AMD 2007 Annual Report Download - page 92

Table of Contents
Foreign Exchange Risk. As of December 29, 2007, as a result of our foreign operations, we had costs, assets and liabilities that were denominated in
foreign currencies, primarily the euro and Canadian dollar. For example, some fixed asset purchases and certain expenses of our German subsidiaries, AMD
Saxony and AMD Fab 36 KG, are denominated in euros while sales of products are denominated in U.S. dollars. Additionally, as a result of our acquisition of
ATI in October 2006, some of our expenses and debt are denominated in Canadian dollars.
As a consequence, movements in exchange rates could cause our foreign currency denominated expenses to increase as a percentage of net revenue,
affecting our profitability and cash flows. We use foreign currency forward and option contracts to reduce our exposure to currency fluctuations on our foreign
currency exposures. The objective of these contracts is to minimize the impact of foreign currency exchange rate movements on our operating results and on the
cost of capital asset acquisitions. Our accounting policy for these instruments is based on our designation of such instruments as hedges of underlying exposure to
variability in cash flows. We do not use these contracts for speculative or trading purposes.
Unrealized gains and losses related to the foreign currency forward and option contracts for the year ended December 29, 2007 were not material. We do
not anticipate any material adverse effect on our consolidated financial position, results of operations or cash flows resulting from the use of these instruments in
the future. However, we cannot give any assurance that these strategies will be effective or that transaction losses can be minimized or forecasted accurately. In
particular, generally we hedge only a portion of our foreign currency exchange exposure. Moreover, we determine our total foreign currency exchange exposure
using projections of long-term expenditures for items such as payroll, equipment and materials used in manufacturing. We cannot assure you that our hedging
activities will eliminate foreign exchange rate exposure. Failure to do so could have an adverse effect on our business, financial condition, results of operations
and cash flow.
The following table provides information about our foreign currency forward and option contracts as of December 29, 2007 and December 31, 2006. All
of our foreign currency forward contracts and option contracts mature within 12 months.
Fiscal 2007 Fiscal 2006
Notional
Amount
Average
Contract
Rate
Estimated
Fair Value
Gain (Loss)
Notional
Amount
Average
Contract
Rate
Estimated
Fair Value
Gain (Loss)
(In millions except contract rates)
Foreign currency forward contracts:
Japanese yen $ 13 112.76 $ — $ 26 117.62 $ —
Canadian Dollar 172 1.0231 8 117 1.1181 (4)
Euro 894 1.4228 30 1,099 1.3036 13
Total: $ 1,079 $ 38 $ 1,242 $ 9
87
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008