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. 29, 2018

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 29, 2018 and December 30, 2017 are summarized below:



	Total Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities
	(In millions)
December 29, 2018
Cash	$	315	$	315	$	—
Level 1^{(1) (2)}
Government money market funds	$	275	$	275	$	—
Total level 1	$	275	$	275	$	—
Level 2^{(1) (3)}
Commercial paper	$	566	$	488	$	78
Total level 2	$	566	$	488	$	78
Total	$	1,156	$	1,078	$	78



	Total Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities
	(In millions)
December 30, 2017
Cash	$	108	$	108	$	—
Level 1^{(1) (2)}
Government money market funds	$	395	$	395	$	—
Total level 1	$	395	$	395	$	—
Level 2^{(1) (3)}
Commercial paper	$	682	$	682	$	—
Total level 2	$	682	$	682	$	—
Total	$	1,185	$	1,185	$	—


⁽¹⁾	The Company did not have any transfers between Level 1 and Level 2 during 2018 and 2017.


⁽²⁾	The Company’s Level 1 assets are valued using quoted prices for identical instruments in active markets.


⁽³⁾	The Company’s Level 2 assets are valued using broker reports that utilize quoted prices for identical instruments in markets that are not active or comparable instruments in active markets. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of industry data providers and other third-party sources.

In addition to those amounts presented above, as of December 29, 2018 and December 30, 2017, the Company had approximately $5 million and $2 million, respectively, of investments in money market funds used as collateral for letters of credit deposits which were included in Other current assets and Other assets, respectively, on the Company’s consolidated balance sheets. These money market funds are classified within Level 1 because they are valued using quoted prices for identical instruments in active markets. Their amortized costs are the same as the fair value for all periods presented. The Company is restricted from accessing these deposits.

As of December 29, 2018 and December 30, 2017, the Company also had approximately $21 million and $18 million, respectively, of investments in mutual funds held in a Rabbi trust established for the Company’s deferred compensation plan which were also included in Other assets on the Company’s consolidated balance sheets. These 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 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 29, 2018				December 30, 2017
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)
Short-term debt	$	136	$	136	$	70	$	70
Long-term debt, net⁽¹⁾	$	1,114	$	2,428	$	1,324	$	2,103


⁽¹⁾	Carrying amounts of long-term debt are net of unamortized debt issuance costs of $16 million and $19 million as of December 29, 2018 and December 30, 2017, respectively, and net of $262 million and $286 million unamortized debt discount associated with the 2.125% Notes as of December 29, 2018 and December 30, 2017, respectively.

The Company’s short-term and long-term debt, net are classified within Level 2. The fair value of the debt 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.

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



	Consolidated Statements of Operations and Statements of Comprehensive Income (Loss) Location	2018			2017
		(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments
Other comprehensive income (loss)		$	(14	)	$	9

Gains (losses) reclassified from OCI into income	Research and development	(4		)	7
Gains (losses) reclassified from OCI into income	Cost of sales; Marketing, general and administrative	(1		)	1
Total Gains (losses) reclassified from OCI into income		(5		)	8
Contracts not designated as hedging instruments
Gains (losses) recognized in income	Other income (expense), net	$	(3	)	$	(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 included in Other current assets should the foreign currency forward contracts be in a gain position or included in Other current liabilities should these contracts be in a loss position. These amounts were recorded in the Company’s consolidated balance sheets as follows:



	December 29, 2018			December 30, 2017
	(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments	$	(7	)	$	7

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 29, 2018 and December 30, 2017, the notional values of the Company’s outstanding foreign currency forward contracts were $396 million and $300 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.