AMD 2004 Annual Report Download - page 115

Table of Contents
NOTE 12: Commitments and Guarantees
The Company leases certain of its facilities, as well as the underlying land in certain jurisdictions, under agreements that expire at various dates through
2032. The Company also leases certain of its manufacturing and office equipment for terms ranging from one to five years. Rent expense was approximately $63
million, $53 million and $65 million in 2004, 2003 and 2002, respectively.
For each of the next five years and beyond, noncancelable long-term operating lease obligations, including facilities vacated in connection with
restructuring activities, and unconditional commitments to construct the 300-millimeter wafer fabrication facility and purchase manufacturing supplies and
services are as follows:
Operating
leases
Purchase
commitments
(in thousands)
2005 $ 76,865 $ 281,662
2006 63,812 205,951
2007 51,007 209,301
2008 44,547 183,774
2009 39,071 43,074
Beyond 2009 155,552 357,438
$ 430,854 $ 1,281,200
The previous operating lease for the Company’s corporate marketing, general and administrative facility in Sunnyvale, California expired in December
1998, at which time the Company arranged for the sale of the facility to a third party and leased it back under a new operating lease. The Company deferred the
gain ($37 million) on the sale and is amortizing it over a period of 20 years, the life of the lease. The lease expires in December 2018. At the beginning of the
fourth lease year and every three years thereafter, the rent will be adjusted by 200 percent of the cumulative increase in the consumer price index over the prior
three-year period, up to a maximum of 6.9 percent. Certain other operating leases contain provisions for escalating lease payments subject to changes in the
consumer price index. Total future lease obligations as of December 26, 2004, were approximately $431 million, of which $106 million was recorded as a
liability for certain facilities that were included in our 2002 Restructuring Plan. (See Note 14.)
The Company, in the normal course of business, entered into purchase commitments for manufacturing supplies and services. Total non-cancelable
purchase commitments as of December 26, 2004, were approximately $1.3 billion for periods through 2020. These purchase commitments include approximately
$546 million related to contractual obligations to purchase energy and gas for Fab 30 and Fab 36 and $250 million representing future payments to IBM pursuant
to the joint development agreement. As IBM’s services are being performed ratably over the life of the agreement, the Company expenses the payments as
incurred. The Company’s non-cancelable purchase commitments also include approximately $141 million to M+W Zander for the design and construction of Fab
36 and other related services. These payments will be made to M+W Zander as services are performed. In addition, unconditional purchase commitments also
include approximately $68 million for software maintenance agreements that require periodic payments through 2009. As a result, the Company has not recorded
any liabilities relating to these agreements. The remaining commitments primarily consist of non-cancelable contractual obligations to purchase raw materials,
natural resources and office supplies. Purchase orders for goods and services that are cancelable without significant penalties are not included in the total amount.
The Company accounts for guarantees in accordance with FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others.”
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005