SanDisk 2014 Annual Report Download - page 187

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
addition of a 3-dimensional NAND (‘‘3D NAND’’) pilot line in the second half of 2015, and for the tools
required for a planned increase in Flash Ventures wafer capacity of approximately 5%, with such wafer
capacity increase expected to be completed by mid-2015. As of December 28, 2014, the Company had
notes receivable from Flash Forward of $161.9 million, denominated in Japanese yen. These notes are
secured by the equipment purchased by Flash Forward with the note proceeds. The Company also has
guarantee obligations to Flash Forward; see ‘‘Off-Balance Sheet Liabilities.’’ As of December 28, 2014 and
December 29, 2013, the Company had an equity investment in Flash Forward of $79.2 million and
$66.7 million, respectively, denominated in Japanese yen, adjusted by ($28.4) million and ($16.2) million,
respectively, of cumulative translation adjustments recorded in AOCI.
In 2014, the Company entered into a non-binding memorandum of understanding with Toshiba
related to the construction and operation of Toshiba’s ‘‘New Fab 2’’ fabrication facility, which is primarily
intended to provide space to convert Flash Ventures’ current 2D NAND capacity to 3D NAND, with
expected readiness for production in 2016.
Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for
up to three months are binding and cannot be canceled. These outstanding purchase commitments are
included as part of the total ‘‘Noncancelable production purchase commitments’’ in the ‘‘Contractual
Obligations’’ table.
Other Arrangements and Activities
Research and Development Activities. The Company participates in common R&D activities with Toshiba
and is contractually committed to a minimum funding level.
Toshiba Foundry. In the first quarter of fiscal year 2013, the Company concluded its foundry
arrangement with Toshiba.
Other Silicon Sources. The Company’s contracts with its other sources of silicon wafers generally require
the Company to provide monthly purchase order commitments. The purchase orders placed under these
arrangements are generally binding and cannot be canceled. These outstanding purchase commitments for
other sources of silicon wafers are included as part of the total ‘‘Noncancelable production purchase
commitments’’ in the ‘‘Contractual Obligations’’ table.
Subcontractors. In the normal course of business, the Company’s subcontractors periodically procure
production materials based on the forecast the Company provides to them. The Company’s agreements
with these subcontractors require that the Company reimburse them for materials that are purchased on
the Company’s behalf in accordance with such forecast. Accordingly, the Company may be committed to
certain costs over and above its open noncancelable purchase orders with these subcontractors. These
commitments for production materials to subcontractors are included as part of the total ‘‘Noncancelable
production purchase commitments’’ in the ‘‘Contractual Obligations’’ table.
Off-Balance Sheet Liabilities
Flash Ventures. Flash Ventures sells and leases back from a consortium of financial institutions
(‘‘lessors’’) a portion of its tools and has entered into equipment master lease agreements of which the
Company guarantees half of the total outstanding obligations. As of December 28, 2014, the total amount
of the Company’s guarantee obligation of Flash Ventures’ master lease agreements, which reflects future
F-47
Annual Report