SanDisk 2014 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... data is readily available and reliable, even in the most challenging environments. Our products are used in the world's leading-edge data centers, embedded in game-changing smartphones, tablets, and laptops, and entrusted by consumers around the world. For more information, visit www.SanDisk.com.

  • Page 3
    Stockholders Letter Proxy Statement Annual Report

  • Page 4
    ... $0 14% 2012 2013 Non-GAAP Operating Margin 2014 2010 2011 2012 2013 Free Cash Flow 2014 Cash Flow from Operations Non-GAAP operating margin excludes share-based compensation expense, acquisition-related amortization and impairments, and purchase accounting adjustments. Non-GAAP to GAAP...

  • Page 5
    ... Drive Milpitas, CA 95035-7933 Stockholders Letter Dear Fellow SanDisk Stockholders, 2014 was a year of significant accomplishments for SanDisk, with record revenue and strong earnings and free cash flow. We executed our strategy of deriving a greater portion of revenue from high-value offerings...

  • Page 6
    ... vertical integration model, is key to SanDisk's future success. Our customers trust our expertise in memory cell design and manufacturing, as well as our systems and software expertise, which we use to transform flash memory into differentiated products used in storage solutions. We partner closely...

  • Page 7
    ... ''Annual Meeting'') of SanDisk Corporation, a Delaware corporation (the ''Company''), to be held on June 18, 2015 at 8:00 a.m., local time, at the Company's headquarters, 951 SanDisk Drive, Milpitas, CA 95035, for the following purposes: 1. To elect eight directors to serve on the Company's Board...

  • Page 8
    ... Program ...Clawback Policy on Bonus Awards ...Stock Ownership Guidelines ...Insider Trading Policy ...Section 162(m) Policy ...Accounting for Share-based Compensation ...COMPENSATION COMMITTEE REPORT ...EXECUTIVE COMPENSATION ...Summary Compensation Table-Fiscal Years 2012-2014 ...Grants of Plan...

  • Page 9
    ... herein. Stockholders of record at the close of business on April 20, 2015 (the ''Record Date'') will be entitled to vote at the Annual Meeting. The Annual Meeting will be held at 8:00 a.m., local time, on June 18, 2015, at the Company's headquarters, 951 SanDisk Drive, Milpitas, CA 95035. These...

  • Page 10
    ... the persons named as proxies will vote on any other matters properly presented at the Annual Meeting in accordance with their best judgment. Stockholder votes will be tabulated by a representative of Broadridge Financial Solutions, Inc. Each share of Common Stock outstanding on the Record Date is...

  • Page 11
    ... Relations, c/o SanDisk Corporation, 951 SanDisk Drive, Milpitas, CA 95035, or call the Company's Investor Relations department at (408) 801-1000, and the Company will promptly comply with such request. Stockholders may contact the Company's Investor Relations representative at the phone number...

  • Page 12
    ... the 2016 Annual Meeting of Stockholders must be received by the Company no later than December 29, 2015 in order that they may be considered for inclusion in the Company's Proxy Statement and form of proxy relating to that meeting. All such proposals must comply with Rule 14a-8 under the Securities...

  • Page 13
    ...served as a Director of the Company since September 1988. Employment History: Mr. Federman has been a general partner in U.S. Venture Partners, a venture capital firm, since April 1990. Mr. Federman was President and Chief Executive Officer from 1979 to 1987, and Chief Financial Officer from 1970 to...

  • Page 14
    ...The Board also values Mr. Gomo's significant experience, expertise and background in financial and accounting matters in the technology industry. Mr. Hartenstein has served as a Director of the Company since November 2005. Employment History: Mr. Hartenstein was President and Chief Executive Officer...

  • Page 15
    ... ability to communicate and inform the Board about technology and industry developments and trends. The Board also benefits from Dr. Hu's experience on the boards of other publicly-held technology companies. Ms. Lego served as a Director of the Company from 1989 to 2002 and returned to the Board in...

  • Page 16
    ... in financial and accounting matters, including in the technology industry. Ms. Lego's venture capital experience aids the Board's understanding of business development, financing, strategic alternatives and industry trends. Mr. Marks has served as a Director of the Company since August 2003 and...

  • Page 17
    ... of software and hardware-based storage solutions, from May 2005 through November 2005. Mr. Mercer also served as a senior vice president and advisor to the chief executive officer of Western Digital Corporation, a supplier of disk drives to the personal computer and consumer electronics industries...

