Advanced Micro Devices, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Financial Instruments

Financial Instruments

12 Months Ended

Dec. 28, 2019

Investments, Debt and Equity Securities [Abstract]

Cash, Cash Equivalents, and Marketable Securities

Cash and financial instruments measured and recorded at fair value on a recurring basis, which approximates amortized cost, as of December 28, 2019 and December 29, 2018 are summarized below:



	Total Fair Value		Cash and Cash Equivalents		Marketable Securities
	(In millions)
December 28, 2019
Cash	$	1,465	$	1,465	$	—
Level 1⁽¹⁾
Government money market funds	$	1	$	1	$	—
Total level 1	$	1	$	1	$	—
Level 2⁽²⁾
Commercial paper	$	37	$	—	$	37
Total level 2	$	37	$	—	$	37
Total	$	1,503	$	1,466	$	37



	Total Fair Value		Cash and Cash Equivalents		Marketable Securities
	(In millions)
December 29, 2018
Cash	$	315	$	315	$	—
Level 1⁽¹⁾
Government money market funds	$	275	$	275	$	—
Total level 1	$	275	$	275	$	—
Level 2⁽²⁾
Commercial paper	$	566	$	488	$	78
Total level 2	$	566	$	488	$	78
Total	$	1,156	$	1,078	$	78



⁽¹⁾		Level 1 fair value estimates are based on quoted prices for identical instruments in active markets.

⁽²⁾		Level 2 fair value estimates are based on quoted prices for identical or comparable instruments in markets that are not active or comparable instruments in active markets.

In addition to those amounts presented above, as of December 28, 2019 and December 29, 2018, the Company had approximately $4 million and $5 million, respectively, of investments in money market funds, used as collateral for letters of credit deposits, which were included in Other current assets on the Company’s consolidated balance sheets. As of December 28, 2019 and December 29, 2018, the Company also had approximately $30 million and $21 million, respectively, of investments in mutual funds held in a Rabbi trust established for the Company’s deferred compensation plan, which were included in Other assets on the Company’s consolidated balance sheets. These government money market funds and mutual funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized cost approximates the fair value for all periods presented. The Company is restricted from accessing these investments.

Financial Instruments Not Recorded at Fair Value on a Recurring Basis. The Company carries its certain financial instruments at fair value with the exception of its debt. Financial instruments that are not recorded at fair value are measured at fair value on a quarterly basis for disclosure purposes. The carrying amounts and estimated fair values of financial instruments not recorded at fair value are as follows:



	December 28, 2019				December 29, 2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)
Short-term debt	$	—	$	—	$	136	$	136
Long-term debt, net⁽¹⁾	$	486	$	1,823	$	1,114	$	2,428

⁽¹⁾

Carrying amounts of long-term debt are net of unamortized debt issuance costs of $4 million and $16 million as of December 28, 2019 and December 29, 2018, respectively, and net of $73 million and $262 million unamortized debt discount associated with the 2.125% Notes as of December 28, 2019 and December 29, 2018, respectively. The carrying amounts above do not include the equity component related to the conversion feature of the 2.125% Notes of $95 million and $305 million as of December 28, 2019 and December 29, 2018, respectively.

The estimated fair value of the Company’s short-term and long-term debt are based on Level 2 inputs. The Company’s 2.125% Notes, included in Long-term debt, net, above, were convertible at the option of the holder as of December 28, 2019. The estimated fair value of the 2.125% Notes takes into account the value of the Company’s stock price of $46.18 as of December 28, 2019 and the initial conversion price of approximately $8.00 per share of common stock.

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.

Hedging Transactions and Derivative Financial Instruments

Cash Flow Hedges and Foreign Currency Forward Contracts not Designated as Hedges

The following table shows the amount of losses included in accumulated other comprehensive income (loss) (AOCI), the amount of losses reclassified from accumulated other comprehensive income (loss) and included in earnings related to the foreign currency forward contracts designated as cash flow hedges and the amount of losses included in other expense, net, related to contracts not designated as hedging instruments which was allocated in the consolidated statements of operations:



				Year Ended
				December 28, 2019									December 29, 2018
	Cost of sales			Research and development			Marketing, general and administrative			Other expense, net			Research and development			Marketing, general and administrative			Other expense, net
				(In millions)
Contracts designated as cash flow hedging instruments
Losses reclassified from AOCI into earnings	$	(1	)	$	(4	)	$	(1	)	$	—		$	(4	)	$	(1	)	$	—
Contracts not designated as hedging instruments
Losses recognized in earnings	—			—			—			(1		)	—			—			(3		)
Total losses	$	(1	)	$	(4	)	$	(1	)	$	(1	)	$	(4	)	$	(1	)	$	(3	)

The Company’s foreign currency derivative contracts are classified within Level 2 because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets such as currency spot and forward rates.

The following table shows the fair value amounts of the Company’s foreign currency derivative contracts depending on whether the foreign currency forward contracts were a gain or loss position. These amounts were recorded in the Company’s consolidated balance sheets in either Other current assets or Other current liabilities.



	December 28, 2019			December 29, 2018
	(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments - gains	$	2		$	1
Contracts designated as cash flow hedging instruments - losses	$	(2	)	$	(8	)

For the foreign currency contracts designated as cash flow hedges, the ineffective portions of the hedging relationship and the amounts excluded from the assessment of hedge effectiveness were immaterial.

As of December 28, 2019 and December 29, 2018, the notional values of the Company’s outstanding foreign currency forward contracts were $739 million and $396 million, respectively. All the contracts mature within 12 months and, upon maturity, the amounts recorded in Accumulated other comprehensive income (loss) are expected to be reclassified into earnings. The Company hedges its exposure to the variability in future cash flows for forecasted transactions over a maximum of 12 months.