SanDisk 2008 Annual Report Download - page 121

Notes To Consolidated Financial Statements
Company and Toshiba America, Inc., in the United States District Court for the Northern District of Alabama,
Northeastern Division. The suit, Case No. CV-08-J-1813, alleges infringement of U.S. Patents 4,977,577 and
5,978,058 by certain of the Company’s discontinued wireless electronic products. On January 21, 2009, the Court
granted a motion by the defendants to transfer the case to the United States District Court for the Northern
District of California, where it is now Case No. 3:09-CV-01813.
Note 18: Condensed Consolidating Financial Statements
As part of the acquisition of msystems Ltd. (hereinafter referred to as “SanDisk IL Ltd.,” “SDIL,” or “Other
Guarantor Subsidiary”) in November 2006, the Company entered into a supplemental indenture whereby the
Company became an additional obligor and guarantor of the assumed $75 million 1% Convertible Notes due
2035 issued by M-Systems Finance, Inc. (the “Subsidiary Issuer” or “mfinco”) and guaranteed by SDIL. The
Company’s (the “Parent Company”) guarantee is full and unconditional, and joint and several with SDIL. Both
SDIL and mfinco are wholly-owned subsidiaries of the Company. The following Condensed Consolidating
Financial Statements present separate information for mfinco as the subsidiary issuer, the Company and SDIL as
guarantors, and the Company’s other combined non-guarantor subsidiaries, and should be read in conjunction
with the Consolidated Financial Statements of the Company.
These Condensed Consolidating Financial Statements have been prepared using the equity method of
accounting. Earnings of subsidiaries are reflected in the Company’s investment in subsidiaries account. The
elimination entries eliminate investments in subsidiaries, related stockholders’ equity and other intercompany
balances and transactions. Amounts of operating and financing cash flows related to combined non-guarantor
subsidiaries and consolidating adjustments for the fiscal year ended December 30, 2007 have been revised to
properly reflect certain reclassifications. The reclassifications did not have any effect on the net change in cash
and cash equivalents for the Combined Non-guarantor Subsidiaries, the Consolidating Adjustments or the Total
Company columns of the Condensed Consolidating Statements of Cash Flows for the fiscal year ended
December 30, 2007.
Condensed Consolidating Statements of Operations
For the fiscal year ended December 28, 2008
Parent
Company (1)
Subsidiary
Issuer (1)
Other
Guarantor
Subsidiary (1)
Combined
Non-Guarantor
Subsidiaries (2)
Consolidating
Adjustments
Total
Company
(In thousands)
Total revenues .............. $1,825,252 $ — $ 222,089 $ 5,125,483 $(3,821,472) $ 3,351,352
Total cost of revenues ........ 1,841,644 — 132,897 4,918,089 (3,604,365) 3,288,265
Gross profit (loss) ........... (16,392) — 89,192 207,394 (217,107) 63,087
Total operating expenses ...... 710,534 — 133,642 390,523 801,868 2,036,567
Operating income (loss) ....... (726,926) — (44,450) (183,129) (1,018,975) (1,973,480)
Total other income (expense) . . 19,571 (1) 8,510 47,970 (5,604) 70,446
Income (loss) before provision
for income taxes ........... (707,355) (1) (35,940) (135,159) (1,024,579) (1,903,034)
Provision for income taxes .... 131,864 — 7,169 14,709 — 153,742
Equity in net income (loss) of
consolidated subsidiaries .... (157,340) — 18,407 40,189 98,744 —
Net income (loss) ............ $ (996,559) $ (1) $ (24,702) $ (109,679) $ (925,835) $(2,056,776)
(1) This represents legal entity results which exclude any subsidiaries required to be consolidated under GAAP.
(2) This represents all other legal subsidiaries.
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