SanDisk 2006 Annual Report Download - page 132

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Alliance under the equity method of accounting. The Company is committed to purchase half of Flash Alliance’s
NAND wafer supply.
The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as a result of its
involvement with Flash Alliance was $4.3 million as of December 31, 2006. These amounts are comprised of the
Company’s investments.
The following summarizes the aggregated financial information for FlashVision, Flash Partners and Flash
Alliance as of December 31, 2006 and January 1, 2006 (in thousands).
December 31,
2006
January 1,
2006
(Unaudited)
Current assets ............................................ $ 448,520 $ 373,409
Property, plant and equipment and other assets.................... 1,652,706 1,039,844
Total assets .............................................. 2,101,226 1,413,253
Current liabilities ......................................... 1,169,543 881,529
Long-term liabilities ....................................... $ 262,063 $ 124,616
The following summarizes the aggregated financial information for FlashVision, Flash Partners and Flash
Alliance for the fiscal years ended December 31, 2006, January 1, 2006 and January 2, 2005 respectively (in
thousands). The Toshiba ventures’ year-ends are March 31, with quarters ending on March 31, June 30,
September 30 and December 31.
December 31,
2006
January 1,
2006
January 2,
2005
Twelve Months Ended
(Unaudited)
Net sales(1) ..................................... $1,462,024 $795,464 $502,949
Gross profit (loss) ................................. 8,894 (349) 2,553
Net income ..................................... $ 1,730 $ 763 $ 1,139
(1) Net sales represent sales to both the Company and Toshiba. In addition, Flash Partners’ revenue in fiscal year
2004 of $21.2 million represents reimbursement of start-up costs.
TwinSys. The Company assumed msystems’ ownership interest in the venture with Toshiba, TwinSys,
designed to enable the parties to benefit from a portion of each party’s respective sales of USB flash drives. As of
December 31, 2006, the Company had a 50.1% beneficial ownership in TwinSys, consisting of (i) 49.9% ownership
in TwinSys and (ii) 0.2% interest held by TwinSys Ltd., in which the Company has a 51% ownership interest. For
the period between the closing date of the msystems acquisition and December 31, 2006, TwinSys had sales to
Toshiba of $28.1 million and purchases from Toshiba of $21.9 million. At December 31, 2006, TwinSys had
receivables from Toshiba of $18.5 million and payables due to Toshiba of $39.9 million.
Tower Semiconductor. As of December 31, 2006, the Company owned approximately 12.7% of the
outstanding shares of Tower Semiconductor Ltd., or Tower, one of its suppliers of wafers for its controller
components, has prepaid wafer credits issued by Tower, and has convertible debt and a warrant to purchase Tower
ordinary shares. The Company’s Chief Executive Officer is also a member of the Tower board of directors. As of
December 31, 2006, the Company owned approximately 12.8 million Tower shares with a carrying value and
market value of $17.5 million and $21.9 million, respectively, and Tower prepaid wafer credits with a carrying value
of zero. In addition, the Company holds a Tower convertible debenture with a market value of $5.8 million. Also, as
of December 31, 2006, the Company loaned the $9.8 million to Tower to fund a portion of the overall expansion of
Tower’s 0.13 micron logic wafer capacity. The loan to Tower is secured by the equipment purchased. The Company
purchased controller wafers and related non-recurring engineering, or NRE, of approximately $41.0 million,
$31.3 million and $28.4 million in the fiscal years ended December 31, 2006, January 1, 2006 and January 2, 2005,
Annual Report
F-33
Notes to Consolidated Financial Statements — (Continued)