  • Page 18
    ... to: Board of Directors, c/o Investor Relations, SanDisk Corporation, 951 SanDisk Drive, Milpitas, CA 95035. Communications that are intended specifically for non-management Directors should be sent to the attention of the Chair of the Nominating and Governance Committee. The Company will deliver...

  • Page 19
    ...'s executive officers, as defined by NASDAQ listing standards and Rule 16a-1(f) of the Exchange Act (the ''Section 16 Officers''), evaluating the performance of the Company's Section 16 Officers, administering the Company's incentive and employee stock purchase plans, including the review and grant...

  • Page 20
    ... may only grant stock options (but not RSUs or other share-based awards) to employees who are not Section 16 Officers. In fiscal year 2014, the Secondary Executive Committee consisted of Judy Bruner, the Company's Executive Vice President, Administration and Chief Financial Officer and Donald...

  • Page 21
    ... in value if the Company's business is not managed for the long term. Internal Processes Further Restrict Risk. The Company has in place additional processes to limit risk to the Company from its compensation programs. Specifically, sales commission payments are subject to multiple internal controls...

  • Page 22
    ... at the Company's annual stockholder meetings and to fill vacancies occurring between annual stockholder meetings, implements the Board's criteria for selecting new Directors, develops or reviews and recommends corporate governance policies for the Board, and oversees the annual board and committee...

  • Page 23
    ...of a Recommended Candidate must be timely delivered to: Chair of the Nominating and Governance Committee, c/o SanDisk Corporation, 951 SanDisk Drive, Milpitas, CA 95035. The recommendation must include the following written materials: (1) all information relating to the Recommended Candidate that is...

  • Page 24
    ... information pertaining to the Company; • Commitment to understand the Company and its business, industry and strategic objectives; • Commitment and ability to regularly attend and participate in meetings of the Board, Board Committees and stockholders, the number of other company boards...

  • Page 25
    ... 10, 2015. Under general accounting principles, compensation expense with respect to stock awards and option awards granted to the Directors is generally recognized over the vesting periods applicable to the awards. In June 2014, the Company granted each of the Non-Employee Directors an annual stock...

  • Page 26
    ... unexercised option awards and the number of unvested stock awards held by each of the Company's Non-Employee Directors as of December 28, 2014: Number of Shares Subject to Outstanding Option Awards as of December 28, 2014 Number of Unvested Shares or Units as of December 28, 2014 Director Michael...

  • Page 27
    ... with the terms of the 2013 Plan and the Company's share-based award grant practices, the fair market value is equal to the closing price of a share of the Common Stock on NASDAQ on the grant date. The stock options granted to Non-Employee Directors are immediately exercisable. However, upon a Non...

  • Page 28
    ... Annual Meeting of Stockholders following the grant date. Pursuant to the terms of the 2013 Plan, RSUs granted to the Company's Non-Employee Directors will vest on an accelerated basis in connection with a change in control of the Company. Upon the cessation of the Non-Employee Director's service...

  • Page 29
    ... of professional services provided in connection with the integrated audit of the Company's financial statements including services provided in connection with the annual audit of the Company's internal control over financial reporting and review of the Company's quarterly financial statements...

  • Page 30
    ... person or represented by proxy at the Annual Meeting and entitled to vote on Proposal No. 2 is required to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending January 3, 2016. Recommendation of the Board of Directors...

  • Page 31
    ... 10-K The Company filed its Annual Report on Form 10-K with the SEC on February 10, 2015. Stockholders may obtain a copy of the Annual Report on Form 10-K, without charge, by writing to: Investor Relations, c/o SanDisk Corporation, 951 SanDisk Drive, Milpitas, CA 95035. The Annual Report on Form 10...

  • Page 32
    ... provide detailed information on the compensation of the Company's Named Executive Officers. The advisory resolution gives stockholders the opportunity to express their approval of the Company's Named Executive Officer compensation program. This vote is not intended to address any specific item of...

  • Page 33
    ... Sadana-Executive Vice President, Chief Strategy Officer and, since April 2015, General Manager, Enterprise Solutions; • Mark Brazeal-Chief Legal Officer and Senior Vice President, IP Licensing; and • Shuki Nir-Senior Vice President, Corporate Marketing, and General Manager, Retail. The Company...

