XML 34 R16.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Commitments, Contingencies and Related Parties | 12 Months Ended
--- | ---
Jun. 29, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments, Contingencies and Related Parties | Commitments, Contingencies and Related Parties Flash Ventures The Company’s business ventures with Toshiba Memory Corporation (“TMC”) consist of three separate legal entities: Flash Partners Ltd. (“Flash Partners”), Flash Alliance Ltd. (“Flash Alliance”), and Flash Forward Ltd. (“Flash Forward”), collectively referred to as “Flash Ventures”. The Company has a 49.9% ownership interest and TMC has a 50.1% ownership interest in each of these entities. Through Flash Ventures, the Company and TMC collaborate in the development and manufacture of flash-based memory wafers, which are manufactured by TMC at its wafer fabrication facilities located in Yokkaichi, Japan, using semiconductor manufacturing equipment individually owned or leased by each Flash Ventures entity. Each Flash Ventures entity purchases wafers from TMC at cost and then resell those wafers to the Company and TMC at cost plus a markup. Flash Partners. Flash Partners was formed in 2004 in connection with the construction of TMC’s “Fab 3” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan. Flash Alliance. Flash Alliance was formed in 2006 in connection with the construction of TMC’s “Fab 4” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan. Flash Forward. Flash Forward was formed in 2010 in connection with the construction of TMC’s “Fab 5” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan. Fab 5 was built in two phases of approximately equal size. New Fab 2. The Company has a facility agreement with TMC related to the construction and operation of TMC’s “New Fab 2” 300-millimeter wafer fabrication facility located in Yokkaichi, Japan. New Fab 2 is primarily intended to provide additional clean room space to convert a portion of 2-dimensional (“2D”) flash-based wafer production capacity to 3-dimensional (“3D”) flash-based wafer production capacity. Production of flash-based wafers in New Fab 2 started in 2016. Fab 6. In December 2017, the Company entered into a facility agreement with TMC related to the construction and operation of a new 300-millimeter wafer fabrication facility in Yokkaichi, Japan, referred to as “Fab 6”, which is primarily intended to provide clean room space to continue the transition of the parties’ existing 2D flash-based wafer capacity to 3D flash-based wafer production capacity. The Company is committed to 50% of Fab 6’s start-up costs, as well as 50% of approved Flash Ventures investments in manufacturing equipment for Fab 6. The Company accounts for its ownership position of each entity within Flash Ventures under the equity method of accounting. 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. Entities within Flash Ventures are variable interest entities (“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, the voting structure and the manner in which the day-to-day operations are conducted for each entity within Flash Ventures, that the Company lacked the power to direct most of the activities that most significantly impact the economic performance of each entity within Flash Ventures. The following table presents the notes receivable from, and equity investments in, Flash Ventures as of June 29, 2018 and June 30, 2017:
| June 29, 2018 |  | June 30, 2017
| (in millions)
Notes receivable, Flash Partners | $ | 767 |  |  | $ | 264 |
Notes receivable, Flash Alliance | 48 |  |  | 119 |
Notes receivable, Flash Forward | 700 |  |  | 379 |
Investment in Flash Partners | 191 |  |  | 187 |
Investment in Flash Alliance | 283 |  |  | 279 |
Investment in Flash Forward | 116 |  |  | 112 |
Total notes receivable and investments in Flash Ventures | $ | 2,105 |  |  | $ | 1,340 |
During 2018 and 2017, the Company made net payments to Flash Ventures of $3.79 billion and $2.64 billion, respectively, for purchased flash-based memory wafers and net loans and investments. The Company makes, or will make, loans to Flash Ventures to fund equipment investments for new process technologies and additional wafer capacity. The Company aggregates its Flash Ventures’ notes receivable into one class of financing receivables due to the similar ownership interest and common structure in each Flash Venture entity. For all reporting periods presented, no loans were past due and no loan impairments were recorded. The Company’s notes receivable from each Flash Ventures entity, denominated in Japanese yen, are secured by equipment owned by that Flash Ventures entity. The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the borrower, where material or known. There were no impairments in 2018, 2017, or 2016. As of June 29, 2018 and June 30, 2017, the Company had accounts payable balances due to Flash Ventures of $259 million and $206 million, respectively. The Company’s maximum reasonably estimable loss exposure (excluding lost profits) as a result of its involvement with Flash Ventures, based upon the Japanese yen to U.S. dollar exchange rate at June 29, 2018, is presented below. Investments in Flash Ventures are denominated in Japanese yen, and the maximum possible loss exposure excludes any cumulative translation adjustment due to revaluation from the Japanese yen to the U.S. dollar.
