SanDisk 2006 Annual Report Download - page 130

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Off Balance Sheet Arrangements.
As of
December 31,
2006
Indemnification of FlashVision foundry equipment lease(5) . . ................... $ 48,640
Guarantee of Flash Partners lease(6) ...................................... $604,797
(1) As of December 31, 2006, the Company and Toshiba have agreed to expand Fab 3 to 135,000 wafers per month.
(2) In May 2006, the Company issued and sold $1.15 billion in aggregate principal amount of 1% Convertible
Senior Notes due May 15, 2013. The Company will pay cash interest at an annual rate of 1%, payable semi-
annually on May 15 and November 15 of each year, beginning November 15, 2006. In addition, in November
2006, through its acquisition of msystems, the Company assumed msystems’ $75 million in aggregate principal
amount of 1% Convertible Notes due March 15, 2035. The Company will pay cash interest at an annual rate of
1%, payable semi-annually on March 15 and September 15 of each year until calendar year 2035.
(3) Includes Toshiba foundries, FlashVision, Flash Partners, related parties vendors and other silicon sources
vendors purchase commitments.
(4) Includes amounts denominated in Japanese yen which are subject to fluctuation in exchange rates prior to
payment and have been translated using the exchange rate at December 31, 2006.
(5) The Company’s contingent indemnification obligation is 5.8 billion Japanese yen, or approximately $49 million
based upon the exchange rate at December 31, 2006.
(6) The Company’s guarantee obligation, net of cumulative lease payments, is 72.0 billion Japanese yen, or
approximately $605 million based upon the exchange rate at December 31, 2006.
The Company leases its headquarters and sales offices under operating leases that expire at various dates from
2007 through 2016. Future minimum lease payments under real estate operating leases at December 31, 2006 were
as follows (in thousands):
Fiscal Year Ending:
2007 ................................................................ $ 8,471
2008 ................................................................ 8,018
2009 ................................................................ 7,850
2010 ................................................................ 7,626
2011 ................................................................ 6,308
2012 and beyond ....................................................... 13,037
Total................................................................ $51,310
Foreign Currency Exchange and Other Contracts. The Company’s objective for holding foreign exchange
derivatives is to minimize the material risks associated with non-functional currency transactions. The Company’s
foreign exchange derivative instruments are designated as fair value hedges and recorded at fair value on the balance
sheet with changes in fair value recorded in other income (expense). The Company had foreign currency exchange
contract lines available in the amount of $1.57 billion at December 31, 2006 to enter into foreign currency forward
contracts. As of December 31, 2006, the Company had foreign currency forward contracts in place with a notional
amount of 8.6 billion Japanese yen, or approximately $72 million based upon the exchange rate at December 31,
2006. For the twelve months ended December 31, 2006, these foreign currency contracts resulted in a realized gain
of $5.8 million, including forward point income. The foreign currency exposures hedged by these forward contracts
had realized losses of $2.2 million. The Company has outstanding cash flow hedges designated to mitigate equity
risk associated with certain available for sale equity securities totaling approximately $68 million. The changes in
the fair value of the cash flow hedge are included in other comprehensive equity and were immaterial as of and for
Annual Report
F-31
Notes to Consolidated Financial Statements — (Continued)