SanDisk 2014 Annual Report Download - page 128

conversion component is treated as a debt discount and amortized to interest expense over the life
of the notes using the effective interest rate method. We also incur interest expense equal to the
change in fair value of the liability component of the convertible debt when we repurchase or a
noteholder converts a portion of the convertible debt. We exclude these non-cash interest expenses
that do not represent cash interest payments made to our note holders.
•Income Tax Adjustments. This amount is used to present each of the amounts described above on an
after-tax basis, considering jurisdictional tax rates, consistent with the presentation of non-GAAP
net income.
•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, if 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, inventory step-up expense, impairment of goodwill and acquisition-related intangible assets,
amortization of acquisition-related intangible assets, non-cash economic interest expense associated with
our convertible debt and related 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 2014 FY 2013 FY 2012
(In millions)
Net cash provided by operating activities ........................ $ 1,698.4 $ 1,863.7 $ 529.9
Net cash used in investing activities ........................... (514.7) (922.9) (574.4)
Net cash used in financing activities ........................... (1,352.8) (956.4) (125.1)
Effect of changes in foreign currency exchange rates on cash .......... (8.1) 6.4 (2.4)
Net decrease in cash and cash equivalents ....................... $ (177.2) $ (9.2) $ (172.0)
58