Sallie Mae 2005 Annual Report Download - page 102

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The impairment charge for 2004 is primarily the result of (a) FFELP Stafford loans consolidating at
levels faster than projected resulting in $47 million of impairment and (b) rising interest rates during the
second quarter 2004 which decreased the value of the Floor Income component of our Retained Interest
resulting in $33 million of impairment. Impairment for 2003 was primarily due to FFELP Stafford loans
prepaying faster than projected. These impairment charges are recorded as a loss and are included as a
reduction to securitization revenue.
We receive annual servicing fees of 90 basis points, 50 basis points and 70 basis points of the
outstanding securitized loan balance related to our FFELP Stafford/PLUS, Consolidation Loan and
Private Education Loan securitizations, respectively.
CONTRACTUAL CASH OBLIGATIONS
The following table provides a summary of our obligations associated with long-term notes and equity
forward contracts at December 31, 2005. For further discussion of these obligations, see Note 8, “Long-
Term Debt,” Note 10, “Derivative Financial Instruments,” and Note 14, “Stockholders’ Equity,” to the
consolidated financial statements.
1 Year
or less
2 to 3
Years
4 to 5
Years
Over
5 Years Total
Long-term notes(1)(2) ............................. $3,388 $26,441 $ 16,351 $ 42,371 $ 88,551
Equity forward contracts(3)........................ — 693 1,643 — 2,336
Total contractual cashobligations................. $3,388 $27,134 $ 17,994 $ 42,371 $ 90,887
(1) Excludes SFAS No. 133 derivative market value adjustment reductions of $432 million for long-term notes; only
includes principal obligations, does not include interest on the debt obligations or on our interest rate swaps.
(2) Includes FIN No. 46 long-term beneficial interests of $47.2 billion of notes issued by consolidated variable
interest entities in conjunction with our on-balance sheet securitization transactions and included in long-term
notes in the consolidated balance sheet.
(3) Our obligation to repurchase shares under equity forward contracts is calculated using the average purchase
prices for outstanding contracts in the year the contracts expire. At or prior to the maturity date of the
agreements, we can purchase shares at the contracted amount plus or minus an early break fee, or we can settle
the contract on a net basis with either cash or shares. If our stock price declines to certain levels, the third parties
with whom we entered into the contracts can liquidate their positions prior to the maturity date.
OFF-BALANCE SHEET LENDING ARRANGEMENTS
The following table summarizes the commitments associated with student loan purchases and
contractual amounts related to off-balance sheet lending related financial instruments and guarantees at
December 31, 2005.
1 Year
or less
2 to 3
Years
4 to 5
Years
Over
5 Years Total
Student loan purchases(1),(2) ........................ $11,297 $35,304 $ 3,876 $ 225 $ 50,702
Lines of credit(2) .................................. 75 1,161 153 100 1,489
$ 11,372 $ 36,465 $ 4,029 $ 325 $ 52,191
(1) Includes amounts committed at specified dates under forward contracts to purchase student loans and anticipated
future requirements to acquire student loans from lending partners (discussed below) estimated based on future
volumes at contractually committed rates. These commitments are not accounted for as derivatives under SFAS
No. 133 as they do not meet the definition of a derivative due to the lack of a fixed and determinable purchase
amount.
(2) Expiration of commitments and guarantees reflect the earlier of call date or maturity date as of December 31,
2005.