AMD 2000 Annual Report Download - page 406

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the difference between fixed-and floating-interest amounts calculated on an
agreed-upon notional principal amount ($400 million). The swap was originally
entered to hedge interest rate exposure on the Company's fixed-rate 11% Senior
Secured Notes, a portion of which were retired during 2000 (see Note 7). The
swap, which can be cancelled by the counterparty beginning after August 1, 2001,
is not designated to hedge specified interest rate risk exposure at December 31,
2000. The Company has the ability to cancel the swap at any time. (See Note 16)
Prior to the debt retirement, the net amount payable or receivable from the
interest-rate swap agreement was accrued as an adjustment to interest expense on
the 11% Senior Secured Notes. Subsequent to the debt retirement, the interest
rate swap was recorded at fair value on the Company's balance sheet with the
resulting gain recognized in interest expense. Changes in the fair value of the
interest rate swap are recorded through other income. The average fair value of
the interest rate swap agreement from the period it ceased to function as a
hedge against interest rate risk exposure on the 11% Senior Secured Notes
through December 31, 2000 was $1,990. The gain realized on the interest rate
swap over this same period, as reflected in the Company's results of operations
for the year ended December 31, 2000, totaled $1,711. The Company's current
credit exposure on the swap is limited to its carrying value at December 31,
2000.
Fair Value of Other Financial Instruments
The fair value of debt is estimated using a discounted cash flow analysis based
on estimated interest rates for similar types of borrowing arrangements with
similar remaining maturities. The carrying amounts and estimated fair values of
the Company's debt are as follows:
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(Thousands) 2000 1999
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Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
Short-term debt:
Current portion of long-term debt
(excluding capital leases) $ 41,101 $ 39,109 $ 5,127 $ 4,974
Long-term debt (excluding capital
leases) 895,688 814,179 1,189,110 1,123,945
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The fair value of the Company's accounts receivable approximates book value
based on existing payment terms.
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.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001