SanDisk 2000 Annual Report Download - page 36

3 4 . Sa n D is k C o rp o ra t io n . 2 0 0 0 A n n u a l Re p o rt
Ad ve r tis in g E x p e n s e
The c ost of ad vertising is exp ense d as inc urred.
Ad ve rtising c o sts w ere $8 .2 m illio n, $ 3.6 m illion, and
$2.0 m illio n in 200 0, 1999 , an d 199 8 , resp ectively.
N e t In c o m e P e r S h a r e
The fo llo w ing table se ts fo rth the c o m putation of basic
and d iluted ne t inc o m e p e r share (in tho usand s,
exc ept p e r share am o unts):
2 0 0 0 199 9 19 98
N u m e rato r:
N um e ra tor for basic and
d iluted ne t inc o m e p er
share – net inco m e $ 2 9 8 ,6 72 $ 26,550 $ 11,836
Deno m in ator fo r basic net
inc om e p er share:
W eig hted ave rag e
c om m on shares 6 6 ,8 6 1 55,834 52,596
Basic n et inc o m e p er s hare $ 4 .4 7 $ 0.4 8 $ 0.2 3
Deno m in ator fo r dilute d net
inc om e p er share:
W eig hted ave rag e
c om m on shares 6 6 ,8 6 1 55,834 52,596
Inc re m e ntal c o m m o n
shares attrib utab le to
exe rc ise o f o ut-
stand ing em p loye e
sto ck o ptio ns and
w arrants (ass um ing
p ro c ee d s w o uld b e
used t o purc hase
c om m on sto ck) 5 ,79 0 5 ,5 9 9 2,74 8
Shares used in co m p u ting
d iluted ne t inc o m e p er
share 72 ,6 5 1 61,433 55,344
Diluted ne t inc o m e p er share $ 4 .11 $ 0.4 3 $ 0 .2 1
Op tio ns and w arrants to purc hase 9 07,380 , 19 0,8 07,
and 1,80 2 ,8 86 shares o f c o m m on sto c k w e re o ut-
stand ing d uring 2 000 , 19 99 and 19 9 8, re sp e c tive ly, b ut
have bee n o m itted fro m the d iluted earning s p e r share
c alc ulatio n b ec ause the o p tio ns’ exercise p ric e w as
g reater than the averag e m arket p ric e o f the c o m m on
shares and , the refo re the e ffect w ould b e antidilutive .
S t o c k B a s e d C o m p e n s a tio n
The Com p any ac c o unts for e m p lo yee sto ck b ased
c o m p e nsatio n under APB Op inio n N o . 2 5 , “ Accounting
fo r Sto c k Issued to Em p lo ye es” and relate d interpreta-
tio ns . Pro fo rm a ne t inc o m e and ne t inc o m e per share
d isc lo sures are req uired b y State m e nt o f Financ ial
Ac c o unting Stand ard s N o . 123 , “ Ac c o unting fo r Sto c k
Base d Com p ensatio n,” and are includ ed in N o te 4.
Im p a c t o f R e c e n t ly Is s u e d A c c o u n tin g S ta n d a rd s
In June 1998 , the Financ ial Ac c o unting Stand ard s
Board issue d State m e nt 13 3, Ac c o unting for Derivative
Instrum e nts and H e d g ing Ac tivities, w hic h is required
to be ad o p ted b y the Com pany b eginning January 1,
200 1. H isto ric ally, the Co m pany has had a m inim al use
o f d erivatives and do not antic ip ate that the ad o p tio n
o f the new State m ent w ill have a sig nific ant effe c t o n
o ur earning s o r financ ial p o sition; ho w e ver, w e have
stud ied the ac tual im p ac t, and have d ete rm ine d that it
w ill b e im m aterial to o ur financ ial p o sition o r earning s.
In Dec e m b e r 199 9 , The Sec urities and Exchange
Co m m issio n issued Staff Accounting B ulle tin N o . 101
" Revenue Re c o g nition in Financ ial Statem ents" . SAB
10 1 provides g uidanc e o n the recog nitio n, p resentation
and d isc lo sure o f revenue in financ ial state m e nts. All
reg istrants are exp e c te d to apply the ac c o unting and
d isc lo sures d e sc rib e d in SAB 10 1. The Co m pany’s
im p lem entation of SAB 10 1 d id no t have a m aterial
im p ac t o n c o nsolid ate d results o f o p e ratio ns, financ ial
p o sition and cash flow s.
In M arc h 200 0 , the Financ ial Accounting Stand ards
Board issue d FASB Interp re tation No. 44 (“ FIN 44” ),
“ Accounting fo r Certain Transac tio ns Involving Sto c k
Co m p e nsatio n- an Interp re tatio n o f APB Op inion N o .
25.” FIN 4 4 c larifie s the ap p lic ation o f APB Opinio n 25
and , am o ng o the r issues c larifies the follow ing : the
d efinition of an em ployee fo r the p urp o s es o f applying
APB Op inion N o . 2 5 ; the criteria fo r d e te rm ining
w he ther a plan q ualifies as a nonc o m p e nsato ry plan;
the ac c o unting c o nseq uenc es o f vario us m o d ific atio ns
to the term s fo r the p reviously fixed sto c k o p tions o r
aw ard s ; and the ac c o unting for an e xc hang e o f sto c k
c o m p e nsatio n aw ard s in a b usiness c o m b inatio n. FIN
44 b ecam e e ffective July 1, 200 0 and did not have a
m aterial im p ac t o n the Co m p any’s c o nsolidate d re sults
o f o p eratio ns, financ ial p o sitio n, an d c ash flo w s.
Note 2:
F in a n c ia l I n s t r u m e n t s
C o n c e n t r a tio n o f C r e d it Ris k
The Com p any’s c o ncentratio n o f c re d it risk c o nsists
p rinc ip ally o f c ash, c ash eq uivalents, s ho rt- term inve st-
m ents and trade receivables. The Co m p any’s invest-
m ent p o lic y re stric ts investm e nts to hig h- c re d it q uality
investm ents and lim its the am o unts inve sted w ith any
o ne issue r. The Co m p any sells to o rig inal equip m e nt
m anufacture rs, re taile rs and d istrib uto rs in the United
States, Jap an, Europe and the Far East, p erfo rm s
o ng o ing c re d it evaluatio ns of its c usto m ers’ financial
c o nd ition, and g e ne rally re q uire s no c o llateral.
Reserve s are m aintained for p o tential cred it lo sses.
O f f B a la nc e S h e e t R is k
Ce rtain o f the Co m pany’s b alanc e shee t ac c o unts are
d eno m inated in Jap anese Yen. The Co m p any e nters
into fore ig n exc hang e c o ntrac ts to he d g e against
c hang es in foreig n c urre nc y exc hang e rates. The
effe c ts o f m ove m e nts in c urre nc y exc hang e rates o n
the se instrum ents are re c o g nized w he n the related
o p erating reve nues and e xp e nses are re c o g nized. The
Co m p any has a fo re ig n exchange c o ntrac t line in the
am o unt o f $15.0 m illio n at De c em b er 31, 19 99. Under
this line, the Co m pany m ay e nter into forw ard
exc hang e c o ntrac ts that req uire the Co m p any to se ll
o r p urchase fo re ig n c urrenc ie s. Tw o fo rw ard ex c hang e
c o ntracts in the no tio nal am o unt o f $ 8.2 m illion w e re