SanDisk 2009 Annual Report Download - page 129

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This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
The Company has an outstanding cash flow hedge designated to mitigate equity risk associated with certain
available-for-sale investments in equity securities. The gain or loss on the cash flow hedge is reported as a
component of accumulated OCI and will be reclassified into other income (expense) in the same period that the
equity securities are sold. The securities had a fair value of $71.8 million and $35.2 million as of January 3, 2010
and December 28, 2008, respectively. The cash flow hedge designated to mitigate equity risk of these securities
had a fair value of $0.7 million and $32.0 million as of January 3, 2010 and December 28, 2008, respectively.
Other Derivatives. Other derivatives that are non-designated consist primarily of forward and cross currency
swap contracts to minimize the risk associated with the foreign exchange effects of revaluing monetary assets
and liabilities. Monetary assets and liabilities denominated in foreign currencies and the associated outstanding
forward and cross currency swap contracts were marked-to-market at January 3, 2010 with realized and
unrealized gains and losses included in other income (expense). As of January 3, 2010, the Company had foreign
currency forward contracts hedging exposures in European euros, Israeli new shekels, Japanese yen and
Taiwanese dollars. Foreign currency forward contracts were outstanding to buy and (sell) U.S. dollar equivalent
of approximately $260.2 million and ($97.6) million in foreign currencies, respectively, based upon the exchange
rates at January 3, 2010.
The Company has currency swap transactions with one counterparty to exchange Japanese yen for U.S.
dollars for a combined notional amount of ($412.6) million which require the Company to maintain a minimum
liquidity of $1.5 billion on, or prior to, June 30, 2010 and $1.0 billion after June 30, 2010. Liquidity is defined as
the sum of the Company’s cash and cash equivalents, and short and long-term marketable securities. The
Company is in compliance with the covenant as of January 3, 2010. Should the Company fail to comply with this
covenant, the Company may be required to settle the unrealized gain or loss on the foreign exchange contracts
prior to the original maturity.
The amounts in the tables below include fair value adjustments related to the Company’s own credit risk and
counterparty credit risk.
Fair Value of Derivative Contracts. Fair value of derivative contracts were as follows (in thousands):
Derivative assets reported in
Other Current Assets Long-term Marketable Securities
January 3,
2010
December 28,
2008
January 3,
2010
December 28,
2008
Designated cash flow hedges
Foreign exchange contracts ................ $ — $ 51,576 $ — $ —
Equity market risk contract ................ — — 725 31,987
— 51,576 725 31,987
Foreign exchange contracts not designated ........ 3,708 21,570 — —
Total derivatives ............................ $ 3,708 $ 73,146 $ 725 $ 31,987
Derivative liabilities reported in
Other Current Accrued Liabilities Non-current Liabilities
January 3,
2010
December 28,
2008
January 3,
2010
December 28,
2008
Foreign exchange contracts not designated ........ $ 7,794 $153,523 $ 15,453 $ —
F-17