                                                       
  Preferred stock dividends                                             -              -              -             10 
                                                                 --------       --------       --------       -------- 
  Net income applicable to common stockholders                   $  9,344       $ 42,000       $ 80,652       $ 84,320 
                                                                 ========       ========       ========       ========
  Net income per common share          -- Primary                $    .07       $    .30       $    .59       $    .66
                                                                 ========       ========       ========       ======== 
                                       -- Fully diluted          $    .07       $    .30       $    .59       $    .63
                                                                 ========       ========       ========       ======== 
  Shares used in per share calculation -- Primary                 138,941        139,288        136,950        127,181
                                                                 ========       ========       ========       ======== 
                                       -- Fully diluted           139,085        139,434        137,647        134,421
                                                                 ========       ========       ========       ======== 
  Common stock market price range      -- High                   $  29.25       $  36.50       $  39.25       $  35.88  
                                       -- Low                    $  16.13       $  28.00       $  32.13       $  23.50  
  </TABLE>
  
  
  
  SUPPLEMENTARY FINANCIAL DATA                                  
  <TABLE>
  <CAPTION>                                                              
  1995 and 1994 by Quarter (Unaudited)                           Dec. 25,       Sept. 25,       June 26,        Mar. 27,
  (Thousands except per share amounts)                             1994           1994            1994            1994
                                                                 --------       ---------      ---------         --------
  <S>                                                           <C>            <C>            <C>              <C>
  Net sales                                                      $557,821       $550,399       $534,146         $513,087
  Expenses:                                                     
   Cost of sales                                                  278,783        267,322        237,038          230,446
   Research and development                                        80,778         72,133         71,025           71,390
   Marketing, general, and administrative                          96,474         93,157         93,549           94,323
                                                                 --------       --------       --------         --------
                                                                  456,035        432,612        401,612          396,159
                                                                 --------       --------       --------         --------
  Operating income (loss)                                         101,786        117,787        132,534          116,928
                                                                
  Litigation settlement                                           (58,000)             -              -                -
  Interest income and other, net                                    5,635            739          6,486            4,274
  Interest expense                                                   (502)          (782)        (1,569)          (1,557)
                                                                 --------       --------       --------         --------
  Income (loss) before income taxes and equity in joint venture    48,919        117,744        137,451          119,645
  Provision (credit) for income taxes                              16,504         39,252         46,895           39,581
                                                                 --------       --------       --------         --------
  Income (loss) before equity in joint venture                     32,415         78,492         90,556           80,064
  Equity in net income (loss) of joint venture                     (2,989)        (4,277)        (2,925)            (394) 
                                                                 --------       --------       --------         --------
  
  Net income                                                       29,426         74,215         87,631           79,670
                                                                
  Preferred stock dividends                                         2,588          2,587          2,587            2,588
                                                                 --------       --------       --------         --------
                                                                
  Net income applicable to common stockholders                   $ 26,838       $ 71,628       $ 85,044         $ 77,082
                                                                 ========       ========       ========         ========
  Net income per common share          -- Primary                $    .21       $    .58       $    .68         $    .63
                                                                 ========       ========       ========         ========
                                       -- Fully diluted          $    .21       $    .56       $    .66         $    .61
                                                                 ========       ========       ========         ========
  Shares used in per share calculation -- Primary                 128,416        123,947        125,428          122,624
                                                                 ========       ========       ========         ========
                                       -- Fully diluted           128,977        132,576        132,742          130,987
                                                                 ========       ========       ========         ========
  Common stock market price range      -- High                   $  30.50       $  31.00       $  31.75         $  31.75
                                       -- Low                    $  22.25       $  24.00       $  22.63         $  16.75
                                                                
  </TABLE> 
  
  Note:  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a
         transaction accounted for as a pooling-of-interests. All quarterly
         financial data of the company, for the periods presented, has been
         supplementally prepared to give retroactive effect to the merger with
         NexGen.
  
  (1)  The company made certain year-end adjustments in 1995, resulting from 
       changes in estimates related to the Nx586 product which was developed by
       NexGen. These adjustments were material to the results of the fourth
       quarter. The adjustment charged to cost of sales in the fourth quarter of
       1995 was approximately $49.2 million.
  
                                         3
  <PAGE>
   
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
  CONDITION
  
  
  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a transaction
  accounted for as a pooling-of-interests. All financial data and footnote
  information of the company, including the company's financial statements for the
  periods discussed herein have been supplementally prepared to give retroactive
  effect to the merger with NexGen.
  
  The following discussion and analysis presents historical information only. For
  information concerning trends, risks, and uncertainties that may have a material
  favorable or unfavorable impact on the company's results of operations,
  liquidity, capital resources in the future, and capital expenditure plans in
  1996, please see "Management's Discussion and Analysis of Results of Operations
  and Financial Condition" contained in the company's Annual Report on Form 10-K
  for the fiscal year ended December 31, 1995 and the company's Quarterly Report
  on Form 10-Q for the quarter ended March 31, 1996.
  
  RESULTS OF OPERATIONS
  
  Net sales of $2.5 billion in 1995 rose by approximately 15 percent from 1994.
  This increase was primarily attributable to substantial growth in Flash memory
  sales and secondarily due to an increase in sales of communication products, the
  combination of which more than offset a decline in microprocessor sales. Net
  sales in 1994 increased by approximately 31 percent from 1993 due to substantial
  growth in microprocessor sales.
  
  Sales of Flash memory devices increased in 1995 from 1994 primarily due to
  growth in unit shipments and secondarily due to a change in product mix
  resulting in higher average selling prices. During 1995, Flash memory devices
  contributed a significant portion of the company's revenues and profits.
  
  Revenues from communication products rose from 1994 to 1995 primarily due to
  growth in the Ethernet family of products. Sales of CMOS programmable logic
  devices increased from 1994 to 1995 primarily due to increased unit shipments.
  In 1995, EPROM sales decreased as compared to 1994 due to comparable declines in
  both unit shipments and average selling prices.
  
  In 1995, Am486(R) microprocessor sales decreased slightly primarily due to
  average selling price declines, partially offset by increases in unit sales.
  Am486 microprocessor products contributed a significant portion of the company's
  revenues and profits in 1994 and 1995.
  
  Am486 and Nx586 are registered trademarks of AMD.
  K86 RISC SUPERSCALAR and AMD-K5 are trademarks of AMD.
  
                                         4
  <PAGE>
   
  Gross margin was 43 percent in 1995 as compared to 53 percent in 1994 and 52
  percent in 1993. The four main factors contributing to the decrease in gross
  margin in 1995, in order of significance, were first, Am486 price declines;
  second, purchase prices of FASL products, which are higher than the costs of
  similar products manufactured internally; third, negative gross margins,
  inventory reserves, and manufacturing loss accruals associated with
  significantly reduced demand for NexGen products; and fourth, the transition of
  Fab 25 costs from research and development to cost of sales when production
  commenced in September 1995. The impact of gross margin declines caused by
  purchase of FASL products during 1995 was mostly offset by the company's share
  of FASL income. The increase in gross margin from 1993 to 1994 was primarily
  attributable to increased sales from higher margin Am486 products during 1994.
  
  Research and development expenses for 1995 increased to $417 million from $295
  million in 1994, and $279 million in 1993. These increases were primarily due to
  higher Fab 25 expenses and secondarily due to increased microprocessor
  development costs.
  
  Marketing, general, and administrative expenses were $413 million for 1995, $378
  million for 1994, and $297 million for 1993. The increase from 1994 to 1995 was
  primarily attributable to promotional expenses for the sale of NexGen's Nx586(R)
  and other related products, and secondarily to higher advertising expenses. The
  incremental change from 1993 to 1994 was mainly due to increased legal and
  microprocessor advertising expenses.
  
  Interest income and other, net rose from 1994 to 1995 primarily due to higher
  interest rates during 1995 and secondarily due to a realized gain of
  approximately $3 million from equity securities sold during 1995. In 1994,
  interest income and other, net included a net charge of approximately $5 million
  resulting from the securities class action lawsuit and stockholders' derivative
  action settlements, and a gain from the damages award in an arbitration
  proceeding with Intel Corporation. Interest expense in 1995 decreased from 1994
  due to higher capitalized interest mainly related to the construction of Fab 25.
  
  The income tax rate was approximately 28, 34, and 29 percent in 1995, 1994, and
  1993, respectively. The lower tax rate in 1995 resulted from lower state taxes
  and increased benefits from low taxed foreign income. The lower tax rate in 1993
  was primarily due to available tax credit carryforwards.
  
  International sales were 56, 55, and 54 percent of total sales in 1995, 1994,
  and 1993, respectively. During 1995, approximately 17 percent of the company's
  net sales were denominated in foreign currencies. The company does not have
  sales denominated in local currencies in those countries which have highly
  inflationary economies. (A highly inflationary economy is defined in accordance
  with the Statement of Financial
  
                                         5
  <PAGE>
   
  Accounting Standards No. 52 as one in which the cumulative inflation over a
  three-year consecutive period approximates 100 percent or more.) The impact on
  the company's operating results from changes in foreign currency rates
  individually and in the aggregate has not been material.
  
  The company enters into foreign exchange forward contracts to buy and sell
  currencies as economic hedges of the company's foreign net monetary asset
  position including the company's liabilities for products purchased from FASL.
  In 1995, these hedging transactions were denominated in lira, yen, French franc,
  deutsche mark, and pound sterling. The maturities of these contracts are
  generally short-term in nature. The company believes its foreign exchange
  contracts do not subject the company to material risk from exchange rate
  movements because gains and losses on these contracts are designed to offset
  losses and gains on the net monetary asset position being hedged. Net foreign
  currency gains and losses have not been material. As of December 31, 1995, the
  company had approximately $37 million (notional amount) of foreign exchange
  forward contracts (see Notes 3, 4, and 5 to the Supplemental Consolidated
  Financial Statements).
  
  The company has engaged in interest rate swaps primarily to reduce its interest
  rate exposure by changing a portion of the company's interest rate obligation
  from a floating rate to a fixed rate basis. At the end of 1995, the net
  outstanding notional amount of interest rate swaps was $190 million, of which
  $150 million will mature in 1996 and $40 million will mature in 1997. Gains and
  losses related to these interest rate swaps have been immaterial (see Notes 3,
  4, and 5 to the Supplemental Consolidated Financial Statements).
  
  The company primarily addresses market risk by participating as an end user in
  various derivative markets to manage its exposure to interest and foreign
  currency exchange rate fluctuations. The counterparties to the company's foreign
  exchange forward contracts and interest rate swaps consist of a number of major,
  high credit quality, international financial institutions. The company does not
  believe that there is significant risk of nonperformance by these counterparties
  because the company monitors the credit ratings of such counterparties, and
  reduces the financial exposure by limiting the amount of agreements entered into
  with any one financial institution.
  
  In 1995, the Financial Accounting Standards Board released the Statement of
  Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
  Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
  SFAS 121 requires recognition of impairment of long-lived assets in the event
  the net book value of such assets exceeds the future undiscounted cash flows
  attributable to such assets. SFAS 121 is effective for fiscal years beginning
  after December 15, 1995. Adoption of SFAS 121 is not expected to have a material
  impact on the company's financial condition or results of operations.
  
                                         6
  <PAGE>
   
  The company accounts for its stock option plans and its employee stock purchase
  plan in accordance with provisions of the Accounting Principles Board's Opinion
  No. 25 (APB 25), "Accounting For Stock Issued to Employees." In 1995, the
  Financial Accounting Standards Board released the Statement of Financial
  Accounting Standards No. 123 (SFAS 123), "Accounting for Stock Based
  Compensation." SFAS 123 provides an alternative to APB 25 and is effective for
  fiscal years beginning after December 15, 1995. The company expects to continue
  to account for its employee stock plans in accordance with the provisions of APB
  25. Accordingly, SFAS 123 is not expected to have any material impact on the
  company's financial condition or results of operations.
  
  FINANCIAL CONDITION
  
  Cash, cash equivalents, and short-term investments increased by $79 million from
  1994 to 1995. This increase was primarily attributable to a $150 million term
  loan obtained in January of 1995 offset by NexGen's cash used in operations. The
  $545 million of cash generated from operating activities in 1995 was used to
  fund investments in property, plant, and equipment to expand manufacturing
  capacity primarily related to Fab 25.
  
  Working capital increased by $20 million from $442 million at the end of 1994 to
  $462 million at the end of 1995. This increase was primarily due to higher cash,
  cash equivalents, and short-term investments.
  
  At the end of 1995, the company's total cash investment in FASL was $160 million
  as compared to $142 million at the end of 1994. In 1995, FASL approved
  construction of a second Flash memory fab, FASL II, at a site contiguous to the
  existing FASL facility in Aizu-Wakamatsu, Japan.
  
  On January 11, 1995, the company and Intel Corporation reached an agreement to
  settle all previously outstanding legal disputes between the two companies. As
  part of the settlement, in December 1995, the company signed a five-year,
  comprehensive patent cross-license agreement with Intel which expires on
  December 31, 2000. The agreement provides that after December 31, 1999, the
  parties will negotiate in good faith a patent cross-license agreement to be
  effective January 1, 2001. Effective January 1, 1996, the new agreement gives
  the company and Intel the rights to use each others' patents and certain
  copyrights, exclusive of microprocessor microcode copyrights. The cross-license
  is royalty-bearing for the company's products that use certain Intel
  technologies. The company is required to pay Intel minimum non-refundable
  royalties during the years 1997 to 2000.
  
  As of the end of 1995, the company had the following financing arrangements:
  unsecured committed bank lines of credit of $250 million, unutilized; long-term
  secured equipment lease lines of $132 million, which were fully utilized; short-
  term, unsecured uncommitted bank credit in the amount of $96 million, of which
  $27
  
                                         7
  <PAGE>
   
  million was utilized; an outstanding $150 million four-year term loan; and
  approximately $12.5 million in short-term debt financing.
  
  RISK FACTORS
  
  The semiconductor industry is generally characterized by a highly competitive
  and rapidly changing environment in which operating results are subject to the
  effects of new product introductions, manufacturing technology innovations,
  rapid fluctuations in product demand, the availability of manufacturing
  capacity, and the ability to secure and maintain intellectual property rights.
  While the company attempts to identify and respond to rapidly changing events
  and conditions as soon as possible, the anticipation of and reaction to such
  events are an ongoing challenge. The company's future results of operations and
  financial condition may be adversely impacted by various factors. These risk
  factors are detailed in the description of the company's business, operations,
  and financial condition in the company's Form 10-K for the fiscal year ended
  December 31, 1995 under the captions "Business" and "Management's Discussion and
  Analysis of Results of Operations and Financial Condition" and in the company's
  Form 10-Q for the quarter ended March 31, 1996 under the caption "Management's
  Discussion and Analysis of Results of Operations and Financial Condition."
  
                                         8
  <PAGE>
   
  The Board of Directors and Shareholders
  Advanced Micro Devices, Inc.
  
  We have audited the supplemental consolidated balance sheets of Advanced Micro 
  Devices, Inc. (formed as a result of the consolidation of Advanced Micro 
  Devices, Inc. and NexGen, Inc.) as of December 31, 1995 and December 25, 1994 
  and the related supplemental consolidated statements of income, stockholders' 
  equity, and cash flows for each of the three years in the period ended December 
  31, 1995. The supplemental consolidated financial statements give retroactive 
  effect to the merger of Advanced Micro Devices, Inc. and NexGen, Inc. on January
  17, 1996, which has been accounted for using the pooling-of-interests method as 
  described in the notes to the supplemental consolidated financial statements. 
  These supplemental financial statements are the responsibility of the management
  of Advanced Micro Devices, Inc. Our responsibility is to express an opinion on 
  these supplemental financial statements based on our audits.
  
  We conducted our audits in accordance with generally accepted auditing 
  standards. Those standards require that we plan and perform the audit to obtain 
  reasonable assurance about whether the financial statements are free of material
  misstatement. An audit includes examining, on a test basis, evidence supporting 
  the amounts and disclosures in financial statements. An audit also includes 
  assessing the accounting principles used and significant estimates made by 
  management, as well as evaluating the overall financial statement presentation. 
  We believe that our audits provide a reasonable basis for our opinion.
  
  In our opinion, based on our audits, the supplemental financial statements 
  referred to above present fairly, in all material respects, the consolidated 
  financial position of Advanced Micro Devices, Inc. at December 31, 1995 and 
  December 25, 1994, and the consolidated results of its operations and its cash 
  flows for each of the three years in the period ended December 31, 1995, after 
  giving retroactive effect to the merger of NexGen, Inc., as described in the 
  notes to the supplemental consolidated financial statements, in conformity with 
  generally accepted accounting principles.
  
  
                                                                Ernst & Young LLP
  
  
  
  
  
  
  San Jose, California
  April 30, 1996
  
                                         9
  <PAGE>
   
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
  Three Years Ended December 31, 1995
  (Thousands except per share amounts)
  <TABLE>
  <CAPTION>
                                                                       95                94                  93
                                                                   ----------        -----------        -----------
  <S>                                                              <C>               <C>                <C>
  Net sales                                                        $2,468,379        $ 2,155,453        $ 1,648,280
  Expenses:
    Cost of sales                                                   1,417,007          1,013,589            789,564
    Research and development                                          416,521            295,326            279,412  
    Marketing, general, and administrative                            412,651            377,503            296,912   
                                                                   ----------        -----------        -----------
                                                                    2,246,179          1,686,418          1,365,888
                                                                   ----------        -----------        -----------
  Operating income                                                    222,200            469,035            282,392
  
  Litigation settlement                                                     -            (58,000)                 -
  Interest income and other, net                                       32,465             17,134             16,931
  Interest expense                                                     (3,059)            (4,410)            (4,398)
                                                                   ----------        -----------        -----------
  Income before income taxes and equity in joint venture              251,606            423,759            294,925
  Provision for income taxes                                           70,206            142,232             85,935
                                                                   ----------        -----------        -----------
  Income before equity in joint venture                               181,400            281,527            208,990
  Equity in net income (loss) of joint venture                         34,926            (10,585)              (634)
                                                                   ----------        -----------        -----------
  Net income                                                          216,326            270,942            208,356
  
  Preferred stock dividends                                                10             10,350             10,350
                                                                   ----------        -----------        -----------
  
  Net income applicable to common stockholders                     $  216,316        $   260,592        $   198,006
                                                                   ==========        ===========        ===========
  
  Net income per common share:
    Primary                                                        $     1.59        $      2.06        $      1.65
                                                                   ==========        ===========        ===========
    Fully diluted                                                  $     1.57        $      2.02        $      1.64
                                                                   ==========        ===========        ===========
  Shares used in per share calculation:
    Primary                                                           136,208            126,674            119,925
    Fully diluted                                                     137,815            134,142            127,167
  </TABLE> 
  
  See accompanying notes
  
                                        10
  <PAGE>
   
  SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
  December 31, 1995, and December 25, 1994
  (Thousands except share and per share amounts)
  <TABLE>
  <CAPTION>
                                                                                    95                 94
                                                                                -----------        -----------   
  <S>                                                                           <C>                <C> 
  Assets
  Current assets:
   Cash and cash equivalents                                                    $   126,316        $   117,997
   Short-term investments                                                           383,349            312,924
                                                                                -----------        -----------   
    Total cash, cash equivalents, and short-term investments                        509,665            430,921
   Accounts receivable, net of allowance for doubtful accounts
    of $15,618 in 1995, and $10,469 in 1994                                         284,238            345,546
   Inventories:                                                           
    Raw materials                                                                    29,494             23,097
    Work-in-process                                                                  68,827             74,892
    Finished goods                                                                   57,665             35,514
                                                                                -----------        -----------   
      Total inventories                                                             155,986            133,503
   Deferred income taxes                                                            147,489            105,238
   Prepaid expenses and other current assets                                         40,564             46,370
                                                                                -----------        -----------   
    Total current assets                                                          1,137,942          1,061,578
  Property, plant, and equipment:
   Land                                                                              28,851             28,820
   Buildings and leasehold improvements                                             893,646            500,530
   Equipment                                                                      1,843,662          1,456,512
   Construction in progress                                                         180,742            492,792
                                                                                -----------        -----------   
    Total property, plant, and equipment                                          2,946,901          2,478,654
   Accumulated depreciation and amortization                                     (1,305,267)        (1,209,813)
                                                                                -----------        -----------   
    Property, plant, and equipment, net                                           1,641,634          1,268,841
  Investment in joint venture                                                       176,821            124,588
  Other assets                                                                      122,070             70,714
                                                                                -----------        -----------   
                                                                                $ 3,078,467        $ 2,525,721
                                                                                ===========        ===========   
  
  Liabilities and Stockholders' Equity
  Current liabilities:
   Notes payable to banks                                                       $    26,770        $    32,459
   Accounts payable                                                                 241,916            159,939
   Accrued compensation and benefits                                                106,347            105,604
   Accrued liabilities                                                              103,404             85,912
   Litigation settlement                                                                  -             58,000
   Income tax payable                                                                56,297             53,795
   Deferred income on shipments to distributors                                     100,057             83,800
   Current portion of long-term debt and capital lease obligations                   41,642             40,420
                                                                                -----------        -----------   
    Total current liabilities                                                       676,433            619,929
  Deferred income taxes                                                              84,607             32,686
  Long-term debt and capital lease obligations, less current portion                214,965             75,752
  Commitments and contingencies                                                           -                  -
  
