AMD 2012 Annual Report Download - page 97

Download and view the complete annual report

Please find page 97 of the 2012 AMD annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 140

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140

The Company’s significant inputs and assumptions used in the discounted cash flow model to determine the
fair value of its ARS are listed below:
December 29,
2012
December 31,
2011
Discount rate for periodic interest payments ............ 0.84% 1.13%
Discount rate for principal repayments ................ 1.31% 1.93%
Liquidity discount ................................ 0.90% 0.90%
Credit discount ................................... 2.00% to 12.00% 2.00%
Estimated period .................................. 17to20years 17 years
Significant increases (decreases) in the significant inputs and assumptions above in isolation would result in
a significantly lower (higher) fair value measurement. There is no interrelationship between changes in the
inputs.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis. Financial instruments that are not
recorded at fair value are measured at fair value quarterly for disclosure purposes. The carrying amounts and
estimated fair values of financial instruments not recorded at fair value are as follows:
December 29,
2012
December 31,
2011
Carrying
amount
Estimated
Fair Value
Carrying
amount
Estimated
Fair Value
(In millions)
Short-term debt (excluding capital leases) .................... $ — $ — $ 485 $ 490
Long-term debt (excluding capital leases) .................... $2,019 $1,837 $1,505 $1,619
The fair value of the Company’s short-term and long-term debt, Level 2 financial instruments, was
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 fair value of the Company’s accounts receivable,
accounts payable and other short-term obligations approximate their carrying value based on existing payment
terms.
NOTE 8: Concentrations of Credit and Operation Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily
of investments in debt securities, trade receivables and derivative financial instruments used in hedging activities.
The Company places its 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. At the time an investment is made, investments in commercial paper and money market auction
rate securities of industrial firms and financial institutions are rated A1, P1 or better. Investments in tax-exempt
securities, including municipal notes and bonds, and corporate bonds that are rated A, A2 or better, and
investments in repurchase agreements must have securities of the type and quality listed above as collateral.
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 22%, 16% and 14% of the total consolidated accounts receivable balance as of December 29,
2012 and 15%, 15% and 14% of the total consolidated accounts receivable balance as of December 31, 2011.
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 its exposure to customer credit risk
through credit limits, credit lines, monitoring procedures and credit approvals. Furthermore, the Company
89