AMD 1999 Annual Report Download - page 156

Note 5: Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents, short-term investments, trade
receivables and financial instruments used in hedging activities.
The Company places its cash equivalents and short-term investments with high
credit quality financial institutions and, by policy, limits the amount of
credit exposure with any one financial institution. The Company acquires
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 better, and investments in repurchase agreements must have
securities of the type and quality listed above as collateral.
Concentrations of credit risk with respect to trade receivables are limited
because a large number of geographically diverse customers make up the Company's
customer base, thus spreading the trade credit risk. The Company controls credit
risk through credit approvals, credit limits and monitoring procedures. The
Company performs in-depth credit evaluations of all new customers and requires
letters of credit, bank guarantees and advance payments, if deemed necessary.
The Company's bad debt expenses have not been material.
The counterparties to the agreements relating to the Company derivative
instruments consist of a number of major, high credit quality, international
financial institutions. The Company does not believe that there is significant
risk of nonperformance by these counterparties because the Company monitors
their credit ratings, and limits 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 the Company's obligations
to the counterparties.
Note 6: Income Taxes
Provision (benefit) for income taxes consists of:
(Thousands) 1999 1998 1997
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Current:
U.S. Federal $ (7,072) $ 1,706 $(43,053)
U.S. State and Local 363 1,772 (1,959)
Foreign National and Local 14,095 11,505 8,423
Deferred:
U.S. Federal 134,050 (89,997) (12,902)
U.S. State and Local 26,178 (16,869) (7,872)
Foreign National and Local (264) 5 2,208
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Provision (benefit) for income taxes $167,350 $(91,878) $(55,155)
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Tax benefits generated from stock option deductions in 1999, 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 the Company's deferred tax assets and liabilities as
of December 26, 1999 and December 27, 1998 are as follows:
(Thousands) 1999 1998
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Deferred tax assets:
Net operating loss carryovers $ 231,542 $ 237,767
Deferred distributor income 32,759 28,940
Accrued expenses not currently deductible 28,149 29,462
Federal and state tax credit carryovers 115,396 92,879
Other 95,660 112,550
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Total deferred tax assets 503,506 501,598
Less: valuation allowance (249,116) (73,243)
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254,390 428,355
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Deferred tax liabilities:
Depreciation (188,879) (196,293)
Other (70,046) (60,887)
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Total deferred tax liabilities (258,925) (257,180)
Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000