AMD 1997 Annual Report Download - page 89

ADVANCED MICRO DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. 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 five years.
Rent expense was approximately $48 million, $40 million and $37 million in
1997, 1996 and 1995, 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:
OPERATING PURCHASE
LEASES COMMITMENTS
--------- -----------
(THOUSANDS)
1998................................................. $32,638 $21,403
1999................................................. 26,783 18,884
2000................................................. 21,619 16,775
2001................................................. 16,330 4,956
2002................................................. 15,635 4,956
Beyond 2002.......................................... 104,453 24,690
The operating leases of the Company's corporate marketing, general and
administrative facility expire in December 1998. These leases provide the
Company with an option to purchase the facility for $40 million during the
lease term. At the end of the lease term, the Company is obligated to either
purchase the facility or to arrange for its sale to a third party with a
guarantee of residual value to the seller equal to the option purchase price.
Alternatively, the Company may seek to renegotiate the terms of the lease.
In addition to the purchase commitments above, the Company had commitments
of approximately $452 million for the construction or acquisition of
additional property, plant and equipment at December 28, 1997.
AMD Saxony is building Dresden Fab 30, a 900,000-square-foot submicron
integrated circuit manufacturing and design facility 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 (i) a guarantee of 65 percent of the bank debt to be incurred
by AMD Saxony up to a maximum of DM1.65 billion, (ii) investment grants and
subsidies totaling DM501 million and (iii) interest subsidies from the State
of Saxony totaling DM300 million. In March 1997, AMD Saxony entered into the
Dresden Loan Agreement under which loan facilities totaling DM1.65 billion
will be made available. In connection with the Dresden Loan Agreement, the
Company has agreed to invest in AMD Saxony over the next two years equity or
subordinated loans in an amount totaling approximately DM478 million, and to
guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreement up to a maximum of DM218 million until Dresden Fab 30 has been
completed. After completion of Dresden Fab 30, the Company has agreed to make
funds available to AMD Saxony up to DM145 million if the subsidiary does not
meet its fixed charge coverage ratio covenant. The Company has agreed to fund
certain contingent obligations, including various obligations to fund project
cost overruns, if any. The Company commenced construction in the second
quarter of 1997 and completed construction of the building shell for the plant
and administration building at the end of 1997. The planned Dresden Fab 30
costs are denominated in deutsche marks and, therefore, are subject to change
due to foreign exchange rate fluctuations. The Company entered into foreign
currency hedging transactions for Dresden Fab 30 during the first quarter of
1997.
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 1998
through 2000.
F-24
Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998