AMD 2002 Annual Report Download - page 35

Table of Contents
Advanced Mask Technology Center Guarantee and BAC Guarantee
The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co., KG (BAC) are joint ventures
formed by us, Infineon Technologies AG and Dupont Photomasks, Inc. for the purpose of constructing and operating a new advanced photomask facility in
Dresden, Germany. In June 2002, BAC entered into a $78 million bridge loan (Bridge Loan) with a consortium of banks led by Dresdner Bank for the purpose of
constructing the facility. We guaranteed the payment obligations of BAC under the Bridge Loan, in an amount not to exceed $26 million plus interest and
expenses. In December 2002, BAC and AMTC executed a facility agreement, consisting of a $125 million revolving credit facility (Revolving Loan) and a $78
million term loan facility (Term Loan), with a consortium of banks led by Dresdner Bank. The Term Loan will supercede and replace the Bridge Loan. We
guaranteed the payment obligations of AMTC, in an amount not to exceed $33 million plus interest and expenses, under the Revolving Loan. In addition, we
guaranteed the payment obligations of BAC, in an amount not to exceed $26 million plus interest and expenses, under the Term Loan.
In December 2002, the AMTC and BAC entered into a rental agreement with respect to the photomask facility. The rental agreement will become effective
upon completion of construction of the photomask facility. We guaranteed approximately 23% of the payment obligations of AMTC under the rental agreement,
which we believe will be equal to approximately $17 million, initially and diminish over time through 2011 as the Term Loan is repaid. Our rental guarantee
replaces our guarantee of the Term Loan. In addition, in the event the other tenant of the photomask facility defaults under its rental agreement, and the AMTC
assumes the defaulting tenant’s lease and related lease obligations, we would be required to guarantee 23% of these additional rental payment obligations.
Further, in the event one of the three joint venture partners is unable to meet its guarantee obligations with respect to AMTC’s additional rental payment
obligations, the remaining joint venture partners agreed to assume, on a pro rata basis, the defaulting partner’s guarantee obligations with respect to AMTC’s
additional rental payment only. Assuming the other tenant of the photomask facility defaults under the rental agreement and AMTC exercises its option to
assume the defaulting tenant’s obligations under its rental agreement, and assuming a default under the rental guarantee by both Infineon and Dupont, the
maximum potential amount of our guarantee obligations for these rental payments would be approximately $131 million.
As of December 29, 2002, no amounts were drawn under the Revolving Loan or the Term Loan and we have not recorded any liability in our consolidated
financial statements associated with the guarantees.
Other Financial Activities
We plan to make capital investments of approximately $650 million during 2003, including amounts related to the continued facilitization of Fab 30 and
Fab 25. We believe that cash flows from operations and current cash balances, together with available external financing and the extension of existing facilities,
will be sufficient to fund operations and capital investments for at least the next 12 months.
Recently Issued Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (SFAS
141) and Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (SFAS 142). SFAS 141 requires all business
combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS 142, goodwill and intangible assets with indefinite lives
are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not
deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of SFAS 142 apply
to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and intangible assets acquired prior to July 1, 2001, the amortization and
impairment provisions of SFAS 142 are effective upon the adoption of SFAS 142. We adopted SFAS 141 and SFAS 142 at the beginning of 2002. These
accounting standards did not have a material effect on our consolidated financial statements.
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003