AMD 1996 Annual Report Download - page 244

in AMD Saxony over the next three years equity and subordinated loans in an
amount totaling approximately DM507.5 million. Until the Dresden Facility has
been completed, AMD has also agreed to guarantee AMD Saxony's obligations under
the loan agreement up to a maximum of DM217.5 million. After completion of the
Dresden Facility, AMD has agreed to make available to AMD Saxony up to DM145
million if the subsidiary does not meet its fixed charge coverage ratio
covenant. Finally, AMD has agreed to undertake certain contingent obligations,
including various obligations to fund project cost overruns. The Company began
site preparation of the Dresden Facility in the fourth quarter of 1996, and
plans to commence construction during the second quarter of 1997. The planned
Dresden Facility costs are denominated in deutsche marks and, therefore, are
subject to change due to foreign exchange rate fluctuations. The Company plans
to hedge future foreign exchange exposure for the Dresden Facility.
In December, 1995 the Company signed a five-year, comprehensive 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 1997 through 2000.
NOTE 15. INVESTMENT IN JOINT VENTURE
In 1993, AMD and Fujitsu Limited formed a joint venture, Fujitsu AMD
Semiconductor Limited (FASL), for the development and manufacture of non-
volatile memory devices. Through FASL, the two companies have constructed and
are operating an advanced integrated circuit manufacturing facility in Aizu-
Wakamatsu, Japan, to produce 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 million in FASL. The
Company's share of FASL net income during 1996 was $55 million, net of income
taxes of approximately $30 million. At December 29, 1996, the adjustment related
to the translation of the FASL financial statements into U.S. dollars resulted
in a decrease of approximately $28 million to the investment in FASL. In 1996
and 1995, the Company made Flash memory device purchases of $234 million and
$128 million, respectively, from FASL. There were no purchases in 1994. At
December 29, 1996 and December 31, 1995, amounts owed to FASL for Flash memory
device purchases were $27 million and $39 million, respectively. In 1996 and
1995, the Company earned royalty revenue, as a result of purchases from FASL, of
$21 million and $11 million, respectively.
Pursuant to a cross-equity provision between AMD and Fujitsu Limited, the
Company purchased approximately $13 million of Fujitsu Limited shares. Under the
same provision, Fujitsu Limited has purchased 3 million shares of AMD common
stock, and is required to purchase an additional 1.5 million shares over the
next several years, for a total investment not to exceed $100 million.
In March of 1996, FASL began construction of a second Flash memory device wafer
fabrication facility (FASL II) at a site contiguous to the existing FASL
facility in Aizu-Wakamatsu, Japan. The facility is expected to cost
approximately $1.1 billion when fully equipped. Capital expenditures for FASL II
construction are expected to be funded by cash generated from FASL operations
and, if necessary, borrowings by FASL. To the extent that FASL is unable to
secure the necessary funds for FASL II, AMD may be required to contribute cash
or guarantee third-party loans in proportion to its percentage interest in FASL.
At December 29, 1996, AMD had loan guarantees of $39 million outstanding with
respect to such loans.
The following is condensed unaudited financial data of FASL:
Three years ended December 29, 1996
(Unaudited)
(Thousands)
1996 1995 1994
----------------------------------------
Net sales $400,099 $252,069 $ -
Gross profit 223,035 145,226 -
Operating income (loss) 168,562 117,411 (32,203)
Net income (loss) 121,973 107,563 (32,293)
-------- -------- --------
December 29, 1996 and
December 31, 1995
(Unaudited)
(Thousands)
1996 1995
------------------------
Current assets $ 97,693 $161,810
Non-current assets 542,684 326,252
Current liabilities 215,524 107,524
Non-current liabilities 474 284
-------- --------
The Company's share of the above FASL net income (loss) differs from the equity
in net income (loss) of joint venture reported on the Consolidated Statements of
Operations due to differences in tax rates, as the above table reflects the FASL
Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997