Related Parties and Strategic Investments

12 Months Ended

Jan. 01, 2012

Related Party Transactions [Abstract]

Related Parties and Strategic Investments

Related Parties and Strategic Investments

Flash Ventures with Toshiba. The Company owns 49.9% of each entity within Flash Ventures and accounts for its ownership position under the equity method of accounting. The Company’s obligations with respect to the Flash Ventures master lease agreements, take-or-pay supply arrangements and research and development cost sharing are described in Note 12, “Commitments, Contingencies and Guarantees.” The financial and other support provided by the Company in all periods presented was either contractually required or the result of a joint decision to expand wafer capacity, transition to new technologies or refinance existing equipment lease commitments. Flash Ventures are VIEs. The Company evaluated whether it is the primary beneficiary of any of the entities within Flash Ventures for all periods presented and determined that it is not the primary beneficiary of any of the entities within Flash Ventures because it does not have a controlling financial interest in any of those entities. In determining whether the Company is the primary beneficiary, the Company analyzed the primary purpose and design of Flash Ventures, the activities that most significantly impact Flash Ventures’ economic performance, and whether the Company had the power to direct those activities. The Company concluded based upon its 49.9% ownership in Flash Ventures, the voting structure of Flash Ventures and the manner in which the day-to-day operations of Flash Ventures are conducted that the Company lacked the power to direct most of the activities that most significantly impact Flash Ventures’ economic performance.

The Company purchased NAND flash memory wafers from Flash Ventures and made prepayments, investments and loans to Flash Ventures totaling approximately $2.95 billion, $2.00 billion and $2.35 billion in fiscal years 2011, 2010 and 2009, respectively. The Company received loan repayments from Flash Ventures of $416.3 million, $59.7 million and $387.3 million in fiscal years 2011, 2010 and 2009, respectively. At January 1, 2012 and January 2, 2011, the Company had accounts payable balances due to Flash Ventures of $275.8 million and $240.5 million, respectively.

The Company’s maximum reasonably estimable loss exposure (excluding lost profits), based upon the exchange rate at each respective balance sheet date, as a result of its involvement with Flash Ventures is presented below (in millions).

	January 1, 2012		January 2, 2011
Notes receivable	$	1,297	$	1,232
Equity investments	646		501
Operating lease guarantees	732		879
Prepayments	50		—
Maximum loss exposure	$	2,725	$	2,612

At January 1, 2012 and January 2, 2011, the Company’s retained earnings included approximately $4.2 million and $2.5 million, respectively, of undistributed earnings of the Flash Ventures.

The following summarizes the aggregated financial information for Flash Ventures (in millions).

	January 1, 2012		January 2, 2011
	(Unaudited)
Current assets	$	1,125	$	1,028
Property, plant, equipment and other assets	5,089		4,187
Total assets	$	6,214	$	5,215
Current liabilities	$	2,269	$	1,632
Long-term liabilities	2,594		2,465

The following summarizes the aggregated financial information for Flash Ventures for fiscal years 2011, 2010 and 2009, respectively (in millions). Flash Ventures’ year-ends are March 31, with quarters ending on March 31, June 30, September 30 and December 31.

	Fiscal years ended
	January 1, 2012			January 2, 2011			January 3, 2010
	(Unaudited)
Net sales(1)	$	4,577		$	3,467		$	3,296
Gross profit (loss)	(2		)	15			14
Net income (loss)	5			(1		)	68

————

⁽¹⁾  Net sales represent sales to both the Company and Toshiba.

Solid State Storage Solutions LLC. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions LLC (“S4”), a venture with third parties to license intellectual property. S4 qualifies as a VIE. The Company is considered the primary beneficiary of S4 and the Company consolidates S4 in its Consolidated Financial Statements for all periods presented. The Company considered multiple factors in determining it was the primary beneficiary, including its overall involvement with the venture, contributions and participation in operating activities. S4’s assets and liabilities were not material to the Company’s Consolidated Balance Sheets as of January 1, 2012 and January 2, 2011.

Sale of SIM Business Net Assets. In February 2010, the Company sold its SIM business net assets for $17.8 million, which resulted in a gain of $13.2 million recorded in other income (expense). The sale proceeds are included in “Proceeds from sale of assets” in investing activities on the Consolidated Statements of Cash Flows. The operating results of the SIM business assets were immaterial for all periods presented.