SanDisk 2013 Annual Report Download - page 196

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 0.5% Notes due 2020 (in thousands):
Fiscal year ended
December 29, 2013
Contractual interest coupon .............................................. $ 1,271
Amortization of bond issuance costs ......................................... 439
Amortization of bond discount ............................................ 7,486
Total interest cost recognized .......................................... $ 9,196
The effective interest rate on the liability component of the 0.5% Notes due 2020 was 4.43% for the
fiscal year ended December 29, 2013. The remaining unamortized bond discount of $344.4 million as of
December 29, 2013 will be amortized over the remaining life of the 0.5% Notes due 2020, which is
approximately 6.8 years.
The 0.5% Notes due 2020 may be converted on any day prior to the close of business on the scheduled
trading day immediately preceding July 15, 2020, in multiples of $1,000 principal amount at the option of
the holder under any of the following circumstances: 1) during the five business-day period after any five
consecutive trading-day period (the ‘‘measurement period’’) in which the trading price per note for each
day of such measurement period was less than 98% of the product of the last reported sale price of the
Company’s common stock and the conversion rate on each such day; 2) during any calendar quarter after
the calendar quarter ending December 29, 2013, if the last reported sale price of the Company’s common
stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day
of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect
on the last trading day of the immediately preceding calendar quarter; or 3) upon the occurrence of
specified corporate transactions. On and after July 15, 2020 until the close of business on the second
scheduled trading day immediately preceding the maturity date of October 15, 2020, holders may convert
their notes at any time, regardless of the foregoing circumstances.
Upon conversion, a holder will receive the conversion value of the 0.5% Notes due 2020 to be
converted equal to the conversion rate multiplied by the volume weighted average price of the Company’s
common stock during a specified period following the conversion date. The conversion value of each 0.5%
Notes due 2020 will be paid in: 1) cash equal to the lesser of the principal amount of the note or the
conversion value, as defined, and 2) to the extent the conversion value exceeds the principal amount of the
note, common stock (plus cash in lieu of any fractional shares of common stock). The conversion price will
be subject to adjustment in some events but will not be adjusted for accrued interest. Upon a ‘‘fundamental
change’’ at any time, as defined, the Company will in some cases increase the conversion rate for a holder
who elects to convert its 0.5% Notes due 2020 in connection with such fundamental change. In addition,
the holders may require the Company to repurchase for cash all or a portion of their notes upon a
‘‘designated event’’ at a price equal to 100% of the principal amount of the notes being repurchased plus
accrued and unpaid interest, if any.
The Company pays cash interest at an annual rate of 0.5%, payable semi-annually on April 15 and
October 15 of each year, beginning April 15, 2014. Debt issuance costs were approximately $18.5 million,
of which $4.3 million was allocated to capital in excess of par value and $14.1 million was allocated to
deferred issuance costs and is amortized to interest expense over the term of the 0.5% Notes due 2020. As
of December 29, 2013, unamortized deferred issuance cost was $13.8 million.
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