AMD 2003 Annual Report Download - page 56

Table of Contents
had an adverse effect upon the Asian economies and affected demand for our products in Asia. A new outbreak of the virus, or a new virus such as the recent bird
flu virus, could have a similar impact on demand for our products in Asia. In addition, if there were to be a case of SARS discovered in any of our operations in
Asia, the measures to prevent the spread of the virus could disrupt our operations at that location.
Terrorist attacks may negatively affect our operations directly or indirectly and such attacks or related armed conflicts may directly impact our physical
facilities or those of our suppliers or customers. Furthermore, these attacks may make travel and the transportation of our products more difficult and more
expensive, and ultimately affect our sales.
Also as a result of terrorism, the United States may be involved in armed conflicts that could have a further impact on our sales, our supply chain and our
ability to deliver products to our customers. Political and economic instability in some regions of the world may also result and could negatively impact our
business. The consequences of armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.
More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility to the United States
economy and worldwide financial markets. Any of these occurrences could have a significant impact on our operating results and financial condition, and also
may result in the volatility of the market price for our securities and on the future prices of our securities.
Intense competition in the integrated circuit industry may materially adversely affect us. The integrated circuit industry is intensely competitive.
Products compete on performance, quality, reliability, price, adherence to industry standards, software and hardware compatibility, marketing and distribution
capability, brand recognition, and availability. After a product is introduced, costs and average selling prices normally decrease over time as production
efficiency improves, competitors enter the market, and successive generations of products are developed and introduced for sale. Failure to reduce our costs on
existing products or to develop and introduce, on a cost-effective and timely basis, new products or enhanced versions of existing products with higher margins,
would have a material adverse effect on us.
If our microprocessors are not compatible with some or all industry-standard software and hardware, we could be materially adversely affected. Our
microprocessors may not be fully compatible with some or all industry-standard software and hardware. Further, we may be unsuccessful in correcting any such
compatibility problems in a timely manner. If our customers are unable to achieve compatibility with software or hardware after our products are shipped in
volume, we could be materially adversely affected. In addition, the mere announcement of an incompatibility problem relating to our products could have a
material adverse effect on us.
Our debt instruments impose restrictions on us that may adversely affect our ability to operate our business. Our July 2003 Loan Agreement, as amended,
contains restrictive covenants and also requires us to maintain specified financial ratios and satisfy other financial condition tests when our net domestic cash is
below specified amounts, and the Dresden Loan Agreements impose restrictive covenants on AMD Saxony, including a restriction on its ability to pay dividends.
The July 2003 FASL Term Loan contains restrictive covenants, including a prohibition on FASL LLC’s ability to pay dividends and also requires FASL LLC to
maintain specified financial ratios and satisfy other financial condition tests when its net domestic cash is below specified amounts.
Our ability to satisfy the covenants, financial ratios and tests of our debt instruments, and FASL LLC’s ability to satisfy the covenants, financial ratios and
tests of the July 2003 FASL Term Loan, can be affected by events beyond our or FASL LLC’s control. We cannot assure you that we or FASL LLC will meet
those requirements. A breach of any of these covenants, financial ratios or tests could result in a default under our July 2003 Loan Agreement, the July 2003
FASL Term Loan and/or the Dresden Loan Agreements. In addition, these agreements contain cross-default provisions whereby a default under one agreement
would likely result in
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004