AMD 2003 Annual Report Download - page 80

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 invests 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. Accounts receivable from one of the Company’s customers accounted for approximately 31
percent of total consolidated accounts receivable balance. However, the Company does not think the receivable balance from this customer represents a credit
risk based on past collection experience. The Company manages 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 or parental guarantees and advance payments, if deemed necessary,
but 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, or
approximately $33 million, at December 28, 2003.
NOTE 6: Income Taxes
The provision (benefit) for income taxes consists of:
2003 2002 2001
(Thousands)
U.S. Federal $ (20,288) $ — $ —
U.S. State and Local — — (6)
Foreign National and Local 20,253 9,159 21,595
Total (35) 9,159 21,589
Deferred:
U.S. Federal 7,090 9,757 (30,192)
U.S. State and Local — 24,602 (7,321)
Foreign National and Local (4,119) 1,068 1,461
Total 2,971 35,427 (36,052)
Provision (benefit) for income taxes $ 2,936 $ 44,586 $ (14,463)
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004