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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 27, 1998
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 1-7882
ADVANCED MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1692300
(I.R.S. Employer Identification No.)
(State or other jurisdiction of
incorporation or organization)
One AMD Place, 94086
Sunnyvale, California (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (408) 732-2400
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange
(Title of each class) on which registered)
--------------------- ----------------------
$.01 Par Value Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Aggregate market value of the voting stock held by non-affiliates as of
March 1, 1999.
$2,665,120,199
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
146,161,636 shares as of March 1, 1999.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Stockholders for the fiscal year ended
December 27, 1998, are incorporated into Parts II and IV hereof.
(2) Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on April 29, 1999, are incorporated into Part III hereof.
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AMD, the AMD logo, and combinations thereof, Advanced Micro Devices, Vantis,
NexGen, K86, K86 RISC SUPERSCALAR, AMD-K5, AMD-K6, AMD-K6-2, AMD-K6-III, AMD-
K7, SLAC, 3DNow!, Nx586 and Nx686 are either our trademarks or our registered
trademarks. Microsoft, MS-DOS, Windows, Windows 95, Windows 98 and Windows NT
are either registered trademarks or trademarks of Microsoft Corporation.
Pentium is a registered trademark and Celeron is a trademark of Intel
Corporation. Other terms used to identify companies and products may be
trademarks of their respective owners.
2
PART I
ITEM 1. BUSINESS
Cautionary Statement Regarding Forward-Looking Statements
The statements in this report that are forward-looking are based on current
expectations and beliefs and involve numerous risks and uncertainties that
could cause actual results to differ materially. The forward-looking
statements relate to operating results; anticipated cash flows; realization of
net deferred tax assets; capital expenditures; adequacy of resources to fund
operations and capital investments; our ability to access external sources of
capital; our ability to transition to new process technologies; our ability to
increase unit shipments of microprocessors at higher speed grades; anticipated
market growth; Year 2000 costs; the effect of foreign currency hedging
transactions; the effect of adverse economic conditions in Asia; our new
integrated manufacturing and design facility in Dresden, Germany (Dresden Fab
30); and the Fujitsu AMD Semiconductor Limited (FASL) manufacturing
facilities. For a discussion of the factors that could cause actual results to
differ materially from the forward-looking statements, see "Risk Factors" and
such other risks and uncertainties as set forth below in this report or
detailed in our other Securities and Exchange Commission reports and filings.
General
Advanced Micro Devices, Inc. was incorporated under the laws of Delaware on
May 1, 1969. Our mailing address and executive offices are located at One AMD
Place, Sunnyvale, California 94086, and our telephone number is (408) 732-
2400. Unless otherwise indicated, references to "AMD," "we" and "us" in this
report include our subsidiaries.
We are a semiconductor manufacturer with manufacturing facilities in the
U.S., Europe and Asia and sales offices throughout the world. Our products
include a wide variety of industry-standard integrated circuits (ICs) which
are used in many diverse product applications such as telecommunications
equipment, data and network communications equipment, consumer electronics,
personal computers (PCs) and workstations.
For segment information with respect to sales, operating results and
identifiable assets, refer to the information set forth in Note 9 of the
Consolidated Financial Statements contained in our 1998 Annual Report to
Stockholders.
For a discussion of the risk factors related to our business operations,
please see the "Cautionary Statement Regarding Forward-Looking Statements" and
"Risk Factors" sections set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our 1998 Annual
Report to Stockholders.
The IC Industry
The IC market has grown dramatically over the past ten years, driven
primarily by the demand for electronic business and consumer products. Today,
virtually all products involving electronics use ICs, including PCs and
related peripherals, voice and data communications and networking products,
facsimile and photocopy machines, home entertainment equipment, industrial
control equipment and automobiles.
The market for ICs can be divided into separate markets for digital and
analog devices. We participate primarily in the market for digital ICs. The
three principal types of digital ICs used in most electronic systems are:
. microprocessors, which are used for control and computing tasks;
. memory circuits, which are used to store data and programming
instructions; and
. logic circuits, which are employed to manage the interchange and
manipulation of digital signals within a system.
3
A discussion of the principal parts of the digital IC market in which we
participate follows.
The Microprocessor Market
The microprocessor, an IC generally consisting of millions of transistors,
serves as the central processing unit, or brain, of a computer system. The
microprocessor is typically the most critical component to the performance and
efficiency of a PC. The microprocessor controls data flowing through the
electronic system and manipulates such data as specified by the hardware or
software which controls the system. In 1981, IBM introduced its first PC
containing a microprocessor based upon the x86 instruction set developed by
Intel Corporation and utilizing the Microsoft(R) Corporation MS-DOS(TM)
operating system. As circuit design and very large scale integration process
technology have evolved, performance and functionality of each new generation
of x86 microprocessors have increased.
The microprocessor business is characterized by short product life cycles,
intense price competition and rapid advances in product design and process
technology. Today, the greatest demand for microprocessors is from PC
manufacturers and, in particular, for microprocessors which are Microsoft
Windows(R) compatible and are based on the x86 instruction set. Improvements
in the performance characteristics of microprocessors and decreases in
production costs resulting from advances in process technology have broadened
the market for PCs and increased the demand for microprocessors. The
microprocessor market is currently dominated by Intel.
The establishment of hardware and software standards for PCs and the
emergence of numerous PC suppliers have caused the PC industry to be extremely
competitive, with short product life cycles, limited product differentiation
and substantial price competition. To compete more effectively, most PC
suppliers have evolved from fully integrated manufacturers with proprietary
system designs to vendors focused on building brand recognition and
distribution capabilities. Almost all of these suppliers now rely either on
Intel or on third-party manufacturers for the major subsystems of their PCs,
such as the motherboard. These suppliers are also increasingly outsourcing the
design and manufacture of complete systems. The third-party manufacturers of
these subsystems, based primarily in Asia, are focused on providing PCs and
motherboards that incorporate the latest trends in features and performance at
low prices. Increasingly, these third-party manufacturers are also supplying
fully configured PC systems through alternative distribution channels.
Embedded processors are also an important segment of the microprocessor
market. Embedded processors are general purpose devices used to carry out a
single application with limited user interface and programmability. A system
designed around an embedded processor usually cannot be programmed by an end
user because the system is preprogrammed to execute a specific task. Key
markets for embedded processors include telecommunications, networking, office
automation, storage, automotive applications and industrial control.
The Memory Market
Memory ICs store data or programs and are characterized as either volatile
or non-volatile. Volatile devices lose their stored information after
electrical power is shut off, while non-volatile devices retain their stored
information. The three most significant categories of semiconductor memory are
(1) Dynamic Random Access Memory (DRAM) and (2) Static Random Access Memory
(SRAM), both of which are volatile memories, and (3) non-volatile memory,
which includes Read-Only Memory (ROM), Flash memory and Erasable Programmable
Read-Only Memory (EPROM) devices. DRAM provides large capacity main memory,
and SRAM provides specialized high-speed memory. Flash and other non-volatile
memory devices are used in applications in which data must be retained after
power is turned off. We do not produce any DRAM products, which are the
largest segment of the memory market, or SRAM products.
Several factors have contributed to an increasing demand for memory devices
in recent years, including:
. the expanding unit sales of PCs in the business and consumer market
segments;
. the increasing use of PCs to perform memory-intensive graphics and
multimedia functions;
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. the volume of memory required to support faster microprocessors;
. the proliferation of increasingly complex PC software;
. the increasing use of cellular phones; and
. the increasing performance requirements of workstations, servers and
networking and telecommunications equipment.
We believe that Flash memory devices are being utilized for an expanding
range of uses. The ability of Flash memory devices to be electrically
rewritten to update parameters or system software provides greater flexibility
and ease of use than other non-volatile memory devices, such as ROM or EPROM
devices. Flash memory can be used to provide storage of control programs and
system-critical data in communication devices such as cellular telephones and
routers (devices used to transfer data between local area networks). Another
common application for Flash memory is in PC cards, which are inserted into
notebook and subnotebook computers or personal digital assistants to provide
added data storage.
The Logic Market
Logic devices consist of structurally interconnected groupings of simple
logical "AND" and logical "OR" functions, commonly described as "gates."
Typically, complex combinations of individual gates are required to implement
the specialized logic functions required for system applications. The greater
the number of gates on a logic device, the higher that logic device's density
and, in general, device cost (for a particular process and architecture).
Logic devices are generally grouped into five families of products (from
lowest density to highest density):
. standard logic devices;
. programmable logic devices (PLDs);
. conventional gate-arrays;
. standard cells; and
. full custom ICs.
Conventional gate-arrays, standard cells and full-custom ICs are often
referred to as application-specific ICs (ASICs).
Many manufacturers of electronic systems are striving to develop new and
increasingly complex products to rapidly address evolving market
opportunities. Achievement of this goal often precludes the use of standard
logic ICs and ASICs. Standard logic ICs generally perform simple functions and
are not customizable, limiting a manufacturer's ability to adequately
customize an end-product system. Although ASICs can be manufactured to perform
customized functions, they generally involve relatively high initial design,
engineering and manufacturing costs and significant design risks, and may
increase an end-product's time to market. As a result, ASICs are generally
limited to high-volume products, and products for which time to market may be
less critical.
Unlike ASICs and standard logic ICs, PLDs are standard products, purchased
by system manufacturers in an unprogrammed or blank state. Each system
manufacturer may then program the PLDs to perform a variety of specific logic
functions. Certain PLDs, including ours, are reprogrammable. This means that
the logic configuration can be modified after the device is initially
programmed, and, sometimes, while the PLD remains in the end-product system.
The programmable and reprogrammable characteristics of PLDs reduce the risk of
inventory obsolescence for system designers and distributors. The risk is
reduced because systems designers and distributors can stock a large number of
standard PLDs that may be programmed for a variety of applications. In
addition, system designers may make last minute design changes, reduce time to
market and accelerate design cycle time. Compared to standard logic ICs and
ASICs, PLDs allow system designers to more quickly design and implement custom
logic.
5
The PLD market consists primarily of three product categories, which can
generally be distinguished by their density:
. simple programmable logic devices (SPLDs);
. complex programmable logic devices (CPLDs); and
. field programmable gate arrays (FPGAs).
