SanDisk 2013 Annual Report Download - page 155

•Diluted Share Adjustments. As share-based compensation is excluded from our presentation of
non-GAAP net income, the impact of share-based compensation on diluted share calculations is
also excluded from non-GAAP diluted shares. Concurrent with the issuance of our convertible debt,
we entered into convertible bond hedge transactions in which counterparties agreed to sell us a
number of shares of our common stock which will be equal to the number of shares issuable upon
conversion of the convertible debt. As a result, our convertible bond hedges, when exercised, will
deliver shares to offset the issuance of dilutive shares from our convertible debt. Because the bond
hedges will ultimately offset the shares issued at maturity of our convertible debt, we include the
impact of the bond hedges in our non-GAAP dilutive shares in any period where the associated
convertible debt is dilutive. The impact of the convertible bond hedges is excluded from GAAP
dilutive shares.
From time-to-time in the future, there may be other items that we may exclude if we believe that
doing so is consistent with the goal of providing useful information to investors and management.
Limitations of Relying on Non-GAAP Financial Measures. We have incurred and will incur in the future,
many of the costs that we exclude from the non-GAAP measures, including share-based compensation
expense, impairment of goodwill and acquisition-related intangible assets, amortization of acquisition-
related intangible assets and other acquisition-related costs, non-cash economic interest expense associated
with our convertible debt and income tax adjustments. These measures should be considered in addition to
results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to,
GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other
companies.
Liquidity and Capital Resources
Cash Flows. Our cash flows were as follows:
FY 2013 FY 2012 FY 2011
(In millions)
Net cash provided by operating activities ........................ $ 1,863.7 $ 529.9 $ 1,053.7
Net cash used in investing activities ........................... (922.9) (574.4) (667.0)
Net cash used in financing activities ........................... (956.4) (125.1) (47.1)
Effect of changes in foreign currency exchange rates on cash .......... 6.4 (2.4) (1.3)
Net increase (decrease) in cash and cash equivalents ............... $ (9.2) $ (172.0) $ 338.3
Operating Activities. Cash provided by operating activities is generated by net income adjusted for
certain non-cash items and changes in assets and liabilities. The increase in cash provided by operations in
fiscal year 2013, compared to fiscal year 2012, resulted primarily from higher net income. Cash flow from
accounts receivable was a lower usage of cash compared with the prior year due to collections of
outstanding receivables, partially offset by higher sales in the current year compared to the prior year. Cash
flow from inventory increased compared to the prior year due primarily to utilization of fiscal year 2012
inventory balances in fiscal year 2013. Cash flow from other assets increased compared to the prior year
due primarily to utilization of income tax receivables. Cash flow related to accounts payable increased due
primarily to the timing of payments to vendors. Cash flow related to accounts payable to related parties
was a higher usage of cash primarily due to the timing of payments to Flash Ventures as compared to the
prior year. Cash flow from other liabilities was a source of cash compared to a usage of cash in the prior
year due primarily to higher accrued incentive compensation and higher tax liabilities in fiscal year 2013,
both as a result of higher fiscal year 2013 profitability, as well as higher other accrued liabilities in fiscal
year 2013.
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