SanDisk 2004 Annual Report Download - page 75

Table of Contents
Notes to Consolidated Financial Statements — (Continued)
Company had accrued current liabilities due to Toshiba for shared research and development expenses of $5.5 million and
$11.8 million, respectively.
The Company owns approximately 14% of the outstanding shares of Tower, prepaid wafer credits issued by Tower and a warrant
to purchase Tower ordinary shares (see Note 7). The Company’s chief executive officer is a member of the Tower board of directors.
The Company paid Tower approximately $28.4 million and $5.3 million in 2004 and 2003, respectively, for the purchase of controller
wafers. These purchases of controller wafers are ultimately reflected as a component of the Company’s cost of product revenues. At
January 2, 2005 and December 28, 2003, the Company had amounts payable to Tower of approximately $7.6 million and zero,
respectively, related to the purchase of controller wafers.
In September 2003, the president and chief executive officer of Flextronics joined the Company’s board of directors. For 2004 and
2003, the Company paid Flextronics and its affiliates approximately $37.4 million and $8.1 million, respectively for wafer testing,
packaged memory final testing, card assembly and card testing. These activities are ultimately reflected as a component of the
Company’s cost of product revenues. At January 2, 2005 and December 28, 2003, the Company had amounts payable to Flextronics
and its affiliates of approximately $2.0 million and $1.5 million, respectively, for these services.
Note 11: Investment in Toshiba Ventures
FlashVision
In the second quarter of 2002, the FlashVision Dominion Semiconductor business in Virginia was consolidated at Toshiba’s
memory fabrication facility in Yokkaichi, Japan. The Company owns 49.9% of FlashVision. The Company’s obligations with respect
to FlashVision’s lease arrangement, capacity expansion, take−or−pay supply arrangements and research and development cost sharing
are described in Note 5. The fair value of the Company’s loan to FlashVision approximates book value. FlashVision is a variable
interest entity and the Company is not the primary beneficiary of FlashVision because it is entitled to less than a majority of any
residual gains and is obligated with respect to less than a majority of residual losses with respect to the venture.
The following is the summarized financial information for FlashVision at the Company’s fiscal years ended January 2, 2005 and
December 28, 2003, respectively. FlashVision’s year−end is March 31, with each quarter ending on March 31, June 30, September 30
and December 31 (in thousands). December 31, December 31,
2004 2003
(Unaudited)
Current Assets $ 148,354 $ 128,774
Property, plant and equipment and other assets $ 516,909 $ 374,438
Total Assets $ 665,263 $ 503,212
Current Liabilities $ 222,017 $ 148,200
The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as a result of its involvement with
FlashVision was $326.0 million and $294.7 million, as of January 2, 2005 and December 29, 2003, respectively. These amounts are
comprised of the Company’s investments, notes receivable and contingent indemnification obligation. At January 2, 2005 and
December 29, 2003, the Company’s consolidated retained earnings included approximately $1.7 million and $1.3 million, respectively
of undistributed earnings of FlashVision. F−29