SanDisk 2012 Annual Report Download - page 191

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the repurchase and related loss on early extinguishment of a portion of the 1% Notes due
2013 are as follows (in thousands):
Fiscal year ended
January 1, 2012
Allocation of consideration paid:
Fair value of debt redeemed ........................................................... $ 208,958
Reacquisition of equity component ..................................................... 2,161
Total consideration related to principal amount of debt redeemed ......................... $ 211,119
Loss on extinguishment:
Fair value of debt redeemed ........................................................... $ 208,958
Less: Carrying value of debt redeemed .................................................. (198,563)
Loss on extinguishment of debt .................................................... 10,395
Reacquisition costs .................................................................. 318
Extinguishment of related unamortized debt issuance costs .................................. 780
Total loss on early extinguishment of debt before tax ........................................... $ 11,493
In connection with the repurchase of a portion of the 1% Notes due 2013, the Company unwound a portion
of the convertible bond hedge and warrants. As a result of this unwinding, the Company received net proceeds of
$0.3 million which was recorded in equity.
1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in
aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (the “1.5% Notes due 2017”)
at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below, based on an
initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of notes (which
represents an initial conversion price of approximately $52.37 per share). The net proceeds to the Company from
the sale of the 1.5% Notes due 2017 were $981.0 million.
The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017. The
principal amount of the liability component of $706.0 million as of the date of issuance was recognized at the
present value of its cash flows using a discount rate of 6.85%, 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 $294.0 million as of December 30, 2012, unchanged from the date of issuance.
The following table presents the amount of interest cost recognized relating to the contractual interest
coupon, amortization of bond issuance costs and amortization of the bond discount on the liability component of
the 1.5% Notes due 2017 (in thousands):
Fiscal years ended
December 30,
2012
January 1,
2012
January 2,
2011
Contractual interest coupon .......................................... $ 15,000 $ 15,000 $ 5,208
Amortization of bond issuance costs ................................... 2,667 2,695 961
Amortization of bond discount ........................................ 36,364 34,140 11,596
Total interest cost recognized ..................................... $ 54,031 $ 51,835 $ 17,765
The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each of the
fiscal years ended December 30, 2012, January 1, 2012 and January 2, 2011. The remaining unamortized bond
discount of $210.1 million as of December 30, 2012 will be amortized over the remaining life of the 1.5% Notes
due 2017, which is approximately 4.6 years.
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