  Stockholders' equity:
   Capital stock:
    Serial preferred stock (redeemed March 13, 1995), par value $.10;
      1,000,000 shares authorized; 345,000 shares issued and 344,862
      shares outstanding in 1994                                                          -                 34
    Common stock, par value $.01; 250,000,000 shares authorized;
      132,182,019 shares issued and outstanding in 1995,
      and 121,919,102 in 1994                                                         1,050                959
   Capital in excess of par value                                                   908,989            871,200
   Retained earnings                                                              1,192,423            925,161
                                                                                -----------        -----------   
    Total stockholders' equity                                                    2,102,462          1,797,354
                                                                                -----------        -----------   
                                                                                $ 3,078,467        $ 2,525,721
                                                                                ===========        ===========   
  </TABLE>
  
  See accompanying notes
  
                                        11
  <PAGE>
   
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
  Three Years Ended December 31, 1995
  (Thousands)
  <TABLE>
  <CAPTION>
                                                  Preferred Stock     Common Stock
                                                 -----------------------------------
                                                 Number             Number                       Capital in                  Total
                                                   of                 of               Warrant   Excess of    Retained   Stockholders'
                                                 Shares    Amount   Shares    Amount  Valuation  Par Value    Earnings       Equity
                                                 ------------------------------------------------------------------------------------
  
  <S>                                            <C>      <C>       <C>      <C>       <C>       <C>         <C>           <C> 
  December 27, 1992                               12,580  $  53,119  89,976  $1,122    $   -     $ 532,674   $  457,454    $1,044,369 
                                                                                                                                      
  Issuance of preferred stock                      3,842     21,725       -       -        -             -            -        21,725 
  Issuance of common stock                             -          -     106      73        -             -            -            73 
  Valuation of warrants                                -          -       -       -      533             -            -           533 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   3,218      31        -        19,408            -        19,439 
      Fujitsu Limited                                  -          -   1,000      10        -        22,952            -        22,962 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         1,313            -         1,313 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        43,386            -        43,386 
  Preferred stock dividends                            -          -       -       -        -             -      (10,350)      (10,350)
  Net income                                           -          -       -       -        -             -      208,356       208,356 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 26, 1993                               16,422     74,844  94,300   1,236      533       619,733      655,460     1,351,806 
                                                                                                                                      
  Issuance of common stock                             -          -   4,676     316        -        65,170            -        65,486 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   1,970      19        -        16,911            -        16,930 
      Fujitsu Limited                                  -          -   1,000      10        -        22,625            -        22,635 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         1,971            -         1,971 
  Conversion of preferred stock to                                                                                                    
      common stock                               (16,078)   (74,810) 19,973       3        -       106,199            -        31,392 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        37,433            -        37,433 
  Preferred stock dividends                            -          -       -       -        -             -      (10,350)      (10,350)
  Reincorporation into a Delaware Corporation          -          -       -    (625)       -           625            -             - 
  Net income                                           -          -       -       -        -             -      270,942       270,942 
  Unrealized gain from available-for-sale                                                                                             
      investments                                      -          -       -       -        -             -        9,109         9,109 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 25, 1994                                  344         34 121,919     959      533       870,667      925,161     1,797,354 
                                                                                                                                      
  Changes in NexGen's stockholders'                                                                                                   
      equity in the six months ended                                                                                                  
      June 30, 1995                               18,161     93,548 (24,530)    352        -      (171,994)      23,803       (54,291)
  Issuance of preferred stock                      1,376     12,653       -       -        -             -            -        12,653 
  Issuance of common stock                             -          -   4,542     271        -        65,340            -        65,611 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   2,283      22        -        23,518            -        23,540 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         2,483            -         2,483 
  Conversion of preferred stock to                                                                                                    
      common stock                               (19,881)  (106,235) 26,823      71        -       103,663            -        (2,501)
  Reincorporation into a Delaware Corporation          -          -     (33)   (625)       -           625                          - 
  Warrants exercised                                   -          -   1,178       -     (533)          533            -             - 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        15,189            -        15,189 
  Preferred stock dividends                            -          -       -       -        -             -          (10)          (10)
  Redemption of stockholder rights plan                -          -       -       -        -        (1,035)           -        (1,035)
  Net income                                           -          -       -       -        -             -      216,326       216,326 
  Unrealized gain from available-for-sale                                                                                             
      investments and translation                                                                                                     
      adjustment for joint venture                     -          -       -       -        -             -       27,143        27,143 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 31, 1995                                    -  $       - 132,182  $1,050    $   -     $ 908,989   $1,192,423    $2,102,462
                                                 =======  ========= =======  ======    =====     =========   ==========    ==========
  </TABLE> 
  
  See accompanying notes
  
                                        12
  <PAGE>
   
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Years Ended December 31, 1995
  (Thousands)
  
  <TABLE>
  <CAPTION>
                                                                                 95              94               93
                                                                             ---------      -----------       ---------
  <S>                                                                        <C>             <C>               <C> 
  Cash flows from operating activities:
    Net income                                                               $ 216,326      $   270,942       $ 208,356
    Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation and amortization                                            264,675          217,665         176,827
      Accrual for litigation settlement                                              -           58,000               -
      Net (gain) loss on sale of property, plant, and equipment                  2,152              276          (2,943)
      Write-down of property, plant, and equipment                                 611            2,230             366
      Net gain realized on sale of available-for-sale securities                (2,707)               -               -
      Compensation recognized under employee stock plans                         2,483            1,971           1,313
      Undistributed (income) loss of joint venture                             (34,926)          10,585             634
      Changes in operating assets and liabilities:
        Net (increase) decrease in receivables, inventories,
          prepaid expenses, and other assets                                    19,548         (128,914)        (57,628)
        Payment of litigation settlement                                       (58,000)               -               -
        Net increase in deferred income taxes                                     (925)         (32,543)        (30,304)
        Increase in income tax payable                                          11,772           61,910          70,502
        Net increase in payables and accrued liabilities                       124,058           63,737          72,131
                                                                             ---------      -----------       ---------
  Net cash provided by operating activities                                    545,067          525,859         439,254
                                                                             ---------      -----------       ---------
  Cash flows from investing activities:
    Purchase of property, plant, and equipment                                (625,900)        (552,271)       (325,981)
    Proceeds from sale of property, plant, and equipment                         4,834            2,058           4,648
    Purchase of available-for-sale securities                                 (817,888)         (56,328)         (4,934)
    Proceeds from sale of available-for-sale securities                        756,373            4,849               -
    Purchase of held-to-maturity debt securities                              (648,012)      (1,245,167)       (715,487)
    Proceeds from maturities of held-to-maturity debt securities               642,229        1,416,431         566,773
    Investment in joint venture                                                (18,019)        (139,175)         (3,160)
                                                                             ---------      -----------       ---------
  Net cash used in investing activities                                       (706,383)        (569,603)       (478,141)
                                                                             ---------      -----------       ---------
  Cash flows from financing activities:
    Proceeds from borrowings                                                   246,345           42,025          17,528
    Payments on capital lease obligations and other debt                      (142,937)         (70,288)        (22,616)
    Proceeds from issuance of stock                                            101,804          136,443          64,692
    Expenses for conversion of preferred stock and redemption of 
     stockholder rights                                                         (3,536)               -               -
    Payments of preferred stock dividends                                          (10)         (10,350)        (10,350)
                                                                             ---------      -----------       ---------
  Net cash provided by financing activities                                    201,666           97,830          49,254
                                                                             ---------      -----------       ---------
  Net increase in cash and cash equivalents                                     40,350           54,086          10,367
  Cash and cash equivalents at beginning of year                                85,966           63,911          53,544
                                                                             ---------      -----------       ---------
  Cash and cash equivalents at end of year                                   $ 126,316      $   117,997       $  63,911
                                                                             =========      ===========       =========
  Supplemental disclosures of cash flow information:
    Cash paid during the year for:
      Interest (net of amounts capitalized)                                  $   2,541      $     4,125       $   2,462
                                                                             =========      ===========       =========
      Income taxes                                                           $  60,329      $   111,704       $  44,433
                                                                             =========      ===========       =========
   Non-cash financing activities:
      Equipment capital leases                                               $  24,422      $    34,202       $  64,512
                                                                             =========      ===========       =========
      Conversion of preferred stock to common stock                          $ 270,328      $   106,201       $       -
                                                                             =========      ===========       =========
  </TABLE> 
  
  See accompanying notes
  
                                        13
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  December 31, 1995, December 25, 1994, and December 26, 1993
   
  1.   NATURE OF OPERATIONS
  
       AMD is a semiconductor manufacturer with manufacturing facilities in the
  U.S. and Asia, and sales offices throughout the world. Focusing on the personal
  and networked computing and communications markets, AMD is a global company that
  derives more than half of its revenues from international sales, mainly in
  Europe and Asia. The company provides programmable products in concert with
  applications solutions to the manufacturers of equipment for personal and
  networked computation and communications.
  
  
  2.   BUSINESS COMBINATION
  
       On January 17, 1996, the company acquired NexGen, Inc. ("NexGen") in a 
  tax-free reorganization in which NexGen was merged directly into the company. 
  The company has exchanged approximately 29.3 million shares of AMD common stock 
  and has reserved 4.3 million shares to be exchanged for NexGen options and 
  warrants assumed by the company. The 33.6 million total shares to be exchanged 
  represent eight-tenths (0.8) of a share of the common stock of AMD for each 
  share of the common stock of NexGen outstanding or subject to an assumed warrant
  or option. The merger has been accounted for under the pooling-of-interests 
  method.
  
  The supplemental consolidated financial statements have been prepared to give
  retroactive effect to the merger of NexGen with and into AMD on January 17,
  1996. Generally accepted accounting principles prescribe giving effect to a
  consummated business combination accounted for by the pooling-of-interests
  method in financial statements that do not include the date of consummation. The
  accompanying supplemental consolidated financial statements do not extend
  through the date of the consummation, however, they will become the historical
  consolidated financial statements of the company after financial statements
  covering the date of consummation of the business combination are issued.
  
  Prior to its merger with AMD, NexGen reported on a fiscal year ending June 30.
  In the accompanying supplemental consolidated financial statements and the notes
  thereto, NexGen's financial position and operating results as of and for the
  years ended June 30, 1994 and 1995 were combined with AMD's financial position
  and operating results as of and for the years ended December 26, 1993 and
  December 25, 1994, respectively. NexGen's financial position and operating
  results for 1995, which were restated to a December 31, 1995 year end, were
  combined with AMD's financial position and operating results as of and for the
  year ended December 31, 1995. Accordingly, NexGen's operating results for the
  six months ended June 30, 1995 were duplicated in each of the years ended
  December 25, 1994 and December 31, 1995. NexGen's revenues and net loss for that
  six month period were $19.9 million and $34.4 million, respectively.
  Consolidated stockholders' equity has been reduced by $54.3 million, which
  represents NexGen's net stockholders' equity activity for the six months ended
  June 30, 1995 in order to eliminate the duplication of stockholders' equity
  activity during that period. As a result of the combination of NexGen's
  financial position as of June 30, 1995 with the financial position of AMD as of
  December 25, 1994, the beginning cash and cash equivalents balance in the
  accompanying 1995 supplemental consolidated statements of cash flows does not
  equal the December 25, 1994 cash and cash equivalents balance.
  
  A reconciliation of net sales, net income, and net income per common share of
  the company, as previously reported, NexGen and combined, including the NexGen
  income tax benefit, is as follows (in thousands, except per share amounts):
  
  <TABLE> 
  <CAPTION> 
  
                                          1995          1994         1993
                                        --------      --------      -------
  <S>                                 <C>           <C>            <C> 
  Net Sales:
    AMD, as previously reported       $2,429,724     $2,134,659    $1,648,280
    NexGen                                38,655         20,794             -
                                      ----------     ----------    ---------- 
    Combined                          $2,468,379     $2,155,453    $1,648,280
                                      ==========     ==========    ==========
  
  Net Income (Loss):
    AMD, as previously reported         $300,521       $305,266      $228,781  
    NexGen                              (126,727)       (45,795)      (23,708)
    NexGen income tax benefit             42,532         11,471         3,283
                                      ----------     ----------    ---------- 
    Combined                            $216,326       $270,942      $208,356
                                      ==========     ==========    ==========
  
  Net Income Per Common Share
   (Primary):
    AMD, as previously reported            $2.85          $3.02         $2.30
                                      ==========     ==========    ==========
    Combined                               $1.59          $2.06         $1.65
                                      ==========     ==========    ==========
  Net Income Per Common Share 
   (Fully Diluted):   
    AMD, as previously reported            $2.81          $2.92         $2.24
                                      ==========     ==========    ==========
    Combined                               $1.57          $2.02         $1.64 
                                      ==========     ==========    ==========
  </TABLE> 
  
  3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  FISCAL YEAR. The company uses a 52- to 53-week fiscal year ending on the last
  Sunday in December, which resulted in a 53-week year ended December 31, 1995.
  This compares with a 52-week fiscal year for 1994 and 1993, which ended on
  December 25 and 26, respectively.
  
  PRINCIPLES OF CONSOLIDATION. The supplemental consolidated financial statements
  include the accounts of the company and its subsidiaries. Upon consolidation,
  all significant intercompany accounts and transactions are eliminated. Also
  included in the financial statements of the company, under the equity method of
  accounting, is the company's 49.95 percent investment in Fujitsu AMD
  Semiconductor Limited (FASL).
  
  FOREIGN CURRENCY TRANSLATION. The U.S. dollar is the functional currency for the
  company's wholly-owned foreign subsidiaries. Translation adjustments, resulting
  from the process of
  
                                        14
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  translating foreign currency financial statements into U.S. dollars, are
  included in operations. The functional currency of the company's unconsolidated
  joint venture is the Japanese yen. Translation adjustments relating to the
  translation of these statements have not been material, and therefore, are not
  disclosed as a separate component of stockholders' equity.
  
  CASH EQUIVALENTS. Cash equivalents consist of financial instruments which are
  readily convertible to cash and have original maturities of three months or less
  at the time of acquisition.
  
  INVESTMENTS. The company classifies its marketable debt and equity securities
  into held-to-maturity and available-for-sale categories in accordance with the
  provisions of the Statement of Financial Accounting Standards No. 115 (SFAS No.
  115), "Accounting for Certain Instruments in Debt and Equity Securities." In
  accordance with the FASB staff Special Report, "A Guide to Implementation of
  Statement 115 on Accounting for Certain Investments in Debt and Equity
  Securities," the company chose to reclassify, as of December 31, 1995, all cash
  equivalents and short-term investments that were classified as held-to-maturity
  at that time from held-to-maturity to available-for-sale. Securities classified
  as available-for-sale are reported at fair market value with the related
  unrealized gains and losses included in retained earnings. Realized gains and
  losses and declines in value of securities judged to be other than temporary are
  included in interest income and other, net. Interest and dividends on all
  securities are included in interest income and other, net.
  
       Investments with maturities between three and twelve months are considered
  short-term investments. Short-term investments consist of money market auction
  preferred stocks and debt securities such as commercial paper, time deposits,
  certificates of deposit, bankers' acceptances, and marketable direct obligations
  of the United States Treasury.
  
  FOREIGN EXCHANGE FORWARD CONTRACTS. Foreign exchange forward contracts are used
  to hedge the company's net monetary asset positions in its foreign subsidiaries
  and the company's liabilities for products purchased from FASL. Realized gains
  and losses from these hedges are included in operations. Premiums and discounts,
  if any, are amortized over the life of the contract and included in operations.
  
  FOREIGN CURRENCY OPTIONS. Foreign currency options are used to hedge firm
  commitments with respect to the company's joint venture (FASL) investment.
  Realized gains and losses from these hedges are deferred and included in other
  assets or accrued liabilities, respectively. They are recognized in operations
  in the same period as the hedged transactions. Premiums and discounts, if any,
  are amortized over the life of the contract and included in operations.
  
  INTEREST RATE SWAPS. The company enters into interest rate swaps primarily to
  reduce its interest rate exposure by changing a portion of the company's
  interest rate exposure from a floating rate to a fixed rate basis. The
  differential between fixed and floating rates to be paid or received is accrued
  and recognized as an adjustment to interest expense. Accordingly, the related
  amount payable to or receivable from counterparties is included in other current
  assets or accrued liabilities.
  
  INVENTORIES. Inventories are stated principally at standard cost adjusted to
  approximate the lower of cost (first-in, first-out method) or market (net
  realizable value).
  
  PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated at
  cost. Depreciation and amortization are provided principally on the straight-
  line basis over the estimated useful lives of the assets for financial reporting
  purposes and on accelerated methods for tax purposes. Estimated useful lives for
  financial reporting purposes are as follows: machinery and equipment 3 to 5
  years; buildings up to 26 years; and leasehold improvements are the shorter of
  the remaining terms of the leases or the estimated economic useful lives of the
  improvements.
  
       In 1995, the Financial Accounting Standards Board released the Statement of
  Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
  Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
  SFAS 121 requires recognition of impairment of long-lived assets in the event
  the net book value of such assets exceeds the future undiscounted cash
  
                                        15
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  flows attributable to such assets. SFAS 121 is effective for fiscal years
  beginning after December 15, 1995. Adoption of SFAS 121 is not expected to have
  a material impact on the company's financial position or results of operations.
  
  DEFERRED INCOME ON SHIPMENTS TO DISTRIBUTORS. A portion of sales is made to
  distributors under terms allowing certain rights of return and price protection
  on unsold merchandise held by the distributors. These agreements can be canceled
  by either party upon written notice, at which time the company generally
  repurchases unsold inventory. Accordingly, recognition of sales to distributors
  and related gross profits are deferred until the merchandise is resold by the
  distributors.
  
  ADVERTISING EXPENSES. The company accounts for advertising costs as expense in
  the period in which they are incurred. Advertising expense for 1995, 1994, and
  1993 was approximately $44 million, $32 million, and $22 million, respectively.
  
  NET INCOME PER COMMON SHARE. Primary net income per common share is based upon
  weighted average common and dilutive common equivalent shares outstanding using
  the treasury stock method. Dilutive common equivalent shares include stock
  options, warrants, and restricted stock. Fully diluted net income per common
  share is computed using the weighted average common and dilutive common
  equivalent shares outstanding, plus other dilutive shares outstanding which are
  not common equivalent shares. Other dilutive shares which are not common
  equivalent shares include convertible preferred stock and convertible notes.
  
       All share information has been adjusted on a retroactive basis herein to
  give effect to the merger with NexGen and the conversion of NexGen shares on a
  0.8 to one share of AMD common stock.
  
  EMPLOYEE STOCK PLANS. The company accounts for its stock option plans and its
  employee stock purchase plan in accordance with provisions of the Accounting
  Principles Board's Opinion No. 25 (APB 25), "Accounting For Stock Issued to
  Employees." In 1995, the Financial Accounting Standards Board released the
  Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
  Stock Based Compensation." SFAS 123 provides an alternative to APB 25 and is
  effective for fiscal years beginning after December 15, 1995. The company
  expects to continue to account for its employee stock plans in accordance with
  the provisions of APB 25. Accordingly, SFAS 123 is not expected to have any
  material impact on the company's financial position or results of operations.
  
  USE OF ESTIMATES. The preparation of financial statements in conformity with
  generally accepted accounting principles requires management to make estimates
  and assumptions that affect the reported amounts of assets and liabilities and
  disclosure of contingent assets and liabilities at the date of the financial
  statements and the reported amounts of revenues and expenses during the
  reporting period. Actual results inevitably will differ from those estimates,
  and such differences may be material to the financial statements.
  
  YEAR-END ADJUSTMENTS (UNAUDITED). The company made certain year-end adjustments
  in 1995, resulting from changes in estimates related to the Nx586 product which
  was developed by NexGen. These adjustments were material to the results of the
  fourth quarter. These adjustments, related to accounts receivable and inventory,
  were charged primarily to net sales and cost of sales and reduced operating
  income by approximately $51.7 million.
  
  4.   FINANCIAL INSTRUMENTS
  
  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
  
  As part of the company's asset and liability management, the company enters into
  various types of transactions that involve financial instruments with off-
  balance-sheet risk. These instruments are entered into in order to manage
  financial market risk, including interest rate and foreign exchange risk. The
  notional values, carrying amounts, and fair values are tabled below.
  
  Foreign exchange forward contracts
  
  The company enters into foreign exchange forward contracts to buy and sell
  currencies as economic hedges of its net monetary asset positions in its foreign
  subsidiaries and liabilities for products. 
  
                                        16
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  purchased from FASL. The hedging transactions in 1995 were denominated in lira,
  yen, French franc, deutsche mark, and pound sterling. The maturities of these
  contracts are generally less than six months.
  
  Foreign currency options
  
  The joint venture (FASL) investments are denominated in yen, and therefore, are
  subject to exposure due to fluctuations in yen exchange rates. Thus, the company
  hedges its exposures on certain firm commitments relating to the FASL investment
  with foreign currency options denominated in yen. The maturities of these
  options are generally less than six months. No foreign currency options were
  outstanding as of December 31, 1995.
  
  Interest rate swaps
  
  The company engaged in interest rate swaps primarily to reduce its interest rate
  exposure on its term loan and on a building lease obligation by changing a
  portion of the company's interest rate obligation from a floating rate to a
  fixed rate basis without exchanges of the underlying notional amounts. The fixed
  interest rates are based on one to five year swap rates, and the floating
  interest rates are based on three or six months LIBOR. These interest rate swaps
  will mature in 1996 and 1997.
  
  FAIR VALUE OF FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
  
  The estimates of fair value were obtained using prevailing financial market
  information as of December 31, 1995. In certain instances where judgment is
  required in estimating fair value, price quotes were obtained from certain of
  the company's counterparty financial institutions.
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                                                  1995                                   1994
                                                ---------------------------------      ---------------------------------
                                                Notional     Carrying       Fair       Notional     Carrying       Fair
                                                 amount       amount       value        amount       amount       value
                                                ---------------------------------      ---------------------------------
  <S>                                           <C>            <C>        <C>          <C>            <C>        <C> 
  Interest rate instruments:
       Swaps                                    $190,000       $(518)     $(1,694)     $ 40,000       $(518)     $   228 
  
  Foreign exchange instruments:
       Foreign exchange forward contracts         36,670        (102)        (102)       32,651         536          536
       Foreign currency options                        -           -            -        12,662           -         (200)
  </TABLE> 
  
  
  FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
  
  The carrying value of short-term debt approximates fair value due to its short-
  term maturity. The fair value of long-term debt was estimated using discounted
  cash flow analysis based on estimated interest rates for similar types of
  borrowing arrangements.
  
