AMD 1998 Annual Report Download - page 250

NOTE 13. INVESTMENT IN JOINT VENTURE
In 1993, we formed a joint venture, FASL, with Fujitsu Limited, for the
development and manufacture of non-volatile memory devices. Through FASL, the
two companies have constructed and are operating an advanced IC manufacturing
facility in Aizu-Wakamatsu, Japan, to produce Flash memory devices. Our share of
FASL is 49.992 percent and the investment is being accounted for under the
equity method. Our share of FASL net income during 1998 was $12 million, net of
income taxes of approximately $11 million. At December 27, 1998, the cumulative
adjustment related to the translation of the FASL financial statements into
U.S. dollars resulted in a decrease of approximately $25 million to the
investment in FASL.
The following table presents the significant FASL related party transactions and
balances:
Three Years Ended December 27, 1998 (Thousands) 1998 1997 1996
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Royalty income $ 21,136 $ 19,322 $ 20,832
Purchases 211,640 242,161 233,656
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December 27, 1998 and December 28, 1997 (Thousands) 1998 1997
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Royalty receivable $ 6,027 $ 5,614
Accounts payable 39,424 40,002
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Pursuant to a cross-equity provision between AMD and Fujitsu Limited, we
purchased shares of Fujitsu Limited common stock and own approximately 0.5
million shares at December 27, 1998. Under the same provision, Fujitsu Limited
has purchased 4 million shares of our common stock, and is required to purchase
an additional 0.5 million shares during 1999, 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 billion when fully equipped. Capital expenditures for FASL II construction to
date have been funded by cash generated from FASL operations and local
borrowings by FASL. To the extent that FASL is unable to secure the necessary
funds for FASL II, we may be required to contribute cash or guarantee third-
party loans in proportion to our 49.992 percent interest in FASL. At December
27, 1998, we had loan guarantees of $81 million outstanding with respect to such
loans.
The following is condensed financial data of FASL:
Three Years Ended December 27, 1998 (Thousands) 1998 1997 1996
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Net sales $427,140 $423,251 $459,075
Gross profit 25,432 105,691 200,255
Operating income 20,758 94,863 185,825
Net income 13,104 46,000 121,119
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December 27, 1998 and December 28, 1997 (Thousands) 1998 1997
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Current assets $118,140 $134,499
Non-current assets 640,040 627,965
Current liabilities 278,309 339,151
Non-current liabilities 1,774 662
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Our share of the above FASL net income differs from the equity in net income of
joint venture reported on the consolidated statements of operations due to
adjustments resulting from the related party relationship between FASL and AMD,
which are reflected on our consolidated statements of operations.
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999