Supplemental Financial Statement Data

3 Months Ended

Sep. 27, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Accounts receivable, net

From time to time, in connection with factoring agreements, the Company sells trade accounts receivable without recourse to third-party purchasers in exchange for cash. There were no trade accounts receivable sold during the three months ended September 27, 2024. During the three months ended September 29, 2023, the Company sold trade accounts receivable aggregating $150 million. The discounts on the trade accounts receivable sold were not material and were recorded within Other income (expense), net in the Condensed Consolidated Statements of Operations. There were no factored receivables outstanding as of September 27, 2024 and June 28, 2024.

Inventories


	September 27, 2024		June 28, 2024
	(in millions)
Inventories:
Raw materials and component parts	$	1,897	$	1,727
Work-in-process	979		1,066
Finished goods	508		549
Total inventories	$	3,384	$	3,342

Property, plant and equipment, net


	September 27, 2024		June 28, 2024
	(in millions)
Property, plant and equipment:
Land and improvements	$	235	$	235
Buildings and improvements	1,706		1,820
Machinery and equipment	7,783		8,646
Computer equipment and software	452		471
Furniture and fixtures	51		54
Construction-in-process	798		797
Property, plant and equipment, gross	11,025		12,023
Accumulated depreciation	(8,108)		(8,856)
Property, plant and equipment, net	$	2,917	$	3,167

Other intangible assets, net

As part of prior acquisitions, the Company recorded at the time of the acquisition acquired in-process research and development (“IPR&D”) for projects in progress that had not yet reached technological feasibility. IPR&D is initially accounted for as an indefinite-lived intangible asset. Once a project reaches technological feasibility, the Company reclassifies the balance to existing technology and begins to amortize the intangible asset over its estimated useful life. As of September 27, 2024 and June 28, 2024, IPR&D included in intangible assets, net was $72 million. During the three months ended September 27, 2024 and September 29, 2023, the Company did not record any impairment charges related to IPR&D.

Product warranty liability

Changes in the warranty accrual were as follows:


	Three Months Ended
	September 27, 2024		September 29, 2023
	(in millions)
Warranty accrual, beginning of period	$	189	$	244

Charges to operations	25		22
Utilization	(37)		(43)
Changes in estimate related to pre-existing warranties	(17)		(5)
Warranty accrual, end of period	$	160	$	218

The current portion of the warranty accrual was classified in Accrued expenses and the long-term portion was classified in Other liabilities as noted below:


	September 27, 2024		June 28, 2024
	(in millions)
Warranty accrual:
Current portion	$	58	$	36
Long-term portion	102		153
Total warranty accrual	$	160	$	189

Other liabilities


	September 27, 2024		June 28, 2024
	(in millions)
Other liabilities:
Non-current net tax payable	$	—	$	201
Non-current portion of unrecognized tax benefits	595		565
Other non-current liabilities	563		604
Total other liabilities	$	1,158	$	1,370

Accumulated other comprehensive loss

Accumulated other comprehensive loss (“AOCL”), net of tax, refers to expenses, gains, and losses that are recorded as an element of shareholders’ equity but are excluded from net income. The components of AOCL were as follows:


	Actuarial Pension Gains		Foreign Currency Translation Adjustment		Unrealized Losses on Derivative Contracts		Total Accumulated Comprehensive Loss
	(in millions)




















Balance at June 28, 2024	$	14	$	(505)	$	(221)	$	(712)
Other comprehensive income before reclassifications	—		121		182		303
Amounts reclassified from accumulated other comprehensive loss	—		—		61		61
Income tax expense related to items of other comprehensive income	—		—		(52)		(52)
Net current-period other comprehensive income	—		121		191		312
Balance at September 27, 2024	$	14	$	(384)	$	(30)	$	(400)

During the three months ended September 27, 2024, the amounts reclassified out of AOCL were losses related to foreign exchange contracts that were substantially charged to Cost of revenue in the Condensed Consolidated Statements of Operations.

As of September 27, 2024, substantially all existing net losses related to cash flow hedges recorded in AOCL are expected to be reclassified to earnings within the next twelve months.

Sale of a Majority Interest in a Subsidiary

In March 2024, the Company’s wholly-owned subsidiary, SanDisk China Limited (“SanDisk China”) entered into an equity purchase agreement to sell 80% of its equity interest in SanDisk Semiconductor (Shanghai) Co. Ltd. (“SDSS”), the Company’s indirect wholly-owned subsidiary in its Flash business, to JCET Management Co., Ltd. (“JCET”), a wholly-owned subsidiary of JCET Group Co., Ltd., a Chinese publicly listed company, thereby forming a venture between SanDisk China and JCET (the “Transaction”). Subsequent to the first quarter of fiscal 2025, on September 28, 2024, the Transaction closed. Proceeds from the sale, subject to certain working capital adjustments and payment of withholding taxes, are expected to be approximately $624 million. Following the closing of the Transaction, SanDisk China’s remaining 20% ownership interest in the venture will be reported as an equity method investment.

Because the divestiture of SDSS does not represent a strategic shift that would have a major effect on the Company’s operations or financial results, it is not reported as discontinued operations. Instead, the assets and liabilities of SDSS subject to the Transaction as listed below have been reclassified to held for sale as of September 27, 2024, and will be derecognized in the second quarter of fiscal 2025 in connection with the closing of the Transaction.


	September 27, 2024
	(in millions)
Cash and cash equivalents	$	71

Inventories	35
Other current assets	6
Property, plant and equipment, net	236
Goodwill (1)	225
Other non-current assets	24
Total assets held for sale (2)	$	597

Accounts payable	$	73
Accrued expenses	17
Accrued compensation	15
Other liabilities	5
Total liabilities held for sale	$	110

(1) Goodwill was preliminarily allocated to SDSS based on the indicated fair value of the SDSS business relative to the total estimated fair value of the Flash business unit. This preliminary allocation of goodwill may be revised based on finalization of working capital adjustments and valuations of SDSS and the Flash business unit in connection with the derecognition of SDSS during the second quarter of fiscal 2025.

(2) An intercompany account receivable and intercompany account payable totaling $110 million between SDSS and another subsidiary of the Company are eliminated in the Company’s Condensed Consolidated Financial Statements and have been excluded from the assets reclassified to held for sale. The intercompany account receivable was sold as part of the Transaction, and thus will be considered when determining the expected gain to be recognized upon the derecognition of SDSS. As a result, during the second quarter of fiscal 2025, the Company will reclassify this intercompany account payable to the applicable liability line item in the Condensed Consolidated Balance Sheets as it will represent a liability to an external third party.