AMD 2003 Annual Report Download - page 43

Table of Contents
• Ensure that as of the last day of any fiscal quarter, the ratio of (a) net income plus depreciation to (b) the sum of (i) interest expense for such period plus
(ii) scheduled amortization of debt for borrowed money (as defined in the loan agreement) for such period, including lease rentals plus (iii) maintenance
capital expenditures for FASL JAPAN’s existing and after acquired real property and improvements at its manufacturing facilities located in
Aizu-Wakamatsu, Japan, is not less than:
Period Percentage
First through Fourth Fiscal Quarters of 2003 90%
First Fiscal Quarter of 2004 100%
Second Fiscal Quarter of 2004 110%
Third and Fourth Fiscal Quarters of 2004 120%
Fiscal Year 2005 120%
Fiscal Year 2006 120%
As of December 28, 2003, FASL JAPAN was in compliance with these financial covenants.
Fujitsu Cash Note
As a result of the FASL LLC transaction, Fujitsu also loaned $40 million to FASL LLC pursuant to a promissory note. The note bears an interest rate of
LIBOR plus four percent, which was 5.14 percent as of December 28, 2003, and has a term of three years. The note is repayable in four equal payments,
including interest, on September 30, 2005, December 31, 2005, March 31, 2006 and June 30, 2006.
Capital Lease Obligations
On July 16, 2003, FASL JAPAN entered into a sale-leaseback transaction for certain equipment with a third-party financial institution in the amount of 12
billion yen (approximately $100 million on July 16, 2003) in cash proceeds. Upon execution of the agreement, the equipment had a net book value of
approximately $168 million. As the term on the leaseback transaction is more than 75 percent of the remaining economic lives of the equipment, we are
accounting for the transaction as a capital lease. We recognized an immediate loss of $16 million on the transaction due to the fact that the fair market value of
the equipment was less than its net book value at the time of the transaction. We also recorded a deferred loss of approximately $52 million which is being
amortized over the term of the lease in proportion to the amortization of the underlying leased assets. We guaranteed 50 percent of the outstanding obligations,
under the lease arrangement. As of December 28, 2003, the outstanding lease obligations under this agreement were approximately $86 million. In addition,
FASL LLC and its subsidiaries also entered into other capital lease and leaseback transactions during the third quarter of 2003, which resulted in additional
capital lease obligations of $159 million as of December 28, 2003. Accordingly, as of December 28, 2003, FASL LLC had aggregate outstanding capital lease
obligations of approximately $245 million. Obligations under these lease agreements are collateralized by the assets leased and are payable through 2007. Leased
assets consist principally of machinery and equipment. We guaranteed approximately $147 million of FASL LLC’s aggregate outstanding capital lease
obligations as of December 28, 2003.
Other Long-term Liabilities
Included in other long-term liabilities as of December 28, 2003 is approximately $99 million of restructuring accrual that will be paid through 2011 and
approximately $18 million in customer cash deposits related to multi-year supply agreements for Spansion Flash memory products that will be paid through
2005, which guarantee customers’ purchases of these products. Excluded from contractual cash obligations is approximately $263 million of deferred grants and
subsidies related to the Fab 30 project and a $23 million deferred gain as a result of the sale and leaseback of our corporate marketing, general and administrative
facility in Sunnyvale, California in 1998, as these liabilities do not require cash payments.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004