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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 29, 1996
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
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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 nonaffiliates as of February 25, 1997.
$5,068,372,307
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
138,952,155 shares as of February 25, 1997.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Stockholders for the fiscal year ended
December 29, 1996, 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 24, 1997, are incorporated into Part III hereof.
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ADVANCED MICRO DEVICES, INC.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Business.............................................................................. 3
Item 2. Properties............................................................................ 14
Item 3. Legal Proceedings..................................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................................... 16
Executive Officers of the Registrant.................................................. 16
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters.............. 17
Item 6. Selected Financial Data............................................................... 18
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 18
Item 8. Financial Statements and Supplementary Data........................................... 18
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.. 18
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 18
Item 11. Executive Compensation................................................................ 18
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 18
Item 13. Certain Relationships and Related Transactions........................................ 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................... 19
AMD, the AMD logo, and combinations thereof, Advanced Micro Devices and
NexGen, are either registered trademarks or trademarks of Advanced Micro
Devices, Inc. Other terms used to identify companies and products may be
trademarks of their respective owners. Am486, K86, K86 RISC SUPERSCALAR, AMD-
K5, AMD-K6, SLAC and Am29000 are trademarks of Advanced Micro Devices, Inc.
Microsoft, MS-DOS, Windows and Windows NT are either registered trademarks or
trademarks of Microsoft Corporation.
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, CASH FLOWS, REALIZATION OF NET
DEFERRED TAX ASSETS, CAPITAL EXPENDITURES AND ADEQUACY OF RESOURCES TO FUND
OPERATIONS AND CAPITAL INVESTMENTS; FUTURE BUSINESS PROSPECTS FOR
MICROPROCESSORS, FLASH MEMORY DEVICE PRODUCTS AND OTHER PRODUCT LINES; THE
EFFECT OF FOREIGN EXCHANGE CONTRACTS AND INTEREST RATE SWAPS; THE DEVELOPMENT,
VALIDATION, CERTIFICATION, INTRODUCTION, MARKET ACCEPTANCE AND PRICING OF THE
K86 PRODUCTS; THE COMPANY'S COMMITMENT TO RESEARCH AND DEVELOPMENT; THE
EFFECTIVE UTILIZATION OF FAB 25 (AS DEFINED BELOW); AND PROJECTS WHICH ARE
PROPOSED OR UNDER CONSTRUCTION IN JAPAN, GERMANY AND CHINA. FOR A DISCUSSION
OF THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, SEE SUCH
OTHER RISKS AND UNCERTAINTIES AS SET FORTH BELOW IN THIS REPORT OR DETAILED IN
THE COMPANY'S OTHER SECURITIES AND EXCHANGE COMMISSION REPORTS AND FILINGS.
GENERAL
Advanced Micro Devices, Inc. was incorporated under the laws of the state of
Delaware on May 1, 1969. The Company's mailing address and executive offices
are located at One AMD Place, Sunnyvale, California 94086, and its telephone
number is (408) 732-2400. Unless otherwise indicated, the terms "Company,"
"AMD" and "Registrant" in this report refer to Advanced Micro Devices, Inc.
and its subsidiaries.
AMD is a semiconductor manufacturer with manufacturing facilities in the
U.S. and Asia and sales offices throughout the world. The Company's 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 a discussion of the risk factors related to the Company's business
operations please see the "Cautionary Statement Regarding Forward-Looking
Statements" and "Risk Factors" sections of Management's Discussion and
Analysis of Results of Operations and Financial Condition contained in the
1996 Annual Report to Stockholders.
INDUSTRY
The IC market has grown dramatically over the past ten years, driven
primarily by the demand for electronic business and consumer products. Today,
ICs are used in virtually all products involving electronics, including
personal computers and related peripherals, voice and data communications and
networking products, fax and copy machines, home entertainment equipment,
industrial control equipment and automobiles.
The market for ICs can be divided into separate markets for digital and
analog devices. AMD participates primarily in the market for digital ICs. The
three principal types of digital ICs used in most electronic systems are: (i)
memory circuits, (ii) logic circuits and (iii) microprocessors. Memory is used
to store data and programming instructions, logic is employed to manage the
interchange and manipulation of digital signals within a system, and
microprocessors are used for control and computing tasks. Set forth below is a
discussion of the principal segments of the digital IC market in which the
Company participates.
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
(i) Dynamic Random Access Memory (DRAM) and (ii) Static Random Access Memory
(SRAM), both of which are volatile memories, and (iii) 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
3
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. The Company does not produce any DRAM products, the
largest and most commodity oriented segment of the memory market, or SRAM
products.
Several factors have contributed to an increasing demand for memory devices
during recent years including the expanding unit sales of personal computers
in the business and consumer market segments; the increasing use of personal
computers to perform memory-intensive graphics and multimedia functions; the
volume of memory required to support faster microprocessors; the proliferation
of increasingly complex personal computer software; and the increasing
performance requirements of workstations, servers and networking and
telecommunications equipment.
The Company believes that Flash memory devices will be one of the fastest
growing segments of the memory market in terms of both unit and dollar sales,
as an expanding range of applications utilize Flash memory in the computer,
telecommunications, networking, consumer electronics, automotive, industrial
control and instrumentation industries. 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 phones 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 circuits contain interconnected groupings of simple logical circuits
commonly described as "gates." Typically, complex combinations of individual
gates are required to implement the specialized logic circuits required for
digital systems applications. While system designers use a relatively small
number of standard ICs to meet their microprocessor and memory needs, they
require a wide variety of logic circuits in order to differentiate their
products from those of their competitors.
Logic circuits are found in a wide range of today's electronic systems,
including communications equipment, computers, peripherals, instrumentation,
industrial control and military systems. The logic market encompasses, among
other segments, standard Transistor-to-Transistor Logic (TTL), custom designed
Application Specific ICs (ASICs), input/output (I/O), communications,
multimedia, networking and programmable logic devices. ASICs include
conventional gate-arrays, standard cells and full custom logic circuits. Logic
circuits are often classified by the number of gates per circuit, with TTL
circuits typically containing up to 100 gates. Conventional gate arrays and
custom logic circuits typically have up to several hundred thousand gates.
Programmable logic devices typically have up to 20,000 gates but may have
fewer gates in specialized applications.
Logic circuits are used extensively in networking and telecommunications
applications including Internet and intranet applications. Networking is a
method of connecting PCs to other PCs and closely related peripherals (e.g.,
printers), so that resources and information can be transferred and shared. In
large corporations today, most PCs are networked to improve productivity and
communication. Networking continues to spread to medium- and small-sized
companies and could eventually make inroads into the home market. The Ethernet
standard is the most commonly used method for networking workstations, network
servers, personal computers and related peripheral devices.
Telecommunications applications relate to the lines, switches, and routing
equipment required to provide connectivity among enterprises and homes that
are part of the public infrastructure. This infrastructure is owned and
operated by private companies such as AT&T and the regional Bell operating
companies in the U.S., and may be owned and operated by governments, private
companies, or some combination of these in other regions of the world. The
infrastructure for voice communications continues to expand throughout the
world, fueling demand for IC-based telecommunications line card solutions,
which convert signals from analog to digital for
4
transmission, then convert signals back to analog on the receiving end. To
perform these tasks, line cards rely on integrated circuit logic products
called subscriber line interface circuits and subscriber line audio processing
circuits.
Logic devices are also used extensively with respect to I/O applications,
which involve the sending and receiving of data from the central processing
unit (CPU) of a PC to peripheral devices such as disk drives and printers, and
multimedia applications, which utilize combinations of sound, graphics,
animation and text.
Manufacturers of electronic systems are increasingly challenged to bring
differentiated products to market quickly. These competitive pressures
sometimes preclude the use of custom designed ASICs, which generally entail
significant design costs and time delay. Standard logic products, an
alternative to custom designed ASICs, limit a manufacturer's flexibility to
adequately optimize and customize an end system. Programmable logic addresses
this inherent dilemma. Programmable logic devices are standard products,
purchased by systems manufacturers in a "blank" state, which can be custom
configured into many specific logic circuits by programming the device with
electrical signals. Programmable logic devices give system designers the
ability to quickly create their own custom logic circuits to provide product
differentiation and rapid time to market. Certain programmable logic products,
including the Company's, are reprogrammable, which means that the logic
configuration can be modified, if needed, after the initial logic programming.
A recent technology development, in-system programmability, extends the
flexibility of standard programmable logic devices by allowing the system
designer to configure and reconfigure the logic functions of the programmable
logic device with a standard 3- or 5-volt power supply without removing the
programmable logic device from the system board.
Several common types of programmable logic devices currently coexist in the
marketplace, each offering customers a particular set of benefits. These
include simple programmable logic devices (SPLDs, less than 1,000 gates),
complex programmable logic devices (CPLDs, up to 20,000 gates) and field
programmable gate arrays (FPGAs, up to 100,000 gates). CPLDs are generally
preferred to FPGAs for control logic applications, such as state machines, bus
arbitration, encoders/decoders and sequencers. FPGAs are generally preferred
to CPLDs for register intensive and data path logic applications, such as
interface logic and arithmetic functions. The Company believes that a
substantial portion of programmable logic device customers utilize both CPLD
and FPGA architectures together to optimize overall system performance and
improve time to market for new products.
THE MICROPROCESSOR MARKET
IBM introduced its first PC in 1981 containing a microprocessor based upon
the x86 instruction set developed by Intel Corporation (Intel) and utilizing
the Microsoft MS-DOS operating system. The so-called IBM-compatible computer
has evolved over the years with each successive generation of x86
microprocessors. Each new generation of x86 microprocessors has delivered
increased performance and functionality while maintaining software, hardware
and peripheral compatibility for industry standard operating systems such as
Microsoft MS-DOS and Microsoft Windows. The microprocessor market is currently
dominated by Intel.
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 is responsible for controlling data
flowing through the electronic system, manipulating such data as specified by
the hardware or software which controls the system. Microprocessors can be
divided into two broad categories: Reduced Instruction Set Computing (RISC)
and Complex Instruction Set Computing (CISC). Compared to CISC
microprocessors, RISC microprocessors employ an architectural approach that
requires a smaller number of simplified instructions to perform the
microprocessors' internal operations. Developments in circuit design and very
large scale integration process technology have resulted in dramatic advances
in microprocessor performance over the past ten years. Today, the greatest
demand for microprocessors is from personal computer manufacturers and, in
particular, for microprocessors which are Microsoft Windows compatible and are
based on the x86 instruction set. Improvements in the performance
characteristics of microprocessors, coupled with decreases in production costs
resulting from advances in process technology, have broadened the market for
PCs and increased the demand for microprocessors.
5
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 cannot usually 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 microprocessor business is characterized by short product life cycles,
intense price competition and rapid advances in product design and process
technology resulting in rapidly occurring product obsolescence. The early
stages of the life cycle of each generation of microprocessors is generally
characterized by high demand, prices and margins. Historically, as the product
life cycle progresses, prices and margins decrease rapidly and production
volume rapidly increases. Toward the end of the product life cycle, as the
life cycles of one or more future generations of microprocessors are
beginning, prices and margins decline further and demand for the product
ultimately ends.
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, many PC
suppliers have evolved from fully integrated manufacturers with proprietary
system designs to vendors focused on building brand recognition and
distribution capabilities. Many of these suppliers now rely either on Intel or
on third-party manufacturers for the major subsystems of their PCs, such as
the motherboard, and increasingly are outsourcing the design and manufacture
of complete systems. The third-party suppliers 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 suppliers are also supplying fully configured
PC systems through alternative distribution channels.
BUSINESS GROUPS; PRODUCTS
AMD participates in all three segments of the digital IC market - memory
circuits, logic circuits and microprocessors - through, collectively, its
Communications and Components Group (CCG), its Computation Products Group
(CPG) and its Programmable Logic Division (Vantis).
COMMUNICATIONS AND COMPONENTS GROUP
CCG products ($1,364 million, or 70%, of the Company's 1996 net sales)
include Flash memory devices, EPROM devices, voice and data communications
products, embedded processors, I/O devices and network products.
FLASH MEMORY. Flash memory devices are used in cellular telephones,
networking equipment and other applications which require memory to be non-
volatile and to be rewritten. Their ability to be rewritten electrically
provides greater flexibility and ease of use than EPROMs and other similar
integrated circuits which cannot be rewritten electrically. Communications
companies use Flash memory devices in cellular telephones and related
equipment to enable users to program and reprogram frequently called numbers
and manufacturers to preprogram other information. In networking applications,
Flash memory devices are used in hubs and routers to enable systems to store
programmed and reprogrammed Internet addresses and other routing information.
The market for Flash memory devices has recently experienced rapid growth and
is becoming increasingly competitive as additional manufacturers introduce
competitive products and production capacity in the industry increases. A
substantial portion of the Company's revenues are derived from sales of Flash
memory devices.
EPROMs. EPROMs represent an older generation of erasable programmable read-
only memory technology which is used primarily in the electronic equipment
industry. The devices are used in cellular phones and base stations,
telecommunication switching equipment, automotive applications, personal
computer hard disk drives and BIOS (basic input/output system software encoded
in read-only memory which controls access to
6
devices connected to a PC, such as the monitor and the serial communications
port), printer controllers, industrial machine controls and numerous other
types of electronic equipment to store software which controls the equipment's
operation. The ability of EPROMs to be programmed electrically enables
equipment manufacturers to achieve shorter time to market for new products
than otherwise would be possible if they were required to have specific
integrated circuits manufactured containing their final software programs.
EPROMs are generally preferred to more expensive Flash memory devices in
applications in which it is not necessary to enable the end user to reprogram
the information stored on the integrated circuit. The market for EPROMs is
significantly smaller than the market for Flash memory devices and the Company
believes the market will decline as EPROMs are replaced in various
applications by Flash memory devices.
COMMUNICATIONS PRODUCTS. The Company's communications products are used in
public and private communications infrastructure systems. Specifically, the
products are used in such equipment as central office switches, private branch
exchange (PBX) equipment and voice/data terminals. Among the Company's more
significant products for the communications market are its logic 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. The AMD SLIC line cards connect the user's telephone wire to the
telephone company's digital switching equipment. The AMD SLAC line cards are
coder/decoders which convert analog voice signals to a digital format and
back.
EMBEDDED PROCESSORS. Embedded processors are general purpose devices,
consisting of an instruction control unit and an arithmetic and logic unit,
used to carry out a single application with limited user interface and
programmability. The Company offers a proprietary family of RISC processors,
known as its Am29000 products, which are used as embedded processors in
applications which include high-performance laser printer controllers, high-
resolution graphics controllers, communications controllers and accelerator
cards. The Company has discontinued development of new versions of its Am29000
products, but it continues to produce existing versions. The Company's current
product focus for embedded processors utilizes existing x86 microprocessor
designs which are customized for specific applications. The Company offers a
line of C186 and C188 processors for use as embedded processors in hard disk
drives. In the future, the Company expects to offer embedded processors based
upon third- and fourth-generation x86 microprocessor technology, the E86
family of processors, which are designed for use in hand-held computers and
voice and data communication devices.
NETWORK AND I/O PRODUCTS. The Company's network and I/O products are used
within personal computers to manage the connection of the personal computer to
local area networks and to manage selected input/output functions. The
Company's network products support voice and data communications and
internetworking and are used in hubs, routers and equipment used to connect
workstations and personal computers in local area network infrastructures. In
data communications, the Company is a supplier of network infrastructure ICs
for products including Ethernet hubs and switches.
The Company supplies integrated circuits for business applications utilizing
the 10-megabit-per-second and the 100-megabit-per-second Ethernet local area
network standards. The Company offers a range of integrated circuits that work
with central processing units to manage selected input/output functions such
as audio, small computer system interface disk drive controllers and
communications and networking devices. The Company also supplies a range of
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.
OTHER PRODUCTS. The Company also offers a wide variety of older standard
products, some of which are nearing the end of their product life cycles,
which are sold into various IC markets and require limited ongoing research
and development or capital expenditures.