  • Page 34
    ... Stock over time, and (3) stock options, with exercise prices equal to the fair market value of the Company's Common Stock on the grant date, which become valuable only upon realized share appreciation after the grant date. Information regarding the compensation mix for the Company's Chief Executive...

  • Page 35
    ... the incentive to manage the Company's business as owners and subjecting a significant portion of the executive officer's total compensation to fluctuations in the market price of Common Stock. Executive Compensation Program Overview Executive Compensation Philosophy. SanDisk has a long-standing...

  • Page 36
    ... the Named Executive Officers, with those of the Company's stockholders, although the Company believes the share-based incentives also help hold executive officers accountable for their performance and help the Company attract, retain and motivate executive officers. The annual bonus opportunity...

  • Page 37
    ... below. • The Company's insider trading policy prohibits the Company's executive officers from short-selling the Company's Common Stock, trading in derivative securities related to the Company's securities, including the Company's Common Stock, or otherwise engaging in activities designed to hedge...

  • Page 38
    ...determining the fiscal year 2014 compensation for the Named Executive Officers. Processes and Procedures. The Company's President and Chief Executive Officer (the ''Chief Executive Officer'') recommends to the Compensation Committee for its approval the base salary, annual bonus and long-term equity...

  • Page 39
    ...'s executive compensation programs relative to the Company's fiscal year 2014 peer companies and provided information on compensation-related trends and developments in the Company's industry and fiscal year 2014 peer companies, including equity award practices. The Company's Chief Executive Officer...

  • Page 40
    ... the Company's broader employee population. In February 2014, the Compensation Committee approved the 2014 bonus program in which the employees, including the Named Executive Officers, were participants. Bonus awards provided to the Named Executive Officers under the 2014 bonus program were designed...

  • Page 41
    ...% of the 2014 bonus program. The strategic objectives approved by the Compensation Committee related to (1) memory technology in 2D NAND, (2) memory technology in 3D NAND, (3) system technology and product platform competitiveness, (4) strategic OEM customer ratings on quality and metrics related to...

  • Page 42
    ...based awards have historically been stock options. The number of shares of Common Stock subject to each annual award is intended to create a meaningful opportunity for stock ownership in light of the Named Executive Officer's current position with the Company, the economic value of comparable awards...

  • Page 43
    ... of stock options with an exercise price that is equal to the fair market value of the closing price of the Common Stock on the grant date. Thus, the Named Executive Officers will only realize value on their stock options if the Company's stockholders realize value on their shares. The stock options...

  • Page 44
    ... as Executive Vice President, Administration and Chief Financial Officer and individual performance in the recent period related to the Company's financial matters, investor relations and other administrative and infrastructure functions, as well as corporate management of the Company. • Mr...

  • Page 45
    ... salary and/or eliminate his or her annual bonus opportunity to force the Named Executive Officer to terminate his or her own employment and thereby avoid paying severance. The Company believes that constructive terminations in connection with a change in control are conceptually the same as actual...

  • Page 46
    ...bonus payout amount in connection with the Company's fiscal year 2015 annual cash incentive program (the ''2015 bonus program'') for the executive officers including the Named Executive Officers. The performance targets under the 2015 bonus program relate to a non-GAAP EPS goal and certain strategic...

  • Page 47
    ...'s Corporate Governance Principles, which are available on the Company's website. Insider Trading Policy The Company's insider trading policy prohibits the Company's employees, including executive officers, from short-selling the Company's Common Stock, trading in derivative securities related to...

  • Page 48
    ... which governs the accounting treatment of sharebased compensation awards. ASC 718 requires the Company to measure and record in the Company's consolidated statement of operations all share-based payments to executive officers, employees, and Directors based on their grant date fair values. The...

  • Page 49
    ...with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act. The Compensation Committee has reviewed and discussed with management the...

  • Page 50
    ... option awards granted to the Company's employees is generally recognized over the vesting periods applicable to the awards. As described in the ''Compensation Discussion and Analysis'' under ''Elements of the Current Executive Compensation Program-Annual Bonus Awards,'' the Named Executive Officers...

  • Page 51
    ... terms of each Named Executive Officer's base salary and annual bonus is provided immediately following this paragraph. The Grants of Plan-Based Awards in Fiscal Year 2014 table, and the description of the material terms of the RSUs and stock options granted in fiscal year 2014 that follows the...

