AMD 2006 Annual Report Download - page 90

Table of Contents
agreement. The obligations under the rental agreement guarantee diminish over time through 2011 as the term loan is repaid. However, under certain
circumstances of default by the other tenant of the photomask facility under its rental agreement with BAC and certain circumstances of default by more than one
joint venture partner under its rental agreement guarantee obligations, the maximum potential amount of our obligations under the rental agreement guarantee is
$101 million. As of December 31, 2006, $91 million was drawn under the revolving credit facility, and $54 million was drawn under the term loan. We have not
recorded any liability in our consolidated financial statements associated with the guarantees because they were issued prior to December 31, 2002, the effective
date of FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN 45).
Spansion Capital and Operating Lease Guarantee
We guaranteed capital and operating leases entered into by Spansion and its subsidiaries totaling $6 million as of December 31, 2006. The amounts
guaranteed are reduced by the actual amount of lease payments paid by Spansion over the lease terms.
No liability has been recognized for these guarantees related to Spansion under the provisions of FIN 45 because we concluded the fair value of the
guarantees is not significant after considering various factors including Spansion’s credit rating, the ability of Spansion to make the payments on these
obligations and the short maturity of the indebtedness.
Other Financial Matters
AMD/Spansion Service Agreements. We are party to various service agreements with Spansion. Under our IT Services Agreement and General Services
Agreement, we provide, among other things, facilities, logistics, tax, finance and human resources services to Spansion. For services rendered, we are paid fees in
an amount equal to cost plus five percent except for services procured by us from third parties, which are provided to Spansion at cost. Unless otherwise earlier
terminated, each of these service agreements expires on June 30, 2007, but each of us may extend the term by mutual agreement. Spansion has the ability to
terminate individual services under the general services agreements at any time and for any reason upon at least six months’ advance notice. With respect to the
IT service agreements and general service agreements, if we failed to comply with applicable service levels for a particular service and have not rectified such
performance failure, Spansion may terminate such service after 60 days have elapsed since Spansion first notified us of the failure to perform the service.
Moreover, Spansion may terminate an entire IT service agreement or general services agreement if we breach our material obligations under the respective
agreement and do not cure the default within 90 days after receipt of a notice of default from Spansion. Similarly, we can terminate the respective agreement for
Spansion’s failure to make payments when due if Spansion fails to cure such default within 90 days after receipt of notice of default.
As of December 31, 2006, we have substantially provided to Spansion the agreed upon services referred to above under the IT Services and General
Services Agreements and as a result we expect the services provided in 2007 and beyond to be minimal.
Outlook
Our outlook disclosure is based on current expectations and contains forward-looking statements. Reference should be made to “Cautionary Statement
Regarding Forward-Looking Statements” at the beginning of Part I, Item I—Business. For a discussion of the factors that could cause actual results to differ
materially from the forward-looking statements in the following disclosure, see the “Financial Condition” and “Risk Factors” sections in this report and such
other risks and uncertainties as set forth in this report or detailed in our other Securities and Exchange Commission reports and filings.
In a seasonally down first quarter, we expect revenue to be in the range of $1.6 billion to $1.7 billion. Also, during the first quarter of 2007, we expect
operating expenses, which include research and development expenses
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007