Sallie Mae 2006 Annual Report Download - page 27

Because of the risks, uncertainties and conditions described above, there can be no assurance that we can
maintain our future growth rates at rates consistent with our historic growth rates.
Our GAAP earnings are highly susceptible to changes in interest rates because most of our derivatives do
not qualify for hedge accounting treatment under SFAS No. 133.
Changes in interest rates can cause volatility in our GAAP earnings as a result of changes in the market
value of our derivatives that do not qualify for hedge accounting treatment under SFAS No. 133, “Accounting
for Derivative Instruments and Hedging Activities.” Under SFAS No. 133, changes in derivative market values
are recognized immediately in earnings. If a derivative instrument does not qualify for hedge accounting
treatment under SFAS No. 133, there is no corresponding change in the fair value of the hedged item
recognized in earnings. As a result, gain or loss recognized on a derivative will not be offset by a
corresponding gain or loss on the underlying hedged item. Because most of our derivatives do not qualify for
hedge accounting treatment, when interest rates change significantly, our GAAP earnings may fluctuate
significantly.
For a discussion of operational, market and interest rate, and liquidity risks, see “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS —
RISKS.”
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table lists the principal facilities owned by the Company:
Location Function
Approximate
Square Feet
Reston, VA ............. Headquarters 240,000
Fishers, IN .............. Loan Servicing and Data Center 450,000
Wilkes Barre, PA ......... Loan Servicing Center 133,000
Killeen, TX ............. Loan Servicing Center 133,000
Lynn Haven, FL .......... Loan Servicing Center 133,000
Indianapolis, IN .......... Loan Servicing Center 100,000
Marianna, FL
(1)
.......... Back-up/Disaster Recovery Facility for Loan Servicing 94,000
Big Flats, NY ............ Debt Management and Collections Center 60,000
Gilbert, AZ ............. Southwest Student Services Headquarters 60,000
Arcade, NY
(2)
........... Debt Management and Collections Center 46,000
Perry, NY
(2)
............. Debt Management and Collections Center 45,000
Swansea, MA............ AMSHeadquarters 36,000
(1)
Facility listed for sale in October 2006.
(2)
In the first quarter of 2003, the Company entered into a ten year lease with the Wyoming County Industrial Development
Authority with a right of reversion to the Company for the Arcade and Perry, New York facilities.
In December 2003, the Company sold its prior Reston, Virginia headquarters and leased approximately
229,000 square feet of that building from the purchaser through August 31, 2004. The Company completed
the construction of a new headquarters building in Reston, Virginia in August 2004 that has approximately
240,000 square feet of space. All Reston-based employees were moved into the new headquarters in August
2004.
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