SanDisk 2013 Annual Report Download - page 210

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ownership interest in each of these entities and Toshiba owns 50.1% of each of these entities. Through
these ventures, the Company and Toshiba have collaborated in the development and manufacture of
NAND flash memory products which are manufactured by Toshiba at its wafer fabrication facility located
in Yokkaichi, Japan, using semiconductor manufacturing equipment owned or leased by Flash Ventures.
The Flash Ventures purchase wafers from Toshiba at cost and then resell those wafers to the Company and
Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in each Flash
Ventures entity under the equity method of accounting. The Company is committed to purchase its
provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of
Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment
obligation beyond its rolling three-month purchase commitment because the price is determined by
reference to the future cost of producing the semiconductor wafers. In addition, the Company is
committed to fund 49.9% of Flash Ventures’ costs to the extent that Flash Ventures’ revenue from wafer
sales to the Company and Toshiba are insufficient to cover these costs.
Flash Partners. Flash Partners Ltd. (‘‘Flash Partners’’) was formed in fiscal year 2004. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba at its
300-millimeter wafer fabrication facility (‘‘Fab 3’’) located in Yokkaichi, Japan. As of December 29, 2013,
the Company had notes receivable from Flash Partners of $100.1 million, denominated in Japanese yen.
These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The
Company also has guarantee obligations to Flash Partners; see ‘‘Off-Balance Sheet Liabilities.’’ At
December 29, 2013 and December 30, 2012, the Company had an equity investment in Flash Partners of
$190.7 million and $232.5 million, respectively, denominated in Japanese yen, offset by $17.3 million and
$59.3 million, respectively, of cumulative translation adjustments recorded in AOCI. In the fiscal years
ended December 29, 2013, December 30, 2012 and January 1, 2012, the Company recorded a basis
adjustment of $1.2 million, $3.0 million and $5.3 million, respectively, to its equity in earnings from Flash
Partners related to the difference between the basis in the Company’s equity investment compared to the
historical basis of the assets recorded by Flash Partners. Flash Partners’ share of the Fab 3 fabrication
facility is fully equipped.
Flash Alliance. Flash Alliance Ltd. (‘‘Flash Alliance’’) was formed in fiscal year 2006. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba at its
300-millimeter wafer fabrication facility (‘‘Fab 4’’) located in Yokkaichi, Japan. As of December 29, 2013,
the Company had notes receivable from Flash Alliance of $324.0 million, denominated in Japanese yen.
These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The
Company also has guarantee obligations to Flash Alliance; see ‘‘Off-Balance Sheet Liabilities.’’ At
December 29, 2013 and December 30, 2012, the Company had an equity investment in Flash Alliance of
$284.0 million and $342.0 million, respectively, denominated in Japanese yen, offset by ($8.7) million and
$53.7 million, respectively, of cumulative translation adjustments recorded in AOCI. In the fiscal years
ended December 29, 2013, December 30, 2012 and January 1, 2012, the Company recorded a basis
adjustment of $6.5 million, $15.2 million and $24.5 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. Flash Alliance’s share of the Fab 4 fabrication
facility is fully equipped.
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