SanDisk 2009 Annual Report Download - page 135

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
value. In performing the analysis, the Company uses the best information available, including reasonable and
supportable assumptions and projections. If the carrying amount of the Company exceeds its implied fair value,
goodwill is considered impaired and a second step is performed to measure the amount of impairment loss, if
any. The Company performed its annual impairment test on the first day of the fourth quarter of fiscal year 2008
and determined that the goodwill was not impaired. However, based on a combination of factors, including the
economic environment, current and forecasted operating results, NAND-industry pricing conditions and a
sustained decline in the Company’s market capitalization, the Company concluded that there were sufficient
indicators to require an interim goodwill impairment analysis during the fourth quarter of fiscal year 2008 and
the Company recognized an impairment charge of $845.5 million. There is no remaining Goodwill balance as of
January 3, 2010 and December 28, 2008.
Note 7: Financing Arrangements
The following table reflects the carrying value of the Company’s convertible debt as of January 3, 2010 and
December 28, 2008 (in millions):
January 3,
2010
December 28,
2008
1% Notes due 2013 .................................................... $ 1,150.0 $ 1,150.0
Less: Unamortized bond discount ......................................... (215.3) (270.9)
Net carrying amount of 1% Notes due 2013 ................................. 934.7 879.1
1% Notes due 2035 .................................................... 75.0 75.0
Total convertible debt .................................................. 1,009.7 954.1
Less: convertible short-term debt ......................................... (75.0) —
Convertible long-term debt .............................................. $ 934.7 $ 954.1
1% Convertible Senior Notes Due 2013. In May 2006, the Company issued and sold $1.15 billion in
aggregate principal amount of 1% Convertible Senior Notes due 2013 (the “1% Notes due 2013”) at par. The 1%
Notes due 2013 may be converted, under certain circumstances described below, based on an initial conversion
rate of 12.1426 shares of common stock per $1,000 principal amount of notes (which represents an initial
conversion price of approximately $82.36 per share). The net proceeds to the Company from the offering of the
1% Notes due 2013 were $1.13 billion.
The Company separately accounts for the liability and equity components of the 1% Notes due 2013. The
principal amount of the liability component ($753.5 million as of the date of issuance) was recognized at the
present value of its cash flows using a discount rate of 7.4%, the Company’s borrowing rate at the date of the
issuance for a similar debt instrument without the conversion feature. The carrying value of the equity
component was $241.9 million as of January 3, 2010 and December 28, 2008.
The following table presents the amount of interest cost recognized for the periods relating to both the
contractual interest coupon and amortization of the discount on the liability component of the 1% Notes due 2013
(in millions):
Fiscal Years Ended
January 3,
2010
December 28,
2008
December 30,
2007
Contractual interest coupon ................................... $ 11.5 $ 11.5 $ 11.5
Amortization of bond discount ................................ 55.6 50.5 47.0
Total interest cost recognized ............................. $ 67.1 $ 62.0 $ 58.5
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