SanDisk 2012 Annual Report Download - page 151

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Amortization and write-off of acquisition-related intangible assets in fiscal year 2011, compared to fiscal
year 2010, was higher due to increased amortization of intangible assets from the acquisition of Pliant, which
was completed in May 2011. Amortization of acquisition-related intangible assets associated with the acquisition
of Pliant will continue to be amortized through the first quarter of fiscal year 2016.
As part of the Pliant purchase agreement, $36.2 million related to the next generation of enterprise storage
products was allocated to acquired in-process technology because technological feasibility had not been
established and no alternative future uses existed. The value was determined by estimating the net cash flows and
discounting forecasted net cash flows to their present values. The net cash flows from the project were based on
estimates of revenues, costs of revenues, operating expenses and income taxes. The estimated net revenues and
gross margins were based on our projections of the project and were in line with industry averages. Estimated
operating expenses included research and development expenses and selling, marketing and administrative
expenses based upon historical and expected direct expense level and general industry metrics. The project is
expected to be completed by the second quarter of fiscal year 2013, at which point, amortization of the $36
million in-process research and development intangible will begin. As of December 30, 2012, it was estimated
that this in-process project would be completed at a total remaining cost of approximately $24 million, which
includes incremental non-recurring engineering costs and customer qualification costs. The estimate of remaining
cost for this in-process project has been revised from the original estimate at acquisition date to reflect an
increase in the overall cost estimates and development timelines. The project is dependent on general
development and project milestones, which if not met, may result in higher costs, or if not successful, could
result in an impairment of the acquired in-process technology intangible.
Other Income (Expense), net.
FY 2012
Percent
Change FY 2011
Percent
Change FY 2010
(In millions, except percentages)
Interest income ....................... $ 59.0 (2%) $ 60.4 13% $ 53.4
Interest expense ....................... (119.7) (3%) (123.3) 37% (90.0)
Other income (expense), net ............. (8.5) (189%) 9.6 (70%) 32.4
Total other income (expense), net ..... $ (69.2) 30% $ (53.3) 1169% $ (4.2)
Our fiscal year 2012 “Total other income (expense), net” was a higher net expense compared to fiscal year
2011 primarily due to non-recurring charges and losses reflected in “Other income (expense), net.” “Other
income (expense), net” for fiscal year 2012 primarily included a non-recurring charge incurred by Flash Ventures
of ($9) million. “Other income (expense), net” for fiscal year 2011 primarily included a net gain on sale of equity
securities of $19 million, offset by the expense of ($11) million incurred from the change in fair value of the
liability component of the repurchased portion of the 1% Notes due 2013.
Our fiscal year 2011 “Total other income (expense), net” was a higher net expense compared to fiscal year
2010 primarily due to a full year of interest expense related to the issuance of the 1.5% Notes due 2017 in August
2010. “Other income (expense), net” for fiscal year 2011 primarily included a net gain on sale of equity securities
of $19 million, offset by the expense of ($11) million incurred from the change in fair value of the liability
component of the repurchased portion of the 1% Notes due 2013. “Other income (expense), net” for fiscal year
2010 was primarily comprised of a non-recurring gain of $13 million related to the sale of the net assets of our
SIM business and a gain on sales of equity securities of $16 million.
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