SanDisk 2010 Annual Report Download - page 225

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
$45.3 million, respectively, of cumulative translation adjustments recorded in accumulated OCI. In fiscal year
2010 and 2009, the Company recorded a basis adjustment of $6.1 million and $13.9 million, respectively, to its
equity earnings from Flash Alliance related to the difference between the basis in the Company’s equity
investment compared to the historical basis of the assets recorded by Flash Alliance.
FlashVision. In the first quarter of fiscal year 2010, the wind-down was completed of FlashVision, a
business venture with Toshiba in which the Company owned 49.9%. The Company recorded a gain of
$4.1 million in the first quarter of fiscal year 2010 in other income (expense) related to the completion of this
wind-down.
Flash Partners and Flash Alliance Restructuring. The Company and Toshiba restructured Flash Partners
and Flash Alliance in the first quarter of fiscal year 2009 by selling more than 20% of these ventures’ capacity to
Toshiba. The restructuring resulted in the Company receiving value of 79.3 billion Japanese yen of which
26.1 billion Japanese yen, or $277.1 million, was received in cash, reducing outstanding notes receivable from
these ventures, and 53.2 billion Japanese yen reflected the transfer of off-balance sheet equipment lease
guarantee obligations from the Company to Toshiba. The restructuring was completed in a series of closings
through March 31, 2009. The Company received the cash and transferred 53.2 billion Japanese yen of
off-balance sheet equipment lease guarantee obligations in the first half of fiscal year 2009. Transaction costs of
$10.9 million related to the sale and transfer of equipment and lease obligations were expensed in the first quarter
of fiscal year 2009.
Flash Forward. In July 2010, the Company and Toshiba entered into an agreement to create Flash Forward
to operate in Toshiba’s Fab 5 facility (“Fab 5”), of which the Company will own 49.9% and Toshiba will own
50.1%. Toshiba will own and fund the construction of the Fab 5 building, which will be located in Yokkaichi,
Japan, adjacent to the site of the Company’s current Flash Partners and Flash Alliance ventures. Fab 5 is
designed to be built in two phases. The Phase 1 building shell is expected to be completed in the second quarter
of calendar year 2011, after which equipment outfitting is expected to begin, with initial NAND production
scheduled for the third quarter of the Company’s fiscal year 2011. The Company is committed to invest in 50%
of the initial ramp within Phase 1 of Fab 5, which is expected to occur in the second half of fiscal year 2011. No
timelines have been finalized for Phase 1 capacity expansions beyond 2011 or for the construction of Phase 2.
For Phase 1 expansion beyond the initial ramp, the Company has the option to make investments and share
output on a 50/50 basis between the Company and Toshiba. If and when Phase 2 is built, the Company is
committed to 50% of an initial ramp in Phase 2, similar to that in Phase 1. On completion of the second phase,
Fab 5 is expected to be of similar size and capacity to Toshiba’s Fab 4. The Company and Toshiba will each
retain some flexibility as to the extent and timing of each party’s respective fab capacity ramps, and the output
allocation will be in accordance with each of the parties’ proportionate level of equipment funding.
Research and Development Activities. The Company participates in common research and development
activities with Toshiba but is not committed to any minimum funding level.
Toshiba Foundry. The Company has the ability to purchase additional capacity under a foundry
arrangement with Toshiba.
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. These
outstanding purchase commitments are included as part of the total “Noncancelable production purchase
commitments” in the “Contractual Obligations” table.
Other Silicon Sources. The Company’s contracts with its other sources of silicon wafers generally require
the Company to provide monthly purchase order commitments based on non-binding nine month rolling
F-39