SanDisk 2003 Annual Report Download - page 41

Among the scope exceptions, companies are not required to apply FIN 46R to an entity that meets the
criteria to be considered a ""business'' as deÑned in the Interpretation unless one or more of four named
conditions exist. FIN 46R applies immediately to a VIE created or acquired after January 31, 2003.
We have reviewed our investment portfolio to determine whether any of our equity investments are
considered variable interest entities. We did not identify any variable interest entities that must be
consolidated, but have made any required additional disclosures. The maximum exposure of any investment
that may be determined to be in a variable interest entity is limited to the amount invested.
In November 2002, the Financial Accounting Standards Board issued Emerging Issues Task Force
(referred to as EITF) Issue No. 00-21, ""Revenue Arrangements with Multiple Deliverables.'' EITF Issue
No. 00-21 addresses certain aspects of the accounting by a company for arrangements under which it will
perform multiple revenue-generating activities. EITF Issue No. 00-21 addresses when and how an arrange-
ment involving multiple deliverables should be divided into separate units of accounting. EITF Issue
No. 00-21 provides guidance with respect to the eÅect of certain customer rights due to company
nonperformance on the recognition of revenue allocated to delivered units of accounting. EITF Issue
No. 00-21 also addresses the impact on the measurement and/or allocation of arrangement consideration of
customer cancellation provisions and consideration that varies as a result of future actions of the customer or
the company. Finally, EITF Issue No. 00-21 provides guidance with respect to the recognition of the cost of
certain deliverables that are excluded from the revenue accounting for an arrangement. The provisions of
EITF Issue No. 00-21 applied to revenue arrangements entered into in Ñscal periods beginning after June 15,
2003. The eÅect that the adoption of EITF Issue No. 00-21 did not have a material eÅect on our Consolidated
Financial Statements for the Ñscal year ended December 28, 2003.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Risks Related to Our Business
Our operating results may Öuctuate signiÑcantly, which may adversely aÅect our operations and our stock
price.
Our quarterly and annual operating results have Öuctuated signiÑcantly in the past and we expect that
they will continue to Öuctuate in the future. This Öuctuation is a result of a variety of factors, including the
following:
‚ unpredictable or changing demand for our products;
‚ decline in the average selling prices of our products due to competitive pricing pressures;
‚ timing of sell through by our distributors and retail customers;
‚ seasonality in sales of our products;
‚ natural disasters aÅecting the countries in which we conduct our business, particularly Japan, where
our principal source of Öash memory wafers is located, as well as Taiwan, South Korea, China and the
United States;
‚ reduced sales to our customers or interruption to our manufacturing processes in the PaciÑc Rim that
may arise from regional issues in Asia;
‚ availability of suÇcient Öash memory wafer foundry capacity to meet customer demand;
‚ increased purchases of Öash memory products from non-captive sources;
‚ diÇculty of forecasting and managing inventory levels; particularly, building a large inventory of unsold
product due to non-cancelable contractual obligations to purchase materials such as Öash memory
wafers, controllers, printed circuit boards and discrete components;
‚ write-oÅs related to obsolescence or devaluation of unsold inventory;
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