  The carrying amounts and estimated fair values of the company's other financial
  instruments are as follows:
  
                                        17
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                               1995                   1994         
                                     -------------------    -------------------  
                                     Carrying     Fair      Carrying     Fair  
                                      Amount     Value       Amount     Value  
                                     --------   --------    --------   -------- 
  <S>                                <C>        <C>         <C>        <C>     
  Short-term debt:                                                              
    Notes payable                    $ 26,770   $ 26,770    $ 32,459   $ 32,459 
  Long-term debt                                             
  (excluding capital leases)          179,301    180,920      33,433     32,755
  </TABLE> 
  
  
  SECURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE
  
  The following is a summary of held-to-maturity and available-for-sale securities
  included in cash and cash equivalents and short-term investments as of December
  31, 1995 and December 25, 1994.
  
  <TABLE> 
  <CAPTION> 
                                                  Available-for-sale     Held-to-maturity     Available-for-sale 
    (Thousands)                                          1995                  1994                  1994        
                                                  ------------------     ----------------     ------------------ 
  <S>                                             <C>                    <C>                  <C>                
    Certificates of deposit                       $           15,002     $          4,997     $                - 
    Treasury notes                                            10,437                    -                 14,348 
    Federal agency notes                                      14,065                    -                      - 
    Security repurchase agreements                            53,370               50,800                 17,998 
    Commercial paper                                          14,914               24,760                      - 
    Other debt securities                                        434                1,672                      - 
                                                  ------------------     ----------------     ------------------ 
  Total cash equivalents                          $          108,222     $         82,229     $           32,346 
                                                  ==================     ================     ================== 
                                                                                                                 
    Certificates of deposit                       $           70,551     $         95,342     $            3,716 
    Municipal notes and bonds                                 52,256                    -                      - 
    Corporate notes                                           37,898              101,850                      - 
    Treasury notes                                            60,989               44,877                 15,997 
    Commercial paper                                          46,656               14,442                      - 
    Money market auction preferred stocks                    114,999               36,700                      - 
                                                  ------------------     ----------------     ------------------ 
  Total short-term investments                    $          383,349     $        293,211     $           19,713
                                                  ==================     ================     ================== 
  </TABLE> 
  
       On November 15, 1995, the FASB staff issued a Special Report, "A Guide to
  Implementation of Statement 115 on Accounting for Certain Investments in Debt
  and Equity Securities." In accordance with provisions in that Special Report,
  the company chose to reclassify cash equivalents and short-term investments from
  held-to-maturity to available-for-sale. At the date of the transfer, the
  amortized cost of those securities was approximately $480.7 million. Since the
  securities transferred on December 31, 1995 are short-term in nature, changes in
  market interest rates did not
  
                                        18
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  have a significant impact on the fair value of these securities. The net
  unrealized gain on these securities was immaterial.
  
       The available-for-sale equity securities that the company held, included in
  other assets, had a cost and fair value of $14.5 million and $75.1 million,
  respectively, as of December 31, 1995, and a cost and fair value of $9.4 million
  and $18.5 million, respectively, as of December 25, 1994. At December 31, 1995,
  the total net unrealized holding gain on these equity securities, net of tax,
  was approximately $42.5 million, of which $33.4 million was recorded in 1995.
  The entire, net of tax, unrealized holding gain is included in retained
  earnings.
  
       As of December 31, 1995, the company did not own any securities classified
  as trading.
  
  5. CONCENTRATIONS OF CREDIT RISK
  
  Financial instruments that potentially subject the company to concentrations of
  credit risk consist primarily of cash equivalents, short-term investments, trade
  receivables, and financial instruments used in hedging activities.
  
       The company places its cash equivalents and short-term investments with
  high credit quality financial institutions and, by policy, limits the amount of
  credit exposure with any one financial institution. Investments in time deposits
  and certificates of deposit are acquired from banks having combined capital,
  surplus, and undistributed profits of not less than $200 million. Investments in
  commercial paper and money market auction preferred stocks of industrial firms
  and financial institutions are rated A1, P1 or better, investments in tax-exempt
  securities including municipal notes and bonds are rated AA, Aa or better, and
  investments in repurchase agreements must have securities of the type and
  quality listed above as collateral.
  
       Concentrations of credit risk with respect to trade receivables are limited
  because a large number of geographically diverse customers make up the company's
  customer base, thus spreading the trade credit risk. The company controls credit
  risk through credit approvals, credit limits, and monitoring procedures. The
  company performs in-depth credit evaluations of all new customers and requires
  letters of credit, bank guarantees and advance payments, if deemed necessary.
  Bad debt expenses have not been material.
  
       The counterparties to the agreements relating to the company's foreign
  exchange and interest rate instruments consist of a number of major, high credit
  quality, international financial institutions. The company does not believe that
  there is significant risk of nonperformance by these counterparties because the
  company monitors the credit ratings of such counterparties, and limits the
  financial exposure and the amount of agreements entered into with any one
  financial institution. While the notional amounts of financial instruments are
  often used to express the volume of these transactions, the potential accounting
  loss on these transactions if all counterparties failed to perform is limited to
  the amounts, if any, by which the counterparties' obligations under the
  contracts exceed the obligations of the company to the counterparties.
  
  6. CONCENTRATIONS OF OTHER RISKS
  
  PRODUCTS. Microprocessor products and Flash memory devices contributed a
  significant portion of the  company's revenues and profits in 1995. The company
  expects that its ability to maintain or expand its current levels of revenues
  and profits in the future will depend upon, among other things, its success in
  developing and marketing, in a timely manner, its next generation of
  microprocessor products, the K86 RISC SUPERSCALAR(TM) products, and future
  generations of Flash memory devices.
  
                                        19
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  MARKETS. The markets for the company's products are characterized by rapid
  technological developments, evolving industry standards, changes in customer
  requirements, frequent new product introductions and enhancements, and short
  product life cycles. The market for microprocessors and Flash memory devices is
  primarily dependent upon the market for personal computers (PC). From time to
  time, the PC industry has experienced significant downturns, often in connection
  with, or in anticipation of, declines in general economic conditions. These
  downturns have been characterized by diminished product demand, production
  overcapacity, and resultant accelerated erosion of average selling prices. The
  company's business could be materially and adversely affected by industry-wide
  fluctuations in the PC marketplace in the future.
  
  INVENTORIES. Given the volatility of the market, the company makes inventory
  provisions for potentially excess and obsolete inventory based on backlog and
  forecasted demand. However, such backlog demand is subject to revisions,
  cancellations, and rescheduling. Actual demand will inevitably differ from such
  anticipated demand, and such differences may have a material effect on the
  financial statements.
  
  CUSTOMERS. The company markets and sells its products primarily to a broad base
  of customers comprised of Distributors and Original Equipment Manufacturers
  (OEM's) of computation and communication equipment. One of the company's
  distributors, Arrow Electronics, Inc., accounted for approximately 12 percent of
  1995 net sales. No other Distributor or OEM customer constituted 10 percent or
  more of net sales in 1995.
  
  INTERNATIONAL OPERATIONS. The company derives more than half of its revenues
  from international sales. However, only a portion of the company's international
  sales were denominated in foreign currencies. Further, the company does not have
  any sales denominated in the local currencies of those countries which have
  highly inflationary economies.
  
       Nearly all product assembly and final testing of the company's products are
  performed at its manufacturing facilities in Penang, Malaysia; Singapore; and
  Bangkok, Thailand; or by subcontractors in Asia. Wafer fabrication of certain
  products is performed at foundries in Asia. FASL wafer fabrication facilities
  are located in Aizu-Wakamatsu, Japan. Foreign manufacturing entails political
  and economic risks, including political instability, expropriation, currency
  controls and fluctuations, changes in freight and interest rates, and exemptions
  for taxes and tariffs. For example, if the company were unable to assemble and
  test its products abroad, or if air transportation between the United States,
  the company's overseas facilities and customers worldwide were disrupted, there
  could be a material adverse effect on the company's operations.
  
  MATERIALS.  Certain of the raw materials used by the company in the manufacture
  of its products are available from a limited number of suppliers.  For example,
  several types of integrated circuit packages purchased by the company, as well
  as by the majority of other companies in the semiconductor industry, are
  principally supplied by Japanese companies.  Shortages could occur in various
  essential materials due to interruption of supply or increased demand in the
  industry.  If the company were unable to procure certain of such materials, it
  would be required to reduce its manufacturing operations, which could have a
  material adverse effect upon its results of operations.
  
  7. SERIAL PREFERRED STOCK
  
  In March 1987, the company sold 345,000 shares of Convertible Exchangeable
  Preferred Stock, $.10 par value. Dividends were payable quarterly in arrears at
  an annual rate of $30 per share (6 
  
                                        20
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  percent) cumulative from the date of original issue. The preferred stock was
  redeemable for cash at any time at the option of the company, in whole or in
  part, at prices declining to $500 per share at March 15, 1997, plus unpaid
  dividends. The preferred stock was convertible at any time at the option of the
  holder into common stock at the initial conversion rate of 19.873 common shares
  for each preferred share.
  
       On February 10, 1995, the company called all outstanding shares of its
  preferred stock for redemption on March 13, 1995, at a redemption price of
  $509.00 per share, plus $7.30 of accrued and unpaid dividends. Prior to the
  redemption date, 343,427 shares of preferred stock were surrendered for
  conversion which resulted in the issuance of 6,824,694 shares of the company's
  common stock. Pursuant to previous arrangements, on March 14, 1995, the company
  sold 28,518 shares of its common stock to certain institutions and used the
  proceeds to fund the redemption of 1,435 shares of preferred stock which were
  not converted.
  
       NexGen's 19,536,328 shares of Convertible Preferred Stock issued and
  outstanding as of May 24, 1995 were converted into 19,970,328 shares of its
  Common Stock in conjunction with its initial public offering on May 24, 1995. As
  of June 30, 1994, 13,583,459 shares of Convertible Preferred Stock were issued
  and outstanding.
  
  8. STOCKHOLDER RIGHTS PLAN
  
  In February 1990, the company adopted a stockholder rights plan and declared a
  dividend distribution of preferred stock purchase rights at the rate of one
  right for each share of common stock held as of the close of business on
  February 20, 1990.  The rights were not exercisable, or transferable apart from
  the common stock, until certain events occurred.  The rights were redeemable at
  any time at the option of the company.
  
       On May 3, 1995, the company redeemed all its preferred stock purchase
  rights for a redemption price of $.01 per right (approximately $1 million) paid
  on May 24, 1995, to the holders of the company's common stock as of the
  redemption date.
  
  9. WARRANTS
  
  On May 24, 1995, the effective date of NexGen's initial public offering, all
  previously issued preferred series warrants were converted into warrants to
  purchase common stock. All outstanding warrants are held by related parties. The
  following summarizes the warrants outstanding as of December 31, 1995:
  
  <TABLE> 
  <CAPTION> 
           WARRANT HOLDER                           WARRANTS       WARRANT PRICE
  - ------------------------------------------------------------------------------
  <S>                                               <C>            <C> 
  Warrants issued in connection with Promissory
   Notes and Preferred Stock Offering                   493,280    $0.63-$9.38
  
  Warrants issued in connection with consulting         
   services                                             280,000       $5.00
  
  Warrants issued to sales agent                        682,392    $5.00-$9.38
  
   Total warrants issued and outstanding 
     as of December 31, 1995                          1,455,672    $0.63-$9.38
  </TABLE> 
  
       For the year ended December 31, 1995 warrants previously issued to purchase
  1,364,000 shares of common stock were exercised on a cashless basis for
  1,178,010 shares of common stock. Warrants for an additional 540 shares of
  common stock are claimed to be outstanding by certain warrant holders. All
  warrants are currently exercisable at December 31, 1995.
  
                                        21
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  10. INCOME TAXES
  
  Provision for income taxes consists of:
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                           1995            1994         1993     
                                    -------------   ------------   ------------ 
  <S>                               <C>             <C>            <C>         
  Current:                                                                    
    U.S. Federal                    $      58,683   $    154,448   $     83,574
    U.S. State and Local                    1,855         13,001          3,640 
    Foreign National and Local             10,594          7,350          2,332
  Deferred:                                                        
    U.S. Federal                            1,295        (29,733)        (5,206)
    U.S. State and Local                   (3,167)        (2,820)         1,798
    Foreign National and Local                946            (14)          (203)
                                    -------------   ------------   ------------
  Provision for income taxes        $      70,206   $    142,232   $     85,935
                                    =============   ============   ============
  </TABLE> 
  
       Tax benefits resulting from the exercise of nonqualified stock options and
  the disqualifying disposition of shares acquired under the company's incentive
  stock option and stock purchase plans reduced taxes currently payable as shown
  above by $15.2 million, $37.4 million, and $43.4 million in 1995, 1994, and
  1993, respectively. Such benefits were credited to capital in excess of par
  value when realized.
  
       Under SFAS No. 109, deferred income taxes reflect the net tax effects of
  tax carryforwards and temporary differences between the carrying amounts of
  assets and liabilities for financial reporting purposes and the amounts used for
  income tax purposes. Significant components of the company's deferred tax assets
  and liabilities as of December 31, 1995, December 25, 1994, and December 26,
  1993 are as follows:
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                                        1995            1994         1993      
                                                 -------------   ------------   ------------ 
  <S>                                            <C>             <C>            <C>         
  Deferred tax assets:                                                                     
   Net operating loss carryovers                 $      62,796   $     30,840   $     21,820
   Deferred distributor income                          40,583         31,396         31,349
   Inventory reserves                                   29,665         18,809         14,935 
   Accrued expenses not currently deductible            35,639         39,467         21,799
   Federal and state tax credit carryovers               6,249          2,873         30,888
   Other                                                49,850         39,081         27,569
                                                 -------------   ------------   ------------ 
    Total deferred tax assets                          224,782        162,466        148,360
   Less: valuation allowance                           (33,386)       (14,445)       (43,335)
                                                 -------------   ------------   ------------ 
    Net deferred tax assets                            191,396        148,021        105,025
                                                 -------------   ------------   ------------ 
  Deferred tax liabilities:                                                     
   Depreciation                                       (109,141)       (59,614)       (44,886)
   Other                                               (19,373)       (15,855)       (20,154)
                                                 -------------   ------------   ------------
    Total deferred tax liabilities                    (128,514)       (75,469)       (65,040)
                                                 -------------   ------------   ------------  
  Net deferred tax assets                        $      62,882   $     72,552   $     39,985 
                                                 =============   ============   ============
  </TABLE> 
  
                                        22
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  Approximately $26.4 million of the 1993 valuation allowance for deferred tax
  assets, attributable to stock option deductions, was credited to equity upon
  realization in 1994.
  
       Pretax income from foreign operations was approximately $60.6 million in
  1995, $45.7 million in 1994, and $40.0 million in 1993.
  
       As of December 31, 1995, the company has net operating loss carryovers of
  approximately $179.4 million for federal income tax purposes. The federal
  carryovers expire on various dates through 2009. No significant state
  carryforwards exist due to the capitalization of research and development
  expenditures for state purposes and state statutory limitations on the amount of
  net operating losses which may be carried forward to subsequent years.
  
       Under the Tax Reform Act of 1986, the amounts of and the benefit from net
  operating losses that can be carried forward may be limited in certain
  circumstances. Because of changes in ownership greater than 50 percent,
  realization of the company's net operating loss carryforwards incurred prior to
  July 1992 and January 1996 may be subject to annual limitations of approximately
  $3.9 million and $27.3 million, respectively. These annual limitations should 
  result in the availability of all carryforwards by the year 2004.
  
       The following is a reconciliation between statutory federal income taxes
  and the total provision for income taxes:
  
  <TABLE> 
  <CAPTION> 
                                                   1995                 1994                1993       
                                          --------------------   -----------------    -----------------  
  (Thousands except percent)                  Tax        Rate      Tax        Rate      Tax        Rate  
                                          --------------------   -----------------    -----------------  
  <S>                                     <C>            <C>     <C>          <C>     <C>          <C>   
  Statutory federal                                                                                      
    income tax provision                  $   88,062     35.0 %  $ 148,316    35.0 %  $ 103,224    35.0 %
  State taxes net of federal benefit             216      0.1        6,601     1.6        3,535     1.2  
  Tax exempt Foreign Sales                                                                               
    Corporation income                        (6,848)    (2.7)      (8,955)   (2.1)      (7,236)   (2.5) 
  Tax credits utilized                             -        -            -       -       (5,004)   (1.7) 
  Foreign income                                                                                         
    at other than U.S. rates                 (11,503)    (4.6)      (9,633)   (2.3)     (10,398)   (3.5) 
  Other                                          279      0.1        5,903     1.4        1,814     0.6   
                                          ----------     ----    ---------    ----    ---------    ----
                                          $   70,206     27.9 %  $ 142,232    33.6 %  $  85,935    29.1 %  
                                          ==========     ====    =========    ====    =========    ====
  </TABLE> 
  
       No provision has been made for income taxes on approximately $264.6 million
  of cumulative undistributed earnings of certain foreign subsidiaries because it
  is the company's intention to permanently invest such earnings. If such earnings
  were distributed, additional taxes of $92.6 million would accrue.
  
       The company's Far East assembly and test plants in Singapore and Thailand
  are operated under various tax holidays which expire in whole or in part during
  1996 and 1998. Possible extensions of the holiday period, as well as other tax
  incentives, are anticipated to result in minimal tax liabilities in these
  countries through 1998. The net impact of these tax holidays was an increase in
  net income of approximately $6.2 million ($0.04 per share) in 1995.
  
  11. DEBT
  
  The company has certain debt agreements that contain provisions regarding
  restrictions on cash dividends, maintenance of specified working capital and net
  worth levels, and specific financial ratio requirements.  At December 31, 1995,
  the company was in compliance with all restrictive covenants 
  
                                        23
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  of such debt agreements and all retained earnings was restricted as to payments
  of cash dividends on common stock.
  
    Significant elements of uncommitted, unsecured revolving lines of credit are:
  
  <TABLE> 
  <CAPTION> 
  (thousands except percent)                      1995             1994
                                              -----------       -----------
  <S>                                         <C>               <C> 
  Total lines of credit                       $   345,801       $   378,182
  Portion of lines of credit available to       
    foreign subsidiaries                           95,801           128,182
  Amounts outstanding at year-end:
    Short-term                                     26,770            32,459
  Short-term borrowings:
    Average daily borrowings                       29,666            33,449
    Maximum amount outstanding at
      any month-end                                36,105            35,384
    Weighted monthly average interest
      rate                                           4.19 %            4.32 %
    Average interest rate on amounts
      outstanding at year-end                        4.41 %            4.42 %
  </TABLE> 
  
       Interest on foreign and short-term domestic borrowings is negotiated at the
  time of the borrowing.
  
       Information with respect to the company's long-term debt and capital lease
  obligations at year-end is:
  
                                        24
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                                                                    1995            1994   
                                                                              ----------      ---------
  <S>                                                                         <C>             <C>       
  Term loan with variable interest at 7.06% at December 31, 1995                                        
     payable quarterly through 1998                                           $  150,000      $       -
  10%-11% Convertible notes payable due on March 1, 1996                           1,774          2,500 
  Promissory notes with principal and 6.88% interest payable                                            
     annually through January 2000, secured by a partnership                                            
     interest                                                                     10,276         11,946 
  12% Note payable due on June 1, 1996                                            10,000         10,000 
  Mortgage with principal and 9.88% interest payable in monthly                                          
     installments through April 2007                                               2,167          2,382 
  Obligations under capital leases                                                77,306         82,739 
  Obligations secured by equipment                                                 4,990          6,482 
  Other                                                                               94            123 
                                                                              ----------      ---------
                                                                                 256,607        116,172 
  Less: current portion                                                          (41,642)       (40,420)
                                                                              ----------      ---------
  Long-term debt and capital lease obligations, less current portion          $  214,965      $  75,752
                                                                              ==========      ========= 
  </TABLE> 
  
       On January 5, 1995, the company obtained a $150 million single term four-
  year loan with a consortium of eight commercial banks. The loan has a floating
  interest rate based on the three months LIBOR and requires quarterly interest
  payments with the principal to be paid at the end of the term in 1998. The
  interest rate on the loan at December 31, 1995 was 7.06 percent.
  
       For each of the next five years and beyond, long-term debt and capital
  lease obligations are:
  
  <TABLE> 
  <CAPTION> 
                                                           Long-term
                                                             Debt                 Capital
  (Thousands)                                           (Principal only)          Leases
                                                        ----------------         ---------
  <S>                                                      <C>                   <C> 
  1996                                                     $  15,420             $  27,304
  1997                                                         3,802                26,255
  1998                                                       154,033                21,532
  1999                                                         2,326                 6,949
  2000                                                         2,493                 1,182
  Beyond 2000                                                  1,227                     -
                                                           ---------             ---------
  Total                                                      179,301                83,222
  Less: Amount representing interest                               -                 5,916
                                                           ---------             ---------
  Total at present value                                   $ 179,301             $  77,306
                                                           =========             =========
  </TABLE> 
       Obligations under the lease agreements are collateralized by the assets
  leased. Total assets leased were approximately $141.9 million and $131.7
  million at December 31, 1995 and December 25, 1994, respectively. Accumulated
  amortization of these leased assets was approximately $95.6 million and $60.5
  million at December 31, 1995 and December 25, 1994, respectively.
  
                                        25
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  12. INTEREST EXPENSE & INTEREST INCOME AND OTHER, NET
  
  INTEREST EXPENSE
  
  <TABLE> 
  <CAPTION> 
  (Thousands)              1995          1994          1993
                        ----------    ----------    ----------
  <S>                   <C>           <C>           <C>
  Interest expense      $   21,102    $   12,704    $   11,482
  Interest capitalized     (18,043)       (8,294)       (7,084)
                        ----------    ----------    ----------
                        $    3,059    $    4,410    $    4,398
                        ==========    ==========    ==========
  </TABLE> 
       In 1995, interest expense primarily consisted of interest payments on the
  $150 million four-year term loan the company entered into on January 5, 1995;
  and interest capitalized primarily related to the construction of Fab 25.
  
  INTEREST INCOME AND OTHER, NET
  
  <TABLE> 
  <CAPTION> 
  (Thousands)              1995           1994          1993
                        ----------    ----------    ----------
  <S>                   <C>           <C>           <C> 
  Interest income       $   29,518    $   23,331    $   16,431
  Other income (loss)        2,947        (6,197)          500
                        ----------    ----------    ----------
                        $   32,465    $   17,134    $   16,931
                        ==========    ==========    ==========
  </TABLE> 
       In 1995, other income (loss) primarily consisted of the $2.7 million
  realized gain on an equity investment in Seeq Corporation. In 1994, other income
  (loss) primarily consisted of the $33 million settlement cost related to the
  class action lawsuits and stockholders' derivative action offset by an $18
  million gain resulting from an award of damages in the arbitration proceedings
  with Intel. Also included in other income (loss) for all years presented is the
  net gain (loss) on the sale of assets.
  
  13. FOREIGN AND DOMESTIC OPERATIONS
  
       The company is currently engaged in a single line of business: The design,
  development, manufacture, and sale of programmable products in concert with
  applications solutions to the manufacturers of equipment for personal and
  networked computation and communications.
  
       Operations outside the United States include both manufacturing and sales.
  Manufacturing subsidiaries are located in Malaysia, Singapore, and Thailand.
  Sales subsidiaries are in Europe and Asia.
  
       The following is a summary of operations by entities within geographic
  areas for the three years ended December 31, 1995:
  
                                        26
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                                       1995             1994             1993
                                                 ----------      -----------      ----------
  <S>                                            <C>             <C>              <C> 
  Sales to unaffiliated customers:
    North America                                $1,780,240      $1,544,844       $1,174,410
    Europe                                          491,293         483,632          343,600
    Asia                                            196,846         126,977          130,270
                                                 ----------      -----------      ----------                        
                                                 $2,468,379      $2,155,453       $1,648,280
                                                 ==========      ==========       ==========
  Transfers between geographic areas                                              
    (eliminated in consolidation):                                                
    North America                                $  743,117      $  563,303       $  444,378
    Asia                                            396,158         323,050          277,496
                                                 ----------      -----------      ----------
                                                 $1,139,275      $  886,353       $  721,874
                                                 ==========      ==========       ==========
  Operating income:                                                               
    North America                                $  164,549      $  423,027       $  243,015
    Europe                                           18,922          15,860            8,376
    Asia                                             38,729          30,148           31,001
                                                 ----------      -----------      ----------
                                                 $  222,200      $  469,035       $  282,392
                                                 ==========      ==========       ==========
  Identifiable assets:                                                            
    North America                                $2,636,675      $2,170,099       $1,663,199
    Europe                                           85,664         120,070           88,003
    Asia                                            463,530         361,144          312,529
    Eliminations                                   (107,402)       (125,592)        (118,778)
                                                 ----------      -----------      ----------
                                                 $3,078,467      $2,525,721       $1,944,953
                                                 ==========      ==========       ==========
  U.S. export sales:                                                              
    Asia                                         $  485,625      $  436,120       $  314,268
    Europe                                          206,328         126,752          109,226
                                                 ----------      -----------      ----------
                                                 $  691,953      $  562,872       $  423,494 
                                                 ==========      ==========       ==========
  </TABLE> 
    Sales to unaffiliated customers are based on the location of the company's
  subsidiary.  Transfers between geographic areas consist of products and services
  that are sold at amounts generally above cost and are consistent with governing
  tax regulations.  Operating income is total sales less operating expenses.
  Identifiable assets are those assets used in each geographic area.  Export sales
  are United States foreign direct sales to unaffiliated customers primarily in
  Europe and Asia.
  
  14. EMPLOYEE BENEFIT PLANS
  
  STOCK OPTION PLANS. The company has several stock option plans under which key
  employees have been granted incentive (ISOs) and nonqualified (NSOs) stock
  options to purchase the company's common stock.  Generally, options are
  exercisable within four years from the date of grant and expire five to ten
  years after the date of grant.  ISOs granted under the plans have exercise
  prices of not less than 100 percent of the fair market value of the common stock
  at the date of grant.  Exercise prices of NSOs may not be less than 50 percent
  of the fair market value of the common stock at the date of grant.  At December
  31, 1995, 3,101 employees, including 161 employees originally from NexGen, were
  eligible and participating in the plans.
  
    The following is a summary of stock option exercises:
  
                                        27
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE> 
  <CAPTION> 
  (Thousands)                                  1995         1994          1993
                                              -------      -------      -------
  <S>                                         <C>          <C>          <C> 
  Aggregate exercise price                    $15,195      $10,355      $14,066
  Options exercised                             2,313        2,218        2,855
  </TABLE> 
  
    A summary of the stock option plans at December 31, 1995 and December 25, 1994
  is shown below.
  
  <TABLE> 
  <CAPTION> 
  (Thousands except per share amounts)         1995          1994                
                                             --------      --------          
  <S>                                         <C>           <C>                
  Options:                                                 
    Outstanding at beginning of year           14,825        13,957
    Granted                                     4,327         4,389
    Canceled                                     (510)         (376)
    Exercised                                  (2,313)       (2,218)
                                             --------      -------- 
      Outstanding at end of year               16,329        15,752
                                             ========      ========
    Exercisable at beginning of year            8,784         7,848
    Exercisable at end of year                 10,374         9,711
    Available for grant at beginning                       
      of year                                   3,386         1,419
    Available for grant at end of year            751         3,150
    Aggregate exercise price of options                    
      outstanding at end of year             $269,953      $211,437
    Average exercise price of options                      
      outstanding at end of year             $  16.53      $  13.42
  </TABLE> 
  
  STOCK APPRECIATION RIGHTS PLANS. The company maintains three stock
  appreciation rights plans under which stock appreciation rights (SARs) either
  have been or may be granted to key employees.  The number of SARs exercised plus
  common stock issued under the stock option plans may not exceed the number of
  shares authorized under the stock option plans.  SARs may be granted in tandem
  with outstanding stock options, in tandem with future stock option grants, or
  independently of any stock options.  Generally, the terms of SARs granted under
  the plans are similar to those of options granted under the stock option plans,
  including exercise prices, exercise dates, and expiration dates.  To date, the
  company has granted only limited SARs, which become exercisable only in the
  event of certain changes in control of the company.
  
  STOCK PURCHASE PLAN. The company has a stock purchase plan that allows
  participating employees to purchase, through payroll deductions, shares of the
  company's common stock at 85 percent of the fair market value at specified
  dates.  At December 31, 1995, 6,723 employees were eligible to participate in
  the plan and 482,182 common shares remained available for issuance under the
  plan.  Beginning in 1995, NexGen had a stock purchase plan that allowed
  participating employees to purchase shares of NexGen's common stock at 85
  percent of the fair market value at specified dates.  At December 31, 1995, 161
  employees were eligible to participate in the plan and 365,504 common shares
  remained available for issuance under the plan.  A summary of stock purchased
  under these plans is shown below.
  
                                        28
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE>
  <CAPTION>
  (Thousands except 
  employee participants)           1995       1994       1993
                                -------     ------     ------
  <S>                           <C>         <C>        <C>
  Aggregate purchase price      $11,457     $8,115     $6,413
  Shares purchased                  501        412        387
  Employee participants           2,825      1,941      1,684
  </TABLE>
   
  PROFIT SHARING PROGRAM. The company has a profit sharing program to which the
  Board of Directors has authorized semiannual contributions.  Profit sharing
  contributions were $44.7 million in 1995, $57.0 million in 1994, and $33.9
  million in 1993.
  
  RETIREMENT SAVINGS PLAN. The company has a retirement savings plan, commonly
  known as a 401(k) plan, that allows participating United States employees to
  contribute from 1 percent to 15 percent of their pre-tax salary subject to
  I.R.S. limits.  The company makes a matching contribution calculated at 50 cents
  on each dollar of the first 3 percent of participant contributions, to a maximum
  of 1.5 percent of eligible compensation.  The company's contributions to the
  401(k) plan were $4.3 million, $3.7 million, and $3.2 million for 1995, 1994,
  and 1993, respectively.  There are four investment funds in which each employee
  may invest contributions in whole percentage increments.  NexGen had a 401(k)
  plan which allowed employees to contribute from one percent to ten percent of
  their pre-tax salary subject to I.R.S. limits.  NexGen did not match employee
  contributions.
  
  RESTRICTED STOCK AWARD PLAN. The company established the 1987 restricted stock
  award plan under which up to two million shares of common stock may be issued to
  employees, subject to terms and conditions determined at the discretion of the
  Board of Directors.  The company entered into agreements to issue 226,427,
  180,000, and 19,000 shares in 1995, 1994, and 1992, respectively.  To date,
  agreements covering 212,212 shares have been canceled without issuance and
  1,252,964 shares have been issued pursuant to prior agreements.  At December 31,
  1995, agreements covering 436,427 shares were outstanding under the plan and
  310,609 shares remained available for future awards.  Outstanding awards vest
  under varying terms within five years.
  
  15. COMMITMENTS
  
  The company leases certain of its facilities under agreements which expire at
  various dates through 2011.  The company also leases certain of its
  manufacturing and office equipment for terms ranging from one to six years.
  Rent expense was $37.2 million, $32.4 million, and $32.3 million in 1995, 1994,
  and 1993, respectively.
  
    For each of the next five years and beyond, noncancelable long-term operating
  lease obligations and commitments to purchase manufacturing supplies and
  services are as follows:
  
                                        29
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE>
  <CAPTION>
                              Operating               Purchase
  (Thousands)                  Leases               Commitments
                              ---------             -----------
  <S>                         <C>                   <C>
  1996                         $29,955                $23,492
  1997                          23,150                  4,868
  1998                          17,781                  4,868
  1999                          11,717                  4,868
  2000                          11,144                  3,797
  Beyond 2000                   11,503                 27,900
  </TABLE>
  
    Included in 1996 purchase commitments is $18.4 million for Nx586 inventory. 
  The Company has fully reserved for these commitments. See footnote 3, year end 
  adjustments.
   
    The operating lease of the company's corporate sales and marketing facility
  expires in December 1998.  The company has the option of extending the lease
  agreement or purchasing the building for $40 million.  The company may also
  consider alternative financing arrangements.
  
    At December 31, 1995, the company had commitments of approximately $93 million
  for the construction or acquisition of additional property, plant, and
  equipment.
  
    The company is currently planning to build a submicron wafer fabrication and
  design facility in Dresden, Germany at an estimated cost of approximately $1.5
  billion over 5 years.  The German federal and state governments will provide
  financing assistance to the facility through grants and allowances, loan
  guarantees, and loan interest subsidies.  As of December 31, 1995, the company
  had commitments to make cash investments and loans, in aggregate, in this
  facility amounting to approximately $350 million over the next 4 years.
  
     In December 1995, the company signed a five-year, comprehensive patent cross-
  license agreement with Intel.  The cross-license is royalty-bearing for the
  company's products that use certain Intel technologies.  The company is required
  to pay Intel minimum non-refundable royalties during the years from 1997 to
  2000.
  
  16.  INVESTMENT IN JOINT VENTURE
  
    In 1993, the company and Fujitsu Limited established a joint venture, Fujitsu
  AMD Semiconductor Limited (FASL), to manufacture Flash memory devices.  The
  company's share of FASL is 49.95 percent and the investment is being accounted
  for under the equity method.  In 1995, the company invested an additional $18.0
  million in FASL, and the company's share of FASL net income during 1995 was
  $34.9 million, net of income taxes of approximately $18.8 million. At December
  31, 1995, the adjustment related to the translation of the FASL financial
  statements into U.S. dollars resulted in a decrease of approximately $6.2
  million to the investment in FASL.
  
    Pursuant to a cross-equity provision between AMD and Fujitsu Limited, the
  company purchased $12.7 million of Fujitsu Limited shares, with certain resale
  restrictions. Under the same provision, Fujitsu Limited has purchased 2 million
  shares of AMD common stock, and is required to purchase an additional 2.5
  million shares over the next several years, for a total investment not to exceed
  $100 million.  No purchases were made in 1995.
  
    The following is condensed unaudited financial data of FASL:
  
                                        30
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  <TABLE> 
  <CAPTION> 
  Three years ended December 31, 1995
  (Unaudited)
  (Thousands)                              1995         1994          1993   
                                         --------     --------      -------
  <S>                                    <C>          <C>           <C>    
  Net sales                              $252,069     $      -      $     - 
  Operating income (loss)                 117,411      (32,203)      (1,772)
  Net income (loss)                       107,563      (32,293)      (1,772) 
  </TABLE> 
   
  <TABLE> 
  <CAPTION> 
  December 31, 1995, and December 25, 1994
  (Unaudited)
  (Thousands)                               1995         1994  
                                          --------     --------
  <S>                                     <C>          <C>     
  Current assets                          $161,810     $ 10,907 
  Non-current assets                       326,252      263,380
  Current liabilities                      107,524       29,362
  Non-current liabilities                      284           60 
  </TABLE> 
  
  17.  CONTINGENCIES
  
  I.   LITIGATIONS
  
  A.   CLASS ACTION LAWSUITS. On November 3 and 15, 1995, two class action
  lawsuits were filed, purportedly on behalf of purchasers of the company's stock
  from April 11, 1995, to September 25, 1995, alleging that the company and
  various of its officers and directors violated sections of the Securities
  Exchange Act of 1934 Rule 10b-5 promulgated thereunder by issuing allegedly
  false and misleading statements concerning the development and production of the
  AMD-K5(TM). The complaints seek damages in an unspecified amount. Based upon
  information presently known to management, the company does not believe that the
  ultimate resolution of these lawsuits will have a material adverse effect upon
  the financial condition or results of operations of the company.
  
  B.   AMD v. ALTERA CORPORATION. This litigation, which began in 1994, involves
  multiple claims and counterclaims for patent infringement relating to the
  company's and Altera Corporation's programmable logic devices. Based upon
  information presently known to management, the company does not believe that the
  ultimate resolution of this lawsuit will have a material adverse effect upon the
  financial condition or results of operations of the company.
  
  C. THORN EMI NORTH AMERICA, INC. v. AMD. This litigation was filed in 1995 and
  alleged that AMD infringed a patent owned by Thorn EMI North America, Inc.
  relating to the processes used by AMD to manufacture microprocessors. The
  litigation was settled and has been dismissed. The settlement will not have a
  material adverse effect upon the financial condition or results of operations of
  the company.
  
  II.  SEC INVESTIGATION
  
       The Securities and Exchange Commission (SEC) began an informal
  investigation of the company in 1993 concerning the company's disclosures
  relating to the development of microcode for one of its Am486 products. The
  company has been cooperating fully with the SEC. Based upon information
  presently known to management, the company does not believe that the ultimate
  resolution of the investigation will have a material adverse effect upon the
  financial condition or results of operations of the company.
  
                                        31
  <PAGE>
   
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  III. ENVIRONMENTAL MATTERS
  
       CLEAN-UP ORDERS. Since 1981, the company has discovered, investigated, and
  begun remediation of three sites where releases from underground chemical tanks
  at its facilities in Santa Clara County, California adversely affected the
  groundwater. The chemicals released into the groundwater were commonly in use in
  the semiconductor industry in the wafer fabrication process prior to 1979. At
  least one of the released chemicals (which is no longer used by the company) has
  been identified as a probable carcinogen.
  
       In 1991, the company received four Final Site Clean-up Requirements Orders
  from the California Regional Water Quality Control Board, San Francisco Bay
  Region ("RWQCB") relating to the three sites. One of the orders named the
  company as well as TRW Microwave, Inc. and Philips Semiconductors Corporation.
  Another of the orders named the company as well as National Semiconductor
  Corporation.
  
       The three sites in Santa Clara County are on the National Priorities List
  (Superfund). If the company fails to satisfy federal compliance requirements or
  inadequately performs the compliance measures, the government (a) can bring an
  action to enforce compliance, or (b) can undertake the desired response actions
  itself and later bring an action to recover its costs, and penalties, which is
  up to three times the costs of clean-up activities, if appropriate. With regard
  to certain claims related to this matter the statute of limitations has been
  tolled.
  
       The company has computed and recorded the estimated environmental liability
  in accordance with applicable accounting rules and has not recorded any
  potential insurance recoveries in determining the estimated costs of the clean-
  up. The amount of environmental charges to earnings has not been material during
  the last three fiscal years. The company believes that the potential liability,
  if any, in excess of amounts already accrued with respect to the foregoing
  environmental matters will not have a material adverse effect on the financial
  condition or results of operations of the company.
  
  IV.  OTHER MATTERS
  
       The company is a defendant or plaintiff in various other actions which
  arose in the normal course of business. In the opinion of management, the
  ultimate disposition of these matters will not have a material adverse effect on
  the financial condition or results of operations of the company.
  
  18.  SHELF REGISTRATION STATEMENT
  
  On May 25, 1994, the Securities and Exchange Commission declared effective the
  company's shelf registration statement covering up to $400 million of its
  securities, which may be either debt securities, preferred stock, depositary
  shares representing fractions of shares of preferred stock, common stock,
  warrants to purchase common stock, or any combination of the foregoing which the
  company may offer from time to time in the future. The nature and terms of the
  securities will be established at the time of their sale. The company may offer
  the securities through underwriters to be named in the future, through agents or
  otherwise. The net proceeds of any offering will be used for general corporate
  purposes, which may include the reduction of outstanding indebtedness, working
  capital increases, and capital expenditures. To date, the company has not
  offered or sold any securities registered under the $400 million registration
  statement.
  
                                        32
  <PAGE>
   
                CONSENT OF ERNST & YOUNG, LLP INDEPENDENT AUDITORS
  
  We consent to the incorporation by reference in the Registration Statement on
  Form S-8 (No. 33-16095) pertaining to the Advanced Micro Devices, Inc. 1987
  Restricted Stock Award Plan, in the Registration Statement on Form S-8 (No. 33-
  39747) pertaining to the Advanced Micro Devices, Inc. 1991 Employee Stock
  Purchase Plan, in the Registration Statements on Form S-8 (Nos. 33-10319, 33-
  36596 and 33-46578) pertaining to the Advanced Micro Devices, Inc. 1982 and 1986
  Stock Option Plans and the 1980 and 1986 Stock Appreciation Rights Plans, in the
  Registration Statements on Form S-8 (Nos. 33-46577 and 33-55107) pertaining to
  the Advanced Micro Devices, Inc., 1992 Stock Incentive Plan, in the Registration
  Statement on Form S-8 (No. 33-00969) pertaining to the Advanced Micro Devices,
  Inc. 1991 Employee Stock Purchase Plan and to the 1995 Stock Plan of NexGen,
  Inc., in the Registration Statement on Form S-3 (No. 33-52943) pertaining to up
  to $400,000,000 in the aggregate of debt securities, preferred stock, depositary
  shares evidencing fractions of preferred shares, common stock and warrants to
  purchase common stock, and in the Registration Statement on Form S-4 (No. 33-
  64911) pertaining to shares issued in connection with the acquisition of NexGen,
  Inc. and Post-Effective Amendment No. 1 thereto on Form S-8, and Form S-8 (No.
  333-04797) pertaining to the Advanced Micro Devices, Inc. 1996 Stock Incentive
  Plan, of our report dated April 30, 1996, with respect to the supplemental
  consolidated financial statements of Advanced Micro Devices, Inc. included
  herein.
  
  
                                     Ernst & Young LLP
  
  June 17, 1996
  San Jose, California
  
                                        33
  <PAGE>
   
                                    SIGNATURES
                                    ----------
  
           Pursuant to the requirements of the Securities Exchange Act of 1934,
  the registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
  
                                        ADVANCED MICRO DEVICES, INC.
                                                (Registrant)
  
  
  
  Date:  June 20, 1996                  By: /s/ Marvin D. Burkett
                                            -------------------------------
                                            Marvin D. Burkett
                                            Senior Vice President, Chief
                                            Financial and Administrative
                                            Officer and Treasurer
  
                                        34
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "FORM 8-K FOR ADVANCED MICRO DEVICES, INC.", "secsgml_size_bytes": 131519}]
metadata_filer: {"company-data": {"conformed-name": "ADVANCED MICRO DEVICES INC", "cik": "0000002488", "assigned-sic": "3674", "irs-number": "941692300", "state-of-incorporation": "DE", "fiscal-year-end": "1227"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-07882", "film-number": "96583421"}, "business-address": {"street1": "ONE AMD PL", "street2": "P O BOX 3453", "city": "SUNNYVALE", "state": "CA", "zip": "94088", "phone": "4087322400"}}
text: UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C.  20549
  
                                     FORM 8-K
  
                 Current Report Pursuant to Section 13 or 15(d) of
                        The Securities Exchange Act of 1934
  
                           Date of Report:  June 19, 1996
  
                           ADVANCED MICRO DEVICES, INC.
            ----------------------------------------------------------
              (Exact name of registrant as specified in its charter)
  
                  DELAWARE                1-7882             94-1692300
       ----------------------------    -------------    -------------------
       (State or other jurisdiction    (Commission      (I.R.S. Employer
        of incorporation)               File Number)     Identification No.)
  
