SanDisk 2003 Annual Report Download - page 75

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Advertising Expense
Advertising expenses, which are predominantly marketing co-op development programs, which meet
certain conditions, are recorded, when granted, as marketing expense. Any other advertising expenses not
meeting these conditions are expensed as incurred. Prepaid advertising expenses were approximately
$0.9 million and zero at December 28, 2003 and December 29, 2002, respectively. Advertising expenses were
$5.0 million, $3.4 million and $8.8 million, in 2003, 2002 and 2001 respectively.
Net Income (Loss) Per Share
The following table sets forth the computation of basic and diluted net income per share (in thousands,
except per share amounts):
2003 2002 2001
Numerator:
Numerator for basic net income (loss) per share:
Net income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $168,859 $ 36,240 $(297,944)
Denominator for basic net income (loss) per share:
Weighted average common shares outstanding ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 144,781 137,610 136,296
Basic net income (loss) per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.17 $ 0.26 $ (2.19)
Numerator for diluted net income (loss) per share:
Net income (loss) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $168,859 $ 36,240 $(297,944)
Tax-eÅected interest and bond amortization expenses attributable
to convertible subordinated notes ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 5,469 Ì Ì
Net income (loss) assuming dilution ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $174,328 $ 36,240 $(297,944)
Denominator for diluted net income (loss) per share:
Weighted average common shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 144,781 137,610 136,296
Incremental common shares attributable to exercise of outstanding
employee stock options and warrants (assuming proceeds would
be used to purchase common stock) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10,559 4,850 Ì
Weighted convertible subordinated debentures ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,276 Ì Ì
Shares used in computing diluted net income (loss) per shareÏÏÏÏÏÏÏ 171,616 142,460 136,296
Diluted net income (loss) per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 1.02 $ 0.25 $ (2.19)
Basic earnings (loss) per share excludes any dilutive eÅects of options, warrants, and convertible
securities. Diluted earnings (loss) per share includes the dilutive eÅects of stock options, warrants, and
convertible securities. Options and warrants to purchase 1,253,457, 8,031,890 and 9,785,824, shares of
common stock were outstanding during 2003, 2002 and 2001, respectively, but have been omitted from the
diluted earnings per share calculation because the options' exercise price was greater than the average market
price of the common shares and, therefore the eÅect would be antidilutive. All options are antidilutive in Ñscal
year 2001 due to the net loss for the year and were omitted from the diluted net loss per share calculation.
Incremental common shares attributable to the assumed conversion of the Company's convertible subordi-
nated debentures were not included in the per share computation as the eÅect would be antidilutive for Ñscal
years 2002 and 2001.
Stock-Based Compensation. The Company accounts for employee stock based compensation using the
intrinsic value method and accordingly, no expense has been recognized for options granted to employees
under the plans as the grant price is set at the fair market value of the stock on the day of grant. The Company
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