  • Page 52
    ...Fair Value of Non-Equity Incentive Plan Shares of Securities Base Price of Stock and Awards Stock or Underlying Option Option Threshold Target Maximum Units Options Awards Awards (1) (1) (1 Sh) ($)(2) Name Grant Date Sanjay Mehrotra ... 2/18/2014 2/18/2014 2/18/2014 2/18/2014 2/18/2014 2/18/2014...

  • Page 53
    ... period prior to the transaction) the bonus and performance objectives based on year-to-date performance. Restricted Stock Units Each RSU reported in the table above and granted to the Named Executive Officers in fiscal year 2014 represents a contractual right to receive one share of the Company...

  • Page 54
    ...with the terms of the 2013 Plan and the Company's option grant practices, the fair market value is equal to the closing price of a share of Common Stock on NASDAQ on the applicable grant date. Each stock option granted to the Named Executive Officers in fiscal year 2014 is subject to a four (4) year...

  • Page 55
    ... as of that date. Additional information regarding these awards is presented in the footnotes below and in the table below under ''Option Exercises and Stock Vested in Fiscal Year 2014.'' Option Awards(1) Stock Awards(2) Number of Number of Number of Market Value Securities Securities Shares or of...

  • Page 56
    ...expiration date if there is a change in control of the Company and the stock options are not assumed or replaced by an acquirer. (2) The shares underlying the RSUs held by the Named Executive Officers are subject to accelerated vesting in connection with certain changes in control of the Company if...

  • Page 57
    ... the number of shares or units, as applicable, that vested by the per-share closing price of Common Stock on the vesting date. (2) Potential Payments Upon Termination or Change in Control The following section describes the benefits that may become payable to Named Executive Officers in connection...

  • Page 58
    ...-half times (two times for Mr. Mehrotra) the sum of (A) the Named Executive Officer's annual base salary as of the Change of Control or termination of employment, whichever is greater, plus (B) the Named Executive Officer's annual target bonus for the calendar year of termination; (ii) for a period...

  • Page 59
    ... by the closing price of the Common Stock on December 26, 2014 of $101.31 per share. Severance Benefits-Termination of Employment Not in Connection with Change in Control. In connection with his promotion to Chief Executive Officer in January 2011, Mr. Mehrotra and the Company entered into...

  • Page 60
    ... 20,000 shares held by limited liability companies controlled by Mr. Marks. Includes 80,406 shares held in the name of a trust for the benefit of Mr. Mehrotra and his spouse. Includes 321,584 shares subject to outstanding options granted to the Directors or executive officers that were exercisable...

  • Page 61
    ... shares of Common Stock and shared dispositive power with respect to 367,171 shares of Common Stock. Number of shares beneficially owned is reported as of December 31, 2014 and based on the Schedule 13G filed by Neuberger Berman LLC on February 11, 2015 with the SEC. Neuberger Berman LLC's Schedule...

  • Page 62
    ... Company's Directors, executive officers and persons who own more than 10% of a registered class of the Company's equity securities, to file initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company with the SEC. Officers, Directors...

  • Page 63
    ... share of Common Stock on the employee's entry date into that six (6) month offering period or (ii) the closing selling price per share on the purchase date. Excludes 506,221 shares that are subject to options and other equity compensation awards that were originally granted by FlashSoft Corporation...

  • Page 64
    ... 2% of that company's total annual revenue; • Compensation to executive officers determined by the Compensation Committee; • Compensation to Directors determined by the Board; • Transactions in which all security holders receive proportional benefits; and • Banking-related services involving...

  • Page 65
    ... 7, 2014 is filed as Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 29, 2014, filed with the SEC on July 31, 2014. In accordance with the related-person transaction approval policy described above, the Consulting Agreements were reviewed by the legal department of the Company and...

  • Page 66
    ...; however, it is the intention of the persons named in the accompanying proxy to vote the shares represented thereby on such matters in accordance with their best judgment. By Order of The Board of Directors, 10APR201403145991 Michael E. Marks Chairman of the Board of Directors April 27, 2015 58

  • Page 67
    ... non-GAAP net income and non-GAAP diluted net income per share, provides important supplemental information to management and investors about financial and business trends relating to the Company's operating results. The Company believes that the use of these non-GAAP financial measures also...

  • Page 68
    ...impairs intangible assets in connection with acquisitions. Since the Company does not acquire businesses on a predictable cycle, the Company excludes these items in order to provide investors and others with a consistent basis for comparison across accounting periods. From time-to-time in the future...