                  One AMD Place,
                  P.O. Box 3453
                  Sunnyvale, CA                             94088-3453
      ----------------------------------------              ----------
      (address of principal executive offices)              (Zip Code)
  
       Registrant's telephone number,
       including area code:                               (408) 732-2400
                                                          --------------
  
                                   Page 1 of 34
  Item 5.  Other Events.
  - ------   ------------ 
  
           This Current Report on Form 8-K includes the Supplemental Consolidated 
  Financial Statements which have been prepared to give retroactive effect to the 
  merger of NexGen, Inc. with and into Advanced Micro Devices, Inc. (the 
  "company" or "AMD") on January 17, 1996.
  
  SUPPLEMENTAL SELECTED FINANCIAL DATA
  Five Years Ended December 31, 1995 
  (Dollars in thousands except per share amounts)           91             92              93              94             95
                                                        ----------     ----------      ----------     ----------      ----------
  Net sales                                             $1,226,649     $1,514,489      $1,648,280     $2,155,453      $2,468,379
  Operating income                                          97,756        257,362         282,392        469,035         222,200
  Net income                                               133,171        233,619         208,356        270,942         216,326
  Net income per common share:
     Primary                                                  1.20           2.02            1.65           2.06            1.59
     Fully diluted                                            1.20           1.99            1.64           2.02            1.57
  Long-term debt and capital lease obligations,
     less current portion                                   48,238         22,213          90,066         75,752         214,965
  Total assets                                           1,304,773      1,453,768       1,944,953      2,525,721       3,078,467
  The company has never paid cash dividends on common stock and has no present
  plans to do so.
  
  Note:  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a
         transaction accounted for as a pooling-of-interests. All financial data
         of the company, for the periods presented, has been supplementally
         prepared to give retroactive effect to the merger with NexGen.
  
                                         2
  SUPPLEMENTARY FINANCIAL DATA
  1995 and 1994 by Quarter (Unaudited)                           Dec. 31,        Oct. 1,        July 2,        Apr. 2, 
  (Thousands except per share amounts)                             1995           1995           1995           1995     
                                                                 --------       --------       --------       --------
  Net sales                                                      $595,178       $606,953       $638,867       $627,381
  Expenses:                                                                                                            
   Cost of sales(1)                                               427,058        368,359        315,905        305,685 
   Research and development                                       107,715        106,237        105,695         96,874 
   Marketing, general, and administrative                         100,766        102,549        106,602        102,734 
                                                                 --------       --------       --------       -------- 
                                                                  635,539        577,145        528,202        505,293 
                                                                 --------       --------       --------       -------- 
  Operating income (loss)                                         (40,361)        29,808        110,665        122,088 
                                                                                                                       
  Litigation settlement                                                 -              -              -              - 
  Interest income and other, net                                    8,024         10,408          6,975          7,058 
  Interest expense                                                 (1,665)          (315)          (501)          (578)
                                                                 --------       --------       --------       -------- 
  Income (loss) before income taxes and equity in joint venture   (34,002)        39,901        117,139        128,568
  Provision (credit) for income taxes                             (21,846)        10,212         39,016         42,824
                                                                 --------       --------       --------       -------- 
  Income (loss) before equity in joint venture                    (12,156)        29,689         78,123         85,744
  Equity in net income (loss) of joint venture                     21,500         12,311          2,529         (1,414)
                                                                 --------       --------       --------       -------- 
  Net income                                                        9,344         42,000         80,652         84,330
                                                                                                                       
  Preferred stock dividends                                             -              -              -             10 
                                                                 --------       --------       --------       -------- 
  Net income applicable to common stockholders                   $  9,344       $ 42,000       $ 80,652       $ 84,320 
                                                                 ========       ========       ========       ========
  Net income per common share          -- Primary                $    .07       $    .30       $    .59       $    .66
                                                                 ========       ========       ========       ======== 
                                       -- Fully diluted          $    .07       $    .30       $    .59       $    .63
                                                                 ========       ========       ========       ======== 
  Shares used in per share calculation -- Primary                 138,941        139,288        136,950        127,181
                                                                 ========       ========       ========       ======== 
                                       -- Fully diluted           139,085        139,434        137,647        134,421
                                                                 ========       ========       ========       ======== 
  Common stock market price range      -- High                   $  29.25       $  36.50       $  39.25       $  35.88  
                                       -- Low                    $  16.13       $  28.00       $  32.13       $  23.50
  SUPPLEMENTARY FINANCIAL DATA
  1995 and 1994 by Quarter (Unaudited)                           Dec. 25,       Sept. 25,       June 26,        Mar. 27,
  (Thousands except per share amounts)                             1994           1994            1994            1994
                                                                 --------       ---------      ---------         --------
  Net sales                                                      $557,821       $550,399       $534,146         $513,087
  Expenses:                                                     
   Cost of sales                                                  278,783        267,322        237,038          230,446
   Research and development                                        80,778         72,133         71,025           71,390
   Marketing, general, and administrative                          96,474         93,157         93,549           94,323
                                                                 --------       --------       --------         --------
                                                                  456,035        432,612        401,612          396,159
                                                                 --------       --------       --------         --------
  Operating income (loss)                                         101,786        117,787        132,534          116,928
                                                                
  Litigation settlement                                           (58,000)             -              -                -
  Interest income and other, net                                    5,635            739          6,486            4,274
  Interest expense                                                   (502)          (782)        (1,569)          (1,557)
                                                                 --------       --------       --------         --------
  Income (loss) before income taxes and equity in joint venture    48,919        117,744        137,451          119,645
  Provision (credit) for income taxes                              16,504         39,252         46,895           39,581
                                                                 --------       --------       --------         --------
  Income (loss) before equity in joint venture                     32,415         78,492         90,556           80,064
  Equity in net income (loss) of joint venture                     (2,989)        (4,277)        (2,925)            (394) 
                                                                 --------       --------       --------         --------
  
  Net income                                                       29,426         74,215         87,631           79,670
                                                                
  Preferred stock dividends                                         2,588          2,587          2,587            2,588
                                                                 --------       --------       --------         --------
                                                                
  Net income applicable to common stockholders                   $ 26,838       $ 71,628       $ 85,044         $ 77,082
                                                                 ========       ========       ========         ========
  Net income per common share          -- Primary                $    .21       $    .58       $    .68         $    .63
                                                                 ========       ========       ========         ========
                                       -- Fully diluted          $    .21       $    .56       $    .66         $    .61
                                                                 ========       ========       ========         ========
  Shares used in per share calculation -- Primary                 128,416        123,947        125,428          122,624
                                                                 ========       ========       ========         ========
                                       -- Fully diluted           128,977        132,576        132,742          130,987
                                                                 ========       ========       ========         ========
  Common stock market price range      -- High                   $  30.50       $  31.00       $  31.75         $  31.75
                                       -- Low                    $  22.25       $  24.00       $  22.63         $  16.75
  Note:  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a
         transaction accounted for as a pooling-of-interests. All quarterly
         financial data of the company, for the periods presented, has been
         supplementally prepared to give retroactive effect to the merger with
         NexGen.
  
  (1)  The company made certain year-end adjustments in 1995, resulting from 
       changes in estimates related to the Nx586 product which was developed by
       NexGen. These adjustments were material to the results of the fourth
       quarter. The adjustment charged to cost of sales in the fourth quarter of
       1995 was approximately $49.2 million.
  
                                         3
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
  CONDITION
  
  On January 17, 1996, the company acquired NexGen, Inc. (NexGen) in a transaction
  accounted for as a pooling-of-interests. All financial data and footnote
  information of the company, including the company's financial statements for the
  periods discussed herein have been supplementally prepared to give retroactive
  effect to the merger with NexGen.
  
  The following discussion and analysis presents historical information only. For
  information concerning trends, risks, and uncertainties that may have a material
  favorable or unfavorable impact on the company's results of operations,
  liquidity, capital resources in the future, and capital expenditure plans in
  1996, please see "Management's Discussion and Analysis of Results of Operations
  and Financial Condition" contained in the company's Annual Report on Form 10-K
  for the fiscal year ended December 31, 1995 and the company's Quarterly Report
  on Form 10-Q for the quarter ended March 31, 1996.
  
  RESULTS OF OPERATIONS
  
  Net sales of $2.5 billion in 1995 rose by approximately 15 percent from 1994.
  This increase was primarily attributable to substantial growth in Flash memory
  sales and secondarily due to an increase in sales of communication products, the
  combination of which more than offset a decline in microprocessor sales. Net
  sales in 1994 increased by approximately 31 percent from 1993 due to substantial
  growth in microprocessor sales.
  
  Sales of Flash memory devices increased in 1995 from 1994 primarily due to
  growth in unit shipments and secondarily due to a change in product mix
  resulting in higher average selling prices. During 1995, Flash memory devices
  contributed a significant portion of the company's revenues and profits.
  
  Revenues from communication products rose from 1994 to 1995 primarily due to
  growth in the Ethernet family of products. Sales of CMOS programmable logic
  devices increased from 1994 to 1995 primarily due to increased unit shipments.
  In 1995, EPROM sales decreased as compared to 1994 due to comparable declines in
  both unit shipments and average selling prices.
  
  In 1995, Am486(R) microprocessor sales decreased slightly primarily due to
  average selling price declines, partially offset by increases in unit sales.
  Am486 microprocessor products contributed a significant portion of the company's
  revenues and profits in 1994 and 1995.
  
  Am486 and Nx586 are registered trademarks of AMD.
  K86 RISC SUPERSCALAR and AMD-K5 are trademarks of AMD.
  
                                         4
  Gross margin was 43 percent in 1995 as compared to 53 percent in 1994 and 52
  percent in 1993. The four main factors contributing to the decrease in gross
  margin in 1995, in order of significance, were first, Am486 price declines;
  second, purchase prices of FASL products, which are higher than the costs of
  similar products manufactured internally; third, negative gross margins,
  inventory reserves, and manufacturing loss accruals associated with
  significantly reduced demand for NexGen products; and fourth, the transition of
  Fab 25 costs from research and development to cost of sales when production
  commenced in September 1995. The impact of gross margin declines caused by
  purchase of FASL products during 1995 was mostly offset by the company's share
  of FASL income. The increase in gross margin from 1993 to 1994 was primarily
  attributable to increased sales from higher margin Am486 products during 1994.
  
  Research and development expenses for 1995 increased to $417 million from $295
  million in 1994, and $279 million in 1993. These increases were primarily due to
  higher Fab 25 expenses and secondarily due to increased microprocessor
  development costs.
  
  Marketing, general, and administrative expenses were $413 million for 1995, $378
  million for 1994, and $297 million for 1993. The increase from 1994 to 1995 was
  primarily attributable to promotional expenses for the sale of NexGen's Nx586(R)
  and other related products, and secondarily to higher advertising expenses. The
  incremental change from 1993 to 1994 was mainly due to increased legal and
  microprocessor advertising expenses.
  
  Interest income and other, net rose from 1994 to 1995 primarily due to higher
  interest rates during 1995 and secondarily due to a realized gain of
  approximately $3 million from equity securities sold during 1995. In 1994,
  interest income and other, net included a net charge of approximately $5 million
  resulting from the securities class action lawsuit and stockholders' derivative
  action settlements, and a gain from the damages award in an arbitration
  proceeding with Intel Corporation. Interest expense in 1995 decreased from 1994
  due to higher capitalized interest mainly related to the construction of Fab 25.
  
  The income tax rate was approximately 28, 34, and 29 percent in 1995, 1994, and
  1993, respectively. The lower tax rate in 1995 resulted from lower state taxes
  and increased benefits from low taxed foreign income. The lower tax rate in 1993
  was primarily due to available tax credit carryforwards.
  
  International sales were 56, 55, and 54 percent of total sales in 1995, 1994,
  and 1993, respectively. During 1995, approximately 17 percent of the company's
  net sales were denominated in foreign currencies. The company does not have
  sales denominated in local currencies in those countries which have highly
  inflationary economies. (A highly inflationary economy is defined in accordance
  with the Statement of Financial
  
                                         5
  Accounting Standards No. 52 as one in which the cumulative inflation over a
  three-year consecutive period approximates 100 percent or more.) The impact on
  the company's operating results from changes in foreign currency rates
  individually and in the aggregate has not been material.
  
  The company enters into foreign exchange forward contracts to buy and sell
  currencies as economic hedges of the company's foreign net monetary asset
  position including the company's liabilities for products purchased from FASL.
  In 1995, these hedging transactions were denominated in lira, yen, French franc,
  deutsche mark, and pound sterling. The maturities of these contracts are
  generally short-term in nature. The company believes its foreign exchange
  contracts do not subject the company to material risk from exchange rate
  movements because gains and losses on these contracts are designed to offset
  losses and gains on the net monetary asset position being hedged. Net foreign
  currency gains and losses have not been material. As of December 31, 1995, the
  company had approximately $37 million (notional amount) of foreign exchange
  forward contracts (see Notes 3, 4, and 5 to the Supplemental Consolidated
  Financial Statements).
  
  The company has engaged in interest rate swaps primarily to reduce its interest
  rate exposure by changing a portion of the company's interest rate obligation
  from a floating rate to a fixed rate basis. At the end of 1995, the net
  outstanding notional amount of interest rate swaps was $190 million, of which
  $150 million will mature in 1996 and $40 million will mature in 1997. Gains and
  losses related to these interest rate swaps have been immaterial (see Notes 3,
  4, and 5 to the Supplemental Consolidated Financial Statements).
  
  The company primarily addresses market risk by participating as an end user in
  various derivative markets to manage its exposure to interest and foreign
  currency exchange rate fluctuations. The counterparties to the company's foreign
  exchange forward contracts and interest rate swaps consist of a number of major,
  high credit quality, international financial institutions. The company does not
  believe that there is significant risk of nonperformance by these counterparties
  because the company monitors the credit ratings of such counterparties, and
  reduces the financial exposure by limiting the amount of agreements entered into
  with any one financial institution.
  
  In 1995, the Financial Accounting Standards Board released the Statement of
  Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
  Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
  SFAS 121 requires recognition of impairment of long-lived assets in the event
  the net book value of such assets exceeds the future undiscounted cash flows
  attributable to such assets. SFAS 121 is effective for fiscal years beginning
  after December 15, 1995. Adoption of SFAS 121 is not expected to have a material
  impact on the company's financial condition or results of operations.
  
                                         6
  The company accounts for its stock option plans and its employee stock purchase
  plan in accordance with provisions of the Accounting Principles Board's Opinion
  No. 25 (APB 25), "Accounting For Stock Issued to Employees." In 1995, the
  Financial Accounting Standards Board released the Statement of Financial
  Accounting Standards No. 123 (SFAS 123), "Accounting for Stock Based
  Compensation." SFAS 123 provides an alternative to APB 25 and is effective for
  fiscal years beginning after December 15, 1995. The company expects to continue
  to account for its employee stock plans in accordance with the provisions of APB
  25. Accordingly, SFAS 123 is not expected to have any material impact on the
  company's financial condition or results of operations.
  
  FINANCIAL CONDITION
  
  Cash, cash equivalents, and short-term investments increased by $79 million from
  1994 to 1995. This increase was primarily attributable to a $150 million term
  loan obtained in January of 1995 offset by NexGen's cash used in operations. The
  $545 million of cash generated from operating activities in 1995 was used to
  fund investments in property, plant, and equipment to expand manufacturing
  capacity primarily related to Fab 25.
  
  Working capital increased by $20 million from $442 million at the end of 1994 to
  $462 million at the end of 1995. This increase was primarily due to higher cash,
  cash equivalents, and short-term investments.
  
  At the end of 1995, the company's total cash investment in FASL was $160 million
  as compared to $142 million at the end of 1994. In 1995, FASL approved
  construction of a second Flash memory fab, FASL II, at a site contiguous to the
  existing FASL facility in Aizu-Wakamatsu, Japan.
  
  On January 11, 1995, the company and Intel Corporation reached an agreement to
  settle all previously outstanding legal disputes between the two companies. As
  part of the settlement, in December 1995, the company signed a five-year,
  comprehensive patent cross-license agreement with Intel which expires on
  December 31, 2000. The agreement provides that after December 31, 1999, the
  parties will negotiate in good faith a patent cross-license agreement to be
  effective January 1, 2001. Effective January 1, 1996, the new agreement gives
  the company and Intel the rights to use each others' patents and certain
  copyrights, exclusive of microprocessor microcode copyrights. The cross-license
  is royalty-bearing for the company's products that use certain Intel
  technologies. The company is required to pay Intel minimum non-refundable
  royalties during the years 1997 to 2000.
  
  As of the end of 1995, the company had the following financing arrangements:
  unsecured committed bank lines of credit of $250 million, unutilized; long-term
  secured equipment lease lines of $132 million, which were fully utilized; short-
  term, unsecured uncommitted bank credit in the amount of $96 million, of which
  $27
  
                                         7
  million was utilized; an outstanding $150 million four-year term loan; and
  approximately $12.5 million in short-term debt financing.
  
  RISK FACTORS
  
  The semiconductor industry is generally characterized by a highly competitive
  and rapidly changing environment in which operating results are subject to the
  effects of new product introductions, manufacturing technology innovations,
  rapid fluctuations in product demand, the availability of manufacturing
  capacity, and the ability to secure and maintain intellectual property rights.
  While the company attempts to identify and respond to rapidly changing events
  and conditions as soon as possible, the anticipation of and reaction to such
  events are an ongoing challenge. The company's future results of operations and
  financial condition may be adversely impacted by various factors. These risk
  factors are detailed in the description of the company's business, operations,
  and financial condition in the company's Form 10-K for the fiscal year ended
  December 31, 1995 under the captions "Business" and "Management's Discussion and
  Analysis of Results of Operations and Financial Condition" and in the company's
  Form 10-Q for the quarter ended March 31, 1996 under the caption "Management's
  Discussion and Analysis of Results of Operations and Financial Condition."
  
                                         8
  The Board of Directors and Shareholders
  Advanced Micro Devices, Inc.
  
  We have audited the supplemental consolidated balance sheets of Advanced Micro 
  Devices, Inc. (formed as a result of the consolidation of Advanced Micro 
  Devices, Inc. and NexGen, Inc.) as of December 31, 1995 and December 25, 1994 
  and the related supplemental consolidated statements of income, stockholders' 
  equity, and cash flows for each of the three years in the period ended December 
  31, 1995. The supplemental consolidated financial statements give retroactive 
  effect to the merger of Advanced Micro Devices, Inc. and NexGen, Inc. on January
  17, 1996, which has been accounted for using the pooling-of-interests method as 
  described in the notes to the supplemental consolidated financial statements. 
  These supplemental financial statements are the responsibility of the management
  of Advanced Micro Devices, Inc. Our responsibility is to express an opinion on 
  these supplemental financial statements based on our audits.
  
  We conducted our audits in accordance with generally accepted auditing 
  standards. Those standards require that we plan and perform the audit to obtain 
  reasonable assurance about whether the financial statements are free of material
  misstatement. An audit includes examining, on a test basis, evidence supporting 
  the amounts and disclosures in financial statements. An audit also includes 
  assessing the accounting principles used and significant estimates made by 
  management, as well as evaluating the overall financial statement presentation. 
  We believe that our audits provide a reasonable basis for our opinion.
  
  In our opinion, based on our audits, the supplemental financial statements 
  referred to above present fairly, in all material respects, the consolidated 
  financial position of Advanced Micro Devices, Inc. at December 31, 1995 and 
  December 25, 1994, and the consolidated results of its operations and its cash 
  flows for each of the three years in the period ended December 31, 1995, after 
  giving retroactive effect to the merger of NexGen, Inc., as described in the 
  notes to the supplemental consolidated financial statements, in conformity with 
  generally accepted accounting principles.
  
