SanDisk 2004 Annual Report Download - page 74

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Table of Contents
Notes to Consolidated Financial Statements — (Continued)
Note 9: Net Income per Share
The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):
2004 2003 2002
Numerator:
Numerator for basic net income per share:
Net income $ 266,616 $ 168,859 $ 36,240
Denominator for basic net income per share:
Weighted average common shares outstanding 164,065 144,781 137,610
Basic net income per share $ 1.63 $ 1.17 $ 0.26
Numerator for diluted net income per share:
Net income $ 266,616 $ 168,859 $ 36,240
Tax−effected interest and bond amortization expenses attributable
to the notes 5,368 5,469 —
Net income for diluted income per share $ 271,984 $ 174,328 $ 36,240
Denominator for diluted net income per share:
Weighted average common shares 164,065 144,781 137,610
Incremental common shares attributable to exercise of outstanding
employee stock options and warrants (assuming proceeds would be
used to purchase common stock) 10,406 10,559 4,850
Conversion of the Notes 14,366 16,276 —
Shares used in computing diluted net income per share 188,837 171,616 142,460
Diluted net income per share $ 1.44 $ 1.02 $ 0.25
Basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share
includes the dilutive effects of stock options, warrants, and convertible securities. Options and warrants to purchase 6,140,781,
1,253,457 and 8,031,890 shares of common stock were outstanding during 2004, 2003 and 2002, 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 effect would be antidilutive. Incremental common shares attributable to the assumed conversion of
the Notes were not included in the per share computation for fiscal year 2002 as the effect would be antidilutive.
Note 10: Related Parties
The Company has entered into agreements with Toshiba, under which they formed FlashVision and Flash Partners, to produce
advanced NAND flash memory wafers (See Notes 5 and 11). During 2004, the Company purchased approximately $63.4 million of
capital equipment, and committed to purchase up to approximately $52.1 million of additional capital equipment, which will be
located in Toshiba’s fab operations. In return, the Company will receive 100% of the output from this equipment. The Company
purchased NAND flash memory wafers from FlashVision and Toshiba, purchased capital equipment from FlashVision, made
payments for shared research and development expenses, loans to FlashVision and made investments in Flash Partners totaling
approximately $516.6 million, $223.5 million and $124.7 million in 2004, 2003 and 2002, respectively. These purchases of NAND
flash memory wafers are ultimately reflected as a component of the Company’s cost of product revenues. At January 2, 2005 and
December 28, 2003, the Company had accounts payable balances due to FlashVision of $30.7 million and $30.4 million respectively,
and balances due to Toshiba of $6.1 million and $14.6 million, respectively. At January 2, 2005 and December 28, 2003, the
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