SPLDs, which have less than 1,000 gates, are considered low-density devices.
In contrast, CPLDs which have up to 20,000 gates, and FPGAs, which have up to
100,000 gates, are considered high-density devices.
SPLDs are typically based on common architectures that are familiar to most
system designers and are supported by standard, widely available software
tools. SPLDs are generally used in systems requiring simple logic functions.
In contrast, CPLDs and FPGAs are typically based on proprietary architectures
and require support from sophisticated software tools. In situations requiring
complex logic functions, high-density PLDs can provide important advantages
over a large cluster of low-density devices, including improved system speed,
lower power requirements and lower cost. As the prices of high-density PLDs
become more competitive, customers are increasingly migrating to CPLDs or
FPGAs to address complex logic requirements and space constraints and to
achieve power savings. We believe that a substantial portion of high-density
PLD customers use both CPLD and FPGA architectures within a single system
design, partitioning logic functions across multiple devices to optimize
overall system performance and cost. PLDs are used in complex electronic
systems, including telecommunications and networking systems, high performance
computers and peripherals, video graphics and imaging systems, and
instrumentation and test systems. PLDs are also used in a variety of consumer
electronic devices, and in medical instrumentation and industrial control
applications.
Business Groups; Products
We participate in all three technology areas within the digital IC market--
memory circuits, logic circuits and microprocessors--through (1) our AMD
segment, which consists of our three product groups--Computation Products
Group (CPG), Memory Group and Communications Group; and (2) our Vantis
segment, which consists of our programmable logic subsidiary, Vantis
Corporation.
Computation Products Group
CPG products ($1,257 million, or 50 percent, of our 1998 net sales) include
microprocessors and core logic products, with the majority of CPG's net sales
being derived from Microsoft Windows compatible microprocessors which are used
primarily in PCs.
In 1998, our most significant microprocessor product was the AMD-K6(R)-2
processor with 3DNow!(TM) technology, a sixth-generation microprocessor
product and a member of the K86(TM) microprocessor family. The K86
microprocessors are based on Superscalar RISC architecture and are designed to
be compatible with operating system software such as MS-DOS, Windows 3.X,
Windows 95(R), Windows 98(R), Windows NT(R) and UNIX. We began volume
shipments of the AMD-K6 microprocessor in the second quarter of 1997. The AMD-
K6 microprocessor was designed to be competitive in performance to Intel's
sixth-generation microprocessor, the Pentium(R) II, which was designed by
Intel specifically for desktop PCs.
In the first quarter of 1999, we introduced and began volume shipments of
the AMD-K6-III processor with 3DNow! technology, our highest performance,
sixth-generation K86 microprocessor for desktop PCs. Our introduction of the
AMD-K6-III processor with 3DNow! technology also marked the debut of our new
TriLevel Cache, an advanced cache memory architecture which improves overall
PC performance in Windows compatible desktop PCs. The AMD-K6-III
microprocessor was designed to be competitive in performance to the
Pentium III, successor to the Intel Pentium II microprocessor.
Our microprocessor business has in the past significantly impacted, and will
continue in 1999 and 2000 to significantly impact, our revenues and profit
margins and operating results. We plan to continue to make
6
significant capital expenditures to support our microprocessor products both
in the near and long term. Our ability to increase microprocessor product
revenues, and benefit fully from the substantial financial investments and
commitments that we have made and continue to make related to microprocessors,
depends upon the success of the AMD-K6 and AMD-K6-III microprocessors with
3DNow! technology, the AMD-K7(TM) microprocessor, which is our seventh-
generation, Microsoft Windows compatible microprocessor planned for
introduction by the end of the first half of 1999, and future generations of
K86 microprocessors. The microprocessor market is characterized by short
product life cycles and migration to ever higher performance microprocessors.
To compete successfully against Intel in this market, we must transition to
new process technologies at a faster pace than before and offer higher
performance microprocessors in significantly greater volumes.
Intel has dominated the market for microprocessors used in PCs for a long
time. Because of its dominant market position, Intel can set and control x86
microprocessor standards and, thus, dictate the type of product the market
requires of Intel's competitors. In addition, Intel may vary prices on its
microprocessors and other products at will and thereby affect the margins and
profitability of its competitors due to its financial strength and dominant
position. Given Intel's industry dominance and brand strength, Intel's
decisions on processor prices can impact and have impacted the average selling
prices of the AMD-K6 microprocessors, and consequently can impact and has
impacted our margins. As an extension of its dominant microprocessor market
share, Intel also now dominates the PC platform. As a result, it is difficult
for PC manufacturers to innovate and differentiate their product offerings. We
do not have the financial resources to compete with Intel on such a large
scale.
As Intel has expanded its dominance over the entirety of the PC system
platform, many PC original equipment manufacturers (OEMs) have reduced their
system development expenditures and have purchased microprocessors in
conjunction with core logic chipsets or in assembled motherboards. PC OEMs are
becoming increasingly dependent on Intel, less innovative on their own and
more of a distribution channel for Intel technology. In marketing our
microprocessors to these OEMs and dealers, we depend upon companies other than
Intel for the design and manufacture of chipsets, motherboards, basic
input/output system (BIOS) software and other components. In recent years,
these third-party designers and manufacturers have lost significant market
share to Intel. In addition, these companies produce chipsets, motherboards,
BIOS software and other components to support each new generation of Intel's
microprocessors only if Intel makes information about its products available
to them in time to address market opportunities. Delay in the availability of
such information makes, and will continue to make, it increasingly difficult
for these third parties to retain or regain market share. To compete with
Intel in this market in the future, we intend to continue to form closer
relationships with third-party designers and manufacturers of chipsets,
motherboards, BIOS software and other components. Similarly, we intend to
expand our chipset and system design capabilities, and to offer OEMs licensed
system designs incorporating our processors and companion products. We cannot
be certain, however, that our efforts will be successful.
Our AMD K-6 microprocessors are based on the Nx686 microprocessor developed
by NexGen, Inc. (NexGen). NexGen was founded in 1986 to design and market high
performance microprocessors. In September 1994, NexGen began shipping its
Nx586 processor to customers. In October 1995, NexGen announced the Nx686
processor technology. However, NexGen never introduced an Nx686 or other
sixth-generation product in the market. On January 17, 1996, we acquired
NexGen in a tax-free reorganization in which NexGen was merged directly into
AMD and all operations of NexGen were integrated into CPG. The merger was
accounted for under the pooling-of-interests method.
Memory Group
Memory Group products ($561 million, or 22 percent, of our 1998 net sales)
include Flash memory devices and EPROMs.
Flash Memory. Our Flash memory devices are used in cellular telephones,
networking equipment and other applications which require memory to be non-
volatile and rewritten. These Flash memory devices may be electrically
rewritten. This feature provides greater flexibility and ease of use than
EPROMs and other similar integrated circuits which cannot be electrically
rewritten. Communications companies use Flash memory devices
7
in cellular telephones and related equipment to enable users to add and modify
frequently called numbers and to allow manufacturers to preprogram firmware
and other information. In networking applications, Flash memory devices are
used in hubs, switches and routers to enable systems to store firmware and
reprogrammed Internet addresses and other routing information.
Competition in the market for Flash memory devices is increasing as existing
manufacturers introduce competitive products and industry-wide production
capacity increases, and as Intel continues to aggressively price its Flash
memory products. Almost all of our Flash memory devices are produced in Aizu-
Wakamatsu, Japan through Fujitsu AMD Semiconductor Limited (FASL), our joint
venture with Fujitsu Limited.
EPROMs. EPROMs represent an older generation of erasable, programmable read-
only memory technology which is used primarily in the electronic equipment
industry. These devices are used in cellular telephones, wireless base
stations, telecommunication switching equipment, automotive applications, PC
hard disk drives, printer controllers, industrial machine controls and
numerous other types of electronic equipment to store firmware which controls
the equipment's operation. EPROMs are generally preferred over more expensive
Flash memory devices in applications where end users do not need to reprogram
the information stored on the IC. We believe the market for EPROMS, which is
significantly smaller than the market for Flash memory devices, will continue
to decline as EPROMs are replaced in various applications by Flash memory
devices.
Communications Group
Communications Group products ($519 million, or 20 percent, of our 1998 net
sales) include telecommunication products, networking and input/output (I/O)
products and embedded processors.
Telecommunication Products. Our telecommunication products are used
primarily in public communications infrastructure systems and cordless
telephony applications. Specifically, the products are used in equipment such
as central office switches, digital loop carriers, wireless local loop
systems, private branch exchange (PBX) equipment and voice/data terminals.
Among our more significant products for the communications market are our line
card products. In modern telephone communications systems, voice
communications are generally transmitted between the speaker and the central
office switch in analog format, but are switched and transmitted over longer
distances in digital format. Our subscriber line interface circuits (SLIC) for
line cards connect the user's telephone wire to the telephone company's
digital switching equipment. Our subscriber line audio processing circuits
(SLAC(TM)) line cards are coder/decoders which convert analog voice signals to
a digital format and back. Our non-cellular telephony products are used in
digital cordless phones.
Networking and I/0 Products. Our networking and I/O products are used in the
data communication and internetworking industry to establish and manage
connectivity. The products are used within PCs, workstations and printers as
well as in network infrastructure equipment such as hubs, switches and
routers.
We supply ICs for business and consumer applications utilizing the 1-
megabit-per-second, 10-megabit-per-second, 100-megabit-per-second and gigabit-
per-second Ethernet local area network standards. We also offer ICs that work
with central processing units to manage selected I/O functions such as small
computer system interface disk drive controllers and communications devices.
In addition, we supply products specially designed to add additional
functions, improve performance and reduce costs in computer peripheral,
interface or mass storage applications. These are generally special-purpose
products which are designed for a specific application. In the case of some
large customers, these products are tailored for specific customers' needs.
Embedded Processors. Embedded processors are general purpose devices, which
consist of an instruction control unit and an arithmetic and logic unit, and
are used to carry out a single application with limited user interface and
programmability. We also offer a line of C186 and C188 processors for use as
embedded processors in hard disk drives. We offer an expanding range of
embedded processors based upon x86 microprocessor technology for both
communications as well as handheld computing applications. These embedded
processors are derivative of the microprocessors we sell in PCs.
