SanDisk 2013 Annual Report Download - page 162

At December 29, 2013, we had foreign exchange forward contracts in place that amounted to a net
purchase in U.S. dollar equivalent of approximately $664 million to partially hedge our expected future
wafer purchases and R&D expenses in Japanese yen. The maturities of these contracts were 13 months or
less. The notional amount and unrealized loss of our outstanding foreign exchange forward contracts that
are designated as cash flow hedges as of December 29, 2013 based upon the exchange rate as of
December 29, 2013 are shown in the table below. In addition, this table shows the change in fair value of
these cash flow hedges assuming a hypothetical adverse foreign currency exchange rate movement of
10 percent.
Change in Fair
Value Due to 10%
Notional Unrealized Adverse Rate
Amount Loss Movement
(In millions)
Foreign exchange forward contracts:
Maturities 12 months or less ................... $ 662.2 $ (38.4) $ (59.9)
Maturities greater than 12 months ............... 2.3 (0.1) (0.2)
Total .................................. $ 664.5 $ (38.5) $ (60.1)
Notwithstanding our efforts to mitigate some foreign exchange risks, we do not hedge all of our
foreign currency exposures, and there can be no assurance that our mitigating activities related to the
exposures that we hedge will adequately protect us against risks associated with foreign currency
fluctuations.
Market Risk. With the U.S. long-term sovereign credit rating below the highest available rating and the
risk of additional future downgrades or related downgrades by recognized credit rating agencies, the
investment choices for our cash and marketable securities portfolio could be reduced, which could
negatively impact our non-operating results. We have direct ownership of European sovereign debt of
$35 million. We also have foreign exchange forward contracts with two European banks. With one bank we
have contracts outstanding to purchase foreign currency with a U.S. dollar equivalent of $68 million and to
sell foreign currency with a U.S. dollar equivalent of $71 million. With regards to the second bank we have
contracts outstanding to purchase foreign currency with a U.S. dollar equivalent of $71 million and to sell
foreign currency with a U.S. dollar equivalent of $28 million. We manage our investments and foreign
exchange contracts to limit our exposure to any one issuer or bank.
All of the potential changes noted above are based on sensitivity analysis performed on our financial
position at December 29, 2013. Actual results may differ materially.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Our management has evaluated, under the supervision
and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of
our disclosure controls and procedures as of December 29, 2013. Based on their evaluation as of
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