SanDisk 2009 Annual Report Download - page 137

This is a TAB type table. Insert
conts here. Annual Report
Notes To Consolidated Financial Statements
•Sold Warrants. The Company received $308.7 million from the same counterparties from the sale of
warrants to purchase up to approximately 14 million shares of the Company’s common stock at an
exercise price of $95.03 per share. As of January 3, 2010, the warrants had an expected life of 3.6 years
and expire in August 2013. At expiration, the Company may, at its option, elect to settle the warrants
on a net share basis. As of January 3, 2010, the warrants had not been exercised and remained
outstanding. The value of the warrants has been classified as equity.
1% Convertible Notes Due 2035. In November 2006, the Company assumed the aggregate principal amount
of $75.0 million 1% Convertible Senior Notes due March 2035 (the “1% Notes due 2035”) from msystems Ltd.
(“msystems”). The Company is obligated to pay interest on the 1% Notes due 2035 semi-annually on March 15
and September 15 commencing March 15, 2007.
The 1% Notes due 2035 are convertible, at the option of the holders at any time before the maturity date,
into shares of the Company at a conversion rate of 26.8302 shares per one thousand dollars principal amount of
the 1% Notes due 2035, representing a conversion price of approximately $37.27 per share.
Beginning on March 15, 2008 and until March 14, 2010, the Company may redeem for cash the notes, in
whole or in part at any time at a redemption price equal to 100% of the principal amount of the notes to be
redeemed, plus accrued but unpaid interest, if any, to but excluding the redemption date, if the last reported sales
price of the Company ordinary shares has exceeded 130% of the conversion price for at least 20 trading days in
any consecutive 30-day trading period ending on the trading day prior to the date of mailing of the notice of
redemption.
At any time on or after March 15, 2010, the Company may redeem the notes in whole or in part at a
redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid
interest, if any, to but excluding the optional redemption date.
Holders of the notes have the right to require the Company to purchase all or a portion of their notes on
March 15, 2010, March 15, 2015, March 15, 2020, March 15, 2025 and March 15, 2030. The purchase price
payable will be equal to 100% of the principal amount of the notes to be purchased, plus accrued and unpaid
interest, if any, to but excluding the purchase date. Due to the short-term nature of the conversion rights, the
Company has reclassified the entire value of the 1% Notes due 2035 to convertible short-term debt in the
Consolidated Balance Sheet as of January 3, 2010.
The Company determined the existence of a substantial premium over par value for the 1% Notes due 2035
based upon quoted market prices at the msystems acquisition date and recorded the notes at par value with the
resulting excess of fair value over par (the substantial premium) recorded in capital in excess of par value in
stockholders’ equity in the amount of $26.4 million.
On February 11, 2010, the Company notified the holders of its 1% Convertible Notes due 2035 that it would
exercise its option to redeem the $75 million outstanding on March 15, 2010. The redemption price will be
$1,000 per $1,000 principal amount of the debentures, plus accrued interest, for an aggregate cash expenditure of
$75 million plus accrued interest of $0.4 million.
Note 8: Concentrations of Risk and Segment Information
Geographic Information and Major Customers. The Company markets and sells flash memory products in
the U.S. and in foreign countries through its sales personnel, dealers, distributors, retailers and subsidiaries. The
Company’s Chief Operating Decision Maker, the President and Chief Operating Officer, evaluates performance
of the Company and makes decisions regarding allocation of resources based on total Company results. Since the
Company operates in one segment, all financial segment information can be found in the accompanying
Consolidated Financial Statements.
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