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Vantis Corporation
In 1997, we transferred our operations relating to the design, development
and marketing of programmable logic devices (excluding bipolar products) to
Vantis, a wholly owned subsidiary of AMD. Vantis does not fabricate any of the
silicon wafers used in the production of its products. As a result, Vantis
relies on us and others for manufacturing. In addition, Vantis relies on us
for certain administrative and other services.
Vantis products ($205 million, or 8 percent, of our 1998 net sales) include
both complex and simple, high performance CMOS (complementary metal oxide
semiconductor) PLDs.
PLDs are standard products purchased by system manufacturers in an
unprogrammed or blank state, which can be programmed by each system
manufacturer to perform a variety of specific logic functions. Certain PLDs,
including ours, are reprogrammable such that the logic configuration can be
modified after the device is initially programmed, and, in many cases, while
the PLD remains in the end-product system. PLDs are used by manufacturers of
telecommunications and networking systems, computers and industrial and other
electronic systems to reduce product development time and costs and to improve
system performance and reliability.
Vantis has developed a broad product line of low-density and high-density
PLD products, including SPLDs and CPLDs, and is currently developing a new
line of FPGA products. PLDs are used in complex electronic systems, including
telecommunications and networking systems, high performance computers and
peripherals, video graphics and imaging systems, and instrumentation and test
systems. PLDs are also used in a variety of consumer electronic devices, and
in medical instrumentation and industrial control applications.
Customers utilizing PLDs generally use special software "fitters," usually
provided by the suppliers of the PLDs, that allow electrical circuit designs
to be implemented using CPLDs for FPGAs. Vantis provides its PLD customers
with software fitters which it has developed internally or has licensed from
third parties. In 1997, Vantis initiated efforts to internally manage and
control the development and maintenance of software fitters for our products.
However, Vantis is dependent on third parties for certain software that is
bundled with Vantis' software for sale to customers. We cannot give any
assurance that our efforts to internally develop and maintain the software
needed to sell and support its products will be successful. If Vantis is
unable to continue to obtain appropriate software and improvements from third
parties, to license alternative software from another third party, or to
successfully develop and maintain its own software internally, this could
materially and adversely affect Vantis' business, including the timing of new
or improved product introductions, which could have a material adverse effect
on our business.
In January 1999, we successfully completed a consent solicitation from
registered holders of our $400,000,000 aggregate principal amount of 11
Percent Senior Secured Notes due 2003, which were issued pursuant to an
indenture dated August 1, 1996 between AMD and United States Trust Company of
New York (the Indenture). Upon receipt of the required consents, we adopted
amendments to the Indenture which permit Vantis to adopt equity-based
incentive plans for its directors, officers and employees. The amendments also
modify certain restrictive covenants contained in the Indenture to permit,
among other things, an initial public offering of all or any portion of our
equity interests in Vantis or an issuance or exchange of Vantis' equity
interests for interests in other entities without compliance with certain
financial tests previously set forth in the Indenture.
Research and Development; Manufacturing Technology
Our expenses for research and development were $567 million in 1998, $468
million in 1997 and $401 million in 1996. These expenses represented 22
percent of net sales in 1998, 20 percent of net sales in 1997 and 21 percent
of net sales in 1996. Our research and development expenses are charged to
operations as incurred. Most of our research and development personnel are
integrated into the engineering staff.
9
Manufacturing technology is the key determinant in the improvement in
semiconductor products. Each new generation of process technology has resulted
in products with higher speeds and greater performance produced at lower cost.
We continue to make significant infrastructure investments to enable us to
continue to achieve high volume, high reliability and low cost production
using leading edge process technology.
Our efforts concerning process technologies are focused in three major
areas: logic technology used by our microprocessors and embedded processors;
non-volatile memory technology used by Flash memory products; and programmable
logic technology used in the Vantis programmable logic products. Our goals are
to increase density and improve product performance, to increase the clock
speed for microprocessor products and to reduce the access time for non-
volatile memory products.
In order to remain competitive, we must make continuing substantial
investments in improving our process technologies. In particular, we have made
and continue to make significant research and development investments in the
technologies and equipment used in the fabrication of our microprocessor
products and in the fabrication of Flash memory devices. If we are not
successful in our microprocessor and Flash memory businesses, we will be
unable to recover such investments, which could have a material adverse effect
on our business. In addition, if we are unable to remain competitive with
respect to process technology we could be materially and adversely affected.
Competition
The IC industry is intensely competitive and, historically, has experienced
rapid technological advances in product and system technologies. After a
product is introduced, prices normally decrease over time as production
efficiency and competition increase, and as successive generations of products
are developed and introduced for sale. Technological advances in the industry
result in frequent product introductions, regular price reductions, short
product life cycles and increased product capabilities that may result in
significant performance improvements. Competition in the sale of ICs is based
on:
. performance;
. product quality and reliability;
. price;
. adherence to industry standards;
. software and hardware compatibility;
. marketing and distribution capability;
. brand recognition;
. financial strength; and
. ability to deliver in large volumes on a timely basis.
In each particular market in which we participate, we face competition from
different groups of companies. With respect to microprocessors, Intel holds a
dominant market position. With respect to the Memory Group, our principal
competitors are Intel, Sharp and Atmel. We compete to a lesser degree with
Fujitsu, our joint venture partner in FASL. With respect to the Communications
Group product lines, our principal competitors are SGS-Thomson
Microelectronics N.V., Texas Instruments Incorporated, Siemens Corporation,
NEC Corporation, LM Ericsson, Alcatel Alsthom, National Semiconductor, 3Com
Corporation, Intel Corporation and Motorola, Inc. In Vantis' market, our
principal competitors are Altera Corporation, Lattice Semiconductor
Corporation, Xilinx, Inc. and other smaller companies focused on PLD
development and production.
Manufacturing Facilities
Our current IC manufacturing facilities are described in the chart set forth
below:
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Production Approx.
Wafer Size Technology Clean Room
Facility Location (Diameter in Inches) (in Microns) (Square Footage)
----------------- ------------------- ----------- ---------------
Austin, TX
Fab 25................ 8 0.25 89,700
Fab 15(/1/)........... 6 0.7 22,000
Fab 14(/1/)........... 6 0.8 & 0.55 22,000
Fab 10(/2/)........... 5 0.9 22,000
Aizu-Wakamatsu, Japan
FASL(/3/)............. 8 0.35 & 0.5 70,000
FASL II(/3/).......... 8 0.35 91,000
Sunnyvale, CA
SDC................... 6 & 8 0.18 & 0.25 42,500
- --------
(1) We plan to consolidate the operations of Fab 14 and Fab 15 in 1999.
(2) Fab 10 decreased production levels and closed during 1998.
(3) We own 49.992 percent of FASL. Fujitsu owns 50.008 percent of FASL.
In 1997, FASL completed construction of a second manufacturing facility in
Aizu-Wakamatsu, Japan (FASL II) at a site contiguous to the existing FASL
facility. In 1998, equipment was installed and production was initiated in
FASL II. In addition, we commenced construction in the second quarter of 1997
of a manufacturing facility in Dresden, Germany (Dresden Fab 30), through AMD
Saxony Manufacturing GmbH (AMD Saxony), an indirect wholly owned German
subsidiary of AMD. At the end of 1997, we completed construction of the plant
and administration building for Dresden Fab 30, and in 1998 we installed
equipment in the building and began testing. We also have foundry arrangements
for the production of our products by third parties.
Our current assembly and test facilities are described in the chart set
forth below:
Approx.
Assembly & Test
Facility Location Square Footage Activity
----------------- --------------- ---------------
Penang, Malaysia............................. 377,000 Assembly & Test
Bangkok, Thailand............................ 78,000 Assembly & Test
Singapore.................................... 162,000 Test
In addition to the assembly and test facilities described above, we have
constructed an additional assembly and test facility in Suzhou, China. We
began operations in Suzhou in the first quarter of 1999. Foreign manufacturing
and construction of foreign facilities entails political and economic risks,
including political instability, expropriation, currency controls and
fluctuations, changes in freight and interest rates, and loss or modification
of exemptions for taxes and tariffs. For example, if we were unable to
assemble and test our products abroad, or if air transportation between the
United States and our overseas facilities were disrupted, there could be a
material adverse effect on our business.
Certain Material Agreements. Set forth below are descriptions of certain
material contractual relationships we have relating to FASL, Dresden Fab 30
and Motorola.
FASL. In 1993, we formed a joint venture with Fujitsu, FASL, for the
development and manufacture of Flash memory devices. Through FASL, the two
companies have constructed and are operating an advanced IC manufacturing
facility in Aizu-Wakamatsu, Japan, to produce Flash memory devices. The
facility began volume production in the first quarter of 1995, and utilizes
eight-inch wafer processing technologies capable of producing products with
geometrics of 0.5 micron or smaller.
11
In 1997, FASL completed construction of a second Flash memory device wafer
fabrication facility, FASL II, at a site contiguous to the existing FASL
facility. In 1998, equipment was installed and production was initiated in
FASL II. We expect the facility, including equipment, to cost approximately $1
billion when fully equipped. Capital expenditures for FASL II construction to
date have been funded by cash generated from FASL operations and local
borrowings by FASL. To the extent that FASL is unable to secure the necessary
funds for FASL II, we may be required to contribute cash or guarantee third-
party loans in proportion to our 49.992 percent interest in FASL. As of
December 27, 1998, we had loan guarantees of $81 million outstanding with
respect to these loans. The planned FASL II costs are denominated in yen and
are, therefore, subject to change due to foreign exchange rate fluctuations.
In connection with FASL, AMD and Fujitsu have entered into various joint
development, cross-license and investment arrangements. Accordingly, the
companies are providing their product designs and process and manufacturing
technologies to FASL. In addition, both companies are collaborating in
developing manufacturing processes and designing Flash memory devices for
FASL. The right of each company to use the licensed intellectual property of
the other with respect to certain products is limited both in scope and
geographic areas. For instance, AMD and Fujitsu have cross-licensed their
respective intellectual property to produce stand-alone Flash memory devices
with geometrics of 0.5 micron or smaller within the joint venture.
