SanDisk 2008 Annual Report Download - page 103

Download and view the complete annual report

Please find page 103 of the 2008 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 135

  • 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

Notes to Consolidated Financial Statements
down qualifying as a reconsideration event under FIN 46R,the Company re-evaluated whether FlashVision is a
variable interest entity and concluded that FlashVision is no longer a variable interest entity within the scope of
FIN 46R. In fiscal year 2008, the Company received distributions of $102.5 million relating to its investment in
FlashVision. At December 28, 2008, the Company had an investment in FlashVision of $64.0 million
denominated in Japanese yen, offset by $43.3 million of cumulative translation adjustments recorded in
accumulated OCI. For discussion on impairment of the FlashVision investment, see Note 4, “Balance Sheet
Information—Notes Receivable and Investments in the Flash Ventures with Toshiba.”
Flash Partners. The Company has a 49.9% ownership interest in Flash Partners Ltd. (“Flash Partners”), a
business venture with Toshiba which owns 50.1%, formed in fiscal year 2004. In the venture, the Company and
Toshiba have collaborated in the development and manufacture of NAND flash memory products. These NAND
flash memory products are manufactured by Toshiba at the 300-millimeter wafer fabrication facility (“Fab 3”)
located in Yokkaichi, Japan, using the semiconductor manufacturing equipment owned or leased by Flash
Partners. Flash Partners purchases wafers from Toshiba at cost and then resells those wafers to the Company and
Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in Flash Partners under
the equity method of accounting. The Company is committed to purchase its provided three-month forecast of
Flash Partner’s NAND wafer supply, which generally equals 50% of the venture’s 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 Partners’ costs to the extent that Flash
Partners’ revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.
As of December 28, 2008, the Company had notes receivable from Flash Partners of 76.3 billion Japanese
yen, or approximately $843 million, based upon the exchange rate of 90.41 Japanese yen to one U.S. dollar at
December 28, 2008. These notes are secured by the equipment purchased by Flash Partners using the note
proceeds. The Company has additional guarantee obligations to Flash Partners, see “Off-Balance Sheet
Liabilities.” At December 28, 2008, the Company had an equity investment in Flash Partners of $202.5 million
denominated in Japanese yen, offset by $48.5 million of cumulative translation gains recorded in accumulated
OCI. In fiscal year 2008, the Company recorded a $20.0 million impairment of its equity investment in Flash
Partners. For discussion on impairment of the Flash Partners investment, see Note 4, “Balance Sheet
Information—Notes Receivable and Investments in the Flash Ventures with Toshiba,” regarding impairment of
equity method investments in fiscal year 2008.
Flash Alliance. The Company has a 49.9% ownership interest in Flash Alliance Ltd. (“Flash Alliance”), a
business venture with Toshiba which owns 50.1%, formed in fiscal year 2006. In the venture, the Company and
Toshiba have collaborated in the development and manufacture of NAND flash memory products. These NAND
flash memory products are manufactured by Toshiba at its 300 millimeter wafer fabrication facility (“Fab 4”)
located in Yokkaichi, Japan, using the semiconductor manufacturing equipment owned or leased by Flash
Alliance. Flash Alliance purchases wafers from Toshiba at cost and then resells those wafers to the Company and
Toshiba at cost plus a markup. The Company accounts for its 49.9% ownership position in Flash Alliance under
the equity method of accounting. The Company is committed to purchase its provided three-month forecast of
Flash Alliance’s NAND wafer supply, which generally equals 50% of the venture’s 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 Alliance’s costs to the extent that Flash
Alliance’s revenues from wafer sales to the Company and Toshiba are insufficient to cover these costs.
As of December 28, 2008, the Company had notes receivable from Flash Alliance of 25.0 billion Japanese
yen, or approximately $277 million, based upon the exchange rate at December 28, 2008. These notes are
secured by the equipment purchased by Flash Alliance using the note proceeds. The Company has additional
F-38