AMD 2002 Annual Report Download - page 32

Table of Contents
In March 1997, AMD Saxony entered into a loan agreement and other related agreements (the Dresden Loan Agreements) with a consortium of banks led
by Dresdner Bank AG, a German financial institution, in order to finance the project. The Dresden Loan Agreements were amended in February 1998, June
1999, February 2001, June 2002 and December 2002.
Because most of the amounts under the Dresden Loan Agreements are denominated in deutsche marks (converted to euros), the dollar amounts are subject
to change based on applicable exchange rates. We used the exchange rate that was permanently fixed on January 1, 1999, of 1.95583 deutsche marks to 1 euro
for the conversion of deutsche marks to euros, and then used exchange rate of 0.96 euro to 1 U.S. dollar as of December 29, 2002, to translate the amounts
denominated in deutsche marks into U.S. dollars.
The Dresden Loan Agreements, as amended, provide for the funding of the construction and facilitization of Fab 30. This funding consists of:
• equity contributions, subordinated and revolving loans and loan guarantees from, and full cost reimbursement through, AMD;
• loans from a consortium of banks; and
• grants, subsidies and loan guarantees from the Federal Republic of Germany and the State of Saxony.
The Dresden Loan Agreements require that we partially fund Fab 30 project costs in the form of subordinated and revolving loans to, or equity investments
in, AMD Saxony. In accordance with the terms of the Dresden Loan Agreements, as of December 29, 2002, we had provided $156 million of subordinated loans,
$315 million of revolving loans and $286 million of equity investments in AMD Saxony. These amounts have been eliminated in our consolidated financial
statements.
In addition to support from AMD, the consortium of banks referred to above made available up to $799 million in loans to AMD Saxony to help fund Fab
30 project costs. The loans have been fully drawn and a portion has been repaid. AMD Saxony had $587 million of such loans outstanding as of December 29,
2002, which are included in our consolidated balance sheets. Please refer to the Contractual Cash Obligation table, above, for the repayment schedule, which was
revised as part of the December 2002 amendments to the Dresden Loan Agreements.
Finally, pursuant to a Subsidy Agreement, as amended in August 2002, the Federal Republic of Germany and the State of Saxony are supporting the Fab
30 project, in accordance with the Dresden Loan Agreements, in the form of:
• guarantees equal to the lesser of 65 percent of AMD Saxony bank debt or $799 million;
• capital investment grants and allowances totaling $433 million; and
• interest subsidies totaling $160 million.
Of these amounts, AMD Saxony received approximately $284 million in capital investment grants and allowances and $98 million in interest subsidies. In
addition, AMD Saxony received advanced payments for interest subsidies amounting to $49 million, of which approximately $18 million is restricted from our
access for more than one year, and is therefore included in Other Assets. In addition to the above-mentioned subsidies, AMD Saxony also received $31 million in
research and development subsidies through December 29, 2002. Amounts received under the Subsidy Agreement are recorded as a long-term liability on our
financial statements and are being amortized to operations ratably over the contractual life of the Subsidy Agreement as a reduction to operating expenses
through December of 2008. The historical rates were used to translate the amounts denominated in deutsche marks (converted to euros) into U.S. dollars.
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003