AMD 2014 Annual Report Download - page 70

Download and view the complete annual report

Please find page 70 of the 2014 AMD annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 127

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127

Foreign Exchange Risk. As a result of our foreign operations, we incur costs and we carry assets and
liabilities that are denominated in foreign currencies, while sales of products are primarily denominated in U.S.
dollars.
We maintain a foreign currency hedging strategy, which uses derivative financial instruments to mitigate the
risks associated with changes in foreign currency exchange rates. This strategy takes into consideration all of our
exposures. We do not use derivative financial instruments for trading or speculative purposes.
In applying our strategy, from time to time, we use foreign currency forward contracts to hedge certain
forecasted expenses denominated in foreign currencies. We designate these contracts as cash flow hedges of
forecasted expenses, to the extent eligible under the accounting rules, and evaluate hedge effectiveness
prospectively and retrospectively. As such, the effective portion of the gain or loss on these contracts is reported
as a component of accumulated other comprehensive income (loss) and reclassified to earnings in the same line
item as the associated forecasted transaction and in the same period during which the hedged transaction affects
earnings. Any ineffective portion is immediately recorded in earnings.
We also use, from time to time, foreign currency forward contracts to economically hedge recognized
foreign currency exposures on the balance sheets of various subsidiaries. We do not designate these forward
contracts as hedging instruments. Accordingly, the gain or loss associated with these contracts is immediately
recorded in earnings.
The following table provides information about our foreign currency forward contracts as of December 27,
2014 and December 28, 2013. All of our foreign currency forward contracts mature within 12 months.
December 27, 2014 December 28, 2013
Notional
Amount
Average
Contract
Rate
Estimated
Fair Value
Gain (Loss)
Notional
Amount
Average
Contract
Rate
Estimated
Fair Value
Gain (Loss)
(In millions except contract rates)
Foreign currency forward contracts:
Canadian Dollar ............... $143 1.1264 $(5.0) $124 1.0409 $(4.0)
Malaysian Ringgit .............. 42 3.5482 — — — —
Indian Rupee .................. 35 64.1608 (1.1) — — —
Singapore Dollar ............... 33 1.313 (0.4) — — —
Taiwan Dollar ................. 23 31.1284 (0.4) — — —
Chinese Renminbi .............. 22 6.1906 0.1 — — —
Total ............................ $298 $(6.8) $124 $(4.0)
In addition, we use fixed-to-floating interest rate swaps to manage a portion of our exposure to interest rate
risk by converting fixed rate interest payments of a portion of our 6.75% Notes to floating rate interest payments
based on LIBOR. The notional amount of the interest rate swap we entered into was $250 million as of
December 27, 2014. The interest rate swaps are designated as a fair value hedge. All changes in fair value of the
swaps are recorded on the Company’s consolidated balance sheets with no net impact to the Company’s
consolidated statements of operations.
64