Tesla 2012 Annual Report Download - page 101

Table of Contents
As of December 31, 2011 and 2010, we held reservation payments of $91.8 million and $30.8 million from potential customers,
respectively, which are not reflected in the table above. As of December 31, 2011, we held reservation payments for undelivered Model S sedans
in an aggregate amount of $90.0 million and payments for Tesla Roadsters in an aggregate amount of $1.8 million. As of December 31, 2010, we
held reservation payments for undelivered Model S sedans in an aggregate amount of $28.3 million and payments for Tesla Roadsters in an
aggregate amount of $2.5 million. In order to convert the reservation payments into revenue, we will need to sell vehicles to these customers. All
reservation payments for Model S are fully refundable until such time that a customer enters into a purchase agreement.
Off-Balance Sheet Arrangements
During the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
Foreign Currency Risk
A portion of our revenues, costs and expenses for the years ended December 31, 2011, 2010 and 2009 were denominated in foreign
currencies. This is primarily due to the contract with Lotus Cars Limited in the United Kingdom to manufacture the Tesla Roadster vehicles and
gliders, and other parts sourced in Europe. Furthermore, we intend to globally procure the Model S parts, which may result in the increase of the
procurement costs if the value of the U.S. dollar depreciates significantly against foreign currencies. In addition, our international sales and
marketing operations incur expenses denominated in foreign currencies, principally in the British pound, the euro and the Japanese yen. These
costs exposure are partially offset by our sales growth in these regions since payments for vehicles sold in these regions are denominated in the
local currency. This provides a partial natural hedge to our cost exposure in Europe and Asia depending on our sales levels in these regions. Our
battery cell purchases from Asian suppliers are also subject to currency risk. To date, the foreign currency effect on our consolidated financial
statements has not been significant.
Interest Rate Risk
We had cash and cash equivalents and short-term marketable securities totaling $280.3 million as of December 31, 2011. A significant
portion of our cash and cash equivalents were invested in money market funds. The cash and cash equivalents and short-term marketable
securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes. We believe that we do not
have any material exposure to changes in the fair value as a result of changes in interest rates due to the short term nature of our cash equivalents
and marketable securities. Declines in interest rates, however, would reduce future investment income.
As of December 31, 2011, we had $25.1 million invested in shorter-term marketable securities. If interest rates increase, the market value
of our investments may decline, which could result in a realized loss if we are required to sell a security before its scheduled maturity. If overall
interest rates had risen by 100 basis points, the fair value of our net investment position as of December 31, 2011 would have decreased by
approximately $38,000, assuming consistent levels.
As of December 31, 2011, we have received loans under the DOE Loan Facility for an aggregate of $276.3 million with interest rates
ranging from 1.0% to 3.4%. As we continue to borrow under our DOE Loan Facility, interest rates will be determined by the Secretary of the
Treasury as of the date of each loan, based on the Treasury yield curve and the scheduled principal installments for such loan. We also have
capital lease obligations of $3.9 million as of December 31, 2011 which are fixed rate instruments and are not subject to fluctuations in interest
rates.
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ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK