SanDisk 2013 Annual Report Download - page 192

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6: Financing Arrangements
The following table reflects the carrying value of the Company’s convertible debt (in thousands):
December 29, December 30,
2013 2012
1% Notes due 2013 ............................................. $ — $ 928,061
Less: Unamortized bond discount ................................... — (21,353)
Net carrying amount of 1% Notes due 2013 ......................... — 906,708
1.5% Notes due 2017 ............................................ 1,000,000 1,000,000
Less: Unamortized bond discount ................................... (170,208) (210,087)
Net carrying amount of 1.5% Notes due 2017 ........................ 829,792 789,913
0.5% Notes due 2020 ............................................ 1,500,000 —
Less: Unamortized bond discount ................................... (344,429) —
Net carrying amount of 0.5% Notes due 2020 ........................ 1,155,571 —
Total convertible debt ............................................ 1,985,363 1,696,621
Less: Convertible short-term debt ................................... — (906,708)
Convertible long-term debt ........................................ $ 1,985,363 $ 789,913
1% Convertible Senior Notes Due 2013. On May 15, 2013, the maturity date for the 1% Convertible Senior
Notes due May 15, 2013 (‘‘1% Notes due 2013’’), the Company settled the 1% Notes due 2013 through an
all-cash transaction for principal and accrued interest of $928.1 million and $4.6 million, respectively. As of
the date of the redemption, the Company had no further obligations related to the 1% Notes due 2013. In
connection with the maturity of the 1% Notes due 2013, the associated convertible bond hedge and
warrant transactions also terminated, with no shares purchased under the convertible bond hedge
agreement and no exercises of the warrants.
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% Notes due 2013 (in thousands):
Fiscal years ended
December 29, December 30, January 1,
2013 2012 2012
Contractual interest coupon ............................. $ 3,481 $ 9,280 $ 10,692
Amortization of bond issuance costs ....................... 1,013 2,783 4,345
Amortization of bond discount ........................... 21,022 53,599 56,424
Total interest cost recognized ......................... $ 25,516 $ 65,662 $ 71,461
The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for the three
fiscal years ended December 29, 2013.
Bond Repurchase. In the twelve months ended January 1, 2012, the Company repurchased
$221.9 million principal amount of its 1% Notes due 2013 in private transactions with a limited number of
bondholders for cash consideration of $211.1 million, which resulted in the recognition of a loss before tax
of $11.5 million, which was recorded in other income (expense). The repurchase was economically
beneficial given the notes were repurchased below the principal amount and given that interest rates on
cash and marketable securities were lower than the 1% coupon rate of the notes. In accordance with
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