AMD 1997 Annual Report Download - page 24

1995 included primarily capital expenditures of $626 million combined with net
purchases of short-term investments of $67 million and investment in joint
venture of $18 million.
The Company's financing activities provided cash of $309 million in 1997,
compared to $227 million and $202 million in 1996 and 1995, respectively.
Financing sources of cash primarily included borrowings from a $250 million
four-year secured term loan in 1997, the sale of $400 million of Senior
Secured Notes in 1996 (the Senior Secured Notes) and borrowings from a $150
million four-year term loan in 1995. The above sources were offset by the debt
repayments of $80 million, $253 million and $143 million in 1997, 1996 and
1995, respectively. Financing activities for all years presented include
issuance of common stock under employee stock plans, as well as $66 million in
1995 from the issuance of stock in NexGen in connection with its initial
public offering.
The Company plans to continue to make significant capital investments, at a
significantly higher rate than in previous years. These investments include
those relating to the conversion of Fab 25 to 0.25 micron process technology
and the construction and facilitization of Dresden Fab 30.
Dresden Fab 30 is being constructed by AMD Saxony, an indirect wholly owned
German subsidiary of the Company. This 900,000-square-foot submicron
integrated circuit manufacturing and design facility is to be completed over
the next four years at a present estimated cost of approximately $1.9 billion.
The Federal Republic of Germany and the State of Saxony have agreed to support
the project in the form of guarantees of bank debt, investment grants and
subsidies and interest subsidies, all of which are denominated in deutsche
marks. In March 1997, AMD Saxony entered into a Loan Agreement (the Dresden
Loan Agreement), also denominated in deutsche marks, with a consortium of
banks led by Dresdner Bank AG. The plan for Dresden has been revised recently
to reflect planned upgrades in wafer production technology as well as the
decline in the deutsche mark relative to the U.S. dollar, which has increased
the proportion of the project to be funded by the Company rather than the
Federal Republic of Germany, the State of Saxony and the consortium of banks.
The Company entered into foreign currency hedging transactions for Dresden Fab
30 during the first quarter of 1997 and anticipates entering into additional
such foreign currency hedging transactions in the first quarter of 1998 and in
the future.
In connection with the Dresden Loan Agreement, as amended in February 1998,
the Company has agreed to invest in AMD Saxony over the next two years equity
and subordinated loans, and to guarantee a portion of AMD Saxony's obligations
under the Dresden Loan Agreement until Dresden Fab 30 has been completed. In
addition, after completion of Dresden Fab 30, the Company has agreed to make
funds available to AMD Saxony if the subsidiary does not meet its fixed charge
coverage ratio covenant. The Company has also agreed to fund certain
contingent obligations, including various obligations to fund project cost
overruns, if any.
In addition to the Company's activities in Dresden, the FASL joint venture
completed construction of the building for a second Flash memory device wafer
fabrication facility, FASL II, in the third quarter of 1997 at a site
contiguous to the existing FASL facility in Aizu-Wakamatsu, Japan. Equipment
installation is in progress and the facility is expected to cost approximately
$1.1 billion when fully equipped, which is anticipated in the second quarter
of 2000. Capital expenditures for FASL II construction to date have been
funded by cash generated from FASL operations and borrowings by FASL. To the
extent that FASL is unable to secure the necessary funds for FASL II, the
Company may be required to contribute cash or guarantee third-party loans in
proportion to its 49.992 percent interest in FASL. At December 28, 1997 AMD
had loan guarantees of $48 million outstanding with respect to such loans. The
planned FASL II costs are denominated in yen and are therefore subject to
change due to foreign exchange rate fluctuations.
In 1996, the Company entered into a syndicated bank loan agreement (the
Credit Agreement), which provided for a $150 million three-year secured
revolving line of credit (which is currently unused) and a $250 million four-
year secured term loan. All of the secured term loan is outstanding at
December 28, 1997. The secured loan is repayable in eight equal quarterly
installments of approximately $31 million commencing in
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Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998