Furthermore, our ability to sell Flash memory products incorporating Fujitsu
intellectual property, whether or not produced by FASL, is also limited in
certain territories, including Japan and Asia (excluding Taiwan). Fujitsu is
likewise limited in its ability to sell Flash memory devices incorporating our
intellectual property, whether or not produced by FASL, in certain territories
including the United States and Taiwan.
Dresden Fab 30. AMD Saxony has constructed and is installing equipment in
Dresden Fab 30, a 900,000-square-foot submicron integrated circuit
manufacturing and design facility located in Dresden, in the State of Saxony,
Germany. AMD, the Federal Republic of Germany, the State of Saxony and a
consortium of banks are supporting the project. We currently estimate
construction and facilitization costs of Dresden Fab 30 to be approximately
$1.9 billion. In March 1997, AMD Saxony entered into a loan agreement and
other related agreements (the Dresden Loan Agreements) with a consortium of
banks led by Dresdner Bank AG. The Dresden Loan Agreements provide for the
funding of the construction and facilitization of Dresden Fab 30. The funding
consists of:
. equity, subordinated loans and loan guarantees from AMD;
. loans of $989 million (denominated in deutsche marks) from a consortium
of banks led by Dresdner Bank AG; and
. capital investment grants and allowances, subsidies and loan guarantees
from the Federal Republic of Germany and the State of Saxony.
The Dresden Loan Agreements, which were amended in February 1998 to reflect
upgrades in wafer production technology as well as the decline in the deutsche
mark relative to the U.S. dollar, require that we partially fund Dresden Fab
30 project costs in the form of subordinated loans to, or equity investments
in, AMD Saxony. The Dresden Loan Agreements also provide that we will:
. provide interim funding to AMD Saxony if capital investment allowances or
interest subsidies to be received by AMD Saxony are delayed;
. fund shortfalls in government subsidies resulting from any default under
the subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreements until Dresden Fab 30 has been completed;
. fund certain contingent obligations, including project cost overruns, if
any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30,
if AMD Saxony does not meet its fixed charge coverage ratio covenant.
12
We completed construction of the plant and administration building for
Dresden Fab 30 at the end of 1997. In 1998, we installed equipment in the
building and began testing. The planned Dresden Fab 30 costs are denominated
in deutsche marks and are, therefore, subject to change based on applicable
conversion rates. We entered into foreign currency hedging transactions for
Dresden Fab 30 in 1997 and 1998 and anticipate entering into additional such
foreign currency hedging transactions in the first quarter of 1999 and in the
future.
Motorola. In 1998, we entered into an alliance with Motorola for the
development of Flash memory and logic technology. The alliance includes a
seven-year technology development and license agreement and a patent cross-
license agreement. The agreements provide that we will co-develop with
Motorola future generation logic process and embedded Flash technologies. The
licenses to each generation of technology vary in scope relative to the
contributions to technology development made by both companies. Subject to
certain conditions, the companies will share:
. ownership to jointly developed technology and any intellectual property
rights relating to such technology;
. development costs for mutually agreed upon facilities, tasks and
technologies; and
. foundry support.
In addition, we will gain access to Motorola's semiconductor logic process
technology, including copper interconnect technology. In exchange, we will
develop and license to Motorola a Flash module design to be used in Motorola's
future embedded Flash products. The licenses to logic process technologies
granted to AMD may be subject to variable royalty rates, which are dependent
on the technology transferred and subject to certain other conditions.
Motorola will have additional rights, subject to certain conditions, to make
stand-alone Flash devices, and to make and sell certain data networking
devices. The rights to data networking devices may be subject to variable
royalty payment provisions.
Marketing and Sales
Our products are marketed and sold under the AMD trademark. We employ a
direct sales force through our principal facilities in Sunnyvale, California,
and field sales offices throughout the United States and abroad (primarily
Europe and Asia Pacific). We also sell our products through third-party
distributors and independent representatives in both domestic and
international markets pursuant to nonexclusive agreements. The distributors
also sell products manufactured by our competitors, including those products
for which we are an alternate source. One of our OEMs, Compaq Computer
Corporation, accounted for approximately 12 percent of 1998 net sales. No
other single distributor or OEM customer accounted for 10 percent or more of
net sales in 1998.
Distributors typically maintain an inventory of our products. In most
instances, our agreements with distributors protect their inventory of our
products against price reductions, as well as products that are slow moving or
have been discontinued. These agreements, which may be canceled by either
party on a specified notice, generally allow for the return of our products if
the agreement with the distributor is terminated. The market for our products
is generally characterized by, among other things, severe price competition.
The price protection and return rights we offer to our distributors could
materially and adversely affect us if there is an unexpected significant
decline in the price of our products.
Our international sales operations entail political and economic risks,
including expropriation, currency controls, exchange rate fluctuations,
changes in freight rates and changes in rates and exemptions for taxes and
tariffs.
Raw Materials
Certain raw materials we use in the manufacture of our products are
available from a limited number of suppliers. For example, a few foreign
companies principally supply several types of the IC packages purchased by us,
as well as by the majority of other companies in the semiconductor industry.
Interruption of supply or increased demand in the industry could cause
shortages in various essential materials. We would have to reduce our
manufacturing operations if we were unable to procure certain of these
materials. This reduction in our manufacturing operations could have a
material adverse effect on us. To date, we have not experienced significant
difficulty in obtaining necessary raw materials.
13
Environmental Regulations
We could possibly be subject to fines, suspension of production, alteration
of our manufacturing processes or cessation of our operations if we fail to
comply with present or future governmental regulations related to the use,
storage, handling, discharge or disposal of toxic, volatile or otherwise
hazardous chemicals used in the manufacturing process. Such regulations could
require us to acquire expensive remediation equipment or to incur other
expenses to comply with environmental regulations. Our failure to control the
use, disposal or storage of, or adequately restrict the discharge of,
hazardous substances could subject us to future liabilities and could have a
material adverse effect on our business.
Intellectual Property and Licensing
We have been granted over 2,014 United States patents, and over 2,848 patent
applications are pending in the United States. In certain cases, we have filed
corresponding applications in foreign jurisdictions. We expect to file future
patent applications in both the United States and abroad on significant
inventions as we deem appropriate.
In January of 1995, we reached an agreement with Intel to settle all
previously outstanding legal disputes between the two companies. As part of
the settlement, in December 1995, we signed a five-year, comprehensive cross-
license agreement with Intel which expires on December 31, 2000. The agreement
provides that after December 20, 1999, the parties will negotiate in good
faith a patent cross-license agreement to be effective on January 1, 2001. The
existing cross-license agreement gives AMD and Intel the right to use each
others' patents and certain copyrights, including copyrights to the x86
instruction sets but excluding other microprocessor microcode copyrights. The
cross-license is royalty-bearing for our products that use certain Intel
technologies. We are required to pay Intel minimum non-refundable royalties
during the years 1997 through 2000.
In addition, we have entered into numerous cross-licensing and technology
exchange agreements with other companies under which they both transfer and
receive technology and intellectual property rights. Although we attempt to
protect our intellectual property rights through patents, copyrights, trade
secrets and other measures, we cannot give any assurance that we will be able
to protect our technology or other intellectual property adequately or that
competitors will not be able to develop similar technology independently. We
cannot give any assurance that any patent applications that we may file will
be issued or that foreign intellectual property laws will protect our
intellectual property rights. We cannot give any assurance that any patent
licensed by or issued to us will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to us. Furthermore, we cannot give any assurance that others will
not independently develop similar products, duplicate our products or design
around our patents and other rights.
From time to time, we have been notified that we may be infringing
intellectual property rights of others. If any claims are asserted against us,
we may seek to obtain a license under the third party's intellectual property
rights. We could decide, in the alternative, to resort to litigation to
challenge these claims. These challenges could be extremely expensive and
time-consuming and could materially and adversely affect us. We cannot give
any assurance that all necessary licenses can be obtained on satisfactory
terms, or that litigation may always be avoided or successfully concluded.
Backlog
We manufacture and market standard lines of products. Consequently, a
significant portion of our sales are made from inventory on a current basis.
Sales are made primarily pursuant to purchase orders for current delivery, or
agreements covering purchases over a period of time, which are frequently
subject to revision and cancellation without penalty. Generally, in light of
current industry practice and experience, we do not believe that such
agreements provide meaningful backlog figures or are necessarily indicative of
actual sales for any succeeding period.
Employees
On January 24, 1999, we employed approximately 13,800 employees, none of
whom are represented by collective bargaining arrangements. We believe that
our relationship with our employees is generally good.
14
ITEM 2. PROPERTIES
Our principal engineering, manufacturing, warehouse and administrative
facilities comprise approximately 3.3 million square feet and are located in
Sunnyvale, California and Austin, Texas. Over 2.3 million square feet of this
space is in buildings we own.
We lease property containing two buildings with an aggregate of
approximately 360,000 square feet, located on 45.6 acres of land in Sunnyvale,
California (One AMD Place). The lease term ends in December 2018. In 1993, we
entered into a lease agreement for approximately 175,000 square feet located
adjacent to One AMD Place (known as AMD Square) to be used by the product
groups as engineering offices and laboratory facilities. In addition, we
entered into lease agreements for approximately 83,950 square feet, also
located adjacent to One AMD Place (the Vantis Facility). Vantis relocated to
the Vantis Facility in the first half of 1998.
We also own or lease facilities containing approximately 997,429 square feet
for our operations in Malaysia, Thailand and Singapore. We lease approximately
15 acres of land in Suzhou, China for our assembly and test facility. In 1996,
we acquired approximately 103 acres of land in Dresden, Germany for Dresden
Fab 30. Dresden Fab 30 is encumbered by a lien securing borrowings of AMD
Saxony. Fab 25 is encumbered by a lien securing our $400 million of Senior
Secured Notes and our $400 million syndicated bank loan agreement.
We lease 37 sales offices in North America, 10 sales offices in Asia
Pacific, 12 sales offices in Europe and one sales office in South America for
our direct sales force. These offices are located in cities in major
electronics markets where concentrations of our customers are located.
Leases covering our facilities expire over terms of generally one to twenty
years. We currently do not anticipate significant difficulty in either
retaining occupancy of any of our facilities through lease renewals prior to
expiration or through month-to-month occupancy, or replacing them with
equivalent facilities.
