AMD 2003 Annual Report Download - page 95

Table of Contents
The Dresden Loan Agreements, as amended, provide for the funding of the construction and facilitization of Fab 30. The 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
• investment grants, investment allowances, interest 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 28, 2003 the Company had provided $179 million
of subordinated 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 the Company, the consortium of banks referred to above made available $954 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 $664 million of such loans outstanding as of December
28, 2003, which are included in the Company’s consolidated balance sheet.
Finally, pursuant to a 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 65 percent of AMD Saxony bank debt, or $432 million;
• capital investment grants and allowances totaling approximately $453 million; and
• interest subsidies totaling $191 million.
Of these amounts, AMD Saxony received approximately $412 million in capital investment grants and allowances and $131 million in interest subsidies.
In addition, AMD Saxony has received advance payments for interest subsidies amounting to $22 million as of December 28, 2003. AMD Saxony also received
$55 million in research and development subsidies through December 28, 2003. 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 of 2008. Historical exchange rates in effect at the time these investment grants and allowances and interest subsidies were
received were used to translate amounts denominated in deutsche marks (converted to euros) into U.S. dollars.
Under the Subsidy Agreement, for the construction and financing of Fab 30, AMD Saxony undertook to attain a certain employee headcount by December
2003 and to maintain such headcount until December 2008. Noncompliance with the conditions of the grants, allowances and subsidies contained in the Subsidy
Agreement could result in the forfeiture of all or a portion of the future amounts to be received, as well as the repayment of all or a portion of amounts received
to date. In December 2002, AMD Saxony reduced its anticipated employment levels as a result of the 2002 Restructuring Plan. Consequently, as of December
2003, headcount was below the level agreed to by AMD Saxony at which AMD Saxony would be entitled to receive the maximum amount of capital investment
grants and allowances available. However, the aggregate amount of grants and allowances actually received by AMD Saxony to date, calculated as a percentage
of the maximum amount of grants and allowances available, does not exceed the actual headcount at AMD Saxony at December 2003, calculated as a percentage
of the headcount target undertaken in the Subsidy Agreement. Accordingly,
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004