SanDisk 1998 Annual Report Download - page 44

SanDisk Corporation
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sheet date. Operations accounts and nonmonetary balance
sheet accounts are remeasured at the rate in effect at the date
of transaction. The effects of foreign currency remeasure-
ment are reported in current operations. See “Note 2.”
Reclassifications
Certain reclassifications, none of which affected net income,
have been made to prior year’s amounts to conform to the
current year’s presentation.
Cash Equivalents and Short-Term Investments
Cash equivalents consist of short-term, highly liquid financial
instruments with insignificant interest rate risk that are readily
convertible to cash and have maturities of three months or
less from the date of purchase. Cash equivalents and short-
term investments consist of money market funds, taxable
commercial paper, certificates of deposit, U.S. government
agency obligations, corporate / municipal notes and bonds
with high-credit quality, money market preferred stock and
auction rate preferred stock. The fair market value, based on
quoted market prices, of cash equivalents and short-term
investments is substantially equal to their carrying value at
December 31, 1998 and 1997.
Under FAS 115, management classifies investments as
available-for-sale at the time of purchase and periodically
reevaluates such designation. Debt securities classified as
available-for-sale are reported at fair value. Unrecognized gains
or losses on available-for-sale securities are included, in equity
until their disposition. Realized gains and losses and declines
in value judged to be other than temporary on available-for-
sale securities are included in interest income. The cost of
securities sold is based on the specific identification method.
All cash equivalents and short-term investments as of
December 31, 1998 and 1997 are classified as available-for-
sale securities and consist of the following:
December 31,
(In thousands) 1998 1997
CASH EQUIVALENTS
Money market fund $ 1,389 $ 115
Commercial paper 9,178 2,000
Municipal notes — 5,800
U.S. government agency obligations — 694
Corporate notes / bonds 2,251 1,650
Total $ 12,818 $ 10,259
SHORT TERM INVESTMENTS
U.S. government agency obligations $ — $ 7,463
Municipal notes / bonds 91,073 54,059
Corporate notes / bonds 12,550 24,429
Money market preferred stock — 4,000
Certificates of deposit — 4,036
Auction rate preferred stock 15,451 20,050
Total $ 119,074 $ 114,037
Unrealized holding gains and losses on available-for-sale
securities at December 31, 1998 and 1997 were $471,000
and $42,000, respectively. Gross realized gains and losses on
sales of available-for-sale securities during the years ended
December 31, 1998 and 1997 were immaterial.
Debt securities at December 31, 1998 and 1997, by contrac-
tual maturity, are shown below. Actual maturities may differ
from contractual maturities because issuers of the securities
may have the right to prepay obligations.
December 31,
(In thousands) 1998 1997
SHORT-TERM INVESTMENTS
Due in one year or less $ 93,983 $ 68,937
Due after one year through two years 25,091 45,100
Total $ 119,074 $ 114,037
Inventories
Inventories are stated at the lower of cost or market. Cost
is computed on a currently adjusted standard basis (which
approximates actual costs on a first-in, first-out basis). Market
value is based upon an estimated average selling price reduced
by normal gross margins. Inventories are as follows:
December 31,
(In thousands) 1998 1997
Raw materials $ 2,710 $ 3,289
Work-in-process 3,818 10,340
Finished goods 2,394 2,019
$ 8,922 $ 15,648
Given the volatility of the market, the Company makes
inventory provisions for potentially excess and obsolete
inventory based on backlog and forecasted demand.
However, backlog is subject to revisions, cancellations and
rescheduling. Actual demand may differ from forecasted
demand and such differences may have a material effect on
the Company’s financial position and results of operations.
Property and Equipment
Property and equipment consist of the following:
December 31,
(In thousands) 1998 1997
Machinery and equipment $ 30,008 $ 23,919
Software 3,413 2,450
Furniture and fixtures 1,173 875
Leasehold improvements 2,120 1,981
Property and equipment, at cost 36,714 29,225
Accumulated depreciation
and amortization (19,172) (13,333)
Property and equipment, net $ 17,542 $ 15,892