AMD 1996 Annual Report Download - page 232

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The available-for-sale equity securities that the Company held, included in
other assets, had a cost and fair value of approximately $15 million and $23
million, respectively, as of December 29, 1996, and a cost and fair value of
approximately $15 million and $75 million, respectively, as of December 31,
1995. At December 29, 1996, the total net unrealized gain on these equity
securities, net of tax, was approximately $5 million. During 1996, pre-tax gains
of $41 million were recognized, and the unrealized gain decreased by
approximately $14 million, net of tax, from December 31, 1995. The entire, net
of tax, unrealized gain is included in retained earnings.
As of December 29, 1996, the Company did not own any securities classified as
trading.
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The carrying value of short-term debt approximates fair value due to its short-
term maturity. The fair value of long-term debt was estimated using discounted
cash flow analysis based on estimated interest rates for similar types of
borrowing arrangements.
The carrying amounts and estimated fair values of the Company's other financial
instruments are as follows:
(Thousands) 1996 1995
--------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------- --------------------
Short-term debt:
Notes payable $ 14,692 $ 14,692 $ 26,770 $ 26,770
Long-term debt
(excluding capital leases) 413,870 451,293 179,301 180,920
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NOTE 5. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents, short-term investments, trade
receivables and financial instruments used in hedging activities.
The Company places its cash equivalents and short-term investments with high
credit quality financial institutions and, by policy, limits the amount of
credit exposure with any one financial institution. Investments in time deposits
and certificates of deposit are acquired from banks having combined capital,
surplus, and undistributed profits of not less than $200 million. Investments in
commercial paper and money market auction preferred stocks of industrial firms
and financial institutions are rated A1, P1 or better, investments in tax-exempt
securities including municipal notes and bonds are rated AA, Aa or better, and
investments in repurchase agreements must have securities of the type and
quality listed above as collateral.
Concentrations of credit risk with respect to trade receivables are limited
because a large number of geographically diverse customers make up the Company's
customer base, thus spreading the trade credit risk. The Company controls credit
risk through credit approvals, credit limits, and monitoring procedures. The
Company performs in-depth credit evaluations of all new customers and requires
letters of credit, bank guarantees and advance payments, if deemed necessary.
Bad debt expenses have not been material.
The counterparties to the agreements relating to the Company's foreign exchange
and interest rate instruments consist of a number of major, high credit quality,
international financial institutions. The Company does not believe that there is
significant risk of nonperformance by these counterparties because the Company
monitors their credit ratings, and limits the financial exposure and the amount
of agreements entered into with any one financial institution. While the
notional amounts of financial instruments are often used to express the volume
of these transactions, the potential accounting loss on these transactions if
all counterparties failed to perform is limited to the amounts, if any, by which
the counterparties' obligations under the contracts exceed the obligations of
the Company to the counterparties.
NOTE 6. OTHER RISKS
PRODUCTS
Flash memory devices contributed a significant portion of the Company's revenues
in 1996. The Company expects that its ability to maintain or expand its total
current levels of revenues in the future will depend upon, among other things,
its success in developing and marketing in a timely manner its future
generations of K86 RISC SUPERSCALAR microprocessor products, and future
generations of Flash memory devices.
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Source: ADVANCED MICRO DEVIC, 10-K, March 20, 1997