AMD 2001 Annual Report Download - page 209

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 $334 million as of December 30, 2001 in the form of subordinated loans
to and equity investments in AMD Saxony, which are eliminated in our
consolidated financial statements. In addition to support from AMD, the
consortium of banks referred to above has made available $692 million in loans
to AMD Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had $602
million of such loans outstanding as of December 30, 2001, which are included in
our consolidated balance sheets.
Finally, the Federal Republic of Germany and the State of Saxony are supporting
the Dresden Fab 30 project, in accordance with the Dresden Loan Agreements, in
the form of:
o guarantees of the lesser of 65 percent of AMD Saxony bank debt or $692
million;
o capital investment grants and allowances totaling $286 million; and
o interest subsidies totaling $142 million.
Of these amounts, AMD Saxony had received $284 million in capital investment
grants and allowances and $64 million in interest subsidies through December 30,
2001, which are included in our consolidated financial statements. The grants
and subsidies are subject to conditions, including meeting specified levels of
employment by December 2001 and maintaining those levels until June 2007.
Noncompliance with the conditions of the grants and subsidies could result in
the forfeiture of all or a portion of the future amounts to be received, as well
as the repayment of all or a portion of amounts received to date. As of December
30, 2001, we were in compliance with all of the conditions of the grants and
subsidies.
In February 2001, the Dresden Loan Agreements were amended to reflect new
capacity and increased capital expenditure plans for Dresden Fab 30. Under the
February 2001 amendments, we agreed to increase and extend our guaranty of AMD
Saxony's obligations and to make available to AMD Saxony revolving loans of up
to $500 million. We expanded our obligation to reimburse AMD Saxony for the cost
of producing wafers for us, and we also agreed to cancel the cost overrun
facility made available by the banks. Under the February 2001 amendments, we
were released from financial covenants limiting capital expenditures and
requiring AMD Saxony to achieve capacity and production cost targets by the end
of 2001. As of December 30, 2001, $59 million of revolving loans were
outstanding. The revolving loan amounts are denominated in European Union euros
and are, therefore, subject to change due to foreign exchange rate fluctuations.
We used the December 30, 2001 exchange rate of 1.11 euros to one U.S. dollar to
translate the amount of the revolving loans. Because the loans are due to be
repaid by our subsidiary, AMD Saxony, the related receivable is not recorded on
our consolidated financial statements.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002