| June 29, 2018
Notes receivable | $ | 1,515 |
Equity investments | 590 |
Operating lease guarantees | 1,223 |
Inventory and prepayments | 282 |
Maximum estimable loss exposure | $ | 3,610 |
As of June 29, 2018 and June 30, 2017, the Company’s retained earnings included undistributed earnings of Flash Ventures of $8 million and $5 million, respectively. The Company is committed to purchase its provided three-month forecast of Flash Ventures’ flash-based wafer supply, which generally equals 50% of Flash Ventures’ 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% to 50.0% of each Flash Ventures entity’s investments to the extent that each Flash Ventures entity’s operating cash flow is insufficient to fund these investments. Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up to three months are binding and cannot be canceled. Research and Development Activities. The Company participates in common R&D activities with TMC and is contractually committed to a minimum funding level. R&D commitments are immaterial to the Consolidated Financial Statements. Off-Balance Sheet Liabilities Flash Ventures sells to and leases back from a consortium of financial institutions a portion of its tools and has entered into equipment lease agreements of which the Company guarantees half or all of the outstanding obligations under each lease agreement. The lease agreements contain customary covenants for Japanese lease facilities. In addition to containing customary events of default related to Flash Ventures that could result in an acceleration of Flash Ventures’ obligations, the lease agreements contain acceleration clauses for certain events of default related to the guarantors, including the Company. The following table presents the Company’s portion of the remaining guarantee obligations under the Flash Ventures’ lease facilities in both Japanese yen and U.S. dollar-equivalent, based upon the Japanese yen to U.S. dollar exchange rate as of June 29, 2018.
| Lease Amounts
| (Japanese yen, in billions) |  | (U.S. dollar, in millions)
Total guarantee obligations | ¥ | 135 |  |  | $ | 1,223 |
The following table details the breakdown of the Company’s remaining guarantee obligations between the principal amortization and the purchase option exercise price at the end of the term of the Flash Ventures lease agreements, in annual installments as of June 29, 2018 in U.S. dollars, based upon the Japanese yen to U.S. dollar exchange rate as of June 29, 2018:
Annual Installments |  | Payment of Principal Amortization |  | Purchase Option Exercise Price at Final Lease Terms |  | Guarantee Amount
|  | (in millions)
2019 |  | $ | 341 |  |  | $ | 24 |  |  | $ | 365 |
2020 |  | 218 |  |  | 45 |  |  | 263 |
2021 |  | 201 |  |  | 104 |  |  | 305 |
2022 |  | 112 |  |  | 70 |  |  | 182 |
2023 |  | 38 |  |  | 28 |  |  | 66 |
Thereafter |  | 5 |  |  | 37 |  |  | 42 |
Total guarantee obligations |  | $ | 915 |  |  | $ | 308 |  |  | $ | 1,223 |
The Company and TMC have agreed to mutually contribute to, and indemnify each other and Flash Ventures for, environmental remediation costs or liability resulting from Flash Ventures’ manufacturing operations in certain circumstances. The Company has not made any indemnification payments, nor recorded any indemnification receivables, under any such agreements. As of June 29, 2018, no amounts have been accrued in the Consolidated Financial Statements with respect to these indemnification agreements. Unis Venture In November 2015, the Company entered into an agreement with Unis to form a joint venture, referred to as the “Unis Venture”, to market and sell the Company’s products in China and to develop data storage systems for the Chinese market in the future. The Unis Venture became operational during 2017. The Unis Venture is 49% owned by the Company and 51% owned by Unis. The Company accounts for its investment in the Unis Venture under the equity method of accounting. Revenue on products distributed by the Unis Venture are recognized upon sell through to third-party customers. During 2018, the Company recognized less than 1% of its consolidated revenue on products distributed by the Unis Venture. The outstanding accounts receivable due from and investment in Unis Venture were not material to the Consolidated Financial Statements as of June 29, 2018 or June 30, 2017. Lease Commitments The Company leases certain facilities and equipment under long-term, non-cancelable operating leases. The Company’s operating leases consist of leased property and equipment that expire at various dates through 2030. Future minimum lease payments under operating leases that have initial non-cancelable lease terms in excess of one year at June 29, 2018 are as follows:
|  | Lease Amounts
|  | (in millions)
Fiscal year |  |
2019 |  | $ | 53 |
2020 |  | 45 |
2021 |  | 35 |
2022 |  | 23 |
2023 |  | 14 |
Thereafter |  | 20 |
Total future minimum lease payments |  | $ | 190 |
Net rent expense was as follows:
| 2018 |  | 2017 |  | 2016
| (In millions)
Rent expense, net | $ | 49 |  |  | $ | 56 |  |  | $ | 59 |
Purchase Agreements In the normal course of business, the Company enters into purchase orders with suppliers for the purchase of components used to manufacture its products. These purchase orders generally cover forecasted component supplies needed for production during the next quarter, are recorded as a liability upon receipt of the components, and generally may be changed or canceled at any time prior to shipment of the components. The Company also enters into long-term purchase agreements with various component suppliers that carry fixed volumes and pricing which obligates the Company to make certain future purchases, contingent on certain conditions of performance, quality and technology of the vendor’s components. As of June 29, 2018, the Company had the following minimum long-term purchase commitments:
|  | Long-term purchase commitments
|  | (in millions)
Fiscal year |  |
2019 |  | $ | 135 |
2020 |  | 141 |
2021 |  | 137 |
2022 |  | 150 |
2023 and thereafter |  | 170 |
Total |  | $ | 733 |

X
- References No definition available. + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration