AMD 2000 Annual Report Download - page 388

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Demand for Our Products Affected by Worldwide Economic Conditions
While general industry demand is currently strong, a decline of the worldwide
semiconductor market could decrease the demand for microprocessors, Flash memory
devices and other integrated circuits. A significant decline in economic
conditions in any significant geographic area, either domestically or
internationally, could decrease the overall demand for our products, which could
have a material adverse effect on our business.
Financing Requirements
We will have significant capital requirements over the next 12 months. To the
extent that we cannot generate the required capital internally or obtain such
capital externally, our business could be materially affected. We cannot assure
the availability of such capital on terms favorable to us, or at all. We
currently plan to make capital investments of approximately $1 billion in 2001
although the actual expenditures may vary. These investments include those
relating to the continued facilitization of Dresden Fab 30 and Fab 25.
In March 1997, our indirect wholly owned subsidiary, AMD Saxony, entered into
the Dresden Loan Agreements with a consortium of banks led by Dresdner Bank AG.
The Dresden Loan Agreements require that we partially fund Dresden Fab 30
project costs in the form of subordinated loans to, or equity investments in,
AMD Saxony. In accordance with the terms of the Dresden Loan Agreements, we have
invested $410 million as of December 31, 2000, in the form of subordinated loans
and equity in AMD Saxony. If we are unable to meet our obligations to AMD Saxony
as required under the Dresden Loan Agreements, we will be in default under the
Dresden Loan Agreement and the Loan Agreement, which would permit acceleration
of indebtedness, which would have a material adverse effect on our business.
In July 2000, FASL broke ground for a third fabrication facility, FASL JV3, for
the manufacture of Flash memory devices in Aizu-Wakamatsu, Japan. As of December
2000, the building was complete and the clean room was under construction. FASL
JV3 is expected to cost $1.5 billion when fully equipped. FASL capital
expenditures to date have been funded by cash generated from FASL operations and
borrowings by FASL. If FASL is unable to secure the necessary funds for FASL
JV3, we may be required to contribute cash or guarantee third-party loans in
proportion to our 49.992 percent interest in FASL. If we are unable to fulfill
our obligations to FASL, our business will be materially and adversely affected.
On July 13, 1999, we entered into a Loan and Security Agreement (the Loan
Agreement) with a consortium of banks led by Bank of America. Under the Loan
Agreement, which provides for a four-year secured revolving line of credit of up
to $200 million, we can borrow, subject to amounts which may be set aside by the
lenders, up to 85 percent of our eligible accounts receivable from OEMs and 50
percent of our eligible accounts receivable from distributors. We must comply
with certain financial covenants if the level of domestic cash we hold declines
to certain levels, or the amount of borrowings under the Loan Agreement rises to
certain levels.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001