SanDisk 2008 Annual Report Download - page 57

Investing Activities. Cash provided from investing activities for fiscal year 2008 was $29 million as
compared to cash used in investing activities of $1.12 billion in fiscal year 2007. The increase in cash provided
from investing was primarily related to reduced purchases of short and long-term investments due to our higher
liquidity requirements and the return of $103 million on our investment in FlashVision and $40 million from the
sale of 200-millimeter fab equipment that we owned directly as compared to the return of $38 million from
FlashVision in the fiscal year 2007. Usage of cash for investments in and loans to Flash Partners and Flash
Alliance was $384 million in fiscal year 2008 compared to $651 million in fiscal year 2007.
We used $1.22 billion for investing activities during the fiscal year ended December 30, 2007. Purchases of
short and long-term investments, net of proceeds from sales and maturities of short-term investments, totaled
$318 million. Capital expenditures for the year were $259 million and investments and notes to FlashVision,
Flash Partners and Flash Alliance were $613 million, net of repayments.
Financing Activities. Net cash provided by financing activities for fiscal year 2008 of $12 million as
compared to cash used in financing activities of $181 million in fiscal year 2007 was primarily related to lower
cash proceeds from employee stock programs and repayment of debt financing in fiscal year 2008 offset by the
termination of the share repurchase programs which used cash in fiscal year 2007.
We used $181 million of cash for financing activities during the fiscal year ended December 30, 2007
comprised primarily of $300 million to purchase treasury shares pursuant to our share repurchase program,
partially offset by cash received from exercises of share-based awards of $100 million. Additionally, during the
fiscal year ended December 30, 2007, we received a tax benefit of $18 million on employee stock programs.
Liquid Assets. At December 28, 2008, we had cash, cash equivalents and short-term investments of
$1.44 billion. We have $1.10 billion of long-term investments which we believe are also liquid assets, but are
classified as long-term investments due to the remaining maturity of the investment being greater than one year.
Short-Term Liquidity. As of December 28, 2008, our working capital balance was $1.44 billion. We expect
our loans to and investments in Flash Ventures as well as our investments in property, plant and equipment to be
approximately $0.5 billion in fiscal year 2009.
Our short-term liquidity is impacted in part by our ability to maintain compliance with covenants in the
outstanding Flash Ventures master lease agreements. The Flash Ventures master lease agreements contain
customary covenants for Japanese lease facilities as well as an acceleration clause for certain events of default
related to us as guarantor, including, among other things, our failure to maintain a minimum shareholder equity
of at least $1.51 billion, and our failure to maintain a minimum corporate rating of BB- from Standard & Poors,
or S&P, or Moody’s Corporation, or a minimum corporate rating of BB+ from Rating & Investment Information,
Inc., or R&I. As of December 28, 2008, Flash Ventures was in compliance with all of its master lease covenants.
While our S&P credit rating was B, two levels below the required minimum corporate rating threshold from
S&P, our R&I credit rating was BBB-, one level above the required minimum corporate rating threshold from
R&I.
On February 4, 2009, R&I confirmed our credit rating at BBB- with a change in outlook from stable to
negative. If R&I were to downgrade our credit rating below the minimum corporate rating threshold, Flash
Ventures would become non-compliant with certain covenants under its master equipment lease agreements and
would be required to negotiate a resolution to the non-compliance to avoid acceleration of the obligations under
such agreements. Such resolution could include, among other things, supplementary security to be supplied by
us, as guarantor, or increased interest rates or waiver fees, should the lessors decide they need additional
collateral or financial consideration under the circumstances. If a resolution was unsuccessful, we could be
required to pay a portion or the entire outstanding lease obligations covered by our guarantee under such Flash
Ventures master lease agreements of up to $2.09 billion, based upon the exchange rate at December 28, 2008,
which could negatively impact our short-term liquidity.
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