AMD 2005 Annual Report Download - page 65

Table of Contents
• 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 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;
• place us at a competitive disadvantage compared to our less leveraged competitors; and
• increase our vulnerability to the impact of adverse economic and industry conditions.
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.
For 2005, our capital expenditures were $1.5 billion which included Spansion’s capital expenditures through December 20, 2005. For 2006, we plan to
make approximately $1.4 billion of capital expenditures. 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.
Moreover, 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 $890 million to AMD Fab 36 KG (based on an exchange rate of 0.843 euros to one U.S. dollar as of December 25, 2005). 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.
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 future 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.
We and our subsidiaries may be able to incur substantially more debt, including secured debt, in the future.
Subject to the restrictions in the agreements governing our existing indebtedness, we and our subsidiaries may incur significant additional debt, including
secured debt, in the future. In particular, AMD Fab 36 KG will have the ability, subject to achieving certain milestones, to borrow up to $831 million (based on
an exchange rate of 0.843 euros to one U.S. dollar as of December 25, 2005) from a consortium of banks under its Fab 36 Loan Agreements.
Although the terms of the agreements governing our existing indebtedness contain restrictions on the incurrence of additional debt, these restrictions are
subject to a number of important exceptions, and debt incurred in compliance with these restrictions could be substantial.
We may not be able to generate sufficient cash to service our debt obligations.
Our ability to make payments on and to refinance our debt, or our guarantees of other parties’ debts, will depend on our financial and operating
performance, which may fluctuate significantly from quarter to quarter,
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006