AMD 2004 Annual Report Download - page 53

Table of Contents
Spansion Operating Lease Guarantees
We guaranteed certain operating leases entered into by Spansion and its subsidiaries totaling approximately $24 million as of December 26, 2004. The
amounts guaranteed are reduced by the lease payments paid by Spansion over the lease term. Under the provision of FIN 45, we have not recorded any liability in
our consolidated financial statements associated with these guarantees because they are for our subsidiary’s performance obligations.
AMTC and BAC Guarantees
The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co., KG (BAC) are joint ventures
formed by us, Infineon Technologies AG and DuPont Photomasks, Inc. for the purpose of constructing and operating an advanced photomask facility in Dresden,
Germany. The results of operations of AMTC, which we account for following the equity method of accounting, are immaterial to our consolidated financial
statements. To finance the project, BAC and AMTC entered into a $162 million revolving credit facility and a $102 million term loan in December 2002. Also in
December 2002, in order to occupy the photomask facility, AMTC entered into a rental agreement with BAC. With regard to these commitments by BAC and
AMTC, as of December 26, 2004, we guaranteed up to approximately $43 million plus interest and expenses under the revolving loan, and up to approximately
$20 million, initially, under the rental agreement. The obligations under the rental agreement guarantee diminish over time through 2011 as the term loan is
repaid. However, under certain circumstances of default by the other tenant of the photomask facility under its rental agreement with BAC and certain
circumstances of default by more than one joint venture partner under its rental agreement guarantee obligations, the maximum potential amount of our
obligations under the rental agreement guarantee is approximately $153 million. As of December 26, 2004, $80 million was drawn under the revolving credit
facility, and $78 million was drawn under the term loan. We have not recorded any liability in our consolidated financial statements associated with these
guarantees because they were issued prior to December 31, 2002, the effective date of FIN 45.
Other Financial Matters
Spansion LLC. During the four-year period commencing on June 30, 2003, we are obligated to provide Spansion with additional funding to finance
operations shortfalls, if any. Generally, Spansion is first required to seek any required financing from external sources. However, if such third-party financing is
not available, we must provide funding to Spansion equal to our pro-rata ownership interest, which is currently 60 percent. At this time, we believe that Spansion
would be able to obtain such external financing when needed. However, there is no assurance that this will happen and currently we cannot estimate the amount
of such additional funding, if any, that we are required to provide during this four-year period.
Sale Leaseback Transaction
In January 2005, Spansion Japan entered into a sale and leaseback transaction for certain semiconductor manufacturing equipment in the amount of
approximately 8.2 billion yen (approximately $79 million based on the exchange rate as of December 26, 2004). As the sales proceeds slightly exceed the net
book value of the equipment, there is a minimal deferred gain to be recognized on the sale. Under the agreement, the lease payments will be made in six equal
semi-annual payments and the lease will terminate on December 31, 2007. At the expiration of the lease term, Spansion Japan has the option to purchase the
equipment at an agreed upon price, which we believe to be a bargain purchase option. In addition, Spansion Japan can renew the lease if the lessor and Spansion
Japan both agree upon the renewal terms not later than six months prior to the expiration of the lease term. During the term of the lease, Spansion Japan is
required to comply with certain financial covenants.
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005