AMD 2005 Annual Report Download - page 99

Table of Contents
At December 25, 2005 and December 26, 2004, the Company had approximately $13 million and $14 million of investments classified as held to maturity,
consisting of commercial paper and treasury notes used for long-term workers’ compensation and leasehold deposits, that are included in other assets on the
accompanying consolidated balance sheet. The fair market value of these investments approximates their cost at December 25, 2005 and December 26, 2004.
Fair Value of Other Financial Instruments. The fair value of the Company’s long-term debt is estimated based on the quoted market prices for the same
or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying amounts and estimated fair values of the
Company’s debt instruments are as follows:
2005 2004
Carrying
amount
Estimated
fair value
Carrying
amount
Estimated
fair value
(In thousands)
Long-term debt and capital leases:
Capital leases $ 113,534 $ 113,534 $ 184,853 $ 183,406
Long-term debt (excluding capital leases) 1,256,755 1,410,407 1,674,243 2,172,113
Total long-term debt and capital leases 1,370,289 1,523,941 1,859,096 2,355,519
Less: current portion 43,224 43,224 230,828 230,855
Total long-term debt and capital leases, less current portion $ 1,327,065 $ 1,480,717 $ 1,628,268 $ 2,124,664
The fair value of the Company’s accounts receivable and accounts payable approximate carrying value based on existing payment terms.
NOTE 6: 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. Concurrently with Spansion’s IPO, the Company
also invested approximately $158.9 million in cash to purchase $175 million principal aggregate amount of Spansion Senior Notes. The Spansion Senior Notes
are not investment grade. See Note 3.
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 the two customers who had the greatest accounts receivable balance for
2005 accounted for approximately 42 percent of total consolidated accounts receivable balance for 2005. Accounts receivable from Fujitsu accounted for
approximately 23 percent of total consolidated accounts receivable balance for 2004. (See Note 4). Accounts receivable from the Company’s next largest
customer accounted for 16 percent of total consolidated accounts receivable balance for 2004. However, the Company does not believe the receivable balance
from these customers represents a significant 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
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006