ITEM 3. LEGAL PROCEEDINGS
1. Environmental Matters. Since 1981, we have discovered, investigated and
begun remediation of three sites where releases from underground chemical
tanks at our facilities in Santa Clara County, California, adversely affected
the groundwater. The chemicals released into the groundwater were commonly in
use in the semiconductor industry in the wafer fabrication process prior to
1979. At least one of the released chemicals (which we no longer use) has been
identified as a probable carcinogen.
In 1991, we received four Final Site Clean-up Requirements Orders from the
California Regional Water Quality Control Board, San Francisco Bay Region
relating to the three sites. One of the orders named us as well as TRW
Microwave, Inc. and Philips Semiconductors Corporation. In January 1999, we
entered into a settlement agreement with Philips whereby Philips will assume
costs allocated to us under this order, although we would be responsible for
these costs in the event that Philips does not fulfill its obligations under
the settlement agreement. Another of the orders named us as well as National
Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If we fail to satisfy federal compliance requirements or
inadequately performs the compliance measures, the government (1) can bring an
action to enforce compliance or (2) can undertake the desired response actions
itself and later bring an action to recover its costs, and penalties, which is
up to three times the costs of clean-up activities, if appropriate. The
statute of limitations has been tolled on the claims of landowners adjacent to
the Santa Clara County Superfund sites for causes of action such as
negligence, nuisance and trespass.
We have computed and recorded the estimated environmental liability in
accordance with applicable accounting rules and have not recorded any
potential insurance recoveries in determining the estimated costs of the
cleanup. The amount of environmental charges to earnings has not been material
during any of the last three fiscal years. We believe that the potential
liability, if any, in excess of amounts already accrued with respect to the
foregoing environmental matters will not have a material adverse effect on our
business.
15
We received a notice dated October 14, 1998 from the Environmental
Protection Agency (EPA) indicating that the EPA has determined AMD to be a
potentially responsible party that arranged for disposal of hazardous
substances at a site located in Santa Barbara County, California. We believe
that this matter will not have a material adverse effect on our business.
2. McDaid v. Sanders, et al. (Case No. C-95-20750-JW, N.D. Cal.); Kozlowski,
et al. v. Sanders, et al. (Case No. C-95-20829-JW, N.D. Cal.). The McDaid and
Kozlowski complaints were filed in November 1995. Both actions allege
violations of Section 10(b) of the Securities Exchange Act of 1934, as amended
(the Exchange Act), and Rule 10b-5 promulgated thereunder, against AMD and
certain individual officers and directors of AMD, and purportedly were filed
on behalf of all persons who purchased or otherwise acquired our common stock
during the period April 11, 1995 through September 25, 1995. We entered into a
Memorandum of Understanding, which settled the litigation for $11.5 million.
Our Board of Directors approved the settlement on April 30, 1998. The Federal
Court approved the settlement on November 2, 1998 and dismissed the case.
3. Advanced Micro Devices, Inc. v. Altera Corporation (Case No. C-94-20567-
RMW, N. D. Cal.). This litigation, which began in 1994, involves multiple
claims and counterclaims for patent infringement relating to AMD's and Altera
Corporation's PLDs. In a trial held in May 1996, a jury found that at least
five of the eight AMD patents-in-suit were licensed to Altera. As a result of
the bench trial held in August 1997, the Court held that Altera is licensed to
the three remaining AMD patents-in-suit. Seven patents were asserted by Altera
in its counterclaim against us. The Court determined that we are licensed to
five of the seven patents and two remain in suit. Altera filed a motion to
recover attorneys' fees in November 1997. We then filed, and the Court
granted, a motion to stay determination of the attorneys' fees motion until
resolution of its appeal. We have filed an appeal of the rulings of the jury
and Court determinations that Altera is licensed to each of our eight patents-
in-suit. Both parties filed briefs and the Federal Court of Appeal heard oral
argument on our appeal on November 3, 1998. Based upon information presently
known to management, we do not believe that the ultimate resolution of this
lawsuit will have a material adverse effect on our business.
4. Lemelson Medical, Education & Research Foundation, Limited
Partnership. We have been informed that a complaint was filed on July 31, 1998
in the United States District Court for the District of Arizona by Lemelson
Medical, Education & Research Foundation, Limited Partnership, as plaintiff,
against 26 semiconductor companies, including our subsidiary, Vantis. The
complaint alleges infringement of numerous patents held by Mr. Jerome H.
Lemelson relating to "machine vision," "automatic identification," "LOCOS" and
"beam processing" technology. At this time, Vantis has been dismissed without
prejudice. A license agreement between AMD and the Lemelson Foundation was
successfully negotiated and signed in the first quarter of 1999 that protects
Vantis from this case being refiled against it.
5. Ellis Investment Co., Ltd. v. Advanced Micro Devices, Inc., et al. (Case
No. C-99-01102-BZ, N.D. Cal.). This class action complaint was filed against
AMD and an individual officer of AMD on March 10, 1999. The complaint alleges
that we made misleading statements about the design and production of the AMD-
K6 microprocessor in violation of Section 10(b) of the Exchange Act and Rule
10b-5 promulgated thereunder. The plaintiff seeks to represent a class
comprised of all persons who purchased our common stock during the period from
November 12, 1998 through March 8, 1999. The complaint seeks unspecified
damages, costs and fees. Following the filing of this complaint, several law
firms published press releases announcing that they also had filed, or intend
to file, substantially similar class action complaints. As of March 12, 1999,
we had not seen or been served with those complaints. Based upon information
presently known to management, we do not believe that the ultimate resolution
of these lawsuits will have a material adverse effect on our business.
6. Other Matters. We are a defendant or plaintiff in various other actions
which arose in the normal course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock (symbol AMD) is listed on the New York Stock Exchange. The
information regarding market price range, dividend information and number of
holders of our common stock appearing under the captions "Supplementary
Financial Data" and "Financial Summary" on pages 46 and 47 of our 1998 Annual
Report to Stockholders is incorporated herein by reference.
During 1998, we did not make any sales of our equity securities which were
not registered under the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
The information regarding selected financial data for the fiscal years 1994
through 1998, under the caption "Financial Summary" on page 47 of our 1998
Annual Report to Stockholder is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 5 through
23 of our 1998 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information appearing under the caption "Quantitative and Qualitative
Disclosure about Market Risk" on pages 12 and 13 of our 1998 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements at December 27, 1998 and December 28,
1997 and for each of the three years in the period ended December 27, 1998,
and the report of independent auditors thereon, and our unaudited quarterly
financial data for the two-year period ended December 27, 1998, appearing on
pages 24 through 45 of our 1998 Annual Report to Stockholders are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Item 1--Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy
Statement for our Annual Meeting of Stockholders to be held on April 29, 1999
(1999 Proxy Statement) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Directors' Fees and Expenses" and under
the main caption "Committees and Meetings of the Board of Directors," and the
information under the captions "Executive Compensation," "Employment
Agreements and Compensation Agreements" and "Change in Control Arrangements"
in our 1999 Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Principal Stockholders" and "Stock Owned
by Directors, Director Nominees and Named Executive Officers" in our 1999
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Relationships and Related Party
Transactions" in our 1999 Proxy Statement is incorporated herein by reference.
With the exception of the information specifically incorporated by reference
in Part III of this Annual Report on Form 10-K from our 1999 Proxy Statement,
our 1999 Proxy Statement shall not be deemed to be filed as part of this
report. Without limiting the foregoing, the information under the captions
"Board Compensation Committee Report on Executive Compensation" and
"Performance Graphs" in our 1999 Proxy Statement is not incorporated by
reference in this Annual Report on Form 10-K.
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
1. Financial Statements
The financial statements listed in the accompanying Index to Consolidated
Financial Statements and Financial Statement Schedule covered by the Report of
Independent Auditors are filed or incorporated by reference as part of this
Annual Report on Form 10-K. The following is a list of such financial
statements:
Page References
-----------------
1998 Annual
Form Report to
10-K Stockholders
---- ------------
Report of Ernst & Young LLP, Independent Auditors.......... -- 45
Consolidated Statements of Operations for the three years
in the period ended December 27, 1998..................... -- 24
Consolidated Balance Sheets at December 27, 1998 and
December 28, 1997......................................... -- 25
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 27, 1998......... -- 26
Consolidated Statements of Cash Flows for the three years
in the period ended December 27, 1998..................... -- 27
Notes to Consolidated Financial Statements................. -- 28-44
2. Financial Statement Schedule
The financial statement schedule listed below is filed as part of this
Annual Report on Form 10-K.
Page References
-----------------
1998 Annual
Form Report to
10-K Stockholders
---- ------------
Schedule for the three years in the period ended December
27, 1998:
Schedule II Valuation and Qualifying Accounts............. S-1 --
All other schedules have been omitted because the required information is
not present or is not present in amounts sufficient to require submission of
the schedules, or because the information required is included in the
Consolidated Financial Statements or Notes thereto. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, the 1998 Annual Report to Stockholders is not
to be deemed filed as part of this report.
3. Exhibits
The exhibits listed in the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K. The
following is a list of such Exhibits:
Exhibit
Number Description Of Exhibits
- ------- -----------------------
2.1 Agreement and Plan of Merger dated October 20, 1995, as amended, between AMD
and NexGen, Inc., filed as Exhibit 2 to AMD's Quarterly Report for the
period ended October 1, 1995, and as Exhibit 2.2 to AMD's Current Report on
Form 8-K dated January 17, 1996, is hereby incorporated by reference.
19
Exhibit
Number Description Of Exhibits
- ------- -----------------------
2.2 Amendment No. 2 to the Agreement and Plan of Merger, dated January 11, 1996,
between AMD and NexGen, Inc., filed as Exhibit 2.2 to AMD's Current Report
on Form 8-K dated January 17, 1996, is hereby incorporated by reference.
3.1 Certificate of Incorporation, as amended, filed as Exhibit 3.1 to AMD's
Quarterly Report on Form 10-Q for the period ended July 2, 1995, is hereby
incorporated by reference.
3.2 By-Laws, as amended, filed as Exhibit 3.2 to AMD's Quarterly Report on Form
10-Q for the period ended March 29, 1998, is hereby incorporated by
reference.
4.1 Form of AMD 11 Percent Senior Secured Notes due August 1, 2003, filed as
Exhibit 4.1 to AMD's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated by reference.
