Related Parties and Strategic Investments

12 Months Ended

Dec. 30, 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 13, “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 $2.71 billion, $2.95 billion and $2.00 billion in the fiscal years endedDecember 30, 2012, January 1, 2012 and January 2, 2011, respectively. At December 30, 2012 and January 1, 2012, the Company had accounts payable balances due to Flash Ventures of $214.5 million and $275.8 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).

	December 30, 2012		January 1, 2012
Notes receivable	$	820	$	1,297
Equity investments	640		646
Operating lease guarantees	926		732
Prepayments	26		50
Maximum loss exposure	$	2,412	$	2,725

At December 30, 2012 and January 1, 2012, the Company’s retained earnings included approximately ($0.6) million and $4.2 million, respectively, of undistributed earnings (deficit) of Flash Ventures.

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

	December 30, 2012		January 1, 2012
	(Unaudited)
Current assets	$	683	$	1,125
Property, plant, equipment and other assets	2,902		5,089
Total assets	$	3,585	$	6,214
Current liabilities	$	653	$	2,269
Long-term liabilities	1,640		2,594

The following summarizes the aggregated financial information for Flash Ventures for fiscal years 2012, 2011 and 2010, 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
	December 30, 2012			January 1, 2012			January 2, 2011
	(Unaudited)
Net sales(1)	$	4,787		$	4,577		$	3,467
Gross profit (loss)	8			(2		)	15
Net income (loss)	(15		)	5			(1		)

————

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

Solid State Storage Solutions, Inc. During the second quarter of fiscal year 2007, the Company formed Solid State Storage Solutions, Inc. (“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 December 30, 2012 and January 1, 2012.

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.