SanDisk 2010 Annual Report Download - page 209

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if
any. The Company performed its annual impairment test on the first day of the fourth quarter of fiscal year 2008
and determined that the goodwill was not impaired. However, based on a combination of factors, including the
economic environment, current and forecasted operating results, NAND flash memory industry pricing
conditions and a sustained decline in the Company’s market capitalization, the Company concluded that there
were sufficient indicators to require an interim goodwill impairment analysis during the fourth quarter of fiscal
year 2008 and the Company recognized an impairment charge of $845.5 million. There was no remaining
Goodwill balance after December 28, 2008.
Note 6: Financing Arrangements
The following table reflects the carrying value of the Company’s convertible debt as of January 2, 2011 and
January 3, 2010 (in millions):
January 2,
2011
January 3,
2010
1% Notes due 2013 ....................................................... $ 1,150.0 $ 1,150.0
Less: Unamortized interest discount .......................................... (156.8) (215.3)
Net carrying amount of 1% Notes due 2013 ................................ 993.2 934.7
1.5% Notes due 2017 ..................................................... 1,000.0 —
Less: Unamortized interest discount .......................................... (282.2) —
Net carrying amount of 1.5% Notes due 2017 .............................. 717.8 —
1% Notes due 2035 ....................................................... — 75.0
Total convertible debt ..................................................... 1,711.0 1,009.7
Less: convertible short-term debt ............................................ — (75.0)
Convertible long-term debt ............................................. $ 1,711.0 $ 934.7
1% Convertible Senior Notes Due 2013. In May 2006, the Company issued and sold $1.15 billion in
aggregate principal amount of 1% Convertible Senior Notes due May 15, 2013 (the “1% Notes due 2013”) at par.
The 1% Notes due 2013 may be converted, under certain circumstances, based on an initial conversion rate of
12.1426 shares of common stock per $1,000 principal amount of notes (which represents an initial conversion
price of approximately $82.36 per share). The net proceeds to the Company from the sale of the 1% Notes due
2013 were $1.13 billion.
The Company separately accounts for the liability and equity components of the 1% Notes due 2013. The
principal amount of the liability component of $753.5 million as of the date of issuance was recognized at the
present value of its cash flows using a discount rate of 7.4%, the Company’s borrowing rate at the date of the
issuance for a similar debt instrument without the conversion feature. The carrying value of the equity
component was $396.5 million, as of January 2, 2011 and January 3, 2010. The effective interest rate on the
liability component of the 1% Notes due 2013 for each of the years ended January 2, 2011, January 3, 2010 and
December 28, 2008 was 7.4%.
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