                                                                Ernst & Young LLP
  
  San Jose, California
  April 30, 1996
  
                                         9
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF INCOME
  Three Years Ended December 31, 1995
  (Thousands except per share amounts)
  95                94                  93
                                                                   ----------        -----------        -----------
  Net sales                                                        $2,468,379        $ 2,155,453        $ 1,648,280
  Expenses:
    Cost of sales                                                   1,417,007          1,013,589            789,564
    Research and development                                          416,521            295,326            279,412  
    Marketing, general, and administrative                            412,651            377,503            296,912   
                                                                   ----------        -----------        -----------
                                                                    2,246,179          1,686,418          1,365,888
                                                                   ----------        -----------        -----------
  Operating income                                                    222,200            469,035            282,392
  
  Litigation settlement                                                     -            (58,000)                 -
  Interest income and other, net                                       32,465             17,134             16,931
  Interest expense                                                     (3,059)            (4,410)            (4,398)
                                                                   ----------        -----------        -----------
  Income before income taxes and equity in joint venture              251,606            423,759            294,925
  Provision for income taxes                                           70,206            142,232             85,935
                                                                   ----------        -----------        -----------
  Income before equity in joint venture                               181,400            281,527            208,990
  Equity in net income (loss) of joint venture                         34,926            (10,585)              (634)
                                                                   ----------        -----------        -----------
  Net income                                                          216,326            270,942            208,356
  
  Preferred stock dividends                                                10             10,350             10,350
                                                                   ----------        -----------        -----------
  
  Net income applicable to common stockholders                     $  216,316        $   260,592        $   198,006
                                                                   ==========        ===========        ===========
  
  Net income per common share:
    Primary                                                        $     1.59        $      2.06        $      1.65
                                                                   ==========        ===========        ===========
    Fully diluted                                                  $     1.57        $      2.02        $      1.64
                                                                   ==========        ===========        ===========
  Shares used in per share calculation:
    Primary                                                           136,208            126,674            119,925
    Fully diluted                                                     137,815            134,142            127,167
  See accompanying notes
  
                                        10
  SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
  December 31, 1995, and December 25, 1994
  (Thousands except share and per share amounts)
  95                 94
                                                                                -----------        -----------
  Assets
  Current assets:
   Cash and cash equivalents                                                    $   126,316        $   117,997
   Short-term investments                                                           383,349            312,924
                                                                                -----------        -----------   
    Total cash, cash equivalents, and short-term investments                        509,665            430,921
   Accounts receivable, net of allowance for doubtful accounts
    of $15,618 in 1995, and $10,469 in 1994                                         284,238            345,546
   Inventories:                                                           
    Raw materials                                                                    29,494             23,097
    Work-in-process                                                                  68,827             74,892
    Finished goods                                                                   57,665             35,514
                                                                                -----------        -----------   
      Total inventories                                                             155,986            133,503
   Deferred income taxes                                                            147,489            105,238
   Prepaid expenses and other current assets                                         40,564             46,370
                                                                                -----------        -----------   
    Total current assets                                                          1,137,942          1,061,578
  Property, plant, and equipment:
   Land                                                                              28,851             28,820
   Buildings and leasehold improvements                                             893,646            500,530
   Equipment                                                                      1,843,662          1,456,512
   Construction in progress                                                         180,742            492,792
                                                                                -----------        -----------   
    Total property, plant, and equipment                                          2,946,901          2,478,654
   Accumulated depreciation and amortization                                     (1,305,267)        (1,209,813)
                                                                                -----------        -----------   
    Property, plant, and equipment, net                                           1,641,634          1,268,841
  Investment in joint venture                                                       176,821            124,588
  Other assets                                                                      122,070             70,714
                                                                                -----------        -----------   
                                                                                $ 3,078,467        $ 2,525,721
                                                                                ===========        ===========   
  
  Liabilities and Stockholders' Equity
  Current liabilities:
   Notes payable to banks                                                       $    26,770        $    32,459
   Accounts payable                                                                 241,916            159,939
   Accrued compensation and benefits                                                106,347            105,604
   Accrued liabilities                                                              103,404             85,912
   Litigation settlement                                                                  -             58,000
   Income tax payable                                                                56,297             53,795
   Deferred income on shipments to distributors                                     100,057             83,800
   Current portion of long-term debt and capital lease obligations                   41,642             40,420
                                                                                -----------        -----------   
    Total current liabilities                                                       676,433            619,929
  Deferred income taxes                                                              84,607             32,686
  Long-term debt and capital lease obligations, less current portion                214,965             75,752
  Commitments and contingencies                                                           -                  -
  
  Stockholders' equity:
   Capital stock:
    Serial preferred stock (redeemed March 13, 1995), par value $.10;
      1,000,000 shares authorized; 345,000 shares issued and 344,862
      shares outstanding in 1994                                                          -                 34
    Common stock, par value $.01; 250,000,000 shares authorized;
      132,182,019 shares issued and outstanding in 1995,
      and 121,919,102 in 1994                                                         1,050                959
   Capital in excess of par value                                                   908,989            871,200
   Retained earnings                                                              1,192,423            925,161
                                                                                -----------        -----------   
    Total stockholders' equity                                                    2,102,462          1,797,354
                                                                                -----------        -----------   
                                                                                $ 3,078,467        $ 2,525,721
                                                                                ===========        ===========
  See accompanying notes
  
                                        11
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
  Three Years Ended December 31, 1995
  (Thousands)
  Preferred Stock     Common Stock
                                                 -----------------------------------
                                                 Number             Number                       Capital in                  Total
                                                   of                 of               Warrant   Excess of    Retained   Stockholders'
                                                 Shares    Amount   Shares    Amount  Valuation  Par Value    Earnings       Equity
                                                 ------------------------------------------------------------------------------------
  December 27, 1992                               12,580  $  53,119  89,976  $1,122    $   -     $ 532,674   $  457,454    $1,044,369 
                                                                                                                                      
  Issuance of preferred stock                      3,842     21,725       -       -        -             -            -        21,725 
  Issuance of common stock                             -          -     106      73        -             -            -            73 
  Valuation of warrants                                -          -       -       -      533             -            -           533 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   3,218      31        -        19,408            -        19,439 
      Fujitsu Limited                                  -          -   1,000      10        -        22,952            -        22,962 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         1,313            -         1,313 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        43,386            -        43,386 
  Preferred stock dividends                            -          -       -       -        -             -      (10,350)      (10,350)
  Net income                                           -          -       -       -        -             -      208,356       208,356 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 26, 1993                               16,422     74,844  94,300   1,236      533       619,733      655,460     1,351,806 
                                                                                                                                      
  Issuance of common stock                             -          -   4,676     316        -        65,170            -        65,486 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   1,970      19        -        16,911            -        16,930 
      Fujitsu Limited                                  -          -   1,000      10        -        22,625            -        22,635 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         1,971            -         1,971 
  Conversion of preferred stock to                                                                                                    
      common stock                               (16,078)   (74,810) 19,973       3        -       106,199            -        31,392 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        37,433            -        37,433 
  Preferred stock dividends                            -          -       -       -        -             -      (10,350)      (10,350)
  Reincorporation into a Delaware Corporation          -          -       -    (625)       -           625            -             - 
  Net income                                           -          -       -       -        -             -      270,942       270,942 
  Unrealized gain from available-for-sale                                                                                             
      investments                                      -          -       -       -        -             -        9,109         9,109 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 25, 1994                                  344         34 121,919     959      533       870,667      925,161     1,797,354 
                                                                                                                                      
  Changes in NexGen's stockholders'                                                                                                   
      equity in the six months ended                                                                                                  
      June 30, 1995                               18,161     93,548 (24,530)    352        -      (171,994)      23,803       (54,291)
  Issuance of preferred stock                      1,376     12,653       -       -        -             -            -        12,653 
  Issuance of common stock                             -          -   4,542     271        -        65,340            -        65,611 
  Issuance of shares:                                                                                                                 
      Employee stock plans                             -          -   2,283      22        -        23,518            -        23,540 
  Compensation recognized under                                                                                                       
      employee stock plans                             -          -       -       -        -         2,483            -         2,483 
  Conversion of preferred stock to                                                                                                    
      common stock                               (19,881)  (106,235) 26,823      71        -       103,663            -        (2,501)
  Reincorporation into a Delaware Corporation          -          -     (33)   (625)       -           625                          - 
  Warrants exercised                                   -          -   1,178       -     (533)          533            -             - 
  Income tax benefits realized from                                                                                                   
      employee stock option exercises                  -          -       -       -        -        15,189            -        15,189 
  Preferred stock dividends                            -          -       -       -        -             -          (10)          (10)
  Redemption of stockholder rights plan                -          -       -       -        -        (1,035)           -        (1,035)
  Net income                                           -          -       -       -        -             -      216,326       216,326 
  Unrealized gain from available-for-sale                                                                                             
      investments and translation                                                                                                     
      adjustment for joint venture                     -          -       -       -        -             -       27,143        27,143 
                                                 -------  --------- -------  ------    -----     ---------   ----------    ----------
                                                                                                                                      
  December 31, 1995                                    -  $       - 132,182  $1,050    $   -     $ 908,989   $1,192,423    $2,102,462
                                                 =======  ========= =======  ======    =====     =========   ==========    ==========
  See accompanying notes
  
                                        12
  SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Years Ended December 31, 1995
  (Thousands)
  95              94               93
                                                                             ---------      -----------       ---------
  Cash flows from operating activities:
    Net income                                                               $ 216,326      $   270,942       $ 208,356
    Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation and amortization                                            264,675          217,665         176,827
      Accrual for litigation settlement                                              -           58,000               -
      Net (gain) loss on sale of property, plant, and equipment                  2,152              276          (2,943)
      Write-down of property, plant, and equipment                                 611            2,230             366
      Net gain realized on sale of available-for-sale securities                (2,707)               -               -
      Compensation recognized under employee stock plans                         2,483            1,971           1,313
      Undistributed (income) loss of joint venture                             (34,926)          10,585             634
      Changes in operating assets and liabilities:
        Net (increase) decrease in receivables, inventories,
          prepaid expenses, and other assets                                    19,548         (128,914)        (57,628)
        Payment of litigation settlement                                       (58,000)               -               -
        Net increase in deferred income taxes                                     (925)         (32,543)        (30,304)
        Increase in income tax payable                                          11,772           61,910          70,502
        Net increase in payables and accrued liabilities                       124,058           63,737          72,131
                                                                             ---------      -----------       ---------
  Net cash provided by operating activities                                    545,067          525,859         439,254
                                                                             ---------      -----------       ---------
  Cash flows from investing activities:
    Purchase of property, plant, and equipment                                (625,900)        (552,271)       (325,981)
    Proceeds from sale of property, plant, and equipment                         4,834            2,058           4,648
    Purchase of available-for-sale securities                                 (817,888)         (56,328)         (4,934)
    Proceeds from sale of available-for-sale securities                        756,373            4,849               -
    Purchase of held-to-maturity debt securities                              (648,012)      (1,245,167)       (715,487)
    Proceeds from maturities of held-to-maturity debt securities               642,229        1,416,431         566,773
    Investment in joint venture                                                (18,019)        (139,175)         (3,160)
                                                                             ---------      -----------       ---------
  Net cash used in investing activities                                       (706,383)        (569,603)       (478,141)
                                                                             ---------      -----------       ---------
  Cash flows from financing activities:
    Proceeds from borrowings                                                   246,345           42,025          17,528
    Payments on capital lease obligations and other debt                      (142,937)         (70,288)        (22,616)
    Proceeds from issuance of stock                                            101,804          136,443          64,692
    Expenses for conversion of preferred stock and redemption of 
     stockholder rights                                                         (3,536)               -               -
    Payments of preferred stock dividends                                          (10)         (10,350)        (10,350)
                                                                             ---------      -----------       ---------
  Net cash provided by financing activities                                    201,666           97,830          49,254
                                                                             ---------      -----------       ---------
  Net increase in cash and cash equivalents                                     40,350           54,086          10,367
  Cash and cash equivalents at beginning of year                                85,966           63,911          53,544
                                                                             ---------      -----------       ---------
  Cash and cash equivalents at end of year                                   $ 126,316      $   117,997       $  63,911
                                                                             =========      ===========       =========
  Supplemental disclosures of cash flow information:
    Cash paid during the year for:
      Interest (net of amounts capitalized)                                  $   2,541      $     4,125       $   2,462
                                                                             =========      ===========       =========
      Income taxes                                                           $  60,329      $   111,704       $  44,433
                                                                             =========      ===========       =========
   Non-cash financing activities:
      Equipment capital leases                                               $  24,422      $    34,202       $  64,512
                                                                             =========      ===========       =========
      Conversion of preferred stock to common stock                          $ 270,328      $   106,201       $       -
                                                                             =========      ===========       =========
  See accompanying notes
  
                                        13
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  December 31, 1995, December 25, 1994, and December 26, 1993
   
  1.   NATURE OF OPERATIONS
  
       AMD is a semiconductor manufacturer with manufacturing facilities in the
  U.S. and Asia, and sales offices throughout the world. Focusing on the personal
  and networked computing and communications markets, AMD is a global company that
  derives more than half of its revenues from international sales, mainly in
  Europe and Asia. The company provides programmable products in concert with
  applications solutions to the manufacturers of equipment for personal and
  networked computation and communications.
  
  2.   BUSINESS COMBINATION
  
       On January 17, 1996, the company acquired NexGen, Inc. ("NexGen") in a 
  tax-free reorganization in which NexGen was merged directly into the company. 
  The company has exchanged approximately 29.3 million shares of AMD common stock 
  and has reserved 4.3 million shares to be exchanged for NexGen options and 
  warrants assumed by the company. The 33.6 million total shares to be exchanged 
  represent eight-tenths (0.8) of a share of the common stock of AMD for each 
  share of the common stock of NexGen outstanding or subject to an assumed warrant
  or option. The merger has been accounted for under the pooling-of-interests 
  method.
  
  The supplemental consolidated financial statements have been prepared to give
  retroactive effect to the merger of NexGen with and into AMD on January 17,
  1996. Generally accepted accounting principles prescribe giving effect to a
  consummated business combination accounted for by the pooling-of-interests
  method in financial statements that do not include the date of consummation. The
  accompanying supplemental consolidated financial statements do not extend
  through the date of the consummation, however, they will become the historical
  consolidated financial statements of the company after financial statements
  covering the date of consummation of the business combination are issued.
  
  Prior to its merger with AMD, NexGen reported on a fiscal year ending June 30.
  In the accompanying supplemental consolidated financial statements and the notes
  thereto, NexGen's financial position and operating results as of and for the
  years ended June 30, 1994 and 1995 were combined with AMD's financial position
  and operating results as of and for the years ended December 26, 1993 and
  December 25, 1994, respectively. NexGen's financial position and operating
  results for 1995, which were restated to a December 31, 1995 year end, were
  combined with AMD's financial position and operating results as of and for the
  year ended December 31, 1995. Accordingly, NexGen's operating results for the
  six months ended June 30, 1995 were duplicated in each of the years ended
  December 25, 1994 and December 31, 1995. NexGen's revenues and net loss for that
  six month period were $19.9 million and $34.4 million, respectively.
  Consolidated stockholders' equity has been reduced by $54.3 million, which
  represents NexGen's net stockholders' equity activity for the six months ended
  June 30, 1995 in order to eliminate the duplication of stockholders' equity
  activity during that period. As a result of the combination of NexGen's
  financial position as of June 30, 1995 with the financial position of AMD as of
  December 25, 1994, the beginning cash and cash equivalents balance in the
  accompanying 1995 supplemental consolidated statements of cash flows does not
  equal the December 25, 1994 cash and cash equivalents balance.
  
  A reconciliation of net sales, net income, and net income per common share of
  the company, as previously reported, NexGen and combined, including the NexGen
  income tax benefit, is as follows (in thousands, except per share amounts):
  1995          1994         1993
                                        --------      --------      -------
  Net Sales:
    AMD, as previously reported       $2,429,724     $2,134,659    $1,648,280
    NexGen                                38,655         20,794             -
                                      ----------     ----------    ---------- 
    Combined                          $2,468,379     $2,155,453    $1,648,280
                                      ==========     ==========    ==========
  
  Net Income (Loss):
    AMD, as previously reported         $300,521       $305,266      $228,781  
    NexGen                              (126,727)       (45,795)      (23,708)
    NexGen income tax benefit             42,532         11,471         3,283
                                      ----------     ----------    ---------- 
    Combined                            $216,326       $270,942      $208,356
                                      ==========     ==========    ==========
  
  Net Income Per Common Share
   (Primary):
    AMD, as previously reported            $2.85          $3.02         $2.30
                                      ==========     ==========    ==========
    Combined                               $1.59          $2.06         $1.65
                                      ==========     ==========    ==========
  Net Income Per Common Share 
   (Fully Diluted):   
    AMD, as previously reported            $2.81          $2.92         $2.24
                                      ==========     ==========    ==========
    Combined                               $1.57          $2.02         $1.64 
                                      ==========     ==========    ==========
  3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
  FISCAL YEAR. The company uses a 52- to 53-week fiscal year ending on the last
  Sunday in December, which resulted in a 53-week year ended December 31, 1995.
  This compares with a 52-week fiscal year for 1994 and 1993, which ended on
  December 25 and 26, respectively.
  
  PRINCIPLES OF CONSOLIDATION. The supplemental consolidated financial statements
  include the accounts of the company and its subsidiaries. Upon consolidation,
  all significant intercompany accounts and transactions are eliminated. Also
  included in the financial statements of the company, under the equity method of
  accounting, is the company's 49.95 percent investment in Fujitsu AMD
  Semiconductor Limited (FASL).
  
  FOREIGN CURRENCY TRANSLATION. The U.S. dollar is the functional currency for the
  company's wholly-owned foreign subsidiaries. Translation adjustments, resulting
  from the process of
  
                                        14
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  translating foreign currency financial statements into U.S. dollars, are
  included in operations. The functional currency of the company's unconsolidated
  joint venture is the Japanese yen. Translation adjustments relating to the
  translation of these statements have not been material, and therefore, are not
  disclosed as a separate component of stockholders' equity.
  
  CASH EQUIVALENTS. Cash equivalents consist of financial instruments which are
  readily convertible to cash and have original maturities of three months or less
  at the time of acquisition.
  
  INVESTMENTS. The company classifies its marketable debt and equity securities
  into held-to-maturity and available-for-sale categories in accordance with the
  provisions of the Statement of Financial Accounting Standards No. 115 (SFAS No.
  115), "Accounting for Certain Instruments in Debt and Equity Securities." In
  accordance with the FASB staff Special Report, "A Guide to Implementation of
  Statement 115 on Accounting for Certain Investments in Debt and Equity
  Securities," the company chose to reclassify, as of December 31, 1995, all cash
  equivalents and short-term investments that were classified as held-to-maturity
  at that time from held-to-maturity to available-for-sale. Securities classified
  as available-for-sale are reported at fair market value with the related
  unrealized gains and losses included in retained earnings. Realized gains and
  losses and declines in value of securities judged to be other than temporary are
  included in interest income and other, net. Interest and dividends on all
  securities are included in interest income and other, net.
  
       Investments with maturities between three and twelve months are considered
  short-term investments. Short-term investments consist of money market auction
  preferred stocks and debt securities such as commercial paper, time deposits,
  certificates of deposit, bankers' acceptances, and marketable direct obligations
  of the United States Treasury.
  
  FOREIGN EXCHANGE FORWARD CONTRACTS. Foreign exchange forward contracts are used
  to hedge the company's net monetary asset positions in its foreign subsidiaries
  and the company's liabilities for products purchased from FASL. Realized gains
  and losses from these hedges are included in operations. Premiums and discounts,
  if any, are amortized over the life of the contract and included in operations.
  
  FOREIGN CURRENCY OPTIONS. Foreign currency options are used to hedge firm
  commitments with respect to the company's joint venture (FASL) investment.
  Realized gains and losses from these hedges are deferred and included in other
  assets or accrued liabilities, respectively. They are recognized in operations
  in the same period as the hedged transactions. Premiums and discounts, if any,
  are amortized over the life of the contract and included in operations.
  
  INTEREST RATE SWAPS. The company enters into interest rate swaps primarily to
  reduce its interest rate exposure by changing a portion of the company's
  interest rate exposure from a floating rate to a fixed rate basis. The
  differential between fixed and floating rates to be paid or received is accrued
  and recognized as an adjustment to interest expense. Accordingly, the related
  amount payable to or receivable from counterparties is included in other current
  assets or accrued liabilities.
  
  INVENTORIES. Inventories are stated principally at standard cost adjusted to
  approximate the lower of cost (first-in, first-out method) or market (net
  realizable value).
  
  PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated at
  cost. Depreciation and amortization are provided principally on the straight-
  line basis over the estimated useful lives of the assets for financial reporting
  purposes and on accelerated methods for tax purposes. Estimated useful lives for
  financial reporting purposes are as follows: machinery and equipment 3 to 5
  years; buildings up to 26 years; and leasehold improvements are the shorter of
  the remaining terms of the leases or the estimated economic useful lives of the
  improvements.
  
       In 1995, the Financial Accounting Standards Board released the Statement of
  Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
  Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
  SFAS 121 requires recognition of impairment of long-lived assets in the event
  the net book value of such assets exceeds the future undiscounted cash
  
                                        15
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  flows attributable to such assets. SFAS 121 is effective for fiscal years
  beginning after December 15, 1995. Adoption of SFAS 121 is not expected to have
  a material impact on the company's financial position or results of operations.
  
  DEFERRED INCOME ON SHIPMENTS TO DISTRIBUTORS. A portion of sales is made to
  distributors under terms allowing certain rights of return and price protection
  on unsold merchandise held by the distributors. These agreements can be canceled
  by either party upon written notice, at which time the company generally
  repurchases unsold inventory. Accordingly, recognition of sales to distributors
  and related gross profits are deferred until the merchandise is resold by the
  distributors.
  
  ADVERTISING EXPENSES. The company accounts for advertising costs as expense in
  the period in which they are incurred. Advertising expense for 1995, 1994, and
  1993 was approximately $44 million, $32 million, and $22 million, respectively.
  
  NET INCOME PER COMMON SHARE. Primary net income per common share is based upon
  weighted average common and dilutive common equivalent shares outstanding using
  the treasury stock method. Dilutive common equivalent shares include stock
  options, warrants, and restricted stock. Fully diluted net income per common
  share is computed using the weighted average common and dilutive common
  equivalent shares outstanding, plus other dilutive shares outstanding which are
  not common equivalent shares. Other dilutive shares which are not common
  equivalent shares include convertible preferred stock and convertible notes.
  
       All share information has been adjusted on a retroactive basis herein to
  give effect to the merger with NexGen and the conversion of NexGen shares on a
  0.8 to one share of AMD common stock.
  
  EMPLOYEE STOCK PLANS. The company accounts for its stock option plans and its
  employee stock purchase plan in accordance with provisions of the Accounting
  Principles Board's Opinion No. 25 (APB 25), "Accounting For Stock Issued to
  Employees." In 1995, the Financial Accounting Standards Board released the
  Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
  Stock Based Compensation." SFAS 123 provides an alternative to APB 25 and is
  effective for fiscal years beginning after December 15, 1995. The company
  expects to continue to account for its employee stock plans in accordance with
  the provisions of APB 25. Accordingly, SFAS 123 is not expected to have any
  material impact on the company's financial position or results of operations.
  
