AMD 2002 Annual Report Download - page 38

Table of Contents
future. If we continue to experience a sustained reduction in the growth rate of PCs sold, sales of our microprocessors may not grow and may even decrease.
In addition, current trends of consolidation within the personal computer industry, as recently evidenced by the Hewlett-Packard/Compaq merger, as well
as potential market share increases by customers who exclusively purchase microprocessors from Intel Corporation, such as Dell Corporation, could further
materially adversely affect us.
We plan for significant capital expenditures in 2003 and beyond and if we cannot generate the capital required for these capital expenditures and other
ongoing operating expenses through operating cash flow and external financing activities, we may be materially adversely affected. We plan to continue to
make significant capital expenditures to support our microprocessor and Flash memory products both in the near and long term, including approximately $650
million during 2003. These capital expenditures include those relating to the continued facilitization of Fab 30 and Fab 25. These capital expenditures, together
with ongoing operating expenses, will be a substantial drain on our cash flow and will also decrease our cash balances. The timing and amount of our capital
requirements cannot be precisely determined at this time and will depend on a number of factors, including demand for products, product mix, changes in
semiconductor industry conditions and competitive factors. We regularly assess markets for external financing opportunities including debt and equity.
Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. In addition, our July 1999 Loan
Agreement is scheduled to expire in July 2003. Our inability to obtain needed debt and/or equity financing would have a material adverse effect on us.
In March 1997, AMD Saxony entered into the Dresden Loan Agreements and other related agreements. These 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. We currently estimate that the maximum
construction and facilitization costs to us of Fab 30 will be $2.6 billion when fully equipped by the end of 2005. We had invested $2.1 billion as of December 29,
2002. If we are unable to meet our obligations to AMD Saxony as required under these agreements, we will be in default under the Dresden Loan Agreements,
which would permit acceleration of $587 million of indebtedness, as well as acceleration by cross-default of our obligations under our other borrowing
arrangements.
Our joint venture with Fujitsu Limited, FASL, continues to facilitize its manufacturing facilities in Aizu-Wakamatsu, Japan, known as 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 this cost had been funded. 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.
We have a substantial amount of debt and debt service obligations, and may incur additional debt, that could adversely affect our financial position. We
have a substantial amount of debt and we may incur additional debt in the future. At December 29, 2002, our total debt was $1.9 billion and stockholders’ equity
was $2.5 billion. In addition, we had up to $200 million of availability under our July 1999 Loan Agreement (subject to our borrowing base). We had also
guaranteed approximately $817 million of debt, and we are currently in disagreement as to the amount we owe, if any, under our additional guarantee to repay up
to $125 million to Fujitsu in connection with a closed wafer fabrication facility in Gresham, Oregon. None of these guaranteed amounts are reflected as debt on
our balance sheet.
Our high degree of leverage may:
• limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general
corporate purposes;
• require a substantial portion of our cash flow from operations to make debt service payments;
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003