SanDisk 2008 Annual Report Download - page 104

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Notes To Consolidated Financial Statements
guarantee obligations to Flash Alliance, see “Off-Balance Sheet Liabilities.” At December 28, 2008, the
Company had an equity investment in Flash Alliance of $215.9 million denominated in Japanese yen, offset by
$49.7 million of cumulative translation adjustments recorded in accumulated OCI. In fiscal year 2008, the
Company recorded an impairment of $63.0 million to the equity investment in Flash Alliance. For discussion on
impairment of the Flash Alliance investment, see Note 4, “Balance Sheet Information—Notes Receivable and
Investments in the Flash Ventures with Toshiba,” regarding impairment of equity method investments in fiscal
year 2008.
Flash Ventures. As a part of the Flash Partners and Flash Alliance (hereinafter referred to as “Flash
Ventures”) agreements, the Company is required to fund direct and common research and development expenses
related to the development of advanced NAND flash memory technologies. As of December 28, 2008 and
December 30, 2007, the Company had accrued liabilities related to these expenses of $4.0 million and
$8.0 million, respectively. In addition, in fiscal year 2008, the Company recorded charges of $121 million in cost
of product revenues for adverse purchase commitments associated with under-utilization of Flash Ventures
capacity for the 90-day period subsequent to December 28, 2008 related to the Company’s non-cancellable
orders to Flash Ventures.
The Company has guarantee obligations to Flash Ventures, see “Off-Balance Sheet Liabilities.”
Toshiba Foundry. The Company has the ability to purchase additional capacity under a foundry
arrangement with Toshiba.
TwinSys. The Company had a 50.1% beneficial ownership in TwinSys Data Storage Limited Partnership
(“TwinSys”), a business venture with Toshiba, 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. The Company and Toshiba
terminated the operations of TwinSys as of March 31, 2007.
Business Ventures and Foundry Arrangement with Toshiba. Purchase orders placed under Flash Ventures
and the foundry arrangement with Toshiba for up to three months are binding and cannot be canceled.
Other Silicon Sources. The Company’s contracts with its other sources of silicon wafers generally require
the Company to provide purchase order commitments based on nine month rolling forecasts. The purchase orders
placed under these arrangements relating to the first three months of the nine month forecast are generally
binding and cannot be canceled. These outstanding purchase commitments for other sources of silicon wafers are
included as part of the total “Noncancelable production purchase commitments” in the “Contractual Obligations”
table below.
Subcontractors. In the normal course of business, the Company’s subcontractors periodically procure
production materials based on the forecast the Company provides to them. The Company’s agreements with
these subcontractors require that the Company reimburse them for materials that are purchased on the
Company’s behalf in accordance with such forecast. Accordingly, the Company may be committed to certain
costs over and above its open noncancelable purchase orders with these subcontractors. These commitments for
production materials to subcontractors are included as part of the total “Noncancelable production purchase
commitments” in the “Contractual Obligations” table below.
F-39