7
COMPUTATION PRODUCTS GROUP
CPG products ($341 million, or 17%, of 1996 net sales) include
microprocessors and the majority of CPG's net sales are derived from Microsoft
Windows compatible microprocessors which are used primarily in personal
computers.
The Company currently participates in the microprocessor market through its
fourth- and fifth-generation Microsoft Windows compatible microprocessors. In
1994 and 1995, the Company's most significant microprocessor product was the
Am486 microprocessor, a fourth-generation CISC x86 microprocessor. In 1996,
Am486 microprocessor sales decreased significantly due to average selling
price and unit volume declines. Accordingly, Am486 microprocessor revenues in
1996 were significantly below those of 1995 as the product life cycle of the
fourth-generation x86 products aged. The Company's fifth- and future
generations of microprocessor products, known as the K86 microprocessors, are
based on Superscalar RISC architecture. The K86 products are designed to be
compatible with operating system software such as Windows, UNIX, DOS and
Windows NT. In the first quarter of 1996, the Company began shipping the AMD-
K5PR75/1/ microprocessor, the first member of the K86 family, and during the
third quarter of 1996, the Company began shipping the AMD-K5PR100. The AMD-K5
is a fifth-generation, superscalar device that has been certified by Microsoft
as being fully compatible with its operating system. The Company introduced
PR133 and PR150 versions of its AMD-K5 microprocessor in the fourth quarter of
1996, and the PR166 version in January of 1997. The AMD-K5 microprocessor was
introduced relatively late in the life cycle of fifth-generation
microprocessor products and will not result in the levels of revenue for the
Company realized from the Am486 microprocessor.
The Company's ability to maintain or expand its current levels of revenues
from microprocessor products, and its ability to benefit fully from the
substantial financial commitments it has made to process technologies and
integrated circuit manufacturing facilities dedicated to the production of
microprocessors, depends primarily upon its success in developing and
marketing in a timely manner its sixth-generation microprocessor products, the
AMD-K6 processors. The AMD-K6 microprocessor has been designed as a
superscalar device to be competitive in performance to Intel Corporation's
forthcoming single chip version of its sixth-generation microprocessor, the
Pentium Pro, which is being designed by Intel specifically for desktop PCs and
is expected to be introduced in 1997. The Company intends to begin volume
shipments of the AMD-K6 products in the second quarter of 1997, although no
assurance can be given that such products will be successfully or timely
developed or that subsequent product orders or related shipments will occur. A
failure of the Company's K86 products, particularly the AMD-K6, to be timely
introduced or to achieve market acceptance, would have a material adverse
effect on the Company. AMD is also devoting substantial resources to the
development of its seventh-generation Microsoft Windows compatible
microprocessor, the AMD-K7 processor.
Intel has long held a dominant position in the market for microprocessors
used in PCs. Intel Corporation's dominant market position has allowed it to
set x86 microprocessor standards and thus dictate the type of product the
market requires of Intel Corporation's competitors. In addition, Intel
Corporation's financial strength has enabled it to reduce prices on its
microprocessor products within a short period of time following their
introduction, which reduces the margins and profitability of its competitors.
In addition to its dominant microprocessor market share, Intel also dominates
the PC platform. The Company does not have the financial resources to compete
with Intel on such a large scale.
As Intel has expanded its dominance in designing and setting standards for
PC systems, many PC original equipment manufacturers (OEMs) have reduced their
system development expenditures and have begun to purchase microprocessors in
conjunction with chip sets or in assembled motherboards. In marketing its
microprocessors to these OEMs and dealers, AMD is dependent upon companies
other than Intel for the design
- --------
/1"PR"/refers to the performance rating assigned to the microprocessors by AMD
based upon tests conducted employing the Ziff-Davis Winstone 96 benchmark,
which compares the systems performance provided by a microprocessor to the
systems performance provided by Pentium processors of various clock speeds.
A performance rating of 166, for example, indicates that the microprocessor
has been determined to deliver systems performance equal to or greater than
that provided by a 166 Megahertz Pentium.
8
and manufacture of core logic chip sets, motherboards, BIOS software and other
components. In recent years, these third-party designers and manufacturers
have lost market share to Intel. To compete with Intel in this market in the
future, the Company intends to continue to form closer relationships with
third-party designers and manufacturers of core logic chip sets, motherboards,
BIOS software and other components. The Company similarly intends to continue
to expand its chip set and system design capabilities, and offer to OEMs a
portion of the Company's processors together with chip sets and licensed
system designs incorporating the Company's processors and companion products.
There can be no assurance, however, that such efforts by the Company will be
successful.
VANTIS
Vantis products ($248 million, or 13%, of the Company's 1996 net sales) are
high speed programmable logic devices which are used in a wide range of
electronic systems. Programmable logic devices are standard logic products
produced in a "blank" state that can be custom configured into specific logic
circuits by programming the devices with electrical signals.
The Company offers a full range of simple programmable logic devices and
complex programmable logic devices, but does not participate in the market for
field programmable gate arrays. Programmable logic devices are used in
telecommunications equipment, network infrastructures, hard disk drives,
printers, industrial machine control and numerous other types of electronic
equipment by third-party OEMs which seek to optimize the performance of their
products by custom configuring the logic IC while minimizing time to market
through the use of a standard logic product. The Company's programmable logic
devices are sold to a broad range of manufacturers of electronics systems.
Customers utilizing programmable logic devices must use special software
packages, generally provided by the suppliers of the programmable logic
devices, to program the programmable logic devices. AMD provides its
programmable logic device customers with software which it licenses from third
parties and is dependent upon third parties for the software and continuing
improvements in the software. An inability of AMD to continue to obtain
appropriate software and improvements from third parties, to license
alternative software from another third party, or to develop its own software
internally could materially adversely affect the Company's Vantis business,
including the timing of new or improved product introductions, which could
have a material adverse effect on the Company.
The Company is in the process of transferring its operations relating to the
design, development and marketing of programmable logic devices to a wholly
owned subsidiary, Vantis Corporation, dedicated solely to programmable logic
devices. Vantis Corporation will rely upon the Company for manufacturing
services. A dedicated programmable logic device sales force was formed from
members of the Company's existing sales force and began operating as a
separate unit in the second half of 1996.
RESEARCH AND DEVELOPMENT; MANUFACTURING TECHNOLOGY
The Company's expenses for research and development in 1994, 1995 and 1996,
were $295 million, $417 million and $401 million, respectively. Such expenses
represented 14%, 17% and 21% of net sales in 1994, 1995 and 1996,
respectively. The Company's research and development expenses are charged to
operations as incurred. Most of the Company's research and development
personnel are integrated into the engineering staff.
Manufacturing technology is the key determinant in the improvement in
semiconductor products. Each new generation of process technology has resulted
in products with higher speed and greater performance produced at lower cost.
AMD continues to make significant infrastructure investments to enable the
Company to continue to achieve high volume, high reliability and low cost
production using leading edge process technology.
The Company's efforts concerning process technologies are focused in three
major areas: non-volatile memory technology used by Flash memory and EPROM
products; logic technology used by the Company's microprocessors, embedded
processors, I/O, networking and communications products; and programmable
logic
9
technology used in the Company's programmable logic products. The Company's
goals are to increase density and improve product performance, to reduce the
access time for non-volatile memory products and to increase the clock speed
for microprocessor products.
In order to remain competitive, the Company must make continuing substantial
investments in improving its process technologies. In particular, the Company
has made and continues to make significant research and development
investments in the technologies and equipment used in the fabrication of its
microprocessor products and in the fabrication of Flash memory devices.
Portions of these investments might not be recoverable if the Company's K86
microprocessors fail to gain market acceptance or if the market for its Flash
memory products should significantly deteriorate. This could have a material
adverse effect on the Company. In addition, any inability of the Company to
remain competitive with respect to process technology could have a material
adverse effect on the Company.
COMPETITION
The IC industry is intensely competitive and, historically, has experienced
rapid technological advances in product and system technologies together with
substantial price reductions in maturing products. After a product is
introduced, prices normally decrease over time as production efficiency and
competition increase, and as a successive generation of products is 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 upon
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 it participates, the Company faces
competition from different groups of companies. With respect to CCG's product
lines, the Company's principal competitors are Intel, Sharp, Atmel, SGS
Thomson, Texas Instruments, Siemens, NEC, LM Ericsson, Alcatel, National
Semiconductor, 3Com and Motorola. With respect to microprocessors, Intel holds
a dominant market position. In Vantis' market, the Company's principal
competitors are Altera, Lattice Semiconductor and other smaller companies
focused on programmable logic device development and production.
MANUFACTURING FACILITIES
The Company's current integrated circuit manufacturing facilities are
described in the chart set forth below:
PRODUCTION APPROX.
WAFER SIZE TECHNOLOGY CLEAN ROOM
FACILITY LOCATION (DIAMETER IN INCHES) (IN MICRONS) (SQUARE FOOTAGE)
----------------- -------------------- ------------ ----------------
Austin, TX
Fab 25.............. 8 0.35 89,700
Fab 15.............. 6 0.7 22,000
Fab 14.............. 6 0.8 22,000
Fab 10.............. 5 0.9 22,000
Aizu-Wakamatsu, Japan
FASL................ 8 0.35 70,000
Sunnyvale, CA
SDC................. 6 0.35 42,500
10
The Company's joint venture with Fujitsu Limited, Fujitsu AMD Semiconductor
Limited (FASL), is constructing a second manufacturing facility in Aizu-
Wakamatsu, Japan. In addition, the Company is planning to construct and
operate a manufacturing facility in Dresden, Germany, through a wholly owned
subsidiary of the Company. AMD also has foundry arrangements for the
production of its products by third parties.
The Company's current assembly and test facilities are described in the
chart set forth below:
APPROX.
ASSEMBLY & TEST
FACILITY LOCATION SQUARE FOOTAGE ACTIVITY
----------------- --------------- ---------------
Penang, Malaysia.......................... 141,283 Assembly & Test
Bangkok, Thailand......................... 77,473 Assembly & Test
Singapore................................. 54,000 Test
In addition to the assembly and test facilities described above, AMD has a
50 year land lease in Suzhou, China, and is constructing an additional
assembly and test facility there. Foreign manufacturing 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 AMD were
unable to assemble and test its products abroad, or if air transportation
between the United States and the Company's overseas facilities were
disrupted, there could be a material adverse effect on the Company.
CERTAIN MATERIAL AGREEMENTS. Set forth below are descriptions of certain
material contractual relationships of the Company relating to FASL and the
Company's planned facility in Dresden, Germany.
FASL. In 1993, the Company and Fujitsu Limited (Fujitsu) formed a joint
venture, FASL, for the development and manufacture of non-volatile memory
devices. Through FASL, the two companies have constructed and are operating an
advanced integrated circuit 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.
Pursuant to the terms of the joint venture, the Company and Fujitsu have each
agreed not to independently produce Flash memory devices with geometrics of
0.5 micron or smaller outside of the joint venture.
In the third quarter of 1995, FASL approved construction of a second Flash
memory integrated circuit manufacturing facility (FASL II) at a site
contiguous to the existing FASL facility. Groundbreaking for FASL II occurred
in the first quarter of 1996. The $1.1 billion in capital expenditures planned
for the construction of FASL II are expected to be funded by cash generated
from FASL operations and, if necessary, borrowings by FASL. To the extent that
FASL is unable to secure the necessary funds for FASL II, the Company may be
required to contribute cash or guarantee third party loans in proportion to
its 49.95% interest in FASL. As of January 26, 1997, the Company had
guarantees of $33 million outstanding with respect to such loans. The planned
FASL II costs are denominated in yen and, therefore, are subject to change due
to foreign exchange rate fluctuations.
In connection with FASL, the Company and Fujitsu have entered into various
joint development, cross-license and investment arrangements. Accordingly, the
Company and Fujitsu are providing their product designs and process and
manufacturing technologies to FASL. In addition, both companies are
collaborating in developing manufacturing processes and designing integrated
circuits for FASL. The right of each company to use the licensed intellectual
property of the other with respect to certain products is limited to certain
geographic areas. Consequently, the Company's ability to sell Flash memory
products incorporating Fujitsu intellectual property, whether or not produced
by FASL, is also limited in certain territories, including the United Kingdom
and Japan. Fujitsu is likewise limited in its ability to sell Flash memory
devices incorporating the Company's intellectual property, whether or not
produced by FASL, in certain territories including the United States and
Europe, other than the United Kingdom and Ireland.
11
DRESDEN. AMD Saxony Manufacturing GmbH (AMD Saxony), a German subsidiary
wholly owned by the Company through a German holding company, is building a
900,000 square foot submicron integrated circuit manufacturing and design
facility in Dresden, in the State of Saxony, Germany (the Dresden Facility)
over the next five years at a presently estimated cost of approximately $1.5
billion. The Dresden Facility is being designed for the production of
microprocessors and other advanced logic products. The Federal Republic of
Germany and the State of Saxony have agreed to support the project in the form
of (i) a guarantee of 65% of the bank debt to be incurred by AMD Saxony up to
a maximum of Deutsche marks (DM) 1.65 billion, (ii) investment grants and
subsidies totaling DM500.5 million, and (iii) interest subsidies from the
State of Saxony totaling DM300 million. In March 1997, AMD Saxony will be
entering into a loan agreement with a consortium of banks led by Dresdner Bank
AG under which facilities totaling DM1.65 billion will be made available. In
connection with the financing, the Company has agreed to invest in AMD Saxony
over the next three years equity and subordinated loans in an amount totaling
approximately DM507.5 million. Until the Dresden Facility has been completed,
AMD has also agreed to guarantee AMD Saxony's obligations under the loan
agreement up to a maximum of DM217.5 million. After completion of the Dresden
Facility, AMD has agreed to make available to AMD Saxony up to DM145 million
if the subsidiary does not meet its fixed charge coverage ratio covenant.
Finally, AMD has agreed to undertake certain contingent obligations, including
various obligations to fund project cost overruns. The Company began site
preparation of the Dresden Facility in the fourth quarter of 1996, and plans
to commence construction during the second quarter of 1997. The planned
Dresden Facility costs are denominated in Deutsche marks and, therefore, are
subject to change due to foreign exchange rate fluctuations. The Company plans
to hedge future foreign exchange exposure for the Dresden Facility.
AMD is currently negotiating the final forms of all the agreements relating
to the operation and financing of the Dresden Facility. The negotiations
presently contemplate that, in addition to the obligations discussed above,
AMD (directly or indirectly) will be required to (1) return all federal and
state government grants, allowances and interest subsidies, or replace all
such subsidies that are not made available, if the Company or AMD Saxony fails
to meet certain material obligations to the Federal Republic of Germany or the
State of Saxony; (2) purchase the output of the Dresden Facility at transfer
prices to be set pursuant to specific formulas, and which adjust downwards
when the Dresden Facility is operating at less than 75% capacity because of a
lack of market demand for the products being fabricated there (the Company's
product purchase obligation can be terminated once the syndicated loan has
been repaid or under circumstances relating to a change of control of AMD
Saxony or the destruction or abandonment of the Dresden Facility); (3) cause
AMD Saxony to undertake bona fide research and development activities at the
design center of the Dresden Facility; and (4) grant a non-exclusive license
to AMD Saxony to use, at the Dresden Facility and in products manufactured at
the Dresden Facility, intellectual property developed at the Dresden design
center.
No assurance can be given that AMD will be able to negotiate final
agreements relating to the operation and financing of the Dresden Facility on
terms satisfactory to it, that the terms of any such agreements will not be
materially different from those described, or that the financial exposure of
AMD in connection with the Dresden Facility will not materially exceed the
proposed terms described herein.
MARKETING AND SALES
The Company's products are marketed and sold under the AMD trademark. AMD
employs a direct sales force through its principal facilities in Sunnyvale,
California, and field sales offices throughout the United States and abroad
(primarily Europe and Asia Pacific). In 1996, the Company established a
separate sales force dedicated to sales of programmable logic devices as a
part of the Company's process of transferring its operations relating to the
design, development and marketing of programmable logic devices to a wholly
owned subsidiary, Vantis Corporation. AMD also sells its 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 the Company's competitors, including those
products for which AMD is an alternate source. One of the Company's
distributors, Arrow Electronics, Inc., accounted for approximately 13% of 1996
net sales. No other distributor or OEM customer accounted for 10% or more of
net sales in 1996.
12
Distributors typically maintain an inventory of the Company's products.
Pursuant to the Company's agreements with distributors, AMD protects its
distributors' inventory of the Company's 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 contain a provision for the return of the Company's products in the
event the agreement with the distributor is terminated. The price protection
and return rights AMD offers to its distributors may materially adversely
affect the Company.
AMD derives a substantial portion of its revenues from its sales
subsidiaries located in Europe and Asia Pacific. AMD subsidiaries have offices
in Australia, Belgium, Brazil, Canada, China, Finland, France, Germany, Hong
Kong, Italy, Japan, Korea, Singapore, Sweden, Switzerland, Taiwan and the
United Kingdom. (See Note 11 of Notes to Consolidated Financial Statements
contained in the 1996 Annual Report to Stockholders.) The international sales
force also works with independent sales representatives and distributors with
offices in approximately 37 countries, including those where AMD has sales
subsidiaries. The Company's 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 of the raw materials used by the Company in the manufacture of its
products are available from a limited number of suppliers. For example,
several types of the integrated circuit packages purchased by AMD, as well as
by the majority of other companies in the semiconductor industry, are
principally supplied by Japanese companies. Shortages could occur in various
essential materials due to interruption of supply or increased demand in the
industry. If AMD were unable to procure certain of such materials, it would be
required to reduce its manufacturing operations which could have a material
adverse effect on the Company. To date, AMD has not experienced significant
difficulty in obtaining necessary raw materials.
ENVIRONMENTAL REGULATIONS
The failure 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
could result in fines being imposed on the Company, suspension of production,
alteration of the Company's manufacturing processes or cessation of
operations. Such regulations could require the Company to acquire expensive
remediation equipment or to incur other expenses to comply with environmental
regulations. Any failure by the Company to control the use, disposal or
storage of, or adequately restrict the discharge of, hazardous substances
could subject the Company to future liabilities and could have a material
adverse effect on the Company.
INTELLECTUAL PROPERTY AND LICENSING
AMD and its subsidiaries have been granted over 1,165 United States patents,
and over 1,327 patent applications are pending in the United States. In
certain cases, the Company has filed corresponding applications in foreign
jurisdictions. The Company expects to file future patent applications in both
the United States and abroad on significant inventions as it deems
appropriate.
On January 11, 1995, the Company and Intel reached an agreement to settle
all previously outstanding legal disputes between the two companies. As part
of the settlement, in December 1995, the Company 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
January 1, 2001. Effective January 1, 1996, the new agreement gives the
Company 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 beyond the Intel 486(TM) processor
code. The cross-license is royalty-bearing for the Company's products that use
certain Intel technologies. The Company is required to pay Intel minimum non-
refundable royalties during the years 1997 through 2000.
13
In addition, AMD has entered into numerous cross-licensing and technology
exchange agreements with other companies under which it both transfers and
receives technology and intellectual property rights. Although the Company
attempts to protect its intellectual property rights through patents,
copyrights, trade secrets and other measures, there can be no assurance that
the Company will be able to protect its technology adequately or that
competitors will not be able to develop similar technology independently.
There can be no assurance that any patent applications that the Company may
file will be issued or that foreign intellectual property laws will protect
the Company's intellectual property rights. There can be no assurance that any
patent licensed by or issued to the Company will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will
provide competitive advantages to the Company. Furthermore, there can be no
assurance that others will not independently develop similar products,
duplicate the Company's products or design around the patents issued to or
licensed by the Company.
From time to time, AMD has been notified that it may be infringing
intellectual property rights of others. If any such claims are asserted
against the Company, the Company may seek to obtain a license under the third
party's intellectual property rights. The Company could decide, in the
alternative, to resort to litigation to challenge such claims. Such challenges
could be extremely expensive and time-consuming and could materially adversely
affect the Company. No assurance can be given that all necessary licenses can
be obtained on satisfactory terms, nor that litigation may always be avoided
or successfully concluded.
BACKLOG
AMD manufactures and markets standard lines of products. Consequently, a
significant portion of its 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, AMD does not believe that such
agreements provide meaningful backlog figures or are necessarily indicative of
actual sales for any succeeding period.
EMPLOYEES
On January 28, 1997, AMD and its subsidiaries employed approximately 12,200
employees, none of whom are represented by collective bargaining arrangements.
The Company believes that its relationship with its employees is generally
good.
ITEM 2. PROPERTIES
The Company's principal engineering, manufacturing, warehouse and
administrative facilities comprise approximately 3.11 million square feet and
are located in Sunnyvale, California and Austin, Texas. Over 2.56 million
square feet of this space is in buildings owned by the Company.
The Company leases 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). These leases provide the Company with an option to
purchase One AMD Place for $40 million during the lease term. The lease term
ends in 1998. At the end of the lease term, the Company is obligated to either
purchase One AMD Place or to arrange for its sale to a third party with a
guarantee of residual value to the seller equal to the option purchase price.
In 1993, the Company entered into a lease agreement for approximately 175,000
square feet located adjacent to One AMD Place (known as AMD Square) to be used
in connection with One AMD Place.
The Company also owns or leases facilities containing approximately 804,000
square feet for its operations in Malaysia, Thailand and Singapore. The
Company leases approximately 15 acres of land in Suzhou, China. The Company
owns 74 undeveloped acres of land in the Republic of Ireland. The Company also
has an equity interest in 58 acres of land in Albuquerque, New Mexico. In
1996, the Company acquired approximately 103 acres of land in Dresden,
Germany. Fab 25 is encumbered by a lien securing the Company's $400 million
Senior Secured Notes and its $400 million bank credit arrangements. The
planned Dresden Facility will be encumbered by a lien securing borrowings of
AMD Saxony.
14
AMD leases 28 sales offices in North America, 9 sales offices in Asia
Pacific, 12 sales offices in Europe and one sales office in South America for
its direct sales force. These offices are located in cities in major
electronics markets where concentrations of the Company's customers are
located.
Leases covering the Company's facilities expire over terms of generally one
to twenty years. The Company currently does not anticipate significant
difficulty in either retaining occupancy of any of its 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, the Company has discovered,
investigated and begun remediation of three sites where releases from
underground chemical tanks at its 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 is no longer used by the Company) has been identified as a
probable carcinogen.
In 1991, the Company 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 the Company as
well as TRW Microwave, Inc. and Philips Semiconductors Corporation. Another of
the orders named the Company as well as National Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If the Company fails to satisfy federal compliance requirements
or inadequately performs the compliance measures, the government (a) can bring
an action to enforce compliance, or (b) 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.
With regard to certain claims related to this matter the statute of
limitations has been tolled.
The Company has computed and recorded the estimated environmental liability
in accordance with applicable accounting rules and has 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. The Company believes 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 the financial condition or results of operations of the Company.
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
complaint was filed November 3, 1995 and the Kozlowski complaint was filed
November 15, 1995. Both actions allege violations of Section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, against
the Company and certain individual officers and directors (the Individual
Defendants), and purportedly were filed on behalf of all persons who purchased
or otherwise acquired common stock of the Company during the period April 11,
1995 through September 22, 1995. The complaints seek damages allegedly caused
by alleged materially misleading statements and/or material omissions by the
Company and the Individual Defendants regarding the Company's development of
its AMD-K5, -K6 and -K7 microprocessors, which statements and omissions, the
plaintiffs claim, allegedly operated to inflate artificially the price paid
for the Company's common stock during the period. The complaints seek
compensatory damages in an amount to be proven at trial, fees and costs, and
extraordinary equitable and/or injunctive relief. The court has consolidated
both actions into one. Defendants filed answers in the consolidated action in
May, 1996 and discovery has begun. Based upon information presently known to
management, the Company does not believe that the ultimate resolution of this
lawsuit will have a material adverse effect on the financial condition or
results of operations of the Company.
15
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 the Company's and
Altera Corporation's programmable logic devices. On June 27, 1996, a jury
returned a verdict and found that four of the eight patents-in-suit were
licensed to Altera. The parties have stipulated that the court, not a jury,
will decide which of the remaining AMD patents-in-suit fall within the scope
of the license that the jury found. The court will hear the first of two
phases regarding the remaining patents in April, 1997. Based upon information
presently known to management, the Company does not believe that the ultimate
resolution of this lawsuit will have a material adverse effect on the
financial condition or results of operations of the Company.
4. INTEL CORPORATION V. ADVANCED MICRO DEVICES, INC., ET AL. (CASE NO. 97-
118, D. DEL.). On March 14, 1997, Intel Corporation (Intel) filed suit against
the Company and Cyrix Corporation in the United States District Court for the
District of Delaware alleging false designation of origin and false
advertising, trademark infringement and trademark dilution, and deceptive
trade practices arising out of alleged misuse by the Company of the term
"MMX," which Intel claims as a trademark. In a related matter filed by Intel
against the Company on March 14, 1997, in the regional Court of Braunschweig,
Germany (Case Ref. No. 9 0 89/97), Intel was granted a temporary injunction
prohibiting the Company from using the term "MMX" to identify, advertise or
market its processors. Based upon information presently known to management,
the Company does not believe that the ultimate resolution of these lawsuits
will have a material adverse effect upon the financial condition or results of
operation of the Company.
5. OTHER MATTERS. The Company is 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 the financial condition or results of operations of the
Company.
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.
EXECUTIVE OFFICERS OF THE REGISTRANT
HELD
NAME AGE POSITION SINCE
---- --- -------- -----
W. J. Sanders III.... 60 Chairman of the Board and Chief Executive Officer. 1969
Richard Previte...... 62 Director, President and Chief Operating Officer. Mr. 1989
Previte became Chief Operating Officer in 1989 and
President in 1990. Mr. Previte was Chief Financial
Officer and Treasurer from 1969 to 1989.
Marvin D. Burkett.... 55 Senior Vice President, Chief Financial and 1989
Administrative Officer and Treasurer. Mr. Burkett was
Controller from 1972 until 1989.
Eugene D. Conner..... 53 Senior Vice President, Operations. Mr. Conner joined 1987
the Company in 1969, and was elected an executive
officer in 1981.
S. Atiq Raza......... 48 Director, Senior Vice President and Chief Technical 1996
Officer. Formerly, Mr. Raza was the Chairman of the
Board, President, Chief Executive Officer, and
Secretary of NexGen, Inc.
Stanley Winvick...... 57 Senior Vice President, Human Resources. Mr. Winvick had 1991
been Vice President, Human Resources since 1980.
Stephen J. Zelencik.. 62 Senior Vice President and Chief Marketing Executive. 1979
Mr. Zelencik joined the Company in 1970.
Thomas M. McCoy...... 46 Vice President, General Counsel and Secretary. Prior to 1995
joining the Company, Mr. McCoy was with the law firm of
O'Melveny and Myers where he had been a partner since
1985.
There is no family relationship between any executive officers of the
Company.
16
KEY EMPLOYEES
HELD
NAME AGE POSITION SINCE
---- --- -------- -----
Donald M. Brettner... 60 Group Vice President, Manufacturing Services Group. Mr. 1996
Brettner joined the Company in 1982. Prior to joining
the Company, Mr. Brettner was Chief Operating Officer
at NBK Corporation and Vice President of Manufacturing
Services at Fairchild Semiconductor.
Vinod Dham........... 46 Group Vice President, Computation Products Group. Prior 1996
to joining the Company, Mr. Dham was Executive Vice
President and Chief Operating Officer of NexGen, Inc.
and held those positions from May, 1995, until it was
acquired by the Company on January 17, 1996. Before
joining NexGen, Mr. Dham was Vice President of the
Microprocessor Products Group and General Manager of
the Pentium Processor Division at Intel. Mr. Dham was
employed by Intel from July 1979 to April 1995.
Richard Forte........ 53 Group Vice President, Communications and Components 1996
Group, and President, Vantis. Mr. Forte joined the
Company in 1986. Prior to joining the Company, Mr.
Forte was Vice President of Monolithic Memories, Inc.
from 1986 until it was acquired by the Company in 1987.
Gary O. Heerssen..... 50 Group Vice President, Wafer Fabrication Group. Mr. 1996
Heerssen joined the Company in 1986. Prior to joining
the Company, Mr. Heerssen worked for Fairchild
Semiconductor and spent 15 years with Texas Instruments
in a variety of engineering and operations management
positions.
William T. Siegle.... 58 Group Vice President, Technology Development Group and 1990
Chief Scientist. Mr. Siegle joined the Company and was
elected Vice President and Chief Scientist in 1990.
Prior to joining the Company, Mr. Siegle was Director
of the Advanced Technology Center for IBM in East
Fishkill, New York.
Terryll R. Smith..... 47 Group Vice President, Sales and Marketing. Mr. Smith 1996
joined the Company in 1975. Prior to his current
position, Mr. Smith was Vice President of Sales &
Marketing for European Operations in Switzerland, Vice
President of International Sales & Marketing for AMD
Sunnyvale and Group Vice President of Applications
Solutions Products.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is publicly traded on the New York Stock
Exchange. The information regarding market price range, dividend information
and number of holders of common stock of AMD appearing under the captions
"Supplementary Financial Data" and "Financial Summary" on pages 38 and 39 of
the Company's 1996 Annual Report to Stockholders is incorporated herein by
reference.
During 1996, the Company sold one million shares of its common stock to
Fujitsu which were not registered under the Securities Act of 1933 based upon
an exemption from the registration requirements of the Act for transactions
not involving public offerings. The Company sold 500,000 shares on April 1,
1996, at $19.00 per share and 500,000 shares on October 1, 1996, at $14.00 per
share. In each case, the consideration was cash.
17
ITEM 6. SELECTED FINANCIAL DATA
The information regarding selected financial data for the fiscal years 1992
through 1996, under the caption "Financial Summary" on page 39 of the
Company's 1996 Annual Report to Stockholders 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 Results of Operations and Financial Condition" on pages 8 through
17 of the Company's 1996 Annual Report to Stockholders is incorporated herein
by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements at December 29, 1996 and
December 31, 1995 and for each of the three years in the period ended December
29, 1996, and the report of independent auditors thereon, and the unaudited
quarterly financial data of AMD for the two-year period ended December 29,
1996, appearing on pages 18 through 38 of the Company's 1996 Annual Report to
Stockholders are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information appearing at the end of Item 4 in Part I of this report
under the caption "Executive Officers of the Registrant" and under the
captions "Proposal No. 1 Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for its
Annual Meeting of Stockholders to be held on April 24, 1997 (the 1997 Proxy
Statement) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Directors Fees and Expenses" under the
main caption "Committees and Meetings of the Board of Directors," and the
information under the captions "Executive Compensation," "Employment
Agreements, Compensation Agreements and Change in Control Agreements" and
"Compensation Committee Interlocks and Insider Participation" in the 1997
Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the captions "Principal Stockholders" and
"Stock Ownership Table" in the 1997 Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Relationships and
Related Transactions" in the 1997 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 the 1997 Proxy Statement,
the 1997 Proxy Statement shall not be deemed to be filed as part of this
report. Without limiting the foregoing, the information under the captions
"Report of the Compensation Committee" and "Comparison of Five-Year Cumulative
Total Return Advanced Micro Devices, S&P 500 Composite Index and Technology-
500 Index" in the 1997 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 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
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
Report of Ernst & Young LLP, Independent Auditors......... -- 37
Consolidated Statements of Operations for the three years
in the period ended December 29, 1996.................... -- 18
Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995........................................ -- 19
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 29, 1996........ -- 20
Consolidated Statements of Cash Flows for the three years
in the period ended December 29, 1996.................... -- 21
Notes to Consolidated Financial Statements................ -- 22-36
2. FINANCIAL STATEMENT SCHEDULE
The financial statement schedule listed in the accompanying Index to
Consolidated Financial Statements and Financial Statement Schedule covered by
the Report of Independent Auditors is filed as part of this Annual Report on
Form 10-K as follows:
PAGE REFERENCES
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
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, the 1996 Annual Report to Stockholders is not
to be deemed filed as part of this report.