  • Page 69
    ... of Cash Provided by Operating Activities to Free Cash Flow. Fiscal Year Ended December 28, 2014 (In millions) Net cash provided by operating activities ...Acquisition of property and equipment, net ...Investment in Flash Ventures ...Notes receivable proceeds from Flash Ventures, ...net...

  • Page 70
    (This page has been left blank intentionally.)

  • Page 71
    ... on the closing sale price as reported on the NASDAQ Global Select Market. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Outstanding at January 30, 2015 Common Stock, $0.001 par value per share Document 213...

  • Page 72
    ...Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 73
    ... after the date of this report. Unless the context requires otherwise, all references in this report to ''SanDisk↧,'' ''we,'' ''our,'' and ''us'' collectively refer to SanDisk Corporation, a Delaware corporation, and its subsidiaries, and all references to years or annual periods are references...

  • Page 74
    ...cards, universal serial bus, or USB, drives, wireless media drives, digital media players, and wafers and components. Our SSD products are used in both enterprise data centers and client computing platforms and provide high-speed, high-capacity storage solutions that can be used in lieu of hard disk...

  • Page 75
    ... technologies, such as controllers, firmware and software that manage the NAND flash and enable us to provide differentiated solutions for our customers. • Strengthen position in high-value solutions. We have been increasing the mix of our sales from embedded and SSD solutions as we grow our share...

  • Page 76
    ... lines of USB flash drives are marketed to the corporate user and are specifically designed to support secure, authorized access to corporate information. • Digital Media Players and Wireless Drives. Sansa↧ is our branded line of flash-based digital media players, and SanDisk Connect↧ is our...

  • Page 77
    ... and we offer solutions that are specifically packaged for the gaming market. Our USB flash drives allow consumers to store and transfer files, pictures and music on keychain-sized devices. We sell a line of digital media players with both embedded and removable NAND flash under our Sansa brand with...

  • Page 78
    ... operating systems for PCs, mobile phones, tablets, notebooks, digital imaging devices, gaming platforms, GPS products, servers and storage systems, and other computing and electronic devices. Our sophisticated controller and firmware technologies permit our flash storage solutions to achieve a high...

  • Page 79
    ... continually seek additional U.S. and international patents on our technology. We have patent license agreements with many companies, including Hitachi, Ltd., or Hitachi, Intel Corporation, or Intel, Renesas Electronics Corporation, Samsung Electronics Co., Ltd., or Samsung, SK hynix Inc., or Hynix...

  • Page 80
    ... retail and commercial customers; • that we have global retail distribution for our products and worldwide leading market share in removable flash cards and USB flash drives; • that we have a well-recognized and trusted brand; and • our strong financial position. Our competitors include...

  • Page 81
    ... relationships with storage OEMs and enterprise customers. • Digital Media Players and Drives. In the standalone digital audio/video player market, we face strong competition from Apple. We also face competition from Coby Electronics Corporation, GPX, a brand of Digital Products International, Inc...

  • Page 82
    ...IP Licensing Senior Vice President, Corporate Marketing, and General Manager, Retail Senior Vice President, Memory Technology Sanjay Mehrotra co-founded SanDisk in 1988 and has been our President and Chief Executive Officer since January 2011. He was appointed to our board of directors in July 2010...

  • Page 83
    ... the audit committee of Brocade Communications Systems, Inc. Since July 2014, Ms. Bruner has served on the board of directors of the Computer History Museum, a 501(c)(3) organization. Sumit Sadana has been our Executive Vice President and Chief Strategy Officer since September 2012, and previously...

  • Page 84
    ...of these markets; • timing, volume and cost of wafer production from Flash Ventures as impacted by fab start-up delays and costs, technology transitions, lower than expected yields or production interruptions; • fluctuations or declines in our license and royalty revenue due to license agreement...

  • Page 85
    ... to NAND, development of new technologies such as 3D NAND or other actions taken by us or our competitors to gain market share. In particular, the NAND flash memory industry has, from time-to-time, experienced periods of excess supply, resulting in price declines. Industry bit supply is expected to...

  • Page 86
    ... for revenue and market share as a result, which would harm our ability to grow or maintain revenue. In such cases, we may have only a limited ability to satisfy our supply needs from non-captive supply sources and may not be able to obtain the right mix of non-captive product that meets our...

