AMD 2008 Annual Report Download - page 101

Foreign Exchange Risk. As of December 27, 2008, 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 is denominated in Canadian
dollars. Furthermore, as a result of a new sales program that has been implemented in China, some of our sales in
China are now denominated in Chinese Renminbi.
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 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.
Realized gains and losses related to the foreign currency forward contracts, net of changes in the value of
the hedged exposures, for the year ended December 27, 2008 were not material. As of December 27, 2008, we
had unrealized losses of $26 million that were recorded to other comprehensive income. 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, since we expect that these unrealized losses will be offset by decreases
in future cash flows of the items being hedged. 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 contracts as of December 27,
2008 and December 29, 2007. All of our foreign currency forward contracts and option contracts mature within
12 months.
Fiscal 2008 Fiscal 2007
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 ................. $ 12 89.7500 $ — $ 13 112.7600 $ —
Canadian Dollar .............. 135 1.1107 (12) 172 1.0231 8
Euro ....................... 673 1.4581 (24) 894 1.4228 30
Total: .......................... $820 $(36) $1,079 $ 38
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