4.2(a) Indenture, dated as of August 1, 1996, between AMD and United States Trust
Company of New York, as trustee, filed as Exhibit 4.2 to AMD's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.2(b) First Supplemental Indenture, dated as of January 13, 1999, between AMD and
United States Trust Company of New York, as trustee.
4.3 Intercreditor and Collateral Agent Agreement, dated as of August 1, 1996,
among United States Trust Company of New York, as trustee, Bank of America
NT&SA, as agent for the banks under the Credit Agreement of July 19, 1996,
and IBJ Schroder Bank & Trust Company, filed as Exhibit 4.3 to AMD's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.4 Payment, Reimbursement and Indemnity Agreement, dated as of August 1, 1996,
between AMD and IBJ Schroder Bank & Trust Company, filed as Exhibit 4.4 to
AMD's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.5 Deed of Trust, Assignment, Security Agreement and Financing Statement, dated
as of August 1, 1996, among AMD, as grantor, IBJ Schroder Bank & Trust
Company, as grantee, and Shelley W. Austin, as trustee, filed as Exhibit 4.5
to AMD's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.6 Security Agreement, dated as of August 1, 1996, among AMD and IBJ Schroder
Bank & Trust Company, as agent for United States Trust Company of New York,
as trustee, and Bank of America NT&SA, as agent for banks, filed as Exhibit
4.6 to AMD's Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.7 Lease, Option to Purchase and Put Option Agreement, dated as of August 1,
1996, between AMD, as lessor, and AMD Texas Properties, LLC, as lessee,
filed as Exhibit 4.7 to AMD's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
4.8 Reciprocal Easement Agreement, dated as of August 1, 1996, between AMD and
AMD Texas Properties, LLC, filed as Exhibit 4.8 to AMD's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by reference.
4.9 Sublease Agreement, dated as of August 1, 1996, between AMD, as sublessee,
and AMD Texas Properties, LLC, as sublessor, filed as Exhibit 4.9 to AMD's
Current Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.10 Indenture, dated as of May 8, 1998, by and between AMD and The Bank of New
York, as trustee, filed as Exhibit 4.1 to AMD's Current Report on Form 8-K
dated May 8, 1998, is hereby incorporated by reference.
4.11 Officers' Certificate, dated as of May 8, 1998, filed as Exhibit 4.2 to
AMD's Current Report on Form 8-K dated May 8, 1998, is hereby incorporated
by reference.
20
Exhibit
Number Description Of Exhibits
- ------- -----------------------
4.12 Form of 6 Percent Convertible Subordinated Note due 2005, filed as Exhibit
4.3 to AMD's Current Report on Form 8-K dated May 8, 1998, is hereby
incorporated by reference.
4.13 AMD hereby agrees to file on request of the Commission a copy of all
instruments not otherwise filed with respect to AMD's long-term debt or any
of its subsidiaries for which the total amount of securities authorized
under such instruments does not exceed 10 percent of the total assets of AMD
and its subsidiaries on a consolidated basis.
*10.1 AMD 1982 Stock Option Plan, as amended, filed as Exhibit 10.1 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 26, 1993, is
hereby incorporated by reference.
*10.2 AMD 1986 Stock Option Plan, as amended, filed as Exhibit 10.2 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 26, 1993, is
hereby incorporated by reference.
*10.3 AMD 1992 Stock Incentive Plan, as amended, filed as Exhibit 10.3 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 26, 1993, is
hereby incorporated by reference.
*10.4 AMD 1980 Stock Appreciation Rights Plan, as amended, filed as Exhibit 10.4
to AMD's Annual Report on Form 10-K for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
*10.6 Forms of Stock Option Agreements, filed as Exhibit 10.8 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 29, 1991, are hereby
incorporated by reference.
*10.7 Form of Limited Stock Appreciation Rights Agreement, filed as Exhibit 4.11
to AMD's Registration Statement on Form S-8 (No. 33-26266), is hereby
incorporated by reference.
*10.8 AMD 1987 Restricted Stock Award Plan, as amended, filed as Exhibit 10.10 to
AMD's Annual Report on Form 10-K for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
*10.9 Forms of Restricted Stock Agreements, filed as Exhibit 10.11 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 29, 1991, are hereby
incorporated by reference.
*10.10 Resolution of Board of Directors on September 9, 1981, regarding
acceleration of vesting of all outstanding stock options and associated
limited stock appreciation rights held by officers under certain
circumstances, filed as Exhibit 10.10 to AMD's Annual Report on Form 10-K
for the fiscal year ended March 31, 1985, is hereby incorporated by
reference.
*10.11 AMD 1996 Stock Incentive Plan, as amended, filed as Exhibit 10.11 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 29, 1996, is
hereby incorporated by reference.
*10.12 Employment Agreement dated September 29, 1996, between AMD and W. J. Sanders
III, filed as Exhibit 10.11(a) to AMD's Quarterly Report on Form 10-Q for
the period ended September 29, 1996, is hereby incorporated by reference.
*10.13 Management Continuity Agreement between AMD and W. J. Sanders III, filed as
Exhibit 10.14 to AMD's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, is hereby incorporated by reference.
*10.14 Bonus Agreement between AMD and Richard Previte, filed as Exhibit 10.14 to
AMD's Quarterly Report on Form 10-Q for the period ended June 28, 1998, is
hereby incorporated by reference.
*10.15 Executive Bonus Plan, as amended, filed as Exhibit 10.16 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 25, 1994, is hereby
incorporated by reference.
21
Exhibit
Number Description Of Exhibits
------- -----------------------
*10.16 AMD Executive Incentive Plan, filed as Exhibit 10.14(b) to AMD's Quarterly
Report on Form 10-Q for the period ended June 30, 1996, is hereby
incorporated by reference.
*10.17 Form of Bonus Deferral Agreement, filed as Exhibit 10.12 to AMD's Annual
Report on Form 10-K for the fiscal year ended March 30, 1986, is hereby
incorporated by reference.
*10.18 Form of Executive Deferral Agreement, filed as Exhibit 10.17 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 31, 1989, is hereby
incorporated by reference.
*10.19 Director Deferral Agreement of R. Gene Brown, filed as Exhibit 10.18 to
AMD's Annual Report on Form 10-K for the fiscal year ended December 31,
1989, is hereby incorporated by reference.
10.20 Intellectual Property Agreements with Intel Corporation, filed as Exhibit
10.21 to AMD's Annual Report on Form 10-K for the fiscal year ended December
29, 1991, are hereby incorporated by reference.
*10.21 Form of Indemnification Agreements with former officers of Monolithic
Memories, Inc., filed as Exhibit 10.22 to AMD's Annual Report on Form 10-K
for the fiscal year ended December 27, 1987, is hereby incorporated by
reference.
*10.22 Form of Management Continuity Agreement, filed as Exhibit 10.25 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 29, 1991, is
hereby incorporated by reference.
**10.23(a) Joint Venture Agreement between AMD and Fujitsu Limited, filed as Exhibit
10.27(a) to AMD's Amendment No. 1 to its Annual Report on Form 10-K for the
fiscal year ended December 26, 1993, is hereby incorporated by reference.
**10.23(b) Technology Cross-License Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(b) to AMD's Amendment No. 1 to its Annual Report on Form 10-K
for the fiscal year ended December 26, 1993, is hereby incorporated by
reference.
**10.23(c) AMD Investment Agreement between AMD and Fujitsu Limited, filed as Exhibit
10.27(c) to AMD's Amendment No. 1 to its Annual Report on Form 10-K for the
fiscal year ended December 26, 1993, is hereby incorporated by reference.
**10.23(d) Fujitsu Investment Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(d) to AMD's Amendment No. 1 to its Annual Report on Form 10-K
for the fiscal year ended December 26, 1993, is hereby incorporated by
reference.
**10.23(e) First Amendment to Fujitsu Investment Agreement dated April 28, 1995, filed
as Exhibit 10.23(e) to AMD's Annual Report on Form 10-K for the fiscal year
ended December 29, 1996, is hereby incorporated by reference.
10.23(f) Second Amendment to Fujitsu Investment Agreement, dated February 27, 1996,
filed as Exhibit 10.23 (f) to AMD's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996, is hereby incorporated by reference.
**10.23(g) Joint Venture License Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(e) to AMD's Amendment No. 1 to its Annual Report on Form 10-K
for the fiscal year ended December 26, 1993, is hereby incorporated by
reference.
**10.23(h) Joint Development Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(f) to AMD's Amendment No. 1 to its Annual Report on Form 10-K
for the fiscal year ended December 26, 1993, is hereby incorporated by
reference.
**10.23(i) Fujitsu Joint Development Agreement Amendment, filed as Exhibit 10.23(g) to
AMD's Quarterly Report on Form 10-Q for the period ended March 31, 1996, is
hereby incorporated by reference.
22
Exhibit
Number Description Of Exhibits
------- -----------------------
10.24(a) Credit Agreement, dated as of July 19, 1996, among AMD, Bank of America
NT&SA, as administrative agent and lender, ABN AMRO Bank N.V., as
syndication agent and lender, and Canadian Imperial Bank of Commerce, as
documentation agent and lender, filed as Exhibit 99.1 to AMD's Current
Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
10.24(b) First Amendment to Credit Agreement, dated as of August 7, 1996, among AMD
Bank of America NT&SA, as administrative agent and lender, ABN AMRO Bank
N.V., as syndication agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as Exhibit 99.2 to AMD's
Current Report on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
10.24(c) Second Amendment to Credit Agreement, dated as of September 9, 1996, among
AMD, Bank of America NT&SA, as administrative agent and lender, ABN AMRO
Bank N.V., as syndication agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as Exhibit 10.24(b) to
AMD's Quarterly Report on Form 10-Q for the period ended September 29,1996,
is hereby incorporated by reference.
10.24(d) Third Amendment to Credit Agreement, dated as of October 1, 1997, among AMD,
Bank of America NT & SA, as administrative agent and lender, ABN AMRO Bank
N.V., as syndicated agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as Exhibit 10.24(d) to
AMD's Quarterly Report on Form 10-Q for the period ended September 28, 1997,
is hereby incorporated by reference.
