SANDISK CORP | 2013 | FY | 3

Balance Sheet Information

Accounts Receivable, net. Accounts receivable, net was as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Accounts receivable
$
904,551

 
$
804,221

Allowance for doubtful accounts
(8,274
)
 
(6,627
)
Price protection, promotions and other activities
(213,468
)
 
(171,569
)
Total accounts receivable, net
$
682,809

 
$
626,025



Allowance for Doubtful Accounts. The activity in the allowance for doubtful accounts was as follows (in thousands):
 
Fiscal years ended
 
December 29,
2013
 
December 30,
2012
 
January 1,
2012
Balance, beginning of period
$
6,627

 
$
5,717

 
$
8,416

Additions (reductions) charged to costs and expenses
2,167

 
1,452

 
(1,476
)
Deductions/write-offs
(520
)
 
(542
)
 
(1,223
)
Balance, end of period
$
8,274

 
$
6,627

 
$
5,717


Inventory. Inventory was as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Raw material
$
440,570

 
$
404,634

Work-in-process
102,543

 
102,249

Finished goods
213,862

 
243,192

Total inventory
$
756,975

 
$
750,075



Other Current Assets. Other current assets were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Tax-related receivables
$
70,760

 
$
186,223

Other non-trade receivables
37,368

 
—

Prepayment to Flash Forward Ltd.
5,144

 
20,577

Derivative contract receivables
777

 
19,064

Prepaid expenses
12,630

 
13,221

Other current assets
40,206

 
21,794

Total other current assets
$
166,885

 
$
260,879



Property and Equipment. Property and equipment were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Machinery and equipment
$
1,148,150

 
$
1,124,701

Software
171,733

 
148,014

Buildings and building improvements
261,471

 
227,651

Capital land lease
6,644

 
6,603

Land
24,427

 
24,427

Furniture and fixtures
20,481

 
10,106

Leasehold improvements
6,559

 
11,979

Property and equipment, at cost
1,639,465

 
1,553,481

Accumulated depreciation and amortization
(983,671
)
 
(887,939
)
Property and equipment, net
$
655,794

 
$
665,542


Depreciation expense of property and equipment totaled $226.3 million, $161.9 million and $115.0 million in fiscal years 2013, 2012 and 2011, respectively.

Notes Receivable and Investments in Flash Ventures. Notes receivable and investments in Flash Partners Ltd., Flash Alliance Ltd. and Flash Forward Ltd. (collectively referred to as “Flash Ventures”) were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Notes receivable, Flash Partners Ltd.
$
100,057

 
$
180,254

Notes receivable, Flash Alliance Ltd.
323,995

 
476,800

Notes receivable, Flash Forward Ltd.
169,144

 
162,810

Investment in Flash Partners Ltd.
190,694

 
232,547

Investment in Flash Alliance Ltd.
283,999

 
342,048

Investment in Flash Forward Ltd.
66,731

 
65,653

Total notes receivable and investments in Flash Ventures
$
1,134,620

 
$
1,460,112



Equity-method investments and the Company’s maximum loss exposure related to Flash Ventures are discussed further in Note 12, “Commitments, Contingencies and Guarantees – Flash Ventures” and Note 13, “Related Parties and Strategic Investments.”

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. Impairments, when required for credit worthiness, are recorded in other income (expense). The Company makes or will make long-term loans to Flash Ventures to fund new process technologies and additional wafer capacities. 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.

Other Non-current Assets. Other non-current assets were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Prepaid tax on intercompany transactions
$
37,747

 
$
42,118

Prepayment to Flash Forward Ltd.
—

 
5,144

Convertible note issuance costs
20,612

 
8,708

Long-term prepaid income tax
66,176

 
63,008

Other non-current assets
42,895

 
34,832

Total other non-current assets
$
167,430

 
$
153,810



Other Current Accrued Liabilities. Other current accrued liabilities were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Accrued payroll and related expenses
$
227,779

 
$
102,269

Derivative contract payables
45,741

 
13,584

Taxes payable
59,618

 
25,476

Other accrued liabilities
176,594

 
116,210

Total other current accrued liabilities
$
509,732

 
$
257,539



Non-current Liabilities. Non-current liabilities were as follows (in thousands):
 
December 29,
2013
 
December 30,
2012
Deferred tax liabilities
$
3,482

 
$
28,672

Income tax liabilities
205,266

 
208,629

Deferred credits on intercompany transactions
15,065

 
58,548

Other non-current liabilities
83,270

 
112,098

Total non-current liabilities
$
307,083

 
$
407,947

 

Warranties. The liability for warranty expense is included in Other current accrued liabilities and Non-current liabilities in the accompanying Consolidated Balance Sheets, and the activity was as follows (in thousands):
 
Fiscal years ended
 
December 29,
2013
 
December 30,
2012
 
January 1,
2012
Balance, beginning of period
$
38,787

 
$
26,957

 
$
24,702

Additions and adjustments to cost of revenue
35,763

 
33,247

 
29,444

Usage
(30,926
)
 
(21,417
)
 
(27,189
)
Balance, end of period
$
43,624

 
$
38,787

 
$
26,957


The majority of the Company’s products have a warranty of less than three years, with a small number of products having a warranty ranging up to ten years or more. For warranties ten years or greater, including lifetime warranties, the Company uses the estimated useful life of the product to calculate the warranty exposure. A provision for the estimated future cost related to warranty expense is recorded at the time of customer invoice. The Company’s warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair or replacement costs, differ from the Company’s estimates, increases or decreases to its warranty liability would be required.

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