AMD 1997 Annual Report Download - page 25

October 1998. As of December 28, 1997, the Company also had available
unsecured uncommitted bank lines of credit in the amount of $67 million, of
which $7 million was outstanding.
In February 1998, certain of the covenants under the Credit Agreement were
amended. The Company will be required to raise funds through external
financing in the second quarter of 1998 in order to meet certain of these
amended covenants and to continue to make the substantial capital investments
required to convert Fab 25 to 0.25 micron process technology, as well as for
other ongoing capital investments. The Company has filed a shelf registration
statement for the offering of debt or equity securities under the Securities
Act of 1933, as amended.
Under the terms of the February 1998 amendments to the Dresden Loan
Agreement, the Company is also required to make subordinated loans to, or
equity investments in, AMD Saxony, totaling $100 million in 1998 and $170
million in 1999. AMD is required to fund $70 million of the 1999 amount on an
accelerated basis as follows: (i) if the Company undertakes a sale or other
placement of its stock in the capital markets in 1998, the $70 million will be
funded upon receipt of the offering proceeds; (ii) if the Company generates
$140 million of net income (as defined in the Indenture for the Senior Secured
Notes) in 1998, the $70 million will be funded prior to January 31, 1999;
(iii) if the Company does not fund through (i) or (ii) above, the Company will
fund the maximum amount allowed under the Indenture for the Senior Secured
Notes by January 31, 1999 and will fund the remaining amount through the sale
of at least $200 million of the Company's stock by June 30, 1999.
In the event the Company is unable to obtain the external financing
necessary to meet its covenants under the Credit Agreement, it will also be
unable to fund its capital investments planned for 1998. In addition, in the
event the Company is unable to meet its obligation to make loans to, or equity
investments in, AMD Saxony as required under the Dresden Loan Agreement, AMD
Saxony will be unable to complete Dresden Fab 30 and the Company will be in
default under the Dresden Loan Agreement, the Credit Agreement and the
Indenture, which would permit acceleration of indebtedness, which would have a
material adverse effect on the Company. There can be no assurance that the
Company will be able to obtain the funds necessary to fulfill these
obligations and any such failure would have a material adverse effect on the
Company.
The Company believes that cash flows from operations and current cash
balances, together with external financing activities during 1998, will be
sufficient to fund operations and capital investments currently planned
through 1998.
RISK FACTORS
The Company's business, results of operations and financial condition are
subject to a number of risk factors, including the following:
Financing Requirements
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.
The Company also plans to continue to make investments in FASL. 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.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998