19
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 the Company and NexGen, Inc., filed as Exhibit 2 to the
Company's Quarterly Report for the period ended October 1, 1995, and
as Exhibit 2.2 to the Company's Current Report on Form 8-K dated
January 17, 1996, is hereby incorporated by reference.
2.2 Amendment No. 2 to the Agreement and Plan of Merger, dated January 11,
1996, among Advanced Micro Devices, Inc. and NexGen, Inc., filed as
Exhibit 2.2 to the Company'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 the
Company'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 the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, is
hereby incorporated by reference.
4.1 Form of Advanced Micro Devices, Inc. 11% Senior Secured Notes due
August 1, 2003, filed as Exhibit 4.1 to the Company's Current Report
on Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.2 Indenture, dated as of August 1, 1996, between Advanced Micro Devices,
Inc. and United States Trust Company of New York, as trustee, filed as
Exhibit 4.2 to the Company's Current Report on Form 8-K dated August
13, 1996, is hereby incorporated by reference.
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 the Company'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 Advanced Micro Devices, Inc. and IBJ Schroder Bank &
Trust Company, filed as Exhibit 4.4 to the Company'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 Advanced Micro Devices, Inc., as
grantor, IBJ Schroder Bank & Trust Company, as grantee, and Shelley W.
Austin as trustee, filed as Exhibit 4.5 to the Company'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, between Advanced Micro
Devices, Inc. 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 the
Company'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 Advanced Micro Devices, Inc., as lessor, and AMD
Texas Properties, LLC, as lessee, filed as Exhibit 4.7 to the
Company'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
Advanced Micro Devices, Inc. and AMD Texas Properties, LLC, filed as
Exhibit 4.8 to the Company'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 Advanced Micro
Devices, Inc., as sublessee, and AMD Texas Properties, LLC, as
sublessor, filed as Exhibit 4.9 to the Company's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by reference.
20
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
4.10 The Company hereby agrees to file on request of the Commission a copy
of all instruments not otherwise filed with respect to long-term debt
of the Company or any of its subsidiaries for which the total amount
of securities authorized under such instruments does not exceed 10% of
the total assets of the Company and its subsidiaries on a consolidated
basis.
*10.1 AMD 1982 Stock Option Plan, as amended, filed as Exhibit 10.1 to the
Company'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 the
Company'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
the Company'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 the Company's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.5 AMD 1986 Stock Appreciation Rights Plan, as amended, filed as Exhibit
10.5 to the Company'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 the
Company'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 the Company'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 the Company'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 the
Company'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 the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1985, is
hereby incorporated by reference.
*10.11 Advanced Micro Devices, Inc. 1996 Stock Incentive Plan, as amended.
*10.12 Employment Agreement dated September 29, 1996, between the Company and
W. J. Sanders III, filed as Exhibit 10.11(a) to the Company'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 the Company and W. J. Sanders
III, filed as Exhibit 10.14 to the Company'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 the Company and Richard Previte, filed as
Exhibit 10.15 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 29, 1991, is hereby incorporated by
reference.
*10.15 Executive Bonus Plan, as amended, filed as Exhibit 10.16 to the
Company'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 Advanced Micro Devices, Inc. 1996 Executive Incentive Plan, filed
as Exhibit 10.14(b) to the Company'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 the
Company'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
the Company'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 the Company'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 the Company'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 the Company'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
the Company'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 the Company and Fujitsu Limited,
filed as Exhibit 10.27(a) to the Company's Amendment No. 1 to its
Annual Report on Form 10K/A for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
**10.23(b) Technology Cross-License Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(b) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
**10.23(c) AMD Investment Agreement between the Company and Fujitsu Limited,
filed as Exhibit 10.27(c) to the Company's Amendment No. 1 to its
Annual Report on Form 10K/A for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
**10.23(d) Fujitsu Investment Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(d) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A 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.
10.23(f) Second Amendment to Fujitsu Investment Agreement, dated February
27, 1996.
**10.23(g) Joint Venture License Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(e) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
**10.23(h) Joint Development Agreement between the Company and Fujitsu
Limited, filed as Exhibit 10.27(f) to the Company's Amendment No.
1 to its Annual Report on Form 10K/A 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 the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1996, is hereby incorporated by reference.
10.24(a) Credit Agreement, dated as of July 19, 1996, among Advanced Micro
Devices, Inc., 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 the Company's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
22
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
10.24(b) First Amendment to Credit Agreement, dated as of August 7, 1996,
among Advanced Micro Devices, Inc., 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 the
Company'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 Advanced Micro Devices, Inc., 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 the
Company's Quarterly Report on Form 10-Q for the period ended
September 29, 1996, is hereby incorporated by reference.
10.25(a) Third Amended and Restated Guaranty, dated as of August 21, 1995,
made by the Company in favor of CIBC Inc. (replacing in entirety the
Amended and Restated Guaranty and the First Amendment thereto filed
as Exhibits 10.29(a) and 10.29(b), respectively, to the Company's
Annual Report on Form 10-K for the fiscal year ended December 25,
1994) filed as Exhibit 10.29(a) to the Company's Quarterly Report on
Form 10-Q for the period ended October 1, 1995, is hereby
incorporated by reference.
10.25(b) First Amendment to Third Amended and Restated Guaranty, dated as of
October 20, 1995, amending the Third Amended and Restated Guaranty
dated as of August 21, 1995, made by the Company in favor of CIBC
Inc. and filed as Exhibit 10.29(a), as filed as Exhibit 10.29(d) to
the Company's Quarterly Report on Form 10-Q for the period ended
October 1, 1995, is hereby incorporated by reference.
10.25(c) Second Amendment to Third Amended and Restated Guaranty, dated as of
January 12, 1996 (amending the Third Amended and Restated Guaranty
dated as of August 21, 1995, made by the Company in favor of CIBC
Inc.), filed as Exhibit 10.25(c) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, is hereby
incorporated by reference.
10.25(d) Third Amendment to Third Amended and Restated Guaranty, dated as of
May 10, 1996 (amending the Second Amendment to the Third Amended and
Restated Guaranty, dated as of January 12, 1996, made by the Company
in favor of CIBC Inc.), filed as Exhibit 10.25(n) to the Company's
Quarterly Report on Form 10-Q for the period ended September 29,
1996, is hereby incorporated by reference.
10.25(e) Fourth Amendment to Third Amended and Restated Guaranty, dated as of
June 20, 1996 (amending the Third Amendment to the Third Amended and
Restated Guaranty, dated as of May 10, 1996, made by the Company in
favor of CIBC Inc.), filed as Exhibit 10.25(o) to the Company's
Quarterly Report on Form 10-Q for the period ended September 29,
1996, is hereby incorporated by reference.
10.25(f) Fifth Amendment to Third Amended and Restated Guaranty, dated as of
August 1, 1996 (amending the Third Amended and Restated Guaranty,
dated as of August 25, 1995, made by the Company in favor of CIBC
Inc.), filed as Exhibit 99.3 to the Company's Current Report on Form
8-K dated August 13, 1996, is hereby incorporated by reference.
10.26(a) Building Lease by and between CIBC Inc. and AMD International Sales &
Service, Ltd., dated as of September 22, 1992, filed as Exhibit
10.28(b) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 27, 1992, is hereby incorporated by reference.
10.26(b) First Amendment to Building Lease dated December 22, 1992, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.28(c) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 27, 1992, is hereby incorporated by
reference.
10.26(c) Second Amendment to Building Lease dated December 17, 1993, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.29(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 25, 1994, is hereby incorporated by
reference.
23
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
10.26(d) Third Amendment to Building Lease dated August 21, 1995, by and
between CIBC Inc. and AMD International Sales and Service, Inc.
(amending the Building Lease filed as Exhibit 10.29(c) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994), filed as Exhibit 10.29(b) to the Company's
Quarterly Report on Form 10-Q for the period ended October 1, 1995,
is hereby incorporated by reference.