  • Page 87
    ... products slowed, we increased sales of embedded NAND flash memory and cards for devices such as mobile phones, tablets and other mobile devices. More recently, SSD products have generated the largest portion of our revenue growth. Our future growth is dependent on the development of new markets...

  • Page 88
    ... of inventory; and • SSDs and other high-value solutions require different go-to-market strategies compared to our historical consumer and mobile products, which could increase our operating expenses, and we may be unable to build an effective sales and marketing operation to sell our high-value...

  • Page 89
    ...include cards for mobile devices, embedded memory products, and SSDs for the notebook, storage and server markets. Our OEM revenue is primarily dependent upon our products meeting OEM specifications and the achievement of design wins in an OEM's products such as mobile phones, tablets, computers and...

  • Page 90
    ..., qualification and test cycles prior to sales. OEM customers in the enterprise storage market typically also require us to customize our products, which could further lengthen the product design, qualification, manufacturing and sales process. We spend substantial time, money and other resources...

  • Page 91
    ...technology, and if NAND flash technology is replaced by a technology where our IP is less relevant, our license and royalty revenue would decrease. Also, we may not have access to or we may have to pay royalties to access alternative technologies that we do not develop internally. If our competitors...

  • Page 92
    ...and if we limit the growth of our production, we may not be able to meet customer requirements or our competitors may become more preferred suppliers based upon either the breadth of their product offerings or volume of their product supply. In addition to the potential loss of bit market share, our...

  • Page 93
    ... new technologies will meet customer specifications. The vast majority of products require controllers or firmware, and any delays in developing or sourcing controllers or firmware, or incompatibility or quality issues relating to the controllers or firmware in our products, could harm our revenue...

  • Page 94
    ... test or manufacturing facilities for the operations of an acquired business, which could harm our ability to achieve the expected benefits from the acquisition; • difficulty in entering into new markets in which we have limited or no experience, such as software solutions, and where competitors...

  • Page 95
    ... of operations; and • potential delay in customer purchasing decisions due to uncertainty about the direction of our product offerings or those of the acquired business. In July 2014, we completed the acquisition of Fusion-io, a developer of flash-based PCIe hardware and software solutions that...

  • Page 96
    ... commercial terms such as the right to return unsold inventory and protection against price declines. As a result, we do not recognize revenue until after the product has been sold through to the end user, in the case of sales to retailers, or to our distributors' customers, in the case of sales...

  • Page 97
    ... cards, wafers or components to certain OEMs who sell flash products that may ultimately compete with our branded products in the retail or commercial channels. The sales volumes and pricing to these OEMs can be highly variable and these OEMs may be more inclined to switch to an alternative supplier...

  • Page 98
    technology in creating hybrid drive products. Our failure to compete effectively against these industry players could harm our business and results of operations. • Enterprise Storage Solution Manufacturers. In the market for enterprise data center SSDs, we face competition from Intel, Micron, ...

  • Page 99
    ... customer service and support costs, indemnification of our customers' product recall and other costs, warranty claims and litigation. Generally, our OEM customers have more stringent requirements than other customers and our concentration of revenue from OEMs, especially OEMs who Annual Report...

  • Page 100
    purchase our enterprise and client SSD products, could result in increased expenditures for product testing, or increase our service costs and potentially lead to increased warranty or indemnification claims. Furthermore, the costs of errors or defects in our embedded products may be greater than ...

  • Page 101
    ... have limited control as to how those sub-contractors run their operations and manage their risks, and as a result, we may not be adequately insured. If our security measures or security measures of our suppliers, vendors and partners are breached and unauthorized access to our or their information...

  • Page 102
    ... raise funds on acceptable terms, if and when needed, our credit rating may be downgraded, and we may not be able to develop or enhance our technology or products, fulfill our obligations to Flash Ventures, increase our wafer supply, take advantage of future opportunities, engage in acquisitions of...

  • Page 103
    ... and impair the value of our brands, which in turn could negatively impact sales of our branded products, our market share and our gross margin, as well as increase our administrative costs related to brand protection and counterfeit detection and prosecution. We and our suppliers rely upon certain...

  • Page 104
    ... lead to greater volatility in our stock price and the need for significant working capital investments in receivables and inventory, including the need to build inventory levels in advance of our projected high volume selling seasons. The Flash Ventures' master equipment lease obligations contain...

  • Page 105
    ...rate at December 28, 2014, covered by our guarantee under Flash Ventures' master lease agreements, which would significantly reduce our cash position and may force us to seek additional financing, which may not be available. We are vulnerable to numerous risks related to our international operations...

