AMD 1997 Annual Report Download - page 90

ADVANCED MICRO DEVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. INVESTMENT IN JOINT VENTURE
In 1993, AMD and Fujitsu Limited formed a joint venture, Fujitsu AMD
Semiconductor Limited (FASL), for the development and manufacture of non-
volatile memory devices. Through FASL, the two companies have constructed and
are operating an advanced integrated circuit manufacturing facility in Aizu-
Wakamatsu, Japan, to produce Flash memory devices. The Company's share of FASL
is 49.992 percent and the investment is being accounted for under the equity
method. In 1995, the Company invested an additional $18 million in FASL. The
Company's share of FASL net income during 1997 was $25 million, net of income
taxes of approximately $23 million. At December 28, 1997, the cumulative
adjustment related to the translation of the FASL financial statements into
U.S. dollars resulted in a decrease of approximately $46 million to the
investment in FASL. In 1997, 1996 and 1995, the Company purchased $242
million, $234 million and $128 million, respectively, of Flash memory devices
from FASL. At December 28, 1997, and December 29, 1996, the Company had
outstanding payables of $40 million and $27 million, respectively, to FASL for
Flash memory device purchases. At December 28, 1997, and December 29, 1996,
the Company had outstanding royalty receivables of $6 million and $4 million,
respectively, as a result of FASL sales. In 1997, 1996 and 1995, the Company
earned royalty income of $19 million, $21 million and $11 million,
respectively, as a result of FASL sales.
Pursuant to a cross-equity provision between AMD and Fujitsu Limited, the
Company purchased shares of Fujitsu Limited common stock and owns
approximately 0.5 million shares at December 28, 1997. Under the same
provision, Fujitsu Limited has purchased 3 million shares of AMD common stock,
and is required to purchase an additional 1.5 million shares over the next
several years, for a total investment not to exceed $100 million.
In the third quarter of 1997, FASL completed construction of the building
for a second Flash memory device wafer fabrication facility, FASL II, 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. 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 percentage
interest in FASL. At December 28, 1997, AMD had loan guarantees of $48 million
outstanding with respect to such loans.
The following is condensed unaudited financial data of FASL:
THREE YEARS ENDED DECEMBER 28, 1997
1997 1996 1995
-------- -------- --------
(UNAUDITED)
(THOUSANDS)
Net sales......................................... $423,251 $459,075 $252,069
Gross profit...................................... 105,691 200,255 120,066
Operating income.................................. 94,863 185,825 117,411
Net income........................................ 46,000 121,119 72,286
DECEMBER 28, 1997 AND DECEMBER 29, 1996
1997 1996
-------- --------
(UNAUDITED)
(THOUSANDS)
Current assets............................................ $134,499 $ 97,693
Non-current assets........................................ 627,965 542,684
Current liabilities....................................... 339,151 215,524
Non-current liabilities................................... 662 474
F-25
Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998