SanDisk 2013 Annual Report Download - page 212

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Off-Balance Sheet Liabilities
Flash Ventures. The Flash Ventures sell and lease back from a consortium of financial institutions
(‘‘lessors’’) a portion of their tools and have entered into equipment master lease agreements totaling
162.6 billion Japanese yen, or approximately $1.55 billion based upon the exchange rate at December 29,
2013. As of December 29, 2013, the total amount outstanding from these master leases was 103.2 billion
Japanese yen, or approximately $983 million based upon the exchange rate at December 29, 2013, of which
the amount of the Company’s guarantee obligation of the Flash Ventures’ master lease agreements, which
reflects future payments and any lease adjustments, was 51.6 billion Japanese yen, or approximately
$492 million based upon the exchange rate at December 29, 2013.
The master lease agreements contain customary covenants for Japanese lease facilities. In addition to
containing customary events of default related to Flash Ventures that could result in an acceleration of Flash
Ventures’ obligations, the master lease agreements contain an acceleration clause for certain events of
default related to the Company as guarantor, including, among other things, the Company’s failure to
maintain a minimum stockholders’ equity of at least $1.51 billion. As of December 29, 2013, Flash Ventures
was in compliance with all of its master lease covenants, including the shareholder equity covenant with our
stockholders’ equity at $6.97 billion as of December 29, 2013. If the Company’s stockholders’ equity falls
below $1.51 billion, or other events of default occur, Flash Ventures would become non-compliant 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 the Company, 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 non-compliance event were to occur and if the Company failed to reach a resolution, the
Company could be required to pay a portion or the entire outstanding lease obligations covered by its
guarantees under such Flash Ventures master lease agreements.
The following table details the Company’s portion of the remaining guarantee obligations under each
of Flash Ventures’ master lease facilities (both original and refinanced leases) in both Japanese yen (in
billions) and U.S. dollar (in thousands) equivalent based upon the exchange rate at December 29, 2013.
Master Lease Agreements by Execution Date Lease Type Lease Amounts Expiration
(Japanese yen) (U.S. dollar)
Flash Partners
April 2010 ....................... Refinanced ¥ 1.0 $ 9,675 2014
January 2011 ..................... Refinanced 1.7 15,768 2014
November 2011 .................... Refinanced 4.5 42,640 2014
March 2012 ...................... Refinanced 3.2 30,917 2015
10.4 99,000
Flash Alliance
March 2012 ...................... Original 7.1 67,633 2017
July 2012 ........................ Refinanced 13.4 127,945 2017
20.5 195,578
Flash Forward
November 2011 .................... Original 11.1 105,320 2016
March 2012 ...................... Original 7.0 66,470 2017
July 2012 ........................ Original 2.6 25,189 2017
20.7 196,979
Total guarantee obligations .......... ¥ 51.6 $ 491,557
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