AMD 2004 Annual Report Download - page 107

Table of Contents
AMD Penang Term Loan
On January 29, 2004, the Company’s subsidiary in Malaysia, AMD Export Sdn. Bhd., or AMD Penang, entered into a term loan agreement with a local
financial institution. Under the terms of the loan agreement, AMD Penang can borrow up to 30 million Malaysian Ringgit (approximately $8 million as of
December 26, 2004) in order to fund the purchase of equipment. The loan bears a fixed annual interest rate of 5.9 percent and is payable in equal, consecutive,
monthly principal and interest installments through February 2009. The total amount outstanding as of December 26, 2004 was approximately $6 million.
Spansion China Loan
During the second quarter of 2004, Spansion (China) Limited, a subsidiary of Spansion LLC, entered into two revolving loan agreements with a local
financial institution. Under the terms of the revolving foreign exchange loan agreement, Spansion China can borrow in U.S. dollars up to an amount of $18
million. Under the terms of the revolving Renminbi (RMB) loan agreement, Spansion China can borrow up to RMB 120 million (approximately $14.5 million as
of December 26, 2004). The interest rate on the U.S. dollar denominated loans is LIBOR plus one percent and the interest rate on the RMB denominated loans is
fixed at 4.779 percent. The maximum term of each loan is 12 months from the date of each drawdown. As of December 26, 2004, Spansion China had fully
drawn on the loans.
Capital Lease and Sale Leaseback Transactions
On July 16, 2003, Spansion Japan entered into a sale-leaseback transaction for certain equipment with a third-party financial institution in the amount of 12
billion yen (approximately $100 million on July 16, 2003) of cash proceeds. Upon execution of the agreement, the equipment had a net book value of
approximately $168 million. As the term on the leaseback transaction was more than 75 percent of the remaining estimated economic lives of the equipment, the
Company is accounting for the transaction as a capital lease. The Company recognized an immediate loss of $16 million on the transaction due to the fact that the
estimated fair market value of the equipment was less than its net book value at the time of the transaction. The Company also recorded a deferred loss of
approximately $52 million, which is being amortized over the term of the lease in proportion to the amortization of the underlying leased assets. The Company
guaranteed 50 percent of the outstanding obligations under the lease arrangement (see Note 12). As of December 26, 2004, the outstanding lease obligation under
this agreement was approximately $60 million. In addition, Spansion LLC and its subsidiaries also entered into other capital lease and leaseback transactions.
These transactions did not result in significant gain or loss. Accordingly, as of December 26, 2004, Spansion LLC had aggregate outstanding capital lease
obligations of approximately $184 million. Obligations under these lease agreements are collateralized by the assets leased and are payable through 2007. Leased
assets consist principally of machinery and equipment. The Company has guaranteed approximately $87 million of Spansion LLC’s aggregate outstanding
capital lease obligations as of December 26, 2004 (see Note 12).
The gross amount of assets recorded under capital leases totaled approximately $361 million and $335 million as of December 26, 2004 and December 28,
2003, and are included in the related property, plant and equipment category. Amortization of assets recorded under capital leases is included in depreciation
expense. Accumulated amortization of these leased assets was approximately $158 million and $83 million as of December 26, 2004 and December 28, 2003.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005