AMD 1998 Annual Report Download - page 240

We limit concentrations of credit risk with respect to trade receivables because
a large number of geographically diverse customers make up our customer base,
thus spreading the trade credit risk. We control credit risk through credit
approvals, credit limits and monitoring procedures. We perform in-depth credit
evaluations of all new customers and require letters of credit, bank guarantees
and advance payments, if deemed necessary. Our bad debt expenses have not been
material.
The counterparties to the agreements relating to our derivative instruments
consist of a number of major, high credit quality, international financial
institutions. We do not believe that there is significant risk of nonperformance
by these counterparties because we monitor their credit ratings and limit the
financial exposure and the amount of agreements entered into with any one
financial institution. While the notional amounts of financial instruments are
often used to express the volume of these transactions, the potential accounting
loss on these transactions if all counterparties failed to perform is limited to
the amounts, if any, by which the counterparties' obligations under the
contracts exceed our obligations to the counterparties.
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NOTE 6. INCOME TAXES
Benefit for income taxes consists of:
(Thousands) 1998 1997 1996
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Current:
U.S. Federal $ 1,706 $(43,053) $(102,213)
U.S. State and Local 1,772 (1,959) (1,026)
Foreign National and Local 11,505 8,423 1,097
Deferred:
U.S. Federal (89,997) (12,902) 16,280
U.S. State and Local (16,869) (7,872) 854
Foreign National and Local 5 2,208 -
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Benefit for income taxes $(91,878) $(55,155) $ (85,008)
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Tax benefits resulting from the exercise of nonqualified stock options and the
disqualifying disposition of shares acquired under our incentive stock option
and stock purchase plans reduced taxes currently payable as shown above by
approximately $2 million in 1996. We credited such benefits to capital in excess
of par value when realized. Tax benefits generated in 1998 and 1997 did not
reduce taxes currently payable.
Deferred income taxes reflect the net tax effects of tax carryovers and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of our deferred tax assets and liabilities as of December
27, 1998 and December 28, 1997 are as follows:
(Thousands) 1998 1997
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Deferred tax assets:
Net operating loss carryovers $ 237,767 $ 99,424
Deferred distributor income 28,940 36,898
Inventory reserves 25,655 30,085
Accrued expenses not currently deductible 29,462 26,345
Federal and state tax credit carryovers 92,879 74,535
Other 86,895 60,927
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Total deferred tax assets 501,598 328,214
Less: valuation allowance (73,243) (44,221)
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428,355 283,993
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Deferred tax liabilities:
Depreciation (196,293) (175,177)
Other (60,887) (44,502)
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Total deferred tax liabilities (257,180) (219,679)
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Net deferred tax assets $ 171,175 $ 64,314
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999