AMD 1998 Annual Report Download - page 217

- --------------------------------------------------------------------------------
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 and long-term debt obligations. We
do not use derivative financial instruments in our investment portfolio. We
place our investments with high credit quality issuers and, by policy, limit the
amount of credit exposure to any one issuer. As stated in our investment policy,
we are averse to principal loss and ensure the safety and preservation of our
invested funds by limiting default risk, market risk and reinvestment 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 primarily use proceeds from debt obligations to support general corporate
purposes including capital expenditures and working capital needs. We have no
interest rate exposure due to rate changes for the Convertible Subordinated
Notes and the Senior Secured Notes. However, we do have interest rate exposure
on our $250 million bank term loan due to its variable LIBOR pricing. From time
to time, we enter into interest rate swaps, primarily to reduce our interest
rate exposure by changing a portion of our interest rate exposure from floating
to fixed rate. There were no interest rate swaps outstanding at the end of
fiscal 1998.
The table below presents principal (or notional) amounts and related weighted-
average interest rates by year of maturity for our investment portfolio and debt
obligations as of December 27, 1998 and December 28, 1997.
1998 1997
---------------------------------------------------------------------------------------- --------
(Thousands) 1999 2000 2001 2002 2003 Thereafter Total Fair value Total
- ---------------------------------------------------------------------------------------------------------------------- --------
Cash equivalents
Fixed rate amounts $ 22,434 - - - - - $ 22,434 $ 22,394 $ 37,761
Average rate 5.51% - - - - -
Variable rate amounts $136,408 - - - - - $ 136,408 $ 136,408 -
Average rate 5.12% - - - - -
Short-term investments
Fixed rate amounts $219,085 - - - - - $ 219,085 $ 219,617 $164,538
Average rate 5.64% - - - - -
Variable rate amounts $115,500 - - - - - $ 115,500 $ 115,500 $ 61,200
Average rate 5.66% - - - - -
Long-term investments
Equity investments - $ 7,027 - - - - $ 7,027 $ 13,292 $ 6,161
Fixed rate amounts - $ 2,000 - - - - $ 2,000 $ 2,003 $ 1,997
Average rate 5.88% 5.88% - - - -
Total investments
Securities $493,427 $ 9,027 - - - - $ 502,454 $ 509,214 $271,657
Average rate 5.49% 5.88% - - - -
Notes payable
Fixed rate amounts $ 6,017 - - - - - $ 6,017 $ 6,017 $ 6,601
Average rate 1.06% - - - - -
Long-term debt
Fixed rate amounts $ 283 $ 151 $53,611 $178,332 $468,290 $518,169 $1,218,836 $1,266,196 $410,056
Average rate 7.49% 7.49% 7.49% 7.59% 8.00% 6.01%
Variable rate amounts $125,000 $93,750 - - - - $ 218,750 $ 218,750 $250,000
Average rate 8.06% 8.06% - - - -
Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999