SanDisk 2003 Annual Report Download - page 39

On August 9, 2000, we entered into a joint venture, Digital Portal Inc., or DPI, with Photo-Me Inc., or
PMI, for the manufacture, installation, marketing, and maintenance of self-service, digital photo printing labs,
or kiosks, bearing the SanDisk brand name in locations in the United States and Canada. Under the
agreement, we invested $2.0 million. In an agreement eÅective September 30, 2002, we and PMI agreed that
we would scale down our kiosk activities and PMI would assume responsibility to Ñnance and direct the future
growth of DPI. Under the agreement, we converted approximately $400,000 in receivables due from DPI to
equity in DPI, reduced our ownership percentage below 20% and gave up our seat on the DPI board of
directors. Under the new agreement, we discontinued our kiosk related activities, are no longer required to
make additional equity investments in DPI, guarantee DPI's equipment leases or otherwise pay any of DPI's
expenses, and furthermore, DPI will no longer use the SanDisk brand name. We have accounted for this
investment under the equity method, and in 2002 we recorded a $1.1 million loss as our share of DPI's losses,
which was deducted from the investment account. As of December 28, 2003, this investment had been sold
and the related gain on the sale was minimal.
Contractual Obligations and OÅ Balance Sheet Arrangements
The following summarizes our contractual obligations and oÅ balance sheet arrangements at Decem-
ber 28, 2003, and the eÅect such obligations are expected to have on our liquidity and cash Öow over the next
Ñve years (in thousands).
Less than 5 Years
Total 1 Year 2 Ó 3 Years 4 Ó 5 Years and Beyond
CONTRACTUAL OBLIGATIONS:
Convertible subordinated notes
payable ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $150,000(1) $ Ì $150,000 $ Ì $Ì
Interest payable on convertible
subordinated notesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 20,250 6,750 13,500 Ì Ì
Operating leasesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,816 3,132 3,684 Ì Ì
FlashVision research and
development, fabrication capacity
expansion and start-up costsÏÏÏÏÏÏÏ 320,516(3)(4) 197,344 69,172 54,000
Non-cancelable purchase
commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 141,723(2) 141,723 Ì Ì Ì
Total contractual cash obligations ÏÏÏÏ $639,305 $348,949 $236,356 $54,000 $Ì
(1) On January 10, 2002, the initial purchasers completed the exercise of their option to purchase an
additional $25.0 million of the Notes.
(2) FlashVision binding three-month purchase commitments for Öash memory wafers are denominated in
Japanese Yen, and are subject to Öuctuation in exchange rates prior to payment.
(3) Includes a loan to FlashVision entered into in February 2004.
(4) Excludes potential Fab 3 FlashVision agreement, as agreement is not Ñnal.
Less than 5 Years
Total 1 Year 2 Ó 3 Years 4 Ó 5 Years and Beyond
CONTRACTUAL SUBLEASE
INCOME:
Non-cancelable operating subleaseÏÏÏÏÏÏ $336 $212 $124 $Ì $Ì
Total contractual cash income ÏÏÏÏÏÏÏÏÏ $336 $212 $124 $Ì $Ì
As of December 28, 2003
OFF BALANCE SHEET ARRANGEMENTS
IndemniÑcation of FlashVision foundry equipment lease ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $125,530
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