AMD 2006 Annual Report Download - page 34

Table of Contents
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 2007, we plan to make approximately $2.5 billion of capital expenditures, primarily related to expanding production capacity at Fab 36, beginning the
conversion of Fab 30 from manufacturing on 200-millimeter wafers to 300-millimeter wafers and purchasing equipment for a new facility to support bump and
test activities. However, our ability to fund these capital expenditures in accordance with our business plan depends on generating sufficient cash flow from
operations and the availability of external financing, if necessary.
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 financing. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory
terms. In addition, in order to finance our acquisition of ATI, we borrowed $2.5 billion pursuant to a Credit Agreement with Morgan Stanley Senior Funding Inc.
dated October 24, 2006 (October 2006 Term Loan). While amounts remain outstanding under this agreement, we are required to prepay these amounts with
(i) 100 percent of the net cash proceeds from any debt incurred by us or a restricted subsidiary, (ii) 50 percent of net cash proceeds from the issuance of any
capital stock by us (subject to specified exceptions); (iii) 100 percent of extraordinary receipts (as defined in the October 2006 Term Loan) in excess of $30
million; (iv) 100 percent of net cash proceeds from asset sales outside of the ordinary course in excess of $30 million, subject to a reinvestment allowance;
(v) commencing with the fiscal year ending December 30, 2007, 50 percent of excess cash flow; and (vi) 100 percent of net cash proceeds from sales of capital
stock of Spansion Inc. See “Part II, Item 7, MD&A—Liquidity,” for additional information on the definition of “excess cash flow.” These mandatory prepayment
requirements limit our ability to use our cash flow, borrow additional funds or conduct equity offerings for future working capital, capital expenditures,
acquisitions or other general corporate purposes. Our inability to obtain needed 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 have a substantial amount of indebtedness that could adversely affect our financial position.
As of December 31, 2006 we had consolidated debt of approximately $3.8 billion. In addition, a significant portion of our consolidated debt bears a
variable interest rate, which increases our exposure to interest rate fluctuations. 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;
• 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.
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, March 01, 2007