SanDisk 2010 Annual Report Download - page 168

net proceeds to us from the offering of the 1.5% Notes were $981 million. Concurrently with the issuance of the
1.5% Notes due 2017, we purchased a convertible bond hedge for ($293) million and sold warrants for
$188 million. The separate convertible bond hedge and warrant transactions are structured to reduce the potential
future economic dilution associated with the conversion of the 1.5% Notes due 2017. We currently intend to use
the net proceeds of the offering for general corporate purposes, including the repayment at maturity or
repurchase, from time-to-time, of a portion of our outstanding 1% Convertible Senior Notes due 2013, which
mature on May 15, 2013, capital expenditures for new and existing manufacturing facilities, development of new
technologies, general working capital, and other non-manufacturing capital expenditures. The net proceeds may
also be used to fund strategic investments or acquisitions of products, technologies or complementary businesses
or to obtain the right or license to use additional technologies.
On January 1, 2011, Sanjay Mehrotra, cofounder and most recently our President and Chief Operating
Officer, became our President and Chief Executive Officer, following the December 31, 2010 retirement of our
founder Dr. Eli Harari, who had been our Chairman and Chief Executive Officer. The Board appointed
Mr. Mehrotra to serve as a director of the Company effective July 21, 2010. Michael Marks, a member of our
Board since 2003, assumed the role of Chairman on January 1, 2011.
Fiscal years 2010 and 2008 included 52 weeks as compared to 53 weeks in fiscal year 2009.
Critical Accounting Policies & Estimates
Our discussion and analysis of our financial condition and results of operations is based upon our
Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted
accounting principles, or U.S. GAAP.
Use of Estimates. The preparation of these financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent
liabilities. On an ongoing basis, we evaluate our estimates, including, among others, those related to customer
programs and incentives, product returns, bad debts, inventories and related reserves, investments, long-lived
assets, income taxes, warranty obligations, restructuring, contingencies, share-based compensation, and
litigation. We base our estimates on historical experience and on other assumptions that we believe are
reasonable under the circumstances, the results of which form the basis for our judgments about the carrying
values of assets and liabilities when those values are not readily apparent from other sources. Estimates have
historically approximated actual results. However, future results will differ from these estimates under different
assumptions and conditions.
Revenue Recognition, Sales Returns and Allowances and Sales Incentive Programs. We recognize
revenues when the earnings process is complete, as evidenced by an agreement with the customer, there is
transfer of title and acceptance, if applicable, pricing is fixed or determinable and collectability is reasonably
assured. Revenue is generally recognized at the time of shipment for customers not eligible for price protection
and/or a right of return. Sales made to distributors and retailers are generally under agreements allowing price
protection and/or right of return and, therefore, the sales and related costs of these transactions are deferred until
the retailers or distributors sell the merchandise to their end customer, or the rights of return expire. At January 2,
2011 and January 3, 2010, deferred income from sales to distributors and retailers was $184 million and
$178 million, respectively. Estimated sales returns are provided for as a reduction to product revenues and
deferred revenues and were not material for any period presented in our Consolidated Financial Statements.
We record estimated reductions to revenues or to deferred revenues for customer and distributor incentive
programs and offerings, including price protection, promotions, co-op advertising, and other volume-based
incentives and expected returns. All sales incentive programs are recorded as an offset to product revenues or
deferred revenues. In calculating the value of sales incentive programs, actual and estimated activity is used
based upon reported weekly sell-through data from our customers. The timing and resolution of these claims
could materially impact product revenues or deferred revenues. In addition, actual returns and rebates in any
future period could differ from our estimates, which could impact the revenue we report.
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