AMD 2008 Annual Report Download - page 96

Toppan Germany’s remaining rental payments in connection with the lease agreement between Toppan
Photomask Germany and BAC. As of December 27, 2008, our guarantee of AMTC’s portion of the rental
obligation was approximately $8 million. Our maximum liability in the event AMTC exercises its “step-in” right
and the other joint venture partners default under the guarantee would be approximately $73 million. These
estimates are based upon forecasted rents to be charged by BAC 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 2007, AMTC entered into a euro denominated revolving credit facility, pursuant to which the
equivalent of $66 million was outstanding as of December 27, 2008. With the lenders’ consent, AMTC may
request that the loan amount be increased by an additional amount of euro (equivalent to approximately $56
million as of December 27, 2008). 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. In September 2008, Qimonda provided
cash security equal to one third of AMTC’s outstanding loan balance pursuant to a cash pledge agreement and
was released from the guarantee agreement. The obligations of the remaining joint venture partners under the
guarantee agreement remain the same. As of December 27, 2008, our potential obligation under this guarantee
was the equivalent of $22 million plus our portion of accrued interest and expenses. Our maximum potential
liability under this guarantee in the event the AMTC revolving credit facility is increased as set for above would
be approximately $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 this guarantee under the provisions of FASB Interpretation No. 45,
Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45) and concluded it was immaterial to our financial position or results of
operations. Upon approval of the partners and banks, our partnership interests in the AMTC and the BAC will be
transferred to The Foundry Company subsequent to the consummation of the transactions contemplated by the
Master Transaction Agreement.
In January 2009, Qimonda filed an application with the local court in Munich to commence insolvency
proceedings. The local Munich court appointed a preliminary insolvency administrator to act on behalf of
Qimonda. Under the AMTC revolving credit facility, Qimonda’s application for insolvency is considered an
event of default and upon the demand of two thirds of the lenders, all the amounts outstanding under the credit
facility may be immediately due and payable. AMTC has received a waiver from the lenders to waive the event
of default until February 27, 2009. Under the BAC term loan, an insolvency of a partner does not constitute an
event of default. However, an event of default may be triggered under the BAC term loan under certain
circumstances, such as an event that results in a material adverse effect on the joint venture, or if a partner ceases
to continue its business or does not fulfill certain material obligations.
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 SEC reports and filings.
In light of the current macroeconomic conditions and the continued corrections in the supply chain, we
expect revenue to decrease in the first quarter of 2009 compared to the fourth quarter of 2008. In addition, as a
result of the additional head count reductions and other cost cutting measures announced in January 2009, we
expect to record restructuring charges in the first and second quarters of 2009.
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