AMD 2007 Annual Report Download - page 117

Table of Contents
At December 29, 2007 and December 31, 2006, respectively, the Company had approximately $12 million and $13 million of investments classified as
held to maturity, consisting of commercial paper and treasury notes used for long-term workers’ compensation and leasehold deposits, which are included in
other assets on the Company’s consolidated balance sheets. The fair value of these investments approximated their cost at December 29, 2007 and December 31,
2006.
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:
2007 2006
Carrying
amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
(In millions)
Long-term debt (excluding capital leases) $ 5,035 $ 4,079 $ 3,637 $ 3,651
The fair value of the Company’s accounts receivable and accounts payable approximate carrying value based on existing payment terms.
NOTE 7: Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, marketable securities,
trade receivables and derivative financial instruments used in hedging activities.
The Company places its cash equivalents and marketable securities 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 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. Concurrently with Spansion’s IPO, the Company
also invested approximately $159 million in cash to purchase $175 million principal aggregate amount of Spansion Senior Notes. The Spansion Senior Notes
were not investment grade.
The Company believes that 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 Company’s top three customers accounted
for approximately 17 percent, 12 percent and 5 percent of the total consolidated accounts receivable balance as of December 29, 2007. 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 corporate guarantees or 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 lower of the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Company’s obligations to the counterparties,
which amounted to approximately $38 million, at December 29, 2007.
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008