Tesla 2015 Annual Report Download - page 60

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In connection with our Tesla Factory located in Fremont, California, we are obligated to pay for the remediation of certain environmental
conditions existing at the time we purchased the property from New United Motor Manufacturing, Inc. (NUMMI). As of December 31, 2014 and
2013, we accrued a total of $4.0 million and $5.5 million, respectively, related to these environmental liabilities. NUMMI is responsible for
remediation costs between $15 million and $30 million for up to 10 years from the closing date.
Off-Balance Sheet Arrangements
During the periods presented, we did not have relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes.
Foreign Currency Risk
Our revenues and costs denominated in foreign currencies are not completely matched. We commenced deliveries of Model S in June
2012 to customers in North America and to European customers in August 2013. We recently introduced Model S to China, Hong Kong, Japan,
and Australia. Through December 31, 2014, a majority of our revenues have been denominated in U.S. dollars. However, we have materially
greater revenues than expenses denominated in the Chinese yuan and Norwegian krona, and materially greater expenses than revenues
denominated in the Japanese yen. December 31, 2014. Accordingly, if the value of the U.S. dollar depreciates significantly against currencies
where we have a net short exposure, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase which may
adversely impact our operating results. Conversely, as the value of the U.S. dollar appreciates significantly against currencies where revenues
exceed expenses, our revenues as measured in U.S. dollars may be reduced.
As a result of a favorable foreign currency exchange impact from foreign currency-denominated liabilities, especially related to the
Japanese yen, we recorded gains of $2.0 million on foreign exchange transactions in other income (expense), net, for the year ended
December 31, 2014.
Interest Rate Risk
We had cash and cash equivalents totaling $1.91 billion as of December 31, 2014. A significant portion of our cash and cash equivalents
were invested in money market funds. Cash and cash equivalents are held for working capital purposes. We do not enter into investments for
trading or speculative purposes. We believe that we do not have any material exposure to changes in the fair value as a result of changes in
interest rates due to the short term nature of our cash equivalents.
As of December 31, 2014, we had $2.96 billion aggregate principal amount of convertible senior notes outstanding and capital lease
obligations of $21.8 million, all of which are fixed rate instruments. Therefore, our results of operations are not subject to fluctuations in interest
rates.
59
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TEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK