SanDisk 2011 Annual Report Download - page 163

This is a TAB type table. Insert
conts here. Annual Report
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basic earnings per share exclude any dilutive effects of stock options, SARs, RSUs, warrants and
convertible debt. Diluted earnings per share include the dilutive effects of stock options, SARs and RSUs. In
addition, diluted earnings per share for fiscal years 2010 and 2009 include the dilutive effect of the Company’s
$75.0 million 1% Convertible Notes due 2035, which were redeemed in the first quarter of fiscal year 2010.
Certain common stock issuable under stock options, SARs, warrants, the 1% Notes due 2013 and the 1.5% Notes
due 2017 have been omitted from the diluted net income per share calculation because their inclusion is
considered anti-dilutive.
Note 12: Commitments, Contingencies and Guarantees
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 its 300-millimeter wafer fabrication facility (“Fab 3”)
located in Yokkaichi, Japan, using 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
Partners’ 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 January 1, 2012, the Company had notes receivable from Flash Partners of $291.6 million,
denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Partners using the
note proceeds. The Company also has guarantee obligations to Flash Partners; see “Off-Balance Sheet
Liabilities.” At January 1, 2012 and January 2, 2011, the Company had an equity investment in Flash Partners of
$258.2 million and $238.6 million, respectively, denominated in Japanese yen, offset by $85.8 million and
$72.9 million, respectively, of cumulative translation adjustments recorded in accumulated OCI. In fiscal year
2011 and 2010, the Company recorded a basis adjustment of $5.3 million and $10.4 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 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 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 January 1, 2012, the Company had notes receivable from Flash Alliance of $973.2 million,
denominated in Japanese yen. These notes are secured by the equipment purchased by Flash Alliance using the
note proceeds. The Company also has guarantee obligations to Flash Alliance; see “Off-Balance Sheet
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