AMD 1994 Annual Report Download - page 406

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred income on shipments to distributors. A portion of sales is made to
distributors under terms allowing certain rights of return and price protection
on unsold merchandise held by the distributors. These agreements can be canceled
by either party upon written notice, at which time the company generally
repurchases unsold inventory. Accordingly, recognition of sales to distributors
and related gross profits are deferred until the merchandise is resold by the
distributors.
Income taxes. Effective December 28, 1992, the company adopted Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes."
Net income per common share. Primary net income per common share is based upon
weighted average common and dilutive common equivalent shares outstanding using
the treasury stock method. Dilutive common equivalent shares include stock
options and restricted stock. Fully diluted net income per common share is
computed using the weighted average common and dilutive common equivalent shares
outstanding, plus other dilutive shares outstanding which are not common
equivalent shares. Other dilutive shares which are not common equivalent shares
include convertible preferred stock.
Financial presentation. Certain prior year amounts on the Consolidated Financial
Statements have been reclassified to conform to the 1994 presentation.
- - --------------------------------------------------------------------------------
2. FINANCIAL INSTRUMENTS
Financial instruments with off-balance-sheet risk.
As part of the company's asset and liability management, the company enters
into various types of transactions that involve financial instruments with
off-balance-sheet risk. These instruments are entered into in order to
manage financial market risk, including interest rate and foreign exchange
risk. The notional values, carrying amounts and fair values are tabled
below.
Foreign exchange forward contracts. The company enters into foreign
exchange forward contracts to buy and sell currencies as economic hedges of
its net monetary asset positions in its foreign subsidiaries. The hedging
transactions in 1994 were denominated in lira, yen, French franc, deutsche
mark, and pound sterling. The maturities of these contracts are generally
less than six months.
Foreign currency options. The joint venture (FASL) investments are
denominated in yen, and therefore, are subject to exposure due to
fluctuations in yen exchange rate. Thus, the company hedges its exposures
on certain firm commitments relating to the FASL investment with foreign
currency options denominated in yen. The maturities of these options are
generally less than six months.
Interest rate swaps. The company engaged in interest rate swaps primarily
to reduce its interest rate exposure on its building lease obligations.
These interest rate swaps generally involve the payment of a fixed interest
rate based on three to five year swap rates and the receipt of a floating
interest rate based on six months LIBOR without exchanges of the underlying
notional amounts. These interest rate swaps will mature in 1997.
Fair value of financial instruments with off-balance-sheet risk.
The estimates of fair value were obtained using prevailing financial market
information as of December 25, 1994. In certain instances where judgment is
required in estimating fair value, price quotes were obtained from certain
of the company's counterparty financial institutions.
- - --------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------
1994 1993
- - ---------------------------------------------------------------------------------------------------
Notional Carrying Fair Notional Carrying Fair
(Thousands) amount amount value amount amount value
- - ---------------------------------------------------------------------------------------------------
Interest rate
instruments:
Swaps $40,000 $(518) $228 $40,000 $(1,122) $(3,384)
Foreign
exchange
instruments:
Foreign
exchange
Source: ADVANCED MICRO DEVIC, 10-K, March 07, 1995