SanDisk 2010 Annual Report Download - page 59

Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
This section contains a discussion of the material elements of compensation awarded to, earned by or paid to
the principal executive and principal financial officers of the Company and its three other most highly
compensated individuals who were serving as executive officers as of the last day of the fiscal year ending
January 2, 2011 (referred to herein as “fiscal 2010”). These individuals are referred to as the “Named Executive
Officers” in this Proxy Statement.
The Company’s current executive compensation programs are determined and approved by the
Compensation Committee of the Board. None of the Named Executive Officers is a member of the
Compensation Committee. As contemplated by the Charter of the Compensation Committee, the Company’s
Chief Executive Officer recommends to the Compensation Committee for its approval the base salary, annual
bonus and long-term equity compensation levels for the other Named Executive Officers. The Company’s other
executive officers, including the other Named Executive Officers, do not have any role in determining or
recommending the form or amount of compensation paid to Named Executive Officers other than providing such
financial or other information as the Compensation Committee may request from time to time.
Executive Summary
Significant 2010 Business Results and Actions. In fiscal 2010 the Company achieved the following financial
results, demonstrating that the Company is successfully executing its strategy:
• Total revenue of $4.8 billion in 2010, up 35% compared to 2009 revenue;
• Diluted earnings per share on a non-GAAP basis was $4.60 per share, 2.5 times the non-GAAP diluted
earnings per share in fiscal 2009;
• Non-GAAP net income of $1.1 billion, more than 2.5 times the non-GAAP net income in 2009; and
• Cash flow from operations of $1.45 billion in 2010, nearly three times the cash flow from operations
generated in 2009.
The Company uses non-GAAP measures to establish operational goals and to measure performance for
executive compensation because the Company believes that non-GAAP measures allow management to better
evaluate the core operating performance of the Company especially when comparing to the results of previous
periods and to the Company’s business model objectives.
For reconciliation of non-GAAP to GAAP financial measures, see Part II, Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operation—Non-GAAP Financial Measures” of
the Company’s Form 10-K filed February 23, 2011.
The Company underwent significant management changes in fiscal 2010. Dr. Harari retired as the
Company’s Chief Executive Officer on December 31, 2010, at which time Mr. Mehrotra became the Company’s
President and Chief Executive Officer. In December 2010, the Company appointed two new executive officers,
James F. Brelsford, Chief Legal Officer and Senior Vice President of IP Licensing and Sumit Sadana, Senior
Vice President and Chief Strategy Officer.
Continued Commitment to Pay-for-Performance. The Compensation Committee sets a significant portion of
the compensation of the Named Executive Officers based on their ability to achieve annual operational objectives
that advance the Company’s long-term business objectives and that are designed to create sustainable long-term
stockholder value in a cost-effective manner. The Company’s performance-based compensation elements are
guided by the Committee’s long term objectives of maintaining market competitiveness and retention value. In
particular, the Committee takes into consideration the fact that, consistent with the Company’s compensation
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