Advanced Micro Devices, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments

Financial Instruments

9 Months Ended

Sep. 28, 2019

Investments, Debt and Equity Securities [Abstract]

Cash, Cash Equivalents, and Marketable Securities

Cash and financial instruments measured and recorded at fair value as of September 28, 2019 and December 29, 2018 are summarized below:



	Total Fair Value		Cash and Cash Equivalents		Short-Term Marketable Securities
	(In millions)
September 28, 2019
Cash	$	1,155	$	1,155	$	—
Level 1⁽¹⁾
Government money market funds	$	1	$	1	$	—
Total level 1	$	1	$	1	$	—
Level 2⁽²⁾
Commercial paper	$	53	$	—	$	53
Total level 2	$	53	$	—	$	53
Total	$	1,209	$	1,156	$	53



	Total Fair Value		Cash and Cash Equivalents		Short-Term 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⁾	The Company’s Level 1 assets are valued using quoted prices for identical instruments in active markets.


⁽²⁾	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 the amounts presented above, as of both September 28, 2019 and December 29, 2018, the Company had $5 million of investments in government money market funds, used as collateral for letters of credit deposits, which were included in Other current assets on the Company’s condensed consolidated balance sheets. As of September 28, 2019 and December 29, 2018, the Company also had $28 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 condensed 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 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:



	September 28, 2019				December 29, 2018
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(In millions)
Short-term debt, net	$	—	$	—	$	136	$	136
Long-term debt, net⁽¹⁾	$	872	$	2,977	$	1,114	$	2,428


⁽¹⁾	Carrying amounts of long-term debt are net of unamortized debt issuance costs of $11 million as of September 28, 2019 and $16 million as of December 29, 2018, and net of unamortized debt discount associated with the 2.125% Notes of $205 million as of September 28, 2019 and $262 million as of December 29, 2018.

The Company’s long-term debt is 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 Company’s 2.125% Notes, included in Long-term debt, net above, were convertible at the option of the holder as of September 28, 2019. The estimated fair value of the 2.125% Notes take into account the value between the Company’s stock price as of the end of the quarter and the equivalent 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 Accounting Hedges

The following table shows the impact of losses resulting from cash flow hedges and foreign currency forward contracts not designated as accounting hedges on the respective condensed consolidated statement of operations line items:



	Three Months Ended
	September 28, 2019									September 29, 2018
	Research and development			Marketing, general and administrative			Other income (expense), net			Research and development			Marketing, general and administrative			Other income (expense), net
	(In millions)
Amounts presented in the condensed consolidated statements of operations in which the effects of cash flow hedges were recorded	$	406		$	185		$	(36	)	$	363		$	148		$	(6	)

Foreign Currency Forward Contracts - losses
Contracts designated as cash flow hedging instruments
Losses reclassified from OCI into income	(1		)	(1		)	—			(4		)	(1		)	—
Contracts not designated as hedging instruments
Losses recognized in income	—			—			(1		)	—			—			—
Total losses	$	(1	)	$	(1	)	$	(1	)	$	(4	)	$	(1	)	$	—



	Nine Months Ended
	September 28, 2019									September 29, 2018
	Research and development			Marketing, general and administrative			Other income (expense), net			Research and development		Marketing, general and administrative		Other income (expense), net
	(In millions)
Amounts presented in the condensed consolidated statements of operations in which the effects of cash flow hedges were recorded	$	1,152		$	544		$	(40	)	$	1,063	$	424	$	(4	)

Foreign Currency Forward Contracts - losses
Contracts designated as cash flow hedging instruments
Losses reclassified from OCI into income	(5		)	(1		)	—			—		—		—
Contracts not designated as hedging instruments
Losses recognized in income	—			—			(2		)	—		—		(2		)
Total losses	$	(5	)	$	(1	)	$	(2	)	$	—	$	—	$	(2	)

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

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 are in a gain or loss position. These amounts were recorded in the Company’s condensed consolidated balance sheets in either Other current assets or Other current liabilities.



	September 28, 2019			December 29, 2018
	(In millions)
Foreign Currency Forward Contracts - gains (losses)
Contracts designated as cash flow hedging instruments - gains	$	1		$	1
Contracts designated as cash flow hedging instruments - losses	$	(7	)	$	(8	)

As of September 28, 2019 and December 29, 2018, the notional values of the Company’s outstanding foreign currency forward contracts were $573 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.