AMD 2005 Annual Report Download - page 74

Table of Contents
Spansion has a substantial amount of indebtedness which could materially adversely affect its financial condition.
Spansion has a substantial amount of indebtedness. This substantial indebtedness may:
• require Spansion to use a substantial portion of its cash flow from operations to make debt service payments;
• make it difficult for Spansion to satisfy its financial obligations;
• limit Spansion’s ability to use its cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general
corporate purposes;
• limit Spansion’s flexibility to plan for, or react to, changes in its business and industry;
• place Spansion at a competitive disadvantage compared to its less leveraged competitors; and
• increase Spansion’s vulnerability to the impact of adverse economic and industry conditions.
If Spansion cannot generate sufficient operating cash flow and obtain external financing, it may be unable to make all of its planned capital
expenditures.
Spansion’s ability to fund anticipated capital expenditures depends on generating sufficient cash flow from operations and the availability of external
financing, which may not be available on favorable terms, if at all. Spansion’s capital expenditures, together with ongoing operating expenses, will be a
substantial drain on Spansion’s cash flow and may decrease its cash balances. Spansion’s inability to obtain needed financing or to generate sufficient cash from
operations may require it to abandon projects or curtail capital expenditures. However, if it cannot generate sufficient operating cash flow or obtain external
financing, Spansion may be delayed in achieving such capacity, and Spansion would be materially adversely affected.
Spansion’s business has been characterized by average selling prices that decline over relatively short time periods, which can negatively affect
Spansion’s results of operations unless it is able to reduce its costs or introduce new products with higher average selling prices.
Average selling prices for Spansion’s products historically have declined over relatively short time periods. Spansion is unable to predict pricing
conditions for future periods. Even in the absence of downturns or oversupply in the industry, average selling prices of Spansion’s products have decreased
during the products’ lives. When Spansion’s average selling prices decline, its net sales and net income decline unless it is able to compensate by selling more
units, reducing its manufacturing costs or introducing new, higher margin products that have higher densities and/or incorporate advanced features. If Spansion’s
average selling prices continue to decline, its operating results could be materially adversely affected.
If Spansion’s cost reduction efforts are not effective, Spansion could be materially adversely affected.
Spansion is undertaking a number of actions in an effort to significantly reduce its expenses. These actions include streamlining operations and continuing
to align manufacturing utilization to the level of demand for Spansion products, controlling increasing testing costs and working with us and Fujitsu to reduce
costs under services agreements. We cannot assure you that any of these actions will occur as anticipated or at all, or that Spansion will be able to achieve
significant cost reductions. If Spansion’s cost reduction efforts are unsuccessful, Spansion would be materially adversely affected.
Manufacturing capacity constraints may have a material adverse affect on Spansion.
There may be situations in which Spansion’s manufacturing facilities are inadequate to meet the demand for certain of Spansion’s products. Spansion’s
inability to obtain sufficient manufacturing capacity to meet demand, either in its own facilities or through foundry or similar arrangements with third parties,
could have a material
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006