AMD 2003 Annual Report Download - page 60

Table of Contents
Any claim that is successfully asserted against us may cause us to pay substantial damages. In addition, future litigation may result in injunctions against future
product sales. Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel
from our business operations, which could have a material adverse effect on us.
Our corporate headquarters in California and FASL LLC’s manufacturing facilities in Japan are located in earthquake zones and these operations could
be interrupted in the event of an earthquake. Our corporate headquarters are located near major earthquake fault lines in California and FASL LLC’s wafer
fabrication facilities are located near major earthquake fault lines in Japan. In the event of a major earthquake, we and FASL LLC could experience business
interruptions, destruction of facilities and/or loss of life, all of which could materially adversely affect us.
The conversion of our outstanding 4.50% Notes could have a significant negative impact on our earnings per share and the market price of our common
stock. On November 25, 2002, we sold $402.5 million of our 4.50% Notes in a registered offering. The 4.50% Notes are convertible at the option of the holder
at any time prior to the close of business on the business day immediately preceding the maturity date of December 1, 2007, unless previously redeemed or
repurchased, into shares of common stock at a conversion price of $7.37 per share, subject to adjustment in certain circumstances. At this conversion price, each
$1,000 principal amount of the 4.50% Notes will be convertible into approximately 135 shares of our common stock, for an aggregate potential issuance of
approximately 54 million additional shares. On March 1, 2004, the closing price of our common stock, as reported on the New York Stock Exchange was $14.89.
If the holders of our 4.50% Notes elect to convert all or some of their notes into common stock, our existing stockholders could experience significant dilution.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. In order to reduce this interest
rate risk, we usually invest our cash in investments with short maturities. As of December 28, 2003, substantially all of our investments in our portfolio were
short-term investments and consisted primarily of bank notes, short-term corporate notes, short-term money market auction rate preferred stocks and short-term
federal agency notes.
The majority of our debt obligations are fixed rate and long term. We continually monitor market conditions and enter into hedges when appropriate. We
do not currently have any hedges of interest rate risk in place. We do not use derivative financial instruments for speculative or trading purposes.
Default Risk. We mitigate default risk by investing in only the highest credit quality securities and by constantly positioning our portfolio to respond
appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active
secondary or resale markets to ensure portfolio liquidity. We are averse to principal loss and ensure the safety and preservation of our invested funds by limiting
default risk and market risk.
We use proceeds from debt obligations primarily to support general corporate purposes, including capital expenditures and working capital needs.
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004