  • Page 106
    ... continued contributions of our senior management and other key research and development, sales, marketing and operations personnel. We do not have employment agreements with any of our executive officers and they are free to terminate their employment with us at any time. Our success will depend on...

  • Page 107
    ... board of directors. This could discourage an acquisition of us. In addition, our certificate of incorporation grants our board of directors the authority to fix the rights, preferences and privileges of and issue up to 4,000,000 shares of preferred stock without stockholder action (2,000,000 shares...

  • Page 108
    ... may be only a limited number of suppliers of ''conflict free'' minerals, we cannot be sure that we will be able to obtain necessary conflict free minerals in sufficient quantities or at competitive prices. Some customers have notified us that they will require that our products be free of conflict...

  • Page 109
    ...stock price. Any internal control or procedure, no matter how well designed and operated, can only provide reasonable assurance of achieving desired control objectives and cannot prevent human error, intentional misconduct or fraud. We have significant financial obligations related to Flash Ventures...

  • Page 110
    ... are located in Milpitas, California. As of December 28, 2014, we owned five buildings in Milpitas comprising approximately 589,000 square feet. These buildings house our corporate offices, including personnel from engineering, sales, marketing, operations and administration. We own two testing and...

  • Page 111
    ...28, 2014 (in millions, except share and per share amounts). Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(a) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(a) Period Total Number of Shares Purchased(a) Average Price Paid...

  • Page 112
    ... the periods assumes that $100 was invested on January 3, 2010 in our common stock, the S&P 500, the S&P Semiconductor Index and the PHLX Semiconductor Sector Index, and assumes all dividends are reinvested. For each reported year, the reported dates are the last trading dates of our fiscal quarters...

  • Page 113
    ... sale of our investment in certain equity securities. Includes share-based compensation expense of $78 million, which includes $17 million due to a non-cash modification of outstanding stock awards pursuant to the retirement of our former Chief Executive Officer, amortization of acquisition-related...

  • Page 114
    ... flash memory, controller, firmware and software technologies. Our solutions include SSDs, embedded products, removable cards, USB drives, wireless media drives, digital media players, and wafers and components. Our SSD products are used in both client computing platforms and enterprise data centers...

  • Page 115
    ...leading-edge, high-quality, low-cost NAND flash wafers. While substantially all of our flash memory supply is purchased from Flash Ventures, from time-to-time, we also purchase flash memory from other NAND flash manufacturers. While we do not unilaterally control the operations of Flash Ventures, we...

  • Page 116
    ... the upper end of the industry supply growth rate of 35% to 40%, compared to our captive bit-supply growth of 20% in fiscal year 2014 and 18% in fiscal year 2013. • In 2015, we plan to increase our inventory levels in order to better meet customer service requirements and accommodate variations in...

  • Page 117
    ...Incentive Programs. Sales made to distributors and retailers are generally under agreements allowing price protection and/or right of return and, therefore, the revenue and related costs of these transactions are deferred until the distributors or retailers sell the merchandise to their end customer...

  • Page 118
    ...our market share, various internal estimates and data from certain external sources, and is based on assumptions that are consistent with the plans and estimates we are using to manage our underlying business and short-term manufacturing plans. To the extent our demand forecast for specific products...

  • Page 119
    ... are obtained from independent pricing vendors, quoted market prices, or other sources to determine the ultimate fair value of our assets and liabilities. The inputs and fair value are reviewed for reasonableness, may be further validated by comparison to publicly available information, compared to...

  • Page 120
    ... the number of gigabytes sold with no change in the average selling price per gigabyte. The increase in Commercial revenue was primarily related to increased sales of client and enterprise SSD products and embedded memory products for mobile devices, partially offset by decreased sales of cards for...

  • Page 121
    ... and USB drives. • Revenue in Asia-Pacific increased in fiscal year 2014, compared to fiscal year 2013, due primarily to increased sales of client and enterprise SSD products, wafer and components, and cards for mobile devices, partially offset by lower sales of embedded products, gaming cards and...

  • Page 122
    ... to fiscal year 2012, due primarily to higher sales of USB drives and cards for mobile devices. Our revenue is designated based on the geographic location where the product is delivered, or in the case of license and royalty revenue, the location of the headquarters of the licensee, and therefore...

  • Page 123
    ... an increase of $