SanDisk 2007 Annual Report Download - page 90

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Provision for Income Taxes.
FY 2007
Percent
Change FY 2006
Percent
Change FY 2005
Provision for income taxes ................. $174.8 (24)% $230.2 1% $226.9
Effective tax rates ........................ 43.9% 53.5% 37.0%
Our fiscal year 2007 effective tax rate decreased from fiscal year 2006 primarily due to the fiscal year 2006
write-off of acquired in-process technology and higher tax-exempt interest income in fiscal year 2007. This
decrease was partially offset by foreign losses not benefited and non-deductible share-based compensation
expenses.
We adopted FIN 48 at the beginning of fiscal year 2007. As a result of the adoption, we recognized
approximately a $1 million increase in the liability for unrecognized tax benefits, which was accounted for as a
reduction to retained earnings as of January 1, 2007. See Note 10, “Income Taxes,” to our consolidated financial
statements included in Item 8 of this report for further discussion on the impact of FIN 48.
Our fiscal year 2006 effective tax rate increased over fiscal year 2005 primarily due to the write-off of acquired
in-process technology and non-deductible share-based compensation expenses, which was partially offset by
foreign earnings at other than U.S. rates.
Liquidity and Capital Resources
Cash Flows. Operating activities generated $652.9 million of cash during the fiscal year ended December 30,
2007. The primary sources of operating cash flow for the fiscal year ended December 30, 2007 were: (1) net income,
adjusted to exclude the effect of non-cash charges including depreciation, amortization, share-based compensation,
loss on equity investments and deferred taxes, and (2) changes in balance sheet accounts including a decrease in
accounts receivable and increases in accounts payable trade and accounts payable to related parties, which were
partially offset by increases in inventory and other assets and a decrease in other liabilities.
Operating activities generated $598.1 million of cash during the fiscal year ended December 31, 2006. The
primary sources of operating cash flow for the fiscal year ended December 31, 2006 were: (1) net income, adjusted
to exclude the effect of non-cash charges including depreciation, amortization, share-based compensation and
write-off of acquired in-process technology, which were partially offset by lower deferred taxes and gain on
investment in foundries, and (2) increases in accounts payable to related parties and other liabilities, which were
partially offset by increases in accounts receivables, inventory and other assets and decreases in accounts payable
trade.
We used $1.22 billion for investing activities during the fiscal year ended December 30, 2007. Purchases of
short and long-term investments, net of proceeds from sales and maturities of short-term investments, totaled
$318.3 million. Capital expenditures for the year were $259.0 million and investments and notes to the flash
ventures with Toshiba were $613.3 million, net of repayments.
We used $978.1 million for investing activities during the fiscal year ended December 31, 2006. Purchases of
short and long-term investments, net of proceeds from sales and maturities of short-term investments, totaled
$638.9 million. Capital expenditures totaling $176.5 million and investments and notes to the flash ventures with
Toshiba of $204.1 million, net of repayments was partially offset by cash acquired of $51.8 million as a result of our
acquisition of Matrix and msystems.
We used $181.0 million of cash for financing activities during the fiscal year ended December 30, 2007
comprised primarily of $299.6 million to purchase treasury shares pursuant to our share repurchase program,
partially offset by cash received from exercises of share-based awards of $100.3 million. Additionally, during the
fiscal year ended December 30, 2007, we received a tax benefit of $18.4 million on employee stock programs.
In fiscal year 2006, we generated $1.20 billion of cash from financing activities including $1.13 billion from
the issuance of the 1% Convertible Senior Notes, net of issuance costs, partially offset by the purchase of the
convertible bond hedge of $386.1 million. We received $308.7 million from the issuance of warrants and
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