10.26(e) Fourth Amendment to Building Lease dated November 10, 1995, by and
between CIBC Inc. and AMD International Sales & Service, Inc.
(amending the Building Lease filed as Exhibit 10.29(c) to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 24, 1994), filed as Exhibit 10.25(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995, is hereby incorporated by reference.
10.26(f) Fifth Amendment to Building Lease dated August 1, 1996 (amending the
Building Lease dated as of September 22, 1992, by and between AMD
International Sales & Service, Ltd. and CIBC Inc.), filed as Exhibit
99.4 to the Company's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
10.27(a) Land Lease by and between CIBC Inc. and AMD International Sales &
Service, Ltd., dated as of September 22, 1992, filed as Exhibit
10.28(d) to the Company's Annual Report on Form 10-K for the fiscal
year ended December 27, 1992, is hereby incorporated by reference.
10.27(b) First Amendment to Land Lease dated December 22, 1992, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.28(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 27, 1992, is hereby incorporated by
reference.
10.27(c) Second Amendment to Land Lease dated December 17, 1993, by and
between CIBC Inc. and AMD International Sales & Service, Ltd., filed
as Exhibit 10.29(h) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 25, 1994, is hereby incorporated by
reference.
10.27(d) Third Amendment to Land Lease dated August 21, 1995, by and between
CIBC Inc. and AMD International Sales & Service, Inc. (amending the
Land Lease filed as Exhibit 10.29(f) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 25, 1994), filed as
Exhibit 10.29(c) to the Company's Quarterly Report on Form 10-Q for
the period ended October 1, 1995, is hereby incorporated by
reference.
10.27(e) Fourth Amendment to Land Lease dated November 10, 1995, by and
between CIBC Inc. and AMD International Sales & Service, Ltd.
(amending the Land Lease filed as Exhibit 10.29(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 25,
1994), filed as Exhibit 10.25(m) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, is hereby
incorporated by reference.
10.27(f) Fifth Amendment to Land Lease dated as of August 1, 1996 (amending
the Land Lease dated as of September 22, 1992, by and between AMD
International Sales & Service, Ltd. and CIBC Inc.), filed as Exhibit
99.5 to the Company's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
*10.28 Executive Savings Plan, as amended, filed as Exhibit 10.30 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994, is hereby incorporated by reference.
*10.29 Form of Split Dollar Agreement, as amended, filed as Exhibit 10.31
to the Company'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 the Company'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 the Company's Registration Statement on Form
S-8 (No. 33-46577), are hereby incorporated by reference.
24
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
*10.32 1992 United Kingdom Share Option Scheme, filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (No. 33-46577), is hereby
incorporated by reference.
**10.33 Compaq Computer Company/Advanced Micro Devices, Inc. Agreement, filed
as Exhibit 10.35 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994, is hereby incorporated by
reference.
*10.34 Form of indemnification agreements with current officers and directors
of the Company, filed as Exhibit 10.38 to the Company'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 the
Company and S. Atiq Raza, filed as Exhibit 10.36 to the Company'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.
**10.37 Patent Cross-License Agreement dated December 20, 1995, between the
Company and Intel Corporation, filed as Exhibit 10.38 to the Company'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 Advanced
Micro Devices (Suzhou) Limited and China-Singapore Suzhou Industrial
Park Development Co., Ltd., filed as Exhibit 10.39 to the Company'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 the Company'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 Advanced Micro Devices,
Inc.), as amended, filed as Exhibit 10.37 to the Company'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.
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.
25
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
*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 C-4 Technology Transfer and Licensing Agreement dated June 11,
1996, between the Company and IBM Corporation, filed as Exhibit
10.48 to the Company'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.
***10.49(a) Design and Build Agreement dated November 15, 1996, between AMD
Saxony Manufacturing GmbH and Meissner and Wurst GmbH.
10.49(b) Amendment to Design and Build Agreement dated January 16, 1997,
between AMD Saxony Manufacturing GmbH and Meissner and Wurst GmbH.
11 Statement regarding computation of per share earnings.
13 1996 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.
The Company will furnish a copy of any exhibit on request and payment of the
Company's reasonable expenses of furnishing such exhibit.
* 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.
(B) REPORTS ON FORM 8-K.
The following report on Form 8-K was filed during the fourth quarter of the
Company's fiscal year ended December 29, 1996:
1. A Current Report on Form 8-K dated October 7, 1996, was filed
announcing the Company's third quarter revenues.
26
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 17, 1997
By: /s/ Marvin D. Burkett
----------------------------------
Marvin D. Burkett
Senior Vice President, Chief
Financial and Administrative Officer
and Treasurer
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 17, 1997
____________________________________ Chief Executive Officer
W. J. Sanders III (Principal Executive
Officer)
/s/ Friedrich Baur* Director March 17, 1997
____________________________________
Friedrich Baur
/s/ Charles M. Blalack* Director March 17, 1997
____________________________________
Charles M. Blalack
/s/ R. Gene Brown* Director March 17, 1997
____________________________________
R. Gene Brown
/s/ Marvin D. Burkett Senior Vice President, Chief March 17, 1997
____________________________________ Financial and Administrative
Marvin D. Burkett Officer and Treasurer
(Principal Financial
Officer)
/s/ Richard Previte* Director, President and March 17, 1997
____________________________________ Chief Operating Officer
Richard Previte
/s/ S. Atiq Raza* Director, Senior Vice March 17, 1997
____________________________________ President and Chief
S. Atiq Raza Technical Officer
/s/ Joe L. Roby* Director March 17, 1997
____________________________________
Joe L. Roby
/s/ Leonard Silverman* Director March 17, 1997
____________________________________
Leonard Silverman
*By: /s/ Marvin D. Burkett
________________________________
Marvin D. Burkett
(Marvin D. Burkett,
Attorney-in-Fact)
/s/ Geoff Ribar Vice President and March 17, 1997
____________________________________ Controller (Principal
Geoff Ribar Accounting Officer)
27
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 the
Company's 1996 Annual Report to Stockholders, a copy of which is attached
hereto as Exhibit 13, is incorporated herein by reference:
PAGE REFERENCES
-----------------
1996 ANNUAL
FORM REPORT TO
10-K STOCKHOLDERS
---- ------------
Report of Ernst & Young LLP, Independent Auditors.......... -- 37
Consolidated Statements of Operations for the three years
in the period ended December 29, 1996..................... -- 18
Consolidated Balance Sheets at December 29, 1996 and
December 31, 1995......................................... -- 19
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 29, 1996......... -- 20
Consolidated Statements of Cash Flows for the three years
in the period ended December 29, 1996..................... -- 21
Notes to Consolidated Financial Statements................. -- 22-36
Schedule for the three years in the period ended December
29, 1996:
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, the 1996 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 9, 1997,
included in the 1996 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
Company's management. 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 Statement on Form S-8 (No. 333-00969) pertaining to
the Advanced Micro Devices, Inc. 1991 Employee Stock Purchase Plan and to the
1995 Stock Plan of NexGen, Inc., in the Registration Statement on Form S-8
(No. 333-04797) pertaining to the Advanced Micro Devices Inc. 1996 Stock
Incentive Plan, 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 such
registration statement pertaining to common stock issuable to certain
warrantholders of our report dated January 9, 1997 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.
ERNST & YOUNG LLP
March 19, 1997
San Jose, California
F-2
SCHEDULE II
ADVANCED MICRO DEVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 25, 1994, DECEMBER 31, 1995 AND DECEMBER 29, 1996
(THOUSANDS)
ADDITIONS
CHARGED
(REDUCTIONS
BALANCE CREDITED) BALANCE
BEGINNING TO END OF
OF PERIOD OPERATIONS DEDUCTIONS(1) PERIOD
--------- ----------- ------------- -------
Allowance for doubtful accounts:
Years ended:
December 25, 1994.............. $ 7,492 $3,873 $ (896) $10,469
December 31, 1995.............. 10,469 7,784 (2,635) 15,618
December 29, 1996.............. 15,618 2,000 (7,809) 9,809
- --------
(1) Accounts (written off) recovered, net.
F-3
AMD-90286