AMD 2005 Annual Report Download - page 50

Table of Contents
• AMD Fab 36 KG’s noncompliance with certain affirmative and negative covenants, including restrictions on payment of profits, dividends or other
distributions except in limited circumstances and restrictions on incurring additional indebtedness, disposing of assets and repaying subordinated debt;
and
• AMD Fab 36 KG’s noncompliance with certain financial covenants, including minimum tangible net worth, minimum interest cover ratio, loan to fixed
asset value ratio and a minimum cash covenant.
In general, any default with respect to other indebtedness of AMD or AMD Fab 36 KG that is not cured, would result in a cross-default under the Fab 36
Loan Agreements.
The occurrence of a default under the Fab 36 Loan Agreements would permit the lenders to accelerate the repayment of all amounts outstanding under the
Fab 36 Loan Agreements. In addition, the occurrence of a default under these agreements could result in a cross-default under the indenture governing our 7.75%
Notes. We cannot provide assurance that we would be able to obtain the funds necessary to fulfill these obligations. Any such failure would have a material
adverse effect on us.
Generally, the amounts under the Fab 36 Loan Agreements and the partnership agreements are denominated in euros. However, we report these amounts in
U.S. dollars, which are subject to change based on applicable exchange rates. We used the exchange rate at December 25, 2005, of 0.843 euro to one U.S. dollar,
to translate the amounts denominated in euros into U.S. dollars. However, with respect to amounts of equity contributions or partnership contributions,
investment grants, allowances and subsidies received by AMD Fab 36 KG through December 25, 2005, we used the historical exchange rates that were in effect
at the time AMD Fab 36 KG received these amounts to convert amounts denominated in euros into U.S. dollars.
AMD Penang Term Loan
On January 29, 2004, our 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 25,
2005) 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 25, 2005 was approximately $5 million. This loan was
transferred to Spansion Penang in January 2006 by novation of the outstanding amounts, and therefore, this loan is no longer outstanding.
Capital Lease Obligations
As of December 25, 2005, we had aggregate outstanding capital lease obligations of $114 million. These capital lease obligations primarily represent
obligations under certain energy supply contracts which AMD Fab 36 KG entered into with local energy suppliers to provide Fab 36 with utilities (gas,
electricity, heating and cooling) to meet the energy demand for our manufacturing needs. We accounted for certain fixed payments due under these energy supply
arrangements as capital leases pursuant to EITF 01-8, “Determining Whether an Arrangement Contains a Lease” and SFAS 13, “Accounting for Leases.” These
capital lease obligations are payable in monthly installments through 2020.
Operating Leases
We lease certain of our facilities, including our executive offices in Sunnyvale, California, and in some jurisdictions we lease the land on which these
facilities are built, under non-cancelable lease agreements that expire at various dates through 2021. We lease certain of our manufacturing and office equipment
for terms ranging from one to five years. Our total future non-cancelable lease obligations as of December 25, 2005, were $326 million, of which $91 million
was recorded as a liability for certain facilities that were included in our 2002 Restructuring Plan.
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006