  USE OF ESTIMATES. The preparation of financial statements in conformity with
  generally accepted accounting principles requires management to make estimates
  and assumptions that affect the reported amounts of assets and liabilities and
  disclosure of contingent assets and liabilities at the date of the financial
  statements and the reported amounts of revenues and expenses during the
  reporting period. Actual results inevitably will differ from those estimates,
  and such differences may be material to the financial statements.
  
  YEAR-END ADJUSTMENTS (UNAUDITED). The company made certain year-end adjustments
  in 1995, resulting from changes in estimates related to the Nx586 product which
  was developed by NexGen. These adjustments were material to the results of the
  fourth quarter. These adjustments, related to accounts receivable and inventory,
  were charged primarily to net sales and cost of sales and reduced operating
  income by approximately $51.7 million.
  
  4.   FINANCIAL INSTRUMENTS
  
  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
  
  As part of the company's asset and liability management, the company enters into
  various types of transactions that involve financial instruments with off-
  balance-sheet risk. These instruments are entered into in order to manage
  financial market risk, including interest rate and foreign exchange risk. The
  notional values, carrying amounts, and fair values are tabled below.
  
  Foreign exchange forward contracts
  
  The company enters into foreign exchange forward contracts to buy and sell
  currencies as economic hedges of its net monetary asset positions in its foreign
  subsidiaries and liabilities for products. 
  
                                        16
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  purchased from FASL. The hedging transactions in 1995 were denominated in lira,
  yen, French franc, deutsche mark, and pound sterling. The maturities of these
  contracts are generally less than six months.
  
  Foreign currency options
  
  The joint venture (FASL) investments are denominated in yen, and therefore, are
  subject to exposure due to fluctuations in yen exchange rates. Thus, the company
  hedges its exposures on certain firm commitments relating to the FASL investment
  with foreign currency options denominated in yen. The maturities of these
  options are generally less than six months. No foreign currency options were
  outstanding as of December 31, 1995.
  
  Interest rate swaps
  
  The company engaged in interest rate swaps primarily to reduce its interest rate
  exposure on its term loan and on a building lease obligation by changing a
  portion of the company's interest rate obligation from a floating rate to a
  fixed rate basis without exchanges of the underlying notional amounts. The fixed
  interest rates are based on one to five year swap rates, and the floating
  interest rates are based on three or six months LIBOR. These interest rate swaps
  will mature in 1996 and 1997.
  
  FAIR VALUE OF FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
  
  The estimates of fair value were obtained using prevailing financial market
  information as of December 31, 1995. In certain instances where judgment is
  required in estimating fair value, price quotes were obtained from certain of
  the company's counterparty financial institutions.
  (Thousands)                                                  1995                                   1994
                                                ---------------------------------      ---------------------------------
                                                Notional     Carrying       Fair       Notional     Carrying       Fair
                                                 amount       amount       value        amount       amount       value
                                                ---------------------------------      ---------------------------------
  Interest rate instruments:
       Swaps                                    $190,000       $(518)     $(1,694)     $ 40,000       $(518)     $   228 
  
  Foreign exchange instruments:
       Foreign exchange forward contracts         36,670        (102)        (102)       32,651         536          536
       Foreign currency options                        -           -            -        12,662           -         (200)
  FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
  
  The carrying value of short-term debt approximates fair value due to its short-
  term maturity. The fair value of long-term debt was estimated using discounted
  cash flow analysis based on estimated interest rates for similar types of
  borrowing arrangements.
  
  The carrying amounts and estimated fair values of the company's other financial
  instruments are as follows:
  
                                        17
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  (Thousands)                               1995                   1994         
                                     -------------------    -------------------  
                                     Carrying     Fair      Carrying     Fair  
                                      Amount     Value       Amount     Value  
                                     --------   --------    --------   --------
  Short-term debt:                                                              
    Notes payable                    $ 26,770   $ 26,770    $ 32,459   $ 32,459 
  Long-term debt                                             
  (excluding capital leases)          179,301    180,920      33,433     32,755
  SECURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE
  
  The following is a summary of held-to-maturity and available-for-sale securities
  included in cash and cash equivalents and short-term investments as of December
  31, 1995 and December 25, 1994.
  Available-for-sale     Held-to-maturity     Available-for-sale 
    (Thousands)                                          1995                  1994                  1994        
                                                  ------------------     ----------------     ------------------
  Certificates of deposit                       $           15,002     $          4,997     $                - 
    Treasury notes                                            10,437                    -                 14,348 
    Federal agency notes                                      14,065                    -                      - 
    Security repurchase agreements                            53,370               50,800                 17,998 
    Commercial paper                                          14,914               24,760                      - 
    Other debt securities                                        434                1,672                      - 
                                                  ------------------     ----------------     ------------------ 
  Total cash equivalents                          $          108,222     $         82,229     $           32,346 
                                                  ==================     ================     ================== 
                                                                                                                 
    Certificates of deposit                       $           70,551     $         95,342     $            3,716 
    Municipal notes and bonds                                 52,256                    -                      - 
    Corporate notes                                           37,898              101,850                      - 
    Treasury notes                                            60,989               44,877                 15,997 
    Commercial paper                                          46,656               14,442                      - 
    Money market auction preferred stocks                    114,999               36,700                      - 
                                                  ------------------     ----------------     ------------------ 
  Total short-term investments                    $          383,349     $        293,211     $           19,713
                                                  ==================     ================     ==================
  On November 15, 1995, the FASB staff issued a Special Report, "A Guide to
  Implementation of Statement 115 on Accounting for Certain Investments in Debt
  and Equity Securities." In accordance with provisions in that Special Report,
  the company chose to reclassify cash equivalents and short-term investments from
  held-to-maturity to available-for-sale. At the date of the transfer, the
  amortized cost of those securities was approximately $480.7 million. Since the
  securities transferred on December 31, 1995 are short-term in nature, changes in
  market interest rates did not
  
                                        18
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  have a significant impact on the fair value of these securities. The net
  unrealized gain on these securities was immaterial.
  
       The available-for-sale equity securities that the company held, included in
  other assets, had a cost and fair value of $14.5 million and $75.1 million,
  respectively, as of December 31, 1995, and a cost and fair value of $9.4 million
  and $18.5 million, respectively, as of December 25, 1994. At December 31, 1995,
  the total net unrealized holding gain on these equity securities, net of tax,
  was approximately $42.5 million, of which $33.4 million was recorded in 1995.
  The entire, net of tax, unrealized holding gain is included in retained
  earnings.
  
       As of December 31, 1995, the company did not own any securities classified
  as trading.
  
  5. CONCENTRATIONS OF CREDIT RISK
  
  Financial instruments that potentially subject the company to concentrations of
  credit risk consist primarily of cash equivalents, short-term investments, trade
  receivables, and financial instruments used in hedging activities.
  
       The company places its cash equivalents and short-term investments with
  high credit quality financial institutions and, by policy, limits the amount of
  credit exposure with any one financial institution. Investments in time deposits
  and certificates of deposit are acquired from banks having combined capital,
  surplus, and undistributed profits of not less than $200 million. Investments in
  commercial paper and money market auction preferred stocks of industrial firms
  and financial institutions are rated A1, P1 or better, investments in tax-exempt
  securities including municipal notes and bonds are rated AA, Aa or better, and
  investments in repurchase agreements must have securities of the type and
  quality listed above as collateral.
  
       Concentrations of credit risk with respect to trade receivables are limited
  because a large number of geographically diverse customers make up the company's
  customer base, thus spreading the trade credit risk. The company controls credit
  risk through credit approvals, credit limits, and monitoring procedures. The
  company performs in-depth credit evaluations of all new customers and requires
  letters of credit, bank guarantees and advance payments, if deemed necessary.
  Bad debt expenses have not been material.
  
       The counterparties to the agreements relating to the company's foreign
  exchange and interest rate instruments consist of a number of major, high credit
  quality, international financial institutions. The company does not believe that
  there is significant risk of nonperformance by these counterparties because the
  company monitors the credit ratings of such counterparties, and limits the
  financial exposure and the amount of agreements entered into with any one
  financial institution. While the notional amounts of financial instruments are
  often used to express the volume of these transactions, the potential accounting
  loss on these transactions if all counterparties failed to perform is limited to
  the amounts, if any, by which the counterparties' obligations under the
  contracts exceed the obligations of the company to the counterparties.
  
  6. CONCENTRATIONS OF OTHER RISKS
  
  PRODUCTS. Microprocessor products and Flash memory devices contributed a
  significant portion of the  company's revenues and profits in 1995. The company
  expects that its ability to maintain or expand its current levels of revenues
  and profits in the future will depend upon, among other things, its success in
  developing and marketing, in a timely manner, its next generation of
  microprocessor products, the K86 RISC SUPERSCALAR(TM) products, and future
  generations of Flash memory devices.
  
                                        19
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  MARKETS. The markets for the company's products are characterized by rapid
  technological developments, evolving industry standards, changes in customer
  requirements, frequent new product introductions and enhancements, and short
  product life cycles. The market for microprocessors and Flash memory devices is
  primarily dependent upon the market for personal computers (PC). From time to
  time, the PC industry has experienced significant downturns, often in connection
  with, or in anticipation of, declines in general economic conditions. These
  downturns have been characterized by diminished product demand, production
  overcapacity, and resultant accelerated erosion of average selling prices. The
  company's business could be materially and adversely affected by industry-wide
  fluctuations in the PC marketplace in the future.
  
  INVENTORIES. Given the volatility of the market, the company makes inventory
  provisions for potentially excess and obsolete inventory based on backlog and
  forecasted demand. However, such backlog demand is subject to revisions,
  cancellations, and rescheduling. Actual demand will inevitably differ from such
  anticipated demand, and such differences may have a material effect on the
  financial statements.
  
  CUSTOMERS. The company markets and sells its products primarily to a broad base
  of customers comprised of Distributors and Original Equipment Manufacturers
  (OEM's) of computation and communication equipment. One of the company's
  distributors, Arrow Electronics, Inc., accounted for approximately 12 percent of
  1995 net sales. No other Distributor or OEM customer constituted 10 percent or
  more of net sales in 1995.
  
  INTERNATIONAL OPERATIONS. The company derives more than half of its revenues
  from international sales. However, only a portion of the company's international
  sales were denominated in foreign currencies. Further, the company does not have
  any sales denominated in the local currencies of those countries which have
  highly inflationary economies.
  
       Nearly all product assembly and final testing of the company's products are
  performed at its manufacturing facilities in Penang, Malaysia; Singapore; and
  Bangkok, Thailand; or by subcontractors in Asia. Wafer fabrication of certain
  products is performed at foundries in Asia. FASL wafer fabrication facilities
  are located in Aizu-Wakamatsu, Japan. Foreign manufacturing entails political
  and economic risks, including political instability, expropriation, currency
  controls and fluctuations, changes in freight and interest rates, and exemptions
  for taxes and tariffs. For example, if the company were unable to assemble and
  test its products abroad, or if air transportation between the United States,
  the company's overseas facilities and customers worldwide were disrupted, there
  could be a material adverse effect on the company's operations.
  
  MATERIALS.  Certain of the raw materials used by the company in the manufacture
  of its products are available from a limited number of suppliers.  For example,
  several types of integrated circuit packages purchased by the company, as well
  as by the majority of other companies in the semiconductor industry, are
  principally supplied by Japanese companies.  Shortages could occur in various
  essential materials due to interruption of supply or increased demand in the
  industry.  If the company were unable to procure certain of such materials, it
  would be required to reduce its manufacturing operations, which could have a
  material adverse effect upon its results of operations.
  
  7. SERIAL PREFERRED STOCK
  
  In March 1987, the company sold 345,000 shares of Convertible Exchangeable
  Preferred Stock, $.10 par value. Dividends were payable quarterly in arrears at
  an annual rate of $30 per share (6 
  
                                        20
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  percent) cumulative from the date of original issue. The preferred stock was
  redeemable for cash at any time at the option of the company, in whole or in
  part, at prices declining to $500 per share at March 15, 1997, plus unpaid
  dividends. The preferred stock was convertible at any time at the option of the
  holder into common stock at the initial conversion rate of 19.873 common shares
  for each preferred share.
  
       On February 10, 1995, the company called all outstanding shares of its
  preferred stock for redemption on March 13, 1995, at a redemption price of
  $509.00 per share, plus $7.30 of accrued and unpaid dividends. Prior to the
  redemption date, 343,427 shares of preferred stock were surrendered for
  conversion which resulted in the issuance of 6,824,694 shares of the company's
  common stock. Pursuant to previous arrangements, on March 14, 1995, the company
  sold 28,518 shares of its common stock to certain institutions and used the
  proceeds to fund the redemption of 1,435 shares of preferred stock which were
  not converted.
  
       NexGen's 19,536,328 shares of Convertible Preferred Stock issued and
  outstanding as of May 24, 1995 were converted into 19,970,328 shares of its
  Common Stock in conjunction with its initial public offering on May 24, 1995. As
  of June 30, 1994, 13,583,459 shares of Convertible Preferred Stock were issued
  and outstanding.
  
  8. STOCKHOLDER RIGHTS PLAN
  
  In February 1990, the company adopted a stockholder rights plan and declared a
  dividend distribution of preferred stock purchase rights at the rate of one
  right for each share of common stock held as of the close of business on
  February 20, 1990.  The rights were not exercisable, or transferable apart from
  the common stock, until certain events occurred.  The rights were redeemable at
  any time at the option of the company.
  
       On May 3, 1995, the company redeemed all its preferred stock purchase
  rights for a redemption price of $.01 per right (approximately $1 million) paid
  on May 24, 1995, to the holders of the company's common stock as of the
  redemption date.
  
  9. WARRANTS
  
  On May 24, 1995, the effective date of NexGen's initial public offering, all
  previously issued preferred series warrants were converted into warrants to
  purchase common stock. All outstanding warrants are held by related parties. The
  following summarizes the warrants outstanding as of December 31, 1995:
  WARRANT HOLDER                           WARRANTS       WARRANT PRICE
  - ------------------------------------------------------------------------------
  Warrants issued in connection with Promissory
   Notes and Preferred Stock Offering                   493,280    $0.63-$9.38
  
  Warrants issued in connection with consulting         
   services                                             280,000       $5.00
  
  Warrants issued to sales agent                        682,392    $5.00-$9.38
  
   Total warrants issued and outstanding 
     as of December 31, 1995                          1,455,672    $0.63-$9.38
  For the year ended December 31, 1995 warrants previously issued to purchase
  1,364,000 shares of common stock were exercised on a cashless basis for
  1,178,010 shares of common stock. Warrants for an additional 540 shares of
  common stock are claimed to be outstanding by certain warrant holders. All
  warrants are currently exercisable at December 31, 1995.
  
                                        21
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  10. INCOME TAXES
  
  Provision for income taxes consists of:
  (Thousands)                           1995            1994         1993     
                                    -------------   ------------   ------------
  Current:                                                                    
    U.S. Federal                    $      58,683   $    154,448   $     83,574
    U.S. State and Local                    1,855         13,001          3,640 
    Foreign National and Local             10,594          7,350          2,332
  Deferred:                                                        
    U.S. Federal                            1,295        (29,733)        (5,206)
    U.S. State and Local                   (3,167)        (2,820)         1,798
    Foreign National and Local                946            (14)          (203)
                                    -------------   ------------   ------------
  Provision for income taxes        $      70,206   $    142,232   $     85,935
                                    =============   ============   ============
  Tax benefits resulting from the exercise of nonqualified stock options and
  the disqualifying disposition of shares acquired under the company's incentive
  stock option and stock purchase plans reduced taxes currently payable as shown
  above by $15.2 million, $37.4 million, and $43.4 million in 1995, 1994, and
  1993, respectively. Such benefits were credited to capital in excess of par
  value when realized.
  
       Under SFAS No. 109, deferred income taxes reflect the net tax effects of
  tax carryforwards and temporary differences between the carrying amounts of
  assets and liabilities for financial reporting purposes and the amounts used for
  income tax purposes. Significant components of the company's deferred tax assets
  and liabilities as of December 31, 1995, December 25, 1994, and December 26,
  1993 are as follows:
  (Thousands)                                        1995            1994         1993      
                                                 -------------   ------------   ------------
  Deferred tax assets:                                                                     
   Net operating loss carryovers                 $      62,796   $     30,840   $     21,820
   Deferred distributor income                          40,583         31,396         31,349
   Inventory reserves                                   29,665         18,809         14,935 
   Accrued expenses not currently deductible            35,639         39,467         21,799
   Federal and state tax credit carryovers               6,249          2,873         30,888
   Other                                                49,850         39,081         27,569
                                                 -------------   ------------   ------------ 
    Total deferred tax assets                          224,782        162,466        148,360
   Less: valuation allowance                           (33,386)       (14,445)       (43,335)
                                                 -------------   ------------   ------------ 
    Net deferred tax assets                            191,396        148,021        105,025
                                                 -------------   ------------   ------------ 
  Deferred tax liabilities:                                                     
   Depreciation                                       (109,141)       (59,614)       (44,886)
   Other                                               (19,373)       (15,855)       (20,154)
                                                 -------------   ------------   ------------
    Total deferred tax liabilities                    (128,514)       (75,469)       (65,040)
                                                 -------------   ------------   ------------  
  Net deferred tax assets                        $      62,882   $     72,552   $     39,985 
                                                 =============   ============   ============
  22
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  Approximately $26.4 million of the 1993 valuation allowance for deferred tax
  assets, attributable to stock option deductions, was credited to equity upon
  realization in 1994.
  
       Pretax income from foreign operations was approximately $60.6 million in
  1995, $45.7 million in 1994, and $40.0 million in 1993.
  
       As of December 31, 1995, the company has net operating loss carryovers of
  approximately $179.4 million for federal income tax purposes. The federal
  carryovers expire on various dates through 2009. No significant state
  carryforwards exist due to the capitalization of research and development
  expenditures for state purposes and state statutory limitations on the amount of
  net operating losses which may be carried forward to subsequent years.
  
       Under the Tax Reform Act of 1986, the amounts of and the benefit from net
  operating losses that can be carried forward may be limited in certain
  circumstances. Because of changes in ownership greater than 50 percent,
  realization of the company's net operating loss carryforwards incurred prior to
  July 1992 and January 1996 may be subject to annual limitations of approximately
  $3.9 million and $27.3 million, respectively. These annual limitations should 
  result in the availability of all carryforwards by the year 2004.
  
       The following is a reconciliation between statutory federal income taxes
  and the total provision for income taxes:
  1995                 1994                1993       
                                          --------------------   -----------------    -----------------  
  (Thousands except percent)                  Tax        Rate      Tax        Rate      Tax        Rate  
                                          --------------------   -----------------    -----------------
  Statutory federal                                                                                      
    income tax provision                  $   88,062     35.0 %  $ 148,316    35.0 %  $ 103,224    35.0 %
  State taxes net of federal benefit             216      0.1        6,601     1.6        3,535     1.2  
  Tax exempt Foreign Sales                                                                               
    Corporation income                        (6,848)    (2.7)      (8,955)   (2.1)      (7,236)   (2.5) 
  Tax credits utilized                             -        -            -       -       (5,004)   (1.7) 
  Foreign income                                                                                         
    at other than U.S. rates                 (11,503)    (4.6)      (9,633)   (2.3)     (10,398)   (3.5) 
  Other                                          279      0.1        5,903     1.4        1,814     0.6   
                                          ----------     ----    ---------    ----    ---------    ----
                                          $   70,206     27.9 %  $ 142,232    33.6 %  $  85,935    29.1 %  
                                          ==========     ====    =========    ====    =========    ====
  No provision has been made for income taxes on approximately $264.6 million
  of cumulative undistributed earnings of certain foreign subsidiaries because it
  is the company's intention to permanently invest such earnings. If such earnings
  were distributed, additional taxes of $92.6 million would accrue.
  
       The company's Far East assembly and test plants in Singapore and Thailand
  are operated under various tax holidays which expire in whole or in part during
  1996 and 1998. Possible extensions of the holiday period, as well as other tax
  incentives, are anticipated to result in minimal tax liabilities in these
  countries through 1998. The net impact of these tax holidays was an increase in
  net income of approximately $6.2 million ($0.04 per share) in 1995.
  
  11. DEBT
  
  The company has certain debt agreements that contain provisions regarding
  restrictions on cash dividends, maintenance of specified working capital and net
  worth levels, and specific financial ratio requirements.  At December 31, 1995,
  the company was in compliance with all restrictive covenants 
  
                                        23
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  of such debt agreements and all retained earnings was restricted as to payments
  of cash dividends on common stock.
  
    Significant elements of uncommitted, unsecured revolving lines of credit are:
  (thousands except percent)                      1995             1994
                                              -----------       -----------
  Total lines of credit                       $   345,801       $   378,182
  Portion of lines of credit available to       
    foreign subsidiaries                           95,801           128,182
  Amounts outstanding at year-end:
    Short-term                                     26,770            32,459
  Short-term borrowings:
    Average daily borrowings                       29,666            33,449
    Maximum amount outstanding at
      any month-end                                36,105            35,384
    Weighted monthly average interest
      rate                                           4.19 %            4.32 %
    Average interest rate on amounts
      outstanding at year-end                        4.41 %            4.42 %
  Interest on foreign and short-term domestic borrowings is negotiated at the
  time of the borrowing.
  
       Information with respect to the company's long-term debt and capital lease
  obligations at year-end is:
  
                                        24
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  (Thousands)                                                                    1995            1994   
                                                                              ----------      ---------
  Term loan with variable interest at 7.06% at December 31, 1995                                        
     payable quarterly through 1998                                           $  150,000      $       -
  10%-11% Convertible notes payable due on March 1, 1996                           1,774          2,500 
  Promissory notes with principal and 6.88% interest payable                                            
     annually through January 2000, secured by a partnership                                            
     interest                                                                     10,276         11,946 
  12% Note payable due on June 1, 1996                                            10,000         10,000 
  Mortgage with principal and 9.88% interest payable in monthly                                          
     installments through April 2007                                               2,167          2,382 
  Obligations under capital leases                                                77,306         82,739 
  Obligations secured by equipment                                                 4,990          6,482 
  Other                                                                               94            123 
                                                                              ----------      ---------
                                                                                 256,607        116,172 
  Less: current portion                                                          (41,642)       (40,420)
                                                                              ----------      ---------
  Long-term debt and capital lease obligations, less current portion          $  214,965      $  75,752
                                                                              ==========      =========
  On January 5, 1995, the company obtained a $150 million single term four-
  year loan with a consortium of eight commercial banks. The loan has a floating
  interest rate based on the three months LIBOR and requires quarterly interest
  payments with the principal to be paid at the end of the term in 1998. The
  interest rate on the loan at December 31, 1995 was 7.06 percent.
  
       For each of the next five years and beyond, long-term debt and capital
  lease obligations are:
  Long-term
                                                             Debt                 Capital
  (Thousands)                                           (Principal only)          Leases
                                                        ----------------         ---------
  1996                                                     $  15,420             $  27,304
  1997                                                         3,802                26,255
  1998                                                       154,033                21,532
  1999                                                         2,326                 6,949
  2000                                                         2,493                 1,182
  Beyond 2000                                                  1,227                     -
                                                           ---------             ---------
  Total                                                      179,301                83,222
  Less: Amount representing interest                               -                 5,916
                                                           ---------             ---------
  Total at present value                                   $ 179,301             $  77,306
                                                           =========             =========
  Obligations under the lease agreements are collateralized by the assets
  leased. Total assets leased were approximately $141.9 million and $131.7
  million at December 31, 1995 and December 25, 1994, respectively. Accumulated
  amortization of these leased assets was approximately $95.6 million and $60.5
  million at December 31, 1995 and December 25, 1994, respectively.
  
                                        25
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  
  12. INTEREST EXPENSE & INTEREST INCOME AND OTHER, NET
  
  INTEREST EXPENSE
  (Thousands)              1995          1994          1993
                        ----------    ----------    ----------
  Interest expense      $   21,102    $   12,704    $   11,482
  Interest capitalized     (18,043)       (8,294)       (7,084)
                        ----------    ----------    ----------
                        $    3,059    $    4,410    $    4,398
                        ==========    ==========    ==========
  In 1995, interest expense primarily consisted of interest payments on the
  $150 million four-year term loan the company entered into on January 5, 1995;
  and interest capitalized primarily related to the construction of Fab 25.
  
  INTEREST INCOME AND OTHER, NET
  (Thousands)              1995           1994          1993
                        ----------    ----------    ----------
  Interest income       $   29,518    $   23,331    $   16,431
  Other income (loss)        2,947        (6,197)          500
                        ----------    ----------    ----------
                        $   32,465    $   17,134    $   16,931
                        ==========    ==========    ==========
  In 1995, other income (loss) primarily consisted of the $2.7 million
  realized gain on an equity investment in Seeq Corporation. In 1994, other income
  (loss) primarily consisted of the $33 million settlement cost related to the
  class action lawsuits and stockholders' derivative action offset by an $18
  million gain resulting from an award of damages in the arbitration proceedings
  with Intel. Also included in other income (loss) for all years presented is the
  net gain (loss) on the sale of assets.
  
  13. FOREIGN AND DOMESTIC OPERATIONS
  
       The company is currently engaged in a single line of business: The design,
  development, manufacture, and sale of programmable products in concert with
  applications solutions to the manufacturers of equipment for personal and
  networked computation and communications.
  
       Operations outside the United States include both manufacturing and sales.
  Manufacturing subsidiaries are located in Malaysia, Singapore, and Thailand.
  Sales subsidiaries are in Europe and Asia.
  
       The following is a summary of operations by entities within geographic
  areas for the three years ended December 31, 1995:
  
                                        26
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  (Thousands)                                       1995             1994             1993
                                                 ----------      -----------      ----------
  Sales to unaffiliated customers:
    North America                                $1,780,240      $1,544,844       $1,174,410
    Europe                                          491,293         483,632          343,600
    Asia                                            196,846         126,977          130,270
                                                 ----------      -----------      ----------                        
                                                 $2,468,379      $2,155,453       $1,648,280
                                                 ==========      ==========       ==========
  Transfers between geographic areas                                              
    (eliminated in consolidation):                                                
    North America                                $  743,117      $  563,303       $  444,378
    Asia                                            396,158         323,050          277,496
                                                 ----------      -----------      ----------
                                                 $1,139,275      $  886,353       $  721,874
                                                 ==========      ==========       ==========
  Operating income:                                                               
    North America                                $  164,549      $  423,027       $  243,015
    Europe                                           18,922          15,860            8,376
    Asia                                             38,729          30,148           31,001
                                                 ----------      -----------      ----------
                                                 $  222,200      $  469,035       $  282,392
                                                 ==========      ==========       ==========
  Identifiable assets:                                                            
    North America                                $2,636,675      $2,170,099       $1,663,199
    Europe                                           85,664         120,070           88,003
    Asia                                            463,530         361,144          312,529
    Eliminations                                   (107,402)       (125,592)        (118,778)
                                                 ----------      -----------      ----------
                                                 $3,078,467      $2,525,721       $1,944,953
                                                 ==========      ==========       ==========
  U.S. export sales:                                                              
    Asia                                         $  485,625      $  436,120       $  314,268
    Europe                                          206,328         126,752          109,226
                                                 ----------      -----------      ----------
                                                 $  691,953      $  562,872       $  423,494 
                                                 ==========      ==========       ==========
  Sales to unaffiliated customers are based on the location of the company's
  subsidiary.  Transfers between geographic areas consist of products and services
  that are sold at amounts generally above cost and are consistent with governing
  tax regulations.  Operating income is total sales less operating expenses.
  Identifiable assets are those assets used in each geographic area.  Export sales
  are United States foreign direct sales to unaffiliated customers primarily in
  Europe and Asia.
  
  14. EMPLOYEE BENEFIT PLANS
  
  STOCK OPTION PLANS. The company has several stock option plans under which key
  employees have been granted incentive (ISOs) and nonqualified (NSOs) stock
  options to purchase the company's common stock.  Generally, options are
  exercisable within four years from the date of grant and expire five to ten
  years after the date of grant.  ISOs granted under the plans have exercise
  prices of not less than 100 percent of the fair market value of the common stock
  at the date of grant.  Exercise prices of NSOs may not be less than 50 percent
  of the fair market value of the common stock at the date of grant.  At December
  31, 1995, 3,101 employees, including 161 employees originally from NexGen, were
  eligible and participating in the plans.
  
    The following is a summary of stock option exercises:
  
                                        27
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  (Thousands)                                  1995         1994          1993
                                              -------      -------      -------
  Aggregate exercise price                    $15,195      $10,355      $14,066
  Options exercised                             2,313        2,218        2,855
  A summary of the stock option plans at December 31, 1995 and December 25, 1994
  is shown below.
  (Thousands except per share amounts)         1995          1994                
                                             --------      --------
  Options:                                                 
    Outstanding at beginning of year           14,825        13,957
    Granted                                     4,327         4,389
    Canceled                                     (510)         (376)
    Exercised                                  (2,313)       (2,218)
                                             --------      -------- 
      Outstanding at end of year               16,329        15,752
                                             ========      ========
    Exercisable at beginning of year            8,784         7,848
    Exercisable at end of year                 10,374         9,711
    Available for grant at beginning                       
      of year                                   3,386         1,419
    Available for grant at end of year            751         3,150
    Aggregate exercise price of options                    
      outstanding at end of year             $269,953      $211,437
    Average exercise price of options                      
      outstanding at end of year             $  16.53      $  13.42
  STOCK APPRECIATION RIGHTS PLANS. The company maintains three stock
  appreciation rights plans under which stock appreciation rights (SARs) either
  have been or may be granted to key employees.  The number of SARs exercised plus
  common stock issued under the stock option plans may not exceed the number of
  shares authorized under the stock option plans.  SARs may be granted in tandem
  with outstanding stock options, in tandem with future stock option grants, or
  independently of any stock options.  Generally, the terms of SARs granted under
  the plans are similar to those of options granted under the stock option plans,
  including exercise prices, exercise dates, and expiration dates.  To date, the
  company has granted only limited SARs, which become exercisable only in the
  event of certain changes in control of the company.
  
  STOCK PURCHASE PLAN. The company has a stock purchase plan that allows
  participating employees to purchase, through payroll deductions, shares of the
  company's common stock at 85 percent of the fair market value at specified
  dates.  At December 31, 1995, 6,723 employees were eligible to participate in
  the plan and 482,182 common shares remained available for issuance under the
  plan.  Beginning in 1995, NexGen had a stock purchase plan that allowed
  participating employees to purchase shares of NexGen's common stock at 85
  percent of the fair market value at specified dates.  At December 31, 1995, 161
  employees were eligible to participate in the plan and 365,504 common shares
  remained available for issuance under the plan.  A summary of stock purchased
  under these plans is shown below.
  
                                        28
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  (Thousands except 
  employee participants)           1995       1994       1993
                                -------     ------     ------
  Aggregate purchase price      $11,457     $8,115     $6,413
  Shares purchased                  501        412        387
  Employee participants           2,825      1,941      1,684
  PROFIT SHARING PROGRAM. The company has a profit sharing program to which the
  Board of Directors has authorized semiannual contributions.  Profit sharing
  contributions were $44.7 million in 1995, $57.0 million in 1994, and $33.9
  million in 1993.
  
  RETIREMENT SAVINGS PLAN. The company has a retirement savings plan, commonly
  known as a 401(k) plan, that allows participating United States employees to
  contribute from 1 percent to 15 percent of their pre-tax salary subject to
  I.R.S. limits.  The company makes a matching contribution calculated at 50 cents
  on each dollar of the first 3 percent of participant contributions, to a maximum
  of 1.5 percent of eligible compensation.  The company's contributions to the
  401(k) plan were $4.3 million, $3.7 million, and $3.2 million for 1995, 1994,
  and 1993, respectively.  There are four investment funds in which each employee
  may invest contributions in whole percentage increments.  NexGen had a 401(k)
  plan which allowed employees to contribute from one percent to ten percent of
  their pre-tax salary subject to I.R.S. limits.  NexGen did not match employee
  contributions.
  
  RESTRICTED STOCK AWARD PLAN. The company established the 1987 restricted stock
  award plan under which up to two million shares of common stock may be issued to
  employees, subject to terms and conditions determined at the discretion of the
  Board of Directors.  The company entered into agreements to issue 226,427,
  180,000, and 19,000 shares in 1995, 1994, and 1992, respectively.  To date,
  agreements covering 212,212 shares have been canceled without issuance and
  1,252,964 shares have been issued pursuant to prior agreements.  At December 31,
  1995, agreements covering 436,427 shares were outstanding under the plan and
  310,609 shares remained available for future awards.  Outstanding awards vest
  under varying terms within five years.
  
  15. COMMITMENTS
  
  The company leases certain of its facilities under agreements which expire at
  various dates through 2011.  The company also leases certain of its
  manufacturing and office equipment for terms ranging from one to six years.
  Rent expense was $37.2 million, $32.4 million, and $32.3 million in 1995, 1994,
  and 1993, respectively.
  
    For each of the next five years and beyond, noncancelable long-term operating
  lease obligations and commitments to purchase manufacturing supplies and
  services are as follows:
  
                                        29
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  Operating               Purchase
  (Thousands)                  Leases               Commitments
                              ---------             -----------
  1996                         $29,955                $23,492
  1997                          23,150                  4,868
  1998                          17,781                  4,868
  1999                          11,717                  4,868
  2000                          11,144                  3,797
  Beyond 2000                   11,503                 27,900
  Included in 1996 purchase commitments is $18.4 million for Nx586 inventory. 
  The Company has fully reserved for these commitments. See footnote 3, year end 
  adjustments.
   
    The operating lease of the company's corporate sales and marketing facility
  expires in December 1998.  The company has the option of extending the lease
  agreement or purchasing the building for $40 million.  The company may also
  consider alternative financing arrangements.
  
    At December 31, 1995, the company had commitments of approximately $93 million
  for the construction or acquisition of additional property, plant, and
  equipment.
  
    The company is currently planning to build a submicron wafer fabrication and
  design facility in Dresden, Germany at an estimated cost of approximately $1.5
  billion over 5 years.  The German federal and state governments will provide
  financing assistance to the facility through grants and allowances, loan
  guarantees, and loan interest subsidies.  As of December 31, 1995, the company
  had commitments to make cash investments and loans, in aggregate, in this
  facility amounting to approximately $350 million over the next 4 years.
  
     In December 1995, the company signed a five-year, comprehensive patent cross-
  license agreement with Intel.  The cross-license is royalty-bearing for the
  company's products that use certain Intel technologies.  The company is required
  to pay Intel minimum non-refundable royalties during the years from 1997 to
  2000.
  
  16.  INVESTMENT IN JOINT VENTURE
  
    In 1993, the company and Fujitsu Limited established a joint venture, Fujitsu
  AMD Semiconductor Limited (FASL), to manufacture Flash memory devices.  The
  company's share of FASL is 49.95 percent and the investment is being accounted
  for under the equity method.  In 1995, the company invested an additional $18.0
  million in FASL, and the company's share of FASL net income during 1995 was
  $34.9 million, net of income taxes of approximately $18.8 million. At December
  31, 1995, the adjustment related to the translation of the FASL financial
  statements into U.S. dollars resulted in a decrease of approximately $6.2
  million to the investment in FASL.
  
    Pursuant to a cross-equity provision between AMD and Fujitsu Limited, the
  company purchased $12.7 million of Fujitsu Limited shares, with certain resale
  restrictions. Under the same provision, Fujitsu Limited has purchased 2 million
  shares of AMD common stock, and is required to purchase an additional 2.5
  million shares over the next several years, for a total investment not to exceed
  $100 million.  No purchases were made in 1995.
  
    The following is condensed unaudited financial data of FASL:
  
                                        30
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
  Three years ended December 31, 1995
  (Unaudited)
  (Thousands)                              1995         1994          1993   
                                         --------     --------      -------
  Net sales                              $252,069     $      -      $     - 
  Operating income (loss)                 117,411      (32,203)      (1,772)
  Net income (loss)                       107,563      (32,293)      (1,772)
  December 31, 1995, and December 25, 1994
  (Unaudited)
  (Thousands)                               1995         1994  
                                          --------     --------
  Current assets                          $161,810     $ 10,907 
  Non-current assets                       326,252      263,380
  Current liabilities                      107,524       29,362
  Non-current liabilities                      284           60
  17.  CONTINGENCIES
  
  I.   LITIGATIONS
  
  A.   CLASS ACTION LAWSUITS. On November 3 and 15, 1995, two class action
  lawsuits were filed, purportedly on behalf of purchasers of the company's stock
  from April 11, 1995, to September 25, 1995, alleging that the company and
  various of its officers and directors violated sections of the Securities
  Exchange Act of 1934 Rule 10b-5 promulgated thereunder by issuing allegedly
  false and misleading statements concerning the development and production of the
  AMD-K5(TM). The complaints seek damages in an unspecified amount. Based upon
  information presently known to management, the company does not believe that the
  ultimate resolution of these lawsuits will have a material adverse effect upon
  the financial condition or results of operations of the company.
  
  B.   AMD v. ALTERA CORPORATION. This litigation, which began in 1994, involves
  multiple claims and counterclaims for patent infringement relating to the
  company's and Altera Corporation's programmable logic devices. Based upon
  information presently known to management, the company does not believe that the
  ultimate resolution of this lawsuit will have a material adverse effect upon the
  financial condition or results of operations of the company.
  
  C. THORN EMI NORTH AMERICA, INC. v. AMD. This litigation was filed in 1995 and
  alleged that AMD infringed a patent owned by Thorn EMI North America, Inc.
  relating to the processes used by AMD to manufacture microprocessors. The
  litigation was settled and has been dismissed. The settlement will not have a
  material adverse effect upon the financial condition or results of operations of
  the company.
  
  II.  SEC INVESTIGATION
  
       The Securities and Exchange Commission (SEC) began an informal
  investigation of the company in 1993 concerning the company's disclosures
  relating to the development of microcode for one of its Am486 products. The
  company has been cooperating fully with the SEC. Based upon information
  presently known to management, the company does not believe that the ultimate
  resolution of the investigation will have a material adverse effect upon the
  financial condition or results of operations of the company.
  
                                        31
  NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
   
  III. ENVIRONMENTAL MATTERS
  
       CLEAN-UP ORDERS. Since 1981, the company has discovered, investigated, and
  begun remediation of three sites where releases from underground chemical tanks
  at its facilities in Santa Clara County, California adversely affected the
  groundwater. The chemicals released into the groundwater were commonly in use in
  the semiconductor industry in the wafer fabrication process prior to 1979. At
  least one of the released chemicals (which is no longer used by the company) has
  been identified as a probable carcinogen.
  
       In 1991, the company received four Final Site Clean-up Requirements Orders
  from the California Regional Water Quality Control Board, San Francisco Bay
  Region ("RWQCB") relating to the three sites. One of the orders named the
  company as well as TRW Microwave, Inc. and Philips Semiconductors Corporation.
  Another of the orders named the company as well as National Semiconductor
  Corporation.
  
       The three sites in Santa Clara County are on the National Priorities List
  (Superfund). If the company fails to satisfy federal compliance requirements or
  inadequately performs the compliance measures, the government (a) can bring an
  action to enforce compliance, or (b) can undertake the desired response actions
  itself and later bring an action to recover its costs, and penalties, which is
  up to three times the costs of clean-up activities, if appropriate. With regard
  to certain claims related to this matter the statute of limitations has been
  tolled.
  
       The company has computed and recorded the estimated environmental liability
  in accordance with applicable accounting rules and has not recorded any
  potential insurance recoveries in determining the estimated costs of the clean-
  up. The amount of environmental charges to earnings has not been material during
  the last three fiscal years. The company believes that the potential liability,
  if any, in excess of amounts already accrued with respect to the foregoing
  environmental matters will not have a material adverse effect on the financial
  condition or results of operations of the company.
  
  IV.  OTHER MATTERS
  
       The company is a defendant or plaintiff in various other actions which
  arose in the normal course of business. In the opinion of management, the
  ultimate disposition of these matters will not have a material adverse effect on
  the financial condition or results of operations of the company.
  
  18.  SHELF REGISTRATION STATEMENT
  
  On May 25, 1994, the Securities and Exchange Commission declared effective the
  company's shelf registration statement covering up to $400 million of its
  securities, which may be either debt securities, preferred stock, depositary
  shares representing fractions of shares of preferred stock, common stock,
  warrants to purchase common stock, or any combination of the foregoing which the
  company may offer from time to time in the future. The nature and terms of the
  securities will be established at the time of their sale. The company may offer
  the securities through underwriters to be named in the future, through agents or
  otherwise. The net proceeds of any offering will be used for general corporate
  purposes, which may include the reduction of outstanding indebtedness, working
  capital increases, and capital expenditures. To date, the company has not
  offered or sold any securities registered under the $400 million registration
  statement.
  
                                        32
  CONSENT OF ERNST & YOUNG, LLP INDEPENDENT AUDITORS
  
  We consent to the incorporation by reference in the Registration Statement on
  Form S-8 (No. 33-16095) pertaining to the Advanced Micro Devices, Inc. 1987
  Restricted Stock Award Plan, in the Registration Statement on Form S-8 (No. 33-
  39747) pertaining to the Advanced Micro Devices, Inc. 1991 Employee Stock
  Purchase Plan, in the Registration Statements on Form S-8 (Nos. 33-10319, 33-
  36596 and 33-46578) pertaining to the Advanced Micro Devices, Inc. 1982 and 1986
  Stock Option Plans and the 1980 and 1986 Stock Appreciation Rights Plans, in the
  Registration Statements on Form S-8 (Nos. 33-46577 and 33-55107) pertaining to
  the Advanced Micro Devices, Inc., 1992 Stock Incentive Plan, in the Registration
  Statement on Form S-8 (No. 33-00969) pertaining to the Advanced Micro Devices,
  Inc. 1991 Employee Stock Purchase Plan and to the 1995 Stock Plan of NexGen,
  Inc., in the Registration Statement on Form S-3 (No. 33-52943) pertaining to up
  to $400,000,000 in the aggregate of debt securities, preferred stock, depositary
  shares evidencing fractions of preferred shares, common stock and warrants to
  purchase common stock, and in the Registration Statement on Form S-4 (No. 33-
  64911) pertaining to shares issued in connection with the acquisition of NexGen,
  Inc. and Post-Effective Amendment No. 1 thereto on Form S-8, and Form S-8 (No.
  333-04797) pertaining to the Advanced Micro Devices, Inc. 1996 Stock Incentive
  Plan, of our report dated April 30, 1996, with respect to the supplemental
  consolidated financial statements of Advanced Micro Devices, Inc. included
  herein.
  
                                     Ernst & Young LLP
  
  June 17, 1996
  San Jose, California
  
                                        33
  SIGNATURES
                                    ----------
  
           Pursuant to the requirements of the Securities Exchange Act of 1934,
  the registrant has duly caused this report to be signed on its behalf by the
  undersigned hereunto duly authorized.
  
                                        ADVANCED MICRO DEVICES, INC.
                                                (Registrant)
  
  Date:  June 20, 1996                  By: /s/ Marvin D. Burkett
                                            -------------------------------
                                            Marvin D. Burkett
                                            Senior Vice President, Chief
                                            Financial and Administrative
                                            Officer and Treasurer
  
                                        34