10.24(e) Fourth Amendment to Credit Agreement, dated as of January 26, 1998, among
AMD, Bank of America NT & SA, as administrative agent and lender, ABN AMRO
Bank N.V., as syndicated agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as Exhibit 10.24(e) to
AMD's Annual Report on Form 10-K for the fiscal year ended December 28,
1997, is hereby incorporated by reference.
10.24(f) Fifth Amendment to Credit Agreement, dated as of February 26, 1998, among
AMD, Bank of America NT & SA, as administrative agent and lender, ABN AMRO
Bank, N.V., as syndicated agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as Exhibit 10.24(f) to
AMD's Annual Report on Form 10-K for the fiscal year ended December 28,
1997, is hereby incorporated by reference.
10.24(g) Sixth Amendment to Credit Agreement, dated as of June 30, 1998, among AMD,
Bank of America NT & SA, as administrative agent and lender, ABN AMRO Bank
N.V., as syndicated agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender, filed as exhibit 10.24(g) to
AMD's Current Report on Form 8-K dated July 8, 1998, is hereby incorporated
by reference.
***10.25 Technology Development and License Agreement, dated as of October 1, 1998,
among AMD and its subsidiaries and Motorola, Inc. and its subsidiaries.
***10.26 Patent License Agreement, dated as of October 1, 1998, between AMD and
Motorola, Inc.
10.27 Lease Agreement, dated as of December 22, 1998, between AMD and Delaware
Chip LLC.
*10.28(a) AMD Executive Savings Plan (Amendment and Restatement, effective as of
August 1, 1993), filed as Exhibit 10.30 to AMD's Annual Report on Form 10-K
for the fiscal year ended December 25, 1994, is hereby incorporated by
reference.
*10.28(b) First Amendment to the AMD Executive Savings Plan (as amended and restated,
effective as of August 1, 1993), filed as Exhibit 10.28(b) to AMD's Annual
Report on Form 10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
23
Exhibit
Number Description Of Exhibits
------- -----------------------
*10.28(c) Second Amendment to the AMD Executive Savings Plan (as amended and restated,
effective as of August 1, 1993), filed as Exhibit 10.28(b) to AMD's Annual
Report on Form 10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
*10.29 Form of Split Dollar Agreement, as amended, filed as Exhibit 10.31 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 25, 1994, is
hereby incorporated by reference.
*10.30 Form of Collateral Security Assignment Agreement, filed as Exhibit 10.32 to
AMD's Annual Report on Form 10-K for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
*10.31 Forms of Stock Option Agreements to the 1992 Stock Incentive Plan, filed as
Exhibit 4.3 to AMD's Registration Statement on Form S-8 (No. 33-46577), are
hereby incorporated by reference.
*10.32 1992 United Kingdom Share Option Scheme, filed as Exhibit 4.2 to AMD's
Registration Statement on Form S-8 (No. 33-46577), is hereby incorporated by
reference.
*10.33 AMD 1998 Stock Incentive Plan.
*10.34 Form of indemnification agreements with current officers and directors of
AMD, filed as Exhibit 10.38 to AMD's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994, is hereby incorporated by reference.
*10.35 Agreement to Preserve Goodwill dated January 15, 1996, between AMD and S.
Atiq Raza, filed as Exhibit 10.36 to AMD's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, is hereby incorporated by
reference.
*10.36 1995 Stock Plan of NexGen, Inc., as amended, filed as Exhibit 10.36 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 29, 1996, is
hereby incorporated by reference.
**10.37 Patent Cross-License Agreement dated December 20, 1995, between AMD and
Intel Corporation, filed as Exhibit 10.38 to AMD's Annual Report on Form 10-
K for the fiscal year ended December 31, 1995, is hereby incorporated by
reference.
10.38 Contract for Transfer of the Right to the Use of Land between AMD (Suzhou)
Limited and China-Singapore Suzhou Industrial Park Development Co., Ltd.,
filed as Exhibit 10.39 to AMD's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, is hereby incorporated by reference.
*10.39 NexGen, Inc. 1987 Employee Stock Plan, filed as Exhibit 99.3 to Post-
Effective Amendment No. 1 on Form S-8 to AMD's Registration Statement on
Form S-4 (No. 33-64911), is hereby incorporated by reference.
*10.40 1995 Stock Plan of NexGen, Inc. (assumed by AMD), as amended, filed as
Exhibit 10.37 to AMD's Quarterly Report on Form 10-Q for the period ended
June 30, 1996, is hereby incorporated by reference.
*10.41 Form of indemnity agreement between NexGen, Inc. and its directors and
officers, filed as Exhibit 10.5 to the Registration Statement of NexGen,
Inc. on Form S-1 (No. 33-90750), is hereby incorporated by reference.
10.42 Series E Preferred Stock Purchase Warrant of NexGen, Inc. issued to
PaineWebber Incorporated, filed as Exhibit 10.14 to the Registration
Statement of NexGen, Inc. on Form S-1 (No. 33-90750), is hereby incorporated
by reference.
10.43 Series F Preferred Stock Purchase Warrant of NexGen, Inc., filed as Exhibit
10.15 to the Registration Statement of NexGen, Inc. on Form S-1 (No. 33-
90750), is hereby incorporated by reference.
24
Exhibit
Number Description Of Exhibits
------- -----------------------
10.44 Series G Preferred Stock Purchase Warrant of NexGen, Inc., filed as Exhibit
10.16 to the Registration Statement of NexGen, Inc. on Form S-1 (No. 33-
90750), is hereby incorporated by reference.
**10.45 Agreement for Purchase of IBM Products between IBM and NexGen, Inc. dated
June 2, 1994, filed as Exhibit 10.17 to the Registration Statement of
NexGen, Inc. on Form S-1 (No. 33-90750), is hereby incorporated by
reference.
*10.46 Letter Agreement dated as of September, 1988, between NexGen, Inc. and S.
Atiq Raza, First Promissory Note dated October 17, 1988, and Second
Promissory Note dated October 17, 1988, as amended, filed as Exhibit 10.20
to the Registration Statement of NexGen, Inc. on Form S-1 (No. 33-90750),
are hereby incorporated by reference.
10.47 Series B Preferred Stock Purchase Warrant of NexGen, Inc. issued to Kleiner,
Perkins, Caufield and Byers IV, as amended, filed as Exhibit 10.23 to the
Registration Statement of NexGen, Inc. on Form S-1 (No. 33-90750), is hereby
incorporated by reference.
**10.48(a) C-4 Technology Transfer and Licensing Agreement dated June 11, 1996, between
AMD and IBM Corporation, filed as Exhibit 10.48 to AMD's Amendment No. 1 to
its Quarterly Report on Form 10-Q/A for the period ended September 29, 1996,
is hereby incorporated by reference.
**10.48(b) Amendment No. 1 to the C-4 Technology Transfer and Licensing Agreement,
dated as of February 23, 1997, between AMD and International Business
Machine Corporation, filed as Exhibit 10.48(a) to AMD's Quarterly Report on
Form 10-Q for the period ended March 30, 1997, is hereby incorporated by
reference.
**10.49(a) Design and Build Agreement dated November 15, 1996, between AMD Saxony
Manufacturing GmbH and Meissner and Wurst GmbH, filed as Exhibit 10.49(a) to
AMD's Annual Report on Form 10-K for the fiscal year ended December 29,
1996, is hereby incorporated by reference.
10.49(b) Amendment to Design and Build Agreement dated January 16, 1997, between AMD
Saxony Manufacturing GmbH and Meissner and Wurst GmbH filed as Exhibit
10.49(b) to AMD's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996, is hereby incorporated by reference.
**10.50(a-1) Syndicated Loan Agreement with Schedules 1, 2 and 17, dated as of March 11,
1997, among AMD Saxony Manufacturing GmbH, Dresdner Bank AG and Dresdner
Bank Luxemborg S.A., filed as Exhibit 10.50(a) to AMD's Quarterly Report on
Form 10-Q for the period ended March 30, 1997, is hereby incorporated by
reference.
**10.50(a-2) Supplemental Agreement to the Syndicated Loan Agreement dated February 6,
1998, among AMD Saxony Manufacturing GmbH, Dresdner Bank AG and Dresdner
Bank Luxemborg S.A., filed as Exhibit 10.50(a-2) to AMD's Annual Report on
Form 10-K/A (No.1) for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
**10.50(b) Determination Regarding the Request for a Guarantee by AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50(b) to AMD's Quarterly Report on
Form 10-Q for the period ended March 30, 1997, is hereby incorporated by
reference.
**10.50(c) AMD Subsidy Agreement, between AMD Saxony Manufacturing GmbH and Dresdner
Bank AG, filed as Exhibit 10.50(c) to AMD's Quarterly Report on Form 10-Q
for the period ended March 30, 1997, is hereby incorporated by reference.
**10.50(d) Subsidy Agreement, dated February 12, 1997, between Sachsische Aufbaubank
and Dresdner Bank AG, with Appendices 1, 2a, 2b, 3 and 4, filed as Exhibit
10.50(d) to AMD's Quarterly Report on Form 10-Q for the period ended March
30, 1997, is hereby incorporated by reference.
25
Exhibit
Number Description Of Exhibits
------- -----------------------
10.50(e) AMD, Inc. Guaranty, dated as of March 11, 1997, among AMD, Saxony
Manufacturing GmbH and Dresdner Bank AG, filed as Exhibit 10.50(e) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
10.50(f-1) Sponsors' Support Agreement, dated as of March 11, 1997, among AMD, AMD
Saxony Holding GmbH and Dresdner Bank AG, filed as Exhibit 10.50(f) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
10.50(f-2) First Amendment to Sponsors' Support Agreement, dated as of February 6,
1998, among AMD, AMD Saxony Holding GmbH and Dresdner Bank AG, filed as
Exhibit 10.50(f-2) to AMD's Annual Report on Form 10-K for the fiscal year
ended December 28, 1997, is hereby incorporated by reference.
10.50(g-1) Sponsors' Loan Agreement, dated as of March 11, 1997, among AMD, AMD Saxony
Holding GmbH and Saxony Manufacturing GmbH, filed as Exhibit 10.50(g) to
AMD's Quarterly Report on Form 10-Q for the period ended March 30, 1997, is
hereby incorporated by reference.
