AMD 2004 Annual Report Download - page 101

Table of Contents
authorities advised AMD Saxony that rather than maintaining employee headcount attained by December 2003 through December 2008, it would be required to
maintain employee headcount attained as of December 2002 through December 2007. Beginning in April 2004, the Company adjusted the quarterly amortization
of the grants and allowances until December 2007.
In December 2002, AMD Saxony reduced its anticipated employment levels as a result of the 2002 Restructuring Plan. Consequently, as of December 26,
2004, 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. Although the maximum amount of capital investment grants and allowances available under the Subsidy Agreement was
reduced from $563 million to approximately $493 million, this reduction did not result in a repayment of capital investment grants and allowances already
received. The Company adjusted the quarterly amortization of these amounts accordingly.
Sachsische Aufbaubank GmbH, (the SAB) an entity acting on behalf of the Free State of Saxony, requested that AMD Saxony exchange investment grants
that it had previously received in the amount of approximately $101 million for an equivalent amount of investment allowances. AMD Saxony has agreed to
repay these investment grants in 2005. AMD Saxony will receive the corresponding amount of investment allowances from the German tax authorities. There is
no right of setoff between these two amounts because investment grants are co-financed by the State of Saxony and the Federal Republic of Germany whereas
investment allowances are financed only by the Federal Republic of Germany. Accordingly, as of December 26, 2004, the Company recorded a receivable for the
investment allowances and a payable in a corresponding amount for the investment grants. The receivable and payable are included in prepaid expenses and other
current assets and accrued liabilities on the consolidated balance sheets. The Company believes that the exchange will not have an impact on its operating results
and cash flows.
Fab 36 Term Loan and Guarantee and Fab 36 Partnership Agreements
The Company is facilitizing its new 300-millimeter wafer fabrication facility, Fab 36, in Dresden, Germany, which is located adjacent to Fab 30. Fab 36 is
owned by a German limited partnership named AMD Fab 36 Limited Liability Company & Co. KG, or AMD Fab 36 KG. The Company controls the
management of AMD Fab 36 KG through a wholly owned Delaware subsidiary, AMD Fab 36 LLC, which is a general partner of AMD Fab 36 KG.
Accordingly, AMD Fab 36 KG is an indirect consolidated subsidiary of the Company. The Company expects that Fab 36 will produce future generations of its
microprocessor products, and that it will be in volume production in 2006. AMD, Leipziger Messe GmbH, a nominee of the State of Saxony, Fab 36 Beteiligungs
GmbH, an investment consortium arranged by M+W Zander Facility Engineering GmbH, the general contractor for the project, and a consortium of banks are
providing financing for the project. Leipziger Messe and Fab 36 Beteiligungs are limited partners in AMD Fab 36 KG. The Company also anticipates receiving
up to approximately $735 million in grants and allowances from federal and state German authorities for the Fab 36 project. The Company expects that capital
expenditures for Fab 36 through 2007 will be approximately $2.5 billion in the aggregate.
The funding to construct and facilitize Fab 36 consists of:
• Equity contributions from the Company of $792 million under the partnership agreements, revolving loans from the Company of up to approximately
$1.0 billion, a guarantee from the Company for amounts owed by AMD Fab 36 KG and its affiliates to the lenders and unaffiliated partners;
• investments of up to approximately $433 million from Leipziger Messe and Fab 36 Beteiligungs;
• loans of up to approximately $947 million from a consortium of banks;
• up to approximately $735 million of subsidies consisting of grants and allowances, from the Federal Republic of Germany and the State of Saxony; and
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005