AMD 2015 Annual Report Download - page 92

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 of industrial firms and
financial institutions are rated A1, P1 or better. The Company invests in tax-exempt securities, including
municipal notes and bonds that are rated A, A2 or better and repurchase agreements, each of which 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
diluting the trade credit risk. Accounts receivable from the Company’s top three customers accounted for
approximately 20%, 16% and 10% of the total consolidated accounts receivable balance as of December 26,
2015 and 28%, 17% and 15% of the total consolidated accounts receivable balance as of December 27, 2014.
However, the Company does not believe the receivable balance from these customers represents a significant
credit risk based on past collection experience, and review of their current credit quality. The Company manages
its exposure to customer credit risk through credit limits, credit lines, ongoing monitoring procedures and credit
approvals. Furthermore, the Company performs in-depth credit evaluations of all new customers and, at intervals,
for existing customers. From this, the Company may require letters of credit, bank or corporate guarantees or
advance payments, if deemed necessary.
The Company’s existing derivative financial instruments are with large international financial institutions of
investment grade credit rating. The Company does not believe that there is significant risk of nonperformance by
these counterparties because the Company monitors their credit rating on an ongoing basis. By using derivative
instruments, the Company is subject to credit and market risk. If a counterparty fails to fulfill its performance
obligations under a derivative contract, the Company’s credit risk will equal the fair value of the derivative
instrument. Generally, when the fair value of a derivative contract is positive, the counterparty owes the
Company, thus creating a receivable risk for the Company. Based upon certain factors, including a review of the
credit default swap rates for the Company’s counterparties, the Company determined its counterparty credit risk
to be immaterial. At December 26, 2015, the Company’s obligations under the contracts exceeded the
counterparties’ obligations by $6 million.
The Company is dependent on certain equipment and materials from a limited number of suppliers and relies on a
limited number of foreign companies to supply the majority of certain types of integrated circuit packages for its
internal back-end manufacturing operations. Similarly, certain non-proprietary materials or components such as
memory, PCBs, substrates and capacitors used in the manufacture of the Company’s graphics products are currently
available from only a limited number of sources. Interruption of supply or increased demand in the industry could
cause shortages and price increases in various essential materials. If the Company or its third-party manufacturing
suppliers are unable to procure certain of these materials, or its foundries are unable to procure materials for
manufacturing its products, its business would be materially adversely affected.
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