AMD 2002 Annual Report Download - page 75

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 were denominated in deutsche marks (converted to euros), the dollar amounts discussed
below are subject to change based on applicable conversion rates. The Company used the exchange rate that was permanently fixed on January 1, 1999, of
1.95583 deutsche marks to one euro for the conversion of deutsche marks to euros, and then used the exchange rate of 0.96 euro to one 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 the Company 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, the Company 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 the
Company’s 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 the Company’s consolidated balance sheets. See Note 7 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 Subsidy Agreement) 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 had 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 the Company’s access for more than one year, and is therefore included in Other Assets. In addition to the above-mentioned subsidies, AMD
Saxony had 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 the Company’s 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 2008. The historical rates were used to translate the amounts denominated in deutsche marks
(converted to euros) into U.S. dollars.
The Subsidy Agreement, as amended, imposes conditions on AMD Saxony, including the requirement to attain certain employee headcount by December
2003 and to maintain such headcount until December 2008.
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003