AMD 2002 Annual Report Download - page 63

Table of Contents
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 derivative 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 AI, PI 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, and generally does not require collateral from its customers.
The counterparties to the agreements relating to the Company’s derivative financial instruments consist of a number of large 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
The provision (benefit) for income taxes consists of:
2002 2001 2000
(Thousands)
Current:
U.S. Federal $ — $ — $ 251,849
U.S. State and Local — (6) 3,599
Foreign National and Local 9,159 21,595 20,496
Total 9,159 21,589 275,944
Deferred:
U.S. Federal 9,757 (30,192) 25,163
U.S. State and Local 24,602 (7,321) (43,789)
Foreign National and Local 1,068 1,461 (450)
Total 35,427 (36,052) (19,076)
Provision (benefit) for income taxes $ 44,586 $ (14,463) $ 256,868
Tax benefits resulting from the exercise of nonqualified stock options and the disqualifying disposition of shares issued under the Company’s stock-based
compensation plans reduced taxes currently payable by $158.3 million in 2000. Such benefits were credited to capital in excess of par value.
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Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003