SanDisk 2012 Annual Report Download - page 156

Net cash used in financing activities for fiscal year 2011, as compared to cash provided by financing
activities in fiscal year 2010, was primarily due to proceeds from the issuance of our 1.5% Notes due 2017 and
related warrants and convertible bond hedge in August 2010, the repurchase of a portion of our 1% Notes due
2013 in the third quarter of fiscal year 2011 and lower cash from employee stock programs in fiscal year 2011.
Liquid Assets. At December 30, 2012, we had cash, cash equivalents and short-term marketable securities of
$2.88 billion. We had $2.84 billion of long-term marketable securities, which we believe are also liquid assets,
but are classified as long-term marketable securities due to the remaining maturity of each marketable security
being greater than one year.
Short-Term Liquidity. As of December 30, 2012, our working capital balance was $2.72 billion. During
fiscal year 2013, we expect our total capital investment to be $1.2 billion to $1.3 billion, comprised of our
portion of capital investments in Flash Ventures of approximately $850 million to $950 million and our
investment in non-fab property and equipment of approximately $350 million. We expect the capital investments
in Flash Ventures to be funded through Flash Ventures’ working capital and equipment leases, and we expect the
non-fab property and equipment to be funded through our cash. Our current estimate of capital investments for
the Flash Ventures includes productivity and technology transition investments, and does not include any new
wafer capacity additions. We are still evaluating the timing and extent of any new capacity addition in fiscal year
2013.
At December 30, 2012, we had $928 million aggregate principal amount of our 1% Notes due on May 15,
2013, which we expect to settle in cash upon maturity.
Depending on the demand for our products, we may decide to make additional investments, which could be
substantial, in wafer fabrication foundry capacity and assembly and test manufacturing equipment to support our
business. We may also make equity investments in other companies, engage in merger or acquisition
transactions, or purchase or license technologies. These activities may require us to raise additional financing,
which could be difficult to obtain, and which if not obtained in satisfactory amounts, could prevent us from
funding Flash Ventures, increasing our wafer supply, developing or enhancing our products, engaging in
investments in or acquisitions of companies, growing our business, responding to competitive pressures or
unanticipated industry changes, or taking advantage of other future opportunities, any of which could harm our
business.
Our short-term liquidity could be impacted in part by our ability to maintain compliance with covenants in
the outstanding Flash Ventures’ master lease agreements. Flash Ventures’ master lease agreements contain
customary covenants for Japanese lease facilities as well as an acceleration clause for certain events of default
related to us as guarantor, including, among other things, our failure to maintain a minimum stockholder equity
of at least $1.51 billion and for some of the leases, our failure to maintain a minimum corporate rating of BB—
from S&P or Moody’s, or a minimum corporate rating of BB+ from R&I. As of December 30, 2012, Flash
Ventures was in compliance with all of its master lease covenants. As of December 30, 2012, our R&I credit
rating was BBB, two notches above the required minimum corporate rating threshold for R&I; and our S&P
credit rating was BB, one notch above the required minimum corporate rating threshold for S&P.
If our stockholders’ equity falls below $1.51 billion, or both S&P and R&I were to downgrade our credit
rating below the minimum corporate rating threshold, or other events of default occur, Flash Ventures would
become non-compliant with certain covenants under certain 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 us, 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 resolution was unsuccessful, we could be required to pay a
portion or up to the entire $926 million outstanding lease obligations covered by our guarantees under such Flash
Ventures’ master lease agreements, based upon the exchange rate at December 30, 2012, which would negatively
impact our short-term liquidity.
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