AMD 2007 Annual Report Download - page 88

Table of Contents
In December 2002, BAC obtained a $110 million term loan to finance the construction of the photomask facility. At the same time, AMTC and BAC, as
lessor, entered into a lease agreement. The term of the lease agreement is ten years, which coincides with the repayment by BAC of the $110 million term loan.
Each joint venture partner guaranteed a specific percentage of AMTC’s rental payments. Pursuant to an agreement between AMTC, BAC and DuPont (now
Toppan), AMTC may exercise a “step-in” right, in which it would assume Toppan’s remaining rental payments in connection with the rental agreement between
Toppan and BAC. As of December 29, 2007, our guarantee of AMTC’s portion of the rental obligation was approximately $11 million, and our maximum
liability in the event AMTC exercises its “step-in” right and the other joint venture partners default under the guarantee was approximately $102 million. These
estimates are based upon forecasted rents to be charged in the future and are subject to change based upon the actual usage of the facility by the tenants and
foreign currency exchange rates.
In December 2002, AMTC obtained a $176 million revolving credit facility to finance its operations. In December 2007, AMTC entered into a new $141
million revolving credit facility, of which $96 million was outstanding as of December 29, 2007. The proceeds were used to repay all amounts outstanding under
the existing $176 million revolving credit facility and to provide additional financing for the acquisition of new tools. Subject to certain conditions under the
revolving credit facility, AMTC may request that the loan amount be increased by an additional $59 million. The term of the revolving credit facility is three
years. Upon request by AMTC and subject to certain conditions, the term of the revolving credit facility may be extended by two additional one year periods.
Pursuant to a guarantee agreement, each joint venture partner guaranteed one third of AMTC’s outstanding loan balance under the revolving credit facility. As of
December 29, 2007, our liability under this guarantee was $32 million plus our portion of accrued interest and expenses. Under the terms of the guarantee, if our
group consolidated cash (which is defined as cash, cash equivalents and marketable securities less the aggregate amount outstanding under any revolving credit
facility) is less than or expected to be less than $500 million, we will be required to provide cash collateral equal to one third of the balance outstanding under the
revolving credit facility. We evaluated our guarantee under the provisions of FIN 45 and concluded it was immaterial to our financial position or results of
operations.
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 1—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 “Risk Factors” section 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 the first quarter of 2008, we expect revenue to decrease in line with seasonality. We also expect during the first quarter that: operating expenses will
increase by approximately five percent compared to the fourth quarter of 2007; acquisition-related charges will be approximately $55 million; income tax
expense will be approximately $15 million; and depreciation and amortization expense will be approximately $315 million. We also expect capital expenditures
to be approximately $1.1 billion for 2008, of which we expect to incur $425 million in the first quarter of 2008.
Recently Issued Accounting Pronouncements
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (SFAS 157). SFAS 157 does not require any new fair value
measurements but clarifies the fair value definition, establishes a fair value hierarchy that prioritizes the information used to develop assumptions used for
measuring fair value, and expands disclosures about fair value measurements. SFAS 157 clarifies that the fair value is the exchange price in an orderly
transaction between market participants to sell the asset or transfer the liability in the market. The fair value hierarchy gives the highest priority to quoted prices
in active markets and the lowest priority to
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008