SanDisk 2010 Annual Report Download - page 177

This is a TAB type table. Insert
conts here. Annual Report
Convertible Debt Interest. This is the non-cash economic interest expense relating to the implied value of
the equity conversion component of our convertible debt. The value of the equity conversion component is
treated as a debt discount and amortized to interest expense over the life of the notes using the effective interest
rate method. We exclude this non-cash interest expense as it does not represent the semi-annual cash interest
payments made to our note holders.
Income Tax Adjustments. This amount is used to present each of the amounts described above on an
after-tax basis, considering jurisdictional tax rates, consistent with the presentation of non-GAAP net income. It
also represents the amount of tax expense or benefit that we would record, considering jurisdictional tax rates, if
we did not have any valuation allowance on our net deferred tax assets.
From time-to-time in the future, there may be other items that we may exclude if we believe that doing so is
consistent with the goal of providing useful information to investors and management.
Limitations of Relying on Non-GAAP Financial Measures.
We have incurred and will incur in the future, many of the costs excluded from the non-GAAP measures,
including share-based compensation expense, impairment of goodwill and acquisition-related intangible assets,
amortization of acquisition-related intangible assets and other acquisition-related costs, non-cash economic
interest expense related to our convertible debt and income tax adjustments. These non-GAAP measures should
be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute
for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures
used by other companies.
Liquidity and Capital Resources
Cash Flows. Our cash flows were as follows:
FY 2010
Percent
Change FY 2009
Percent
Change FY 2008
(In millions, except percentages)
Net cash provided by operating activities . . . $ 1,451.9 198% $ 487.8 456% $ 87.7
Net cash provided by (used in) investing
activities ........................... (2,714.6) 624% (374.8) (1379%) 29.3
Net cash provided by financing activities . . . 985.2 4614% 20.9 90% 11.0
Effect of changes in foreign currency
exchange rates on cash ............... 6.3 43% 4.4 1367% 0.3
Net increase (decrease) in cash and cash
equivalents ......................... $ (271.2) (296%) $ 138.3 8% $ 128.3
Operating Activities. Cash provided by operating activities is generated by net income (loss) adjusted for
certain non-cash items and changes in assets and liabilities. The increase in cash provided by operations in fiscal
year 2010 compared to fiscal year 2009 resulted primarily from higher net income of $1.30 billion compared
with net income of $415 million in the prior year. Cash flow from accounts receivable decreased, as reflected by
higher accounts receivable levels in fiscal year 2010 compared with the prior year, due to increased revenue in
fiscal year 2010. Cash flow from inventory increased primarily due to a reduction in inventory from increased
product sales. Cash flow from other assets decreased compared to the prior year primarily due to an increase in
tax-related receivables in fiscal year 2010 and a tax refund received in the first quarter of fiscal year 2009.
Accounts payable trade and accounts payable from related parties increased primarily due to the timing of Flash
Ventures payments as compared to the prior year, resulting in an increase in cash provided. Cash flow from other
liabilities in fiscal year 2010 increased as compared to the prior year primarily as a result of increased accrued
payroll and related expenses.
49