SanDisk 2011 Annual Report Download - page 112

twelve months. In addition, we are currently under audit by various state and international tax authorities. We
cannot reasonably estimate that the outcome of these examinations will not have a material effect on our
financial position, results of operations or liquidity.
Non-GAAP Financial Measures
Reconciliation of Net Income.
Fiscal years ended
January 1,
2012
January 2,
2011
January 3,
2010
(In millions except per share amounts)
Net income ................................................ $ 987.0 $ 1,300.1 $ 415.3
Share-based compensation ................................ 63.1 77.6 95.6
Amortization of acquisition-related intangible assets ............ 44.2 14.2 13.7
Convertible debt interest .................................. 111.4 68.9 54.4
Income tax adjustments ................................... (67.7) (360.5) (151.8)
Non-GAAP net income ....................................... $ 1,138.0 $ 1,100.3 $ 427.2
Diluted net income per share: .................................. $ 4.04 $ 5.44 $ 1.79
Share-based compensation ................................ 0.26 0.32 0.41
Amortization of acquisition-related intangible assets ............ 0.18 0.06 0.06
Convertible debt interest .................................. 0.45 0.29 0.23
Income tax adjustments ................................... (0.28) (1.51) (0.65)
Non-GAAP diluted net income per share: ........................ $ 4.65 $ 4.60 $ 1.84
Shares used in computing diluted net income per share (in thousands):
GAAP ................................................ 244,553 238,901 231,959
Non-GAAP ............................................ 244,568 239,042 232,300
We believe that providing this additional information is useful in enabling the investor to better assess and
understand our operating performance, especially when comparing results with previous periods or forecasting
performance for future periods, primarily because management typically monitors the business excluding these
items. We also use these non-GAAP measures to establish operational goals and for measuring performance for
compensation purposes. However, analysis of results on a non-GAAP basis should be used as a complement to,
and in conjunction with, and not as a replacement for, data presented in accordance with GAAP.
We believe that the presentation of non-GAAP measures, including non-GAAP net income and non-GAAP
net income per diluted share, provides important supplemental information to management and investors about
financial and business trends relating to our operating results. We believe that the use of these non-GAAP
financial measures also provides consistency and comparability with our past financial reports.
We have historically used these non-GAAP measures when evaluating operating performance because we
believe that the inclusion or exclusion of the items described below provides an additional measure of our core
operating results and facilitates comparisons of our core operating performance against prior periods and our
business model objectives. We have chosen to provide this information to investors to enable them to perform
additional analyses of past, present and future operating performance and as a supplemental means to evaluate
our ongoing core operations. Externally, we believe that these non-GAAP measures continue to be useful to
investors in their assessment of our operating performance and their valuation of the company.
Internally, these non-GAAP measures are significant measures used by us for purposes of:
• evaluating the core operating performance of the company;
• establishing internal budgets;
• setting and determining variable compensation levels;
48