10.50(g-2) First Amendment to Sponsors' Loan Agreement, dated as of February 6, 1998,
among AMD, AMD Saxony Holding GmbH and AMD Saxony Manufacturing GmbH, filed
as Exhibit 10.50(g-2) to AMD's Annual Report on Form 10-K for the fiscal
year ended December 28, 1997, is hereby incorporated by reference.
10.50(h) Sponsors' Subordination Agreement, dated as of March 11, 1997, among AMD,
AMD Saxony Holding GmbH, AMD Saxony Manufacturing GmbH and Dresdner Bank AG,
filed as Exhibit 10.50(h) to AMD's Quarterly Report on Form 10-Q for the
period ended March 30, 1997, is hereby incorporated by reference.
10.50(i) Sponsors' Guaranty, dated as of March 11, 1997, among AMD, AMD Saxony
Holding GmbH and Dresdner Bank AG, filed as Exhibit 10.50(i) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
**10.50(j) AMD Holding Wafer Purchase Agreement, dated as of March 11, 1997, among AMD
and AMD Saxony Holding GmbH, filed as Exhibit 10.50(j) to AMD's Quarterly
Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
**10.50(k) AMD Holding Research, Design and Development Agreement, dated as of March
11, 1997, between AMD Saxony Holding GmbH and AMD, filed as Exhibit 10.50(k)
to AMD's Quarterly Report on Form 10-Q for the period ended March 30, 1997,
is hereby incorporated by reference.
**10.50(l-1) AMD Saxonia Wafer Purchase Agreement, dated as of March 11, 1997, between
AMD Saxony Holding GmbH and AMD Saxony Manufacturing GmbH, filed as Exhibit
10.50(l) to AMD's Quarterly Report on Form 10-Q for the period ended March
30, 1997, is hereby incorporated by reference.
10.50(l-2) First Amendment to AMD Saxonia Wafer Purchase Agreement, dated as of
February 6, 1998, between AMD Saxony Holding GmbH and AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50 (l-2) to AMD's Annual Report on
Form 10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
**10.50(m) AMD Saxonia Research, Design and Development Agreement, dated as of March
11, 1997, between AMD Saxony Manufacturing GmbH and AMD Saxony Holding GmbH,
filed as Exhibit 10.50(m) to AMD's Quarterly Report on Form 10-Q for the
period ended March 30, 1997, is hereby incorporated by reference.
10.50(n) License Agreement, dated March 11, 1997, among AMD, AMD Saxony Holding GmbH
and AMD Saxony Manufacturing GmbH, filed as Exhibit 10.50(n) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
26
Exhibit
Number Description Of Exhibits
------- -----------------------
10.50(o) AMD, Inc. Subordination Agreement, dated March 11, 1997, among AMD, AMD
Saxony Holding GmbH and Dresdner Bank AG, filed as Exhibit 10.50(o) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
**10.50(p-1) ISDA Agreement, dated March 11, 1997, between AMD and AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50(p) to AMD's Quarterly Report on
Form 10-Q for the period ended March 30, 1997, is hereby incorporated by
reference.
**10.50(p-2) Confirmation to ISDA Agreement, dated February 6, 1998, between AMD and AMD
Saxony Manufacturing GmbH, filed as Exhibit 10.50(p-2) to AMD's Annual
Report on Form 10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
13 1998 Annual Report to Stockholders, portions of which have been incorporated
by reference into Parts II and IV of this annual report.
21 List of AMD subsidiaries.
23 Consent of Ernst & Young LLP, Independent Auditors, refer to page F-2
herein.
24 Power of Attorney.
27 Financial Data Schedule.
* Management contracts and compensatory plans or arrangements required to be
filed as an Exhibit to comply with Item 14(a)(3).
**Confidential treatment has been granted as to certain portions of these
Exhibits.
***Confidential treatment has been requested as to certain portions of these
Exhibits.
AMD will furnish a copy of any exhibit on request and payment of AMD's
reasonable expenses of furnishing such exhibit.
(b) Reports on Form 8-K.
A Current Report on Form 8-K dated October 23, 1998 reporting under Item 5--
Other Events was filed announcing AMD's third quarter earnings.
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ADVANCED MICRO DEVICES, INC.
Registrant
March 26, 1999
/s/ Francis P. Barton
By: _________________________________
Francis P. Barton
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ W. J. Sanders III* Chairman of the Board and March 26, 1999
____________________________________ Chief Executive Officer
W. J. Sanders III (Principal Executive
Officer)
/s/ Francis P. Barton* Senior Vice President and March 26, 1999
____________________________________ Chief Financial Officer
Francis P. Barton (Principal Financial
Officer)
/s/ Friedrich Baur* Director March 26, 1999
____________________________________
Friedrich Baur
/s/ Charles M. Blalack* Director March 26, 1999
____________________________________
Charles M. Blalack
/s/ R. Gene Brown* Director March 26, 1999
____________________________________
R. Gene Brown
/s/ Richard Previte* Director, President and Co- March 26, 1999
____________________________________ Chief Operating Officer
Richard Previte
/s/ S. Atiq Raza* Director, Co-Chief Operating March 26, 1999
____________________________________ Officer and Chief Technical
S. Atiq Raza Officer
/s/ Joe L. Roby* Director March 26, 1999
____________________________________
Joe L. Roby
/s/ Leonard Silverman* Director March 26, 1999
____________________________________
Leonard Silverman
*By: /s/ Francis P. Barton March 26, 1999
________________________________
(Francis P. Barton,
Attorney-in-Fact)
28
ADVANCED MICRO DEVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
COVERED BY THE REPORT OF INDEPENDENT AUDITORS
ITEM 14(a) (1) and (2)
The information under the following captions, which is included in AMD's 1998
Annual Report to Stockholders, a copy of which is attached hereto as Exhibit
13, is incorporated herein by reference:
Page References
-----------------
1998 Annual
Form Report to
10-K Stockholders
---- ------------
Report of Ernst & Young LLP, Independent Auditors.......... -- 45
Consolidated Statements of Operations for the three years
in the period ended December 27, 1998..................... -- 24
Consolidated Balance Sheets at December 27, 1998 and
December 28, 1997......................................... -- 25
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 27, 1998......... -- 26
Consolidated Statements of Cash Flows for the three years
in the period ended December 27, 1998..................... -- 27
Notes to Consolidated Financial Statements................. -- 28-44
Schedule for the three years in the period ended December
27, 1998:
Schedule II Valuation and Qualifying Accounts............. F-3 --
All other schedules have been omitted because the required information is
not present or is not present in amounts sufficient to require submission of
the schedules, or because the information required is included in the
Consolidated Financial Statements or Notes thereto. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, our 1998 Annual Report to Stockholders is not
to be deemed filed as part of this report.
F-1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Advanced Micro Devices, Inc. of our report dated January 12, 1999 except
for the third paragraph of Note 14, as to which the date is March 12, 1999,
included in the 1998 Annual Report to Stockholders of Advanced Micro Devices,
Inc.
Our audits also included the financial statement schedule of Advanced Micro
Devices, Inc. listed in Item 14(a). This schedule is the responsibility of the
management of Advanced Micro Devices, Inc. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-16095) pertaining to the Advanced Micro Devices,
Inc. 1987 Restricted Stock Award Plan; in the Registration Statement on Form
S-8 (No. 33-39747) pertaining to the Advanced Micro Devices, Inc. 1991
Employee Stock Purchase Plan; in the Registration Statements on Form S-8 (Nos.
33-10319, 33-36596 and 33-46578) pertaining to the Advanced Micro Devices,
Inc. 1982 and 1986 Stock Option Plans and the 1980 and 1986 Stock Appreciation
Rights Plans; in the Registration Statements on Form S-8 (Nos. 33-46577 and
33-55107) pertaining to the Advanced Micro Devices, Inc. 1992 Stock Incentive
Plan; in the Registration Statements on Form S-8 (Nos. 333-00969 and 333-
33855) pertaining to the Advanced Micro Devices, Inc. 1991 Employee Stock
Purchase Plan and to the 1995 Stock Plan of NexGen, Inc.; in the Registration
Statements on Form S-8 (Nos. 333-04797 and 333-57525) pertaining to the
Advanced Micro Devices, Inc. 1996 Stock Incentive Plan; in the Registration
Statement on Form S-8 (No. 333-68005) pertaining to the Advanced Micro
Devices, Inc. 1998 Stock Incentive Plan; in the Registration Statement on Form
S-3 (No. 333-47243), as amended, pertaining to debt securities, preferred
stock, common stock, equity warrants and debt warrants issued or issuable by
Advanced Micro Devices, Inc.; in Post-Effective Amendment No. 1 to the
Registration Statement on Form S-8 (No. 33-95888) pertaining to the 1995 Stock
Plan of NexGen, Inc. and the NexGen, Inc. 1987 Employee Stock Plan; in Post-
Effective Amendment No. 1 to the Registration Statement on Form S-8 (No. 33-
92688) pertaining to the 1995 Employee Stock Purchase Plan of NexGen, Inc.; in
Post-Effective Amendment No. 1 on Form S-8 to the Registration Statement on
Form S-4 (No. 33-64911) pertaining to the 1995 Employee Stock Purchase Plan of
NexGen, Inc., the 1995 Stock Plan of NexGen, Inc. and the NexGen, Inc. 1987
Employee Stock Plan; and in Post-Effective Amendment No. 2 on Form S-3 to the
Registration Statement on Form S-4 (No. 33-64911) pertaining to common stock
issuable to certain warrantholders of our report dated January 12, 1999 except
for the third paragraph of Note 14, as to which the date is March 12, 1999,
with respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) of
Advanced Micro Devices, Inc.
/s/ Ernst & Young LLP
San Jose, California
March 26, 1999
F-2
SCHEDULE II
ADVANCED MICRO DEVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 29, 1996, December 28, 1997 and December 27, 1998
Additions
Charged
(Reductions
Balance Credited) Balance
Beginning to End of
of Period Operations Deductions(1) Period
--------- ----------- ------------- -------
Allowance for doubtful accounts:
Years ended:
December 29, 1996.............. $15,618 $2,000 $(7,809) $ 9,809
December 28, 1997.............. 9,809 1,500 (88) 11,221
December 27, 1998.............. 11,221 1,498 (56) 12,663
- --------
(1) Accounts (written off) recovered, net.
F-3
AMD-22315A