SanDisk 2003 Annual Report Download - page 59

The ratings assigned to us and our notes may Öuctuate, which could harm the market price of our common
stock.
We and our notes have been rated by Standard & Poor's Ratings Services, and may be rated by other
rating agencies in the future. Standard & Poor's Ratings Services assigned its ""B°'' corporate credit rating to
us and its ""B¿'' subordinated debt rating to our notes. If our current ratings are lowered or if other rating
agencies assign us or the notes ratings lower than expected by investors, the market price of our common stock
could be signiÑcantly harmed.
We may need additional Ñnancing, which could be diÇcult to obtain, and which if not obtained in
satisfactory amounts may prevent us from increasing our wafer supply, developing or enhancing our products,
taking advantage of future opportunities, growing our business or responding to competitive pressures or
unanticipated industry changes, any of which could harm our business.
We may need to raise additional funds, and we cannot be certain that we will be able to obtain additional
Ñnancing on favorable terms, if at all. From time to time, we may decide to raise additional funds through
public or private debt or equity Ñnancings to fund our activities. If we issue additional equity securities in the
future, our stockholders will experience dilution and the new equity securities may have rights, preferences or
privileges senior to those of existing holders of common stock or debt securities. In addition, if we raise funds
through debt Ñnancing, we will have to pay interest and may be subject to restrictive covenants, which could
harm our business. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to
develop or enhance our products, take advantage of future opportunities, grow our business or respond to
competitive pressures or unanticipated industry changes, any of which could have a negative impact on our
business.
Risks Related to Our Indebtedness
We have convertible subordinated notes outstanding, which may restrict our cash Öow, make it diÇcult for
us to obtain future Ñnancing, divert our resources from other uses, limit our ability to react to changes in the
industry, and place us at a competitive disadvantage.
As a result of the sale and issuance of our 4
1
/ 2 % convertible subordinated notes in December 2001 and
January 2002, we incurred $150.0 million aggregate principal amount of additional indebtedness, substantially
increasing our ratio of debt to total capitalization. While the notes are outstanding, we will have debt service
obligations on the notes of approximately $6.8 million per year in interest payments. If we are unable to
generate suÇcient cash to meet these obligations and must instead use our existing cash or investments, we
may have to reduce, curtail or terminate other activities of our business.
We intend to fulÑll our debt service obligations from cash generated by our operations, if any, and from
our existing cash and investments. If necessary, among other alternatives, we may add lease lines of credit to
Ñnance capital expenditures and obtain other long-term debt and lines of credit. We may incur substantial
additional indebtedness in the future. The level of our indebtedness, among other things, could:
‚ require the dedication of a substantial portion of any cash Öow from our operations to service our
indebtedness, thereby reducing the amount of cash Öow available for other purposes, including working
capital, capital expenditures and general corporate purposes;
‚ make it diÇcult for us to obtain any necessary future Ñnancing for working capital, capital expendi-
tures, debt service requirements or other purposes;
‚ cause us to use a signiÑcant portion of our cash and cash equivalents or possibly liquidate other assets
to repay the total principal amount due under the notes and our other indebtedness if we were to
default under the notes or our other indebtedness;
‚ limit our Öexibility in planning for, or reacting to changes in, our business and the industries in which
we complete;
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