AMD 1998 Annual Report Download - page 238

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
exchange risk. The notional amounts, carrying amounts and fair values of these
instruments as of December 27, 1998 and December 28, 1997 are included in the
table below.
1998 1997
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(Thousands) Notional amount Carrying amount Fair value Notional amount Carrying amount Fair value
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Foreign exchange instruments:
Purchased foreign currency
call option contracts $ 75,000 $ 289 $ 45 $150,000 $893 $ 369
Purchased foreign currency
put option contracts 220,000 - 1,547 - - -
Written foreign currency
call option contracts 220,000 (3,416) (13,469) - - -
Foreign exchange forward
contracts 13,112 (32) (25) 48,500 53 309
We used prevailing financial market information and price quotes from certain of
our counterparty financial institutions as of the respective dates to obtain the
estimates of fair value.
Foreign Exchange Forward Contracts We use foreign exchange forward contracts
to hedge our exposure to currency fluctuations on our net monetary assets
position in our foreign subsidiaries, liabilities for products purchased from
FASL and fixed asset purchase commitments. Our hedging transactions in 1998 were
denominated in Italian lira, Japanese yen, French franc, German mark, British
pound, Dutch guilder, Thailand baht, Singapore dollar and Malaysian ringit. The
maturities of these contracts were generally less than 12 months.
Foreign Currency Option Contracts In 1998, we entered into a no-cost collar
arrangement to hedge Dresden Fab 30 project costs denominated in U.S. dollars.
In addition to purchased put option contracts, no-cost collars include written
call option contracts, the contract rates of which are structured so as to avoid
payment of any option premium at the time of purchase. With respect to the
written call option contracts, we recognized a loss in 1998 associated with the
counterparties' in-the-money position. Unrealized losses on outstanding written
contracts are included in accrued liabilities. These contracts mature on various
dates through 2000.
In 1997, we purchased foreign currency call option contracts to hedge market
risk exposures related to currency fluctuations on firm commitments denominated
in deutsche marks to make investments in, or subordinated loans to, AMD Saxony.
These contracts mature on various dates through 1999.
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS We estimated the fair value of debt
using discounted cash flow analysis based on estimated interest rates for
similar types of borrowing arrangements.
The carrying amounts and estimated fair values of our other financial
instruments are as follows:
1998 1997
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(Thousands) Carrying amount Fair value Carrying amount Fair value
- ------------------------------------------------------------------------------------------------------------------------------------
Short-term debt:
Notes payable $ 6,017 $ 6,017 $ 6,601 $ 6,601
Current portion of long-term debt
(excluding capital leases) 125,283 148,178 37,176 47,013
Long-term debt (excluding capital leases) 1,312,303 1,336,768 622,880 640,604
NOTE 5. CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject us to concentrations of credit
risk consist primarily of cash equivalents, short-term investments, trade
receivables and financial instruments used in hedging activities.
We place our cash equivalents and short-term investments with high credit
quality financial institutions and, by policy, limit the amount of credit
exposure with any one financial institution. We acquire investments in time
deposits and certificates of deposit from banks having combined capital, surplus
and undistributed profits of not less than $200 million. Investments in
commercial paper and money market auction rate 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
Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999