AMD 2002 Annual Report Download - page 34

Table of Contents
material adverse effect on us. The occurrence of a default under these agreements would likely result in a cross-default under the Indentures governing our 4.75%
Debentures and 4.50% Notes. We cannot assure that we will be able to obtain the funds necessary to fulfill these obligations. Any such failure would have a
material adverse effect on us.
Capital Lease Obligations
As of December 29, 2002, we had capital lease obligations of approximately $45 million. Obligations under these lease agreements are collateralized by
the assets leased and are payable through 2006. Leased assets consist principally of machinery and equipment.
Operating Leases, Unconditional Purchase Commitments and Other Operating Commitments
We lease certain of our facilities, including our executive offices in Sunnyvale, California, under lease agreements that expire at various dates through
2018. We lease certain of our manufacturing and office equipment for terms ranging from one to five years. Total future lease obligations as of December 29,
2002 were approximately $377 million, of which $137 million was recorded as a liability for certain facilities that were included in our 2002 Restructuring Plan.
We enter into purchase commitments for manufacturing supplies and services. Total purchase commitments as of December 29, 2002 were approximately
$160 million for periods through 2009.
FASL Facilities and Guarantees
FASL, a joint venture formed by AMD and Fujitsu Limited in 1993, operates advanced integrated circuit manufacturing facilities in Aizu-Wakamatsu,
Japan, to produce Flash memory devices. FASL is continuing the facilitization of its second and third Flash memory device wafer fabrication facilities, FASL
JV2 and FASL JV3. We expect FASL JV2 and FASL JV3, including equipment, to cost approximately $2.1 billion when fully equipped. As of December 29,
2002, approximately $1.6 billion of these costs had been funded by cash generated primarily from FASL operations and borrowings by FASL. These costs are
incurred in Japanese yen and are, therefore, subject to change due to foreign exchange rate fluctuations. On December 29, 2002, the exchange rate was 119.97
yen to one U.S. dollar. We use this rate to translate the amounts denominated in yen into U.S. dollars.
A significant portion of FASL capital expenditures in 2003 will continue to be funded by cash generated from FASL operations. However, to the extent
that additional funds are required for the full facilitization of FASL JV2 and FASL JV3, we will be required to contribute cash or guarantee third-party loans in
proportion to our 49.992 percent interest in FASL, up to 25 billion yen ($208 million). As of December 29, 2002, we had $121 million in loan guarantees
outstanding with respect to these third-party loans.
In 2000, FASL further expanded its production capacity through a foundry arrangement with Fujitsu Microelectronics, Inc. (FMI), a wholly owned
subsidiary of Fujitsu Limited. In connection with FMI equipping its wafer fabrication facility in Gresham, Oregon (the Gresham Facility) to produce flash
memory devices for sale to FASL, we agreed to guarantee the repayment of up to $125 million of Fujitsu’s obligations as a co-signer with FMI under its global
multicurrency revolving credit facility (the Credit Facility) with a third-party bank (the Fujitsu Guarantee). On November 30, 2001, Fujitsu announced that it was
closing the Gresham Facility, due to the downturn of the flash memory market. To date we have not received notice from Fujitsu that FMI has defaulted on any
payments due under the Credit Facility. Fujitsu has requested that we pay the entire $125 million under the Fujitsu Guarantee. We continue to disagree with
Fujitsu as to the amount, if any, of our obligations under the Fujitsu Guarantee. While we continue to discuss this matter with Fujitsu, we cannot predict the
outcome of this matter. Accordingly, we have not recorded any liability in our consolidated financial statements associated with the Fujitsu Guarantee.
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003