SanDisk 2014 Annual Report Download - page 126

various state and international tax authorities. While we believe that we have an adequate provision for the
years under audit, there is still a possibility that an adverse outcome from these matters could have a
material effect on our financial position, results of operations or liquidity.
The Tax Increase Prevention Act of 2014 enacted on December 19, 2014 extended the federal R&D
tax credit and exemption of certain intercompany transactions from federal taxation through December 31,
2014. As a result, our income tax provision for fiscal year 2014 includes a tax benefit that reduced our
effective annual fiscal year 2014 tax rate. The financial statement benefit related to the 2014 federal R&D
tax credit was $19 million.
Non-GAAP Financial Measures
Reconciliation of Net Income.
Fiscal years ended
FY 2014 FY 2013 FY 2012
(In millions except per share amounts)
Net income ............................................ $ 1,007.4 $ 1,042.7 $ 417.4
Share-based compensation ................................ 155.4 99.8 78.4
Amortization of acquisition-related intangible assets .............. 127.4 60.7 51.5
Inventory step-up expense ................................ 7.8 — —
Impairment of acquisition-related intangible assets ............... — 83.2 0.9
Convertible debt interest ................................. 85.7 67.6 90.0
Income tax adjustments .................................. (95.5) (87.0) (55.8)
Non-GAAP net income ................................ $ 1,288.2 $ 1,267.0 $ 582.4
Diluted net income per share ............................... $ 4.23 $ 4.34 $ 1.70
Share-based compensation ................................ 0.73 0.42 0.32
Amortization of acquisition-related intangible assets .............. 0.59 0.26 0.21
Inventory step-up expense ................................ 0.09 — —
Impairment of acquisition-related intangible assets ............... — 0.35 —
Convertible debt interest ................................. 0.40 0.29 0.37
Income tax adjustments .................................. (0.44) (0.35) (0.22)
Non-GAAP diluted net income per share .................... $ 5.60 $ 5.31 $ 2.38
Reconciliation of Diluted Shares.
FY 2014 FY 2013 FY 2012
(In millions)
GAAP diluted shares ..................................... 238.2 240.2 245.3
Adjustment for share-based compensation ..................... 0.3 0.3 (0.1)
Offsetting shares from call options .......................... (8.3) (2.1) —
Non-GAAP diluted shares .............................. 230.2 238.4 245.2
We believe these non-GAAP measures provide investors the ability to better assess and understand
operating performance, especially when comparing results with previous periods or forecasting
performance for future periods, primarily because management typically monitors the business excluding
these items. We also use these non-GAAP measures to establish operational goals and for measuring
performance for compensation purposes. However, analysis of results on a non-GAAP basis should be
used as a complement to, and in conjunction with, and not as a replacement for, data presented in
accordance with GAAP.
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