SanDisk 2007 Annual Report Download - page 130

Download and view the complete annual report

Please find page 130 of the 2007 SanDisk annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 157

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157

The following table details the breakdown of the Company’s remaining indemnification or guarantee
obligations between the principal amortization and the purchase option exercise price at the term of the leases,
in annual installments as of December 30, 2007 in U.S. dollars based upon the exchange rate at December 30, 2007.
Annual Installments
Payment of
Principal
Amortization
Purchase
Option
Exercise Price
at Final Lease
Terms
Indemnification
or Guarantee
Amount
(In millions)
Year1 ................................. $ 231 $ — $ 231
Year2 ................................. 234 13 247
Year3 ................................. 191 53 244
Year4 ................................. 118 177 295
Year5 ................................. 34 88 122
Total indemnification or guarantee obligations .... $ 808 $ 331 $1,139
FlashVision. FlashVision has an equipment lease arrangement of approximately 15.0 billion Japanese yen,
or approximately $133 million based upon the exchange rate at December 30, 2007, of which 7.3 billion Japanese
yen, or approximately $64 million based upon the exchange rate at December 30, 2007, was outstanding as of
December 30, 2007.
Master lease payments are due quarterly and are scheduled to be completed in February 2009. Under the terms
of the June 2006 master lease, Toshiba guaranteed these commitments on behalf of FlashVision. The Company
agreed to indemnify Toshiba for certain liabilities Toshiba incurs as a result of Toshiba’s guarantee of the
FlashVision equipment lease arrangement. If FlashVision fails to meet its lease commitments, and Toshiba fulfills
these commitments under the terms of Toshiba’s guarantee, then the Company will be obligated to reimburse
Toshiba for 49.9% of any claims and associated expenses under the lease, unless the claims result from Toshiba’s
failure to meet its obligations to FlashVision or its covenants to the lenders. Because FlashVision’s equipment lease
arrangement is denominated in Japanese yen, the maximum amount of the Company’s contingent indemnification
obligation on a given date when converted to U.S. dollars will fluctuate based on the exchange rate in effect on that
date. As of December 30, 2007, the maximum amount of the Company’s contingent indemnification obligation,
which reflects payments and any lease adjustments, was approximately 3.6 billion Japanese yen, or approximately
$32 million based upon the exchange rate at December 30, 2007.
Flash Partners. Flash Partners sells and leases-back from a consortium of financial institutions a portion of
its tools and has entered into and drawn down five equipment master lease agreements totaling approximately
275.0 billion Japanese yen, or approximately $2.44 billion based upon the exchange rate at December 30, 2007, of
which 220.0 billion Japanese yen, or approximately $1.95 billion based upon the exchange rate at December 30,
2007, was outstanding at December 30, 2007. The Company and Toshiba have each guaranteed, on a several basis,
50% of Flash Partners’ obligations under the master lease agreements. As of December 30, 2007, the maximum
amount of the Company’s guarantee obligation of the Flash Partners master lease agreements, which reflects
payments and any lease adjustments, was approximately 110.0 billion Japanese yen, or approximately $974 million
based upon the exchange rate at December 30, 2007. Master lease payments are due quarterly and semi-annually,
and are scheduled to be completed in stages through fiscal year 2012. At the end of each of the lease terms, Flash
Partners has the option of purchasing the tools from the lessors. Flash Partners is obligated to insure the equipment,
maintain the equipment in accordance with the manufacturers’ recommendations and comply with other customary
terms to protect the leased assets. The master lease agreements contain covenants, the most restrictive of which
require the Company to maintain a minimum shareholder equity balance of $1.16 billion as well as a long-term loan
rating of BB- or Ba3, based on a named independent rating service. In addition, the master lease agreements contain
customary events of default for a Japanese lease facility. The fair value of the Company’s guarantee of Flash
Partners’ lease obligations was insignificant at inception of each of the guarantees. In addition, Flash Partners
F-34
Notes to Consolidated Financial Statements — (Continued)