AMD 2004 Annual Report Download - page 57

Table of Contents
RISK FACTORS
If we cannot generate sufficient operating cash flow or obtain external financing, we may be unable to make all of our planned capital expenditures or fulfill
our obligations to Fab 36 or Spansion.
Our ability to fund capital expenditures in accordance with our business plan depends on generating sufficient cash flow from operations and the
availability of external financing. In 2005, we plan to make approximately $1.5 billion in capital expenditures.
Moreover, under the partnership agreement for AMD Fab 36 KG, our German subsidiaries, AMD Fab 36 Holding and AMD Fab 36 Admin are obligated
to invest approximately $792 million into AMD Fab 36 KG. In addition, under the revolving credit agreement among AMD, AMD Fab 36 Holding and AMD
Fab 36 KG, we or AMD Fab 36 Holding are required to provide up to approximately $1.0 billion to AMD Fab 36 KG. Loans provided to AMD Fab 36 KG under
this revolving credit agreement are unsecured and subordinated to the rights of the consortium of banks that will also be providing financing to AMD Fab 36 KG.
We are also obligated through June 30, 2007 to provide Spansion with additional funding to finance operational cash flow needs. Generally, Spansion must
seek any required financing from external sources. However, if third-party financing is not available, either on a non-recourse basis to us or with guarantees
based on our pro rata ownership interest, we must provide funding to Spansion equal to our pro rata ownership interest in Spansion, which is currently 60
percent. An inability to meet our funding obligations for Spansion could, among other things, result in additional equity in Spansion being issued to Fujitsu or
third parties, which would reduce our ownership in and control over Spansion.
Our capital expenditures, together with ongoing operating expenses, will be a substantial drain on our cash flow and may decrease our cash balances. The
timing and amount of our capital requirements cannot be precisely determined at this time and will depend on a number of factors, including demand for
products, product mix, changes in semiconductor industry conditions and market competition. We regularly assess markets for external financing opportunities,
including debt and equity. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. Our
inability to obtain needed debt and/ or equity financing or to generate sufficient cash from operations may require us to abandon projects or curtail capital
expenditures. If we curtail capital expenditures or abandon projects, we could be materially adversely affected. For example, if we abandon the Fab 36 project,
we will have to write off related costs that we capitalized and we will be required to continue to make payments or otherwise be liable pursuant to then-existing
contracts that we cannot terminate at will or without significant penalties.
We have a substantial amount of indebtedness that could adversely affect our financial position.
As of December 26, 2004, we had consolidated debt of approximately $1.9 billion. In addition, we guaranteed approximately $227 million of obligations,
which are not reflected on our balance sheet. Our substantial indebtedness may:
• make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments;
• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes;
• limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general
corporate purposes;
• require us to use a substantial portion of our cash flow from operations to make debt service payments;
• limit our flexibility to plan for, or react to, changes in our business and industry;
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005