AMD 2004 Annual Report Download - page 106

Table of Contents
In addition, during an enhanced covenant period, Spansion LLC is restricted in its ability to pay cash dividends to the Company or Fujitsu.
As of December 26, 2004, Spansion LLC’s net domestic cash balance was $119 million and its net worldwide cash balance was $196 million. Because
Spansion LLC was not in an enhanced covenant period, the preceding financial covenants were not applicable.
Spansion Japan Term Loan and Guarantee
As a result of the formation of Spansion LLC (see Note 3), the third-party loans of the Manufacturing Joint Venture were refinanced from the proceeds of
a term loan entered into between Spansion Japan, which owns the assets of the Manufacturing Joint Venture, and a Japanese financial institution. Under the
agreement, the amounts borrowed bear an interest rate of TIBOR plus a spread that is determined by Fujitsu’s current debt rating and Spansion Japan’s
non-consolidated net asset value as of the last day of its fiscal year. The interest rate was 0.98 percent as of December 26, 2004. Repayment occurs in equal,
consecutive, quarterly principal installments ending in June 2007. As of December 26, 2004, $127 million was outstanding under this term loan agreement.
Spansion Japan’s assets are pledged as security for its borrowings under this agreement. Also, Fujitsu has guaranteed 100 percent of the amounts outstanding
under this facility. The Company agreed to reimburse Fujitsu 60 percent of any amount paid by Fujitsu under its guarantee of this loan. Pursuant to the terms of
the Spansion Japan Term Loan, Spansion Japan is required to comply with the following financial covenants:
• ensure that assets exceed liabilities as of the end of each fiscal year and each six-month period during such fiscal year;
• maintain an adjusted tangible net worth (as defined in the loan agreement), as of the last day of each fiscal quarter, of not less than 60 billion yen
(approximately $579 million based on the exchange rate as of December 26, 2004);
• maintain total net income plus depreciation, as of the last day of each fiscal period, as follows:
Period Amount
(in millions)
Fiscal year 2004 $ 221
Fiscal year 2005 $ 204
Fiscal year 2006 $ 188
• ensure that as of the last day of any fiscal quarter, the ratio of (a) net income plus depreciation to (b) the sum of (i) interest expense for such period plus
(ii) scheduled amortization of debt for borrowed money (as defined in the loan agreement) for such period, including lease rentals plus (iii) maintenance
capital expenditures for Spansion Japan’s existing and after acquired real property and improvements at its manufacturing facilities located in
Aizu-Wakamatsu, Japan, is not less than:
Period Percentage
Third and fourth fiscal quarters of 2004 120%
Fiscal year 2005 120%
Fiscal year 2006 120%
As of December 26, 2004, Spansion Japan was in compliance with these financial covenants.
Because most amounts under the Spansion Japan Term Loan are denominated in yen, the dollar amounts are subject to change based on applicable
exchange rates. The Company used the exchange rate as of December 26, 2004 of 103.62 yen to one U.S. dollar to translate the amounts denominated in yen into
U.S. dollars.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005