SanDisk 2005 Annual Report Download - page 151

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than half of any residual losses with respect to the U3, LLC entity. As a result, U3, LLC is considered a variable
interest entity and the Company is the primary beneficiary. The Company has consolidated the statement of
financial position and the results of operations for the year ended January 1, 2006. The Company’s total investment
in U3 as of January 1, 2006 was $2.8 million.
Note 8: Stockholders’ Rights Plan
On September 15, 2003, the Company amended its existing stockholder rights plan to terminate the rights
issued under that rights plan, and the Company adopted a new rights plan. Under the new rights plan, rights were
distributed as a dividend at the rate of one right for each share of common stock of the Company held by
stockholders of record as of the close of business on September 25, 2003. The rights will expire on April 28, 2007
unless redeemed or exchanged. Under the new rights agreement and after giving effect to the Company’s stock
dividend effected on February 18, 2004, each right will, under the circumstances described below, entitle the
registered holder to buy one two-hundredths of a share of Series A Junior Participating Preferred Stock for $225.00.
The rights will become exercisable only if a person or group acquires beneficial ownership of 15% or more of the
Company’s common stock or commences a tender offer or exchange offer upon consummation of which such
person or group would beneficially own 15% or more of the Company’s common stock.
Note 9: Net Income per Share
The following table sets forth the computation of basic and diluted net income per share (in thousands, except
per share amounts):
FY 2005 FY 2004 FY 2003
Numerator:
Numerator for basic net income per share:
Net income .................................... $386,384 $266,616 $168,859
Denominator for basic net income per share: Weighted average
common shares outstanding ......................... 183,008 164,065 144,781
Basic net income per share ............................ $ 2.11 $ 1.63 $ 1.17
Numerator for diluted net income per share:
Net income .................................... $386,384 $266,616 $168,859
Tax-effected interest and bond amortization expenses
attributable to the notes ......................... — 5,368 5,469
Net income for diluted income per share .............. $386,384 $271,984 $174,328
Denominator for diluted net income per share:
Weighted average common shares ..................... 183,008 164,065 144,781
Incremental common shares attributable to exercise of
outstanding employee stock options, restricted stock,
restricted stock units and warrants (assuming proceeds
would be used to purchase common stock) . . . ......... 10,008 10,406 10,559
Conversion of the Notes ............................ — 14,366 16,276
Shares used in computing diluted net income per share ....... 193,016 188,837 171,616
Diluted net income per share .......................... $ 2.00 $ 1.44 $ 1.02
Basic earnings per share exclude any dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share include the dilutive effects of stock options, warrants, and convertible securities. Options and
warrants to purchase 97,753, 6,140,781 and 1,253,457 shares of common stock were outstanding during 2005, 2004
F-32
Notes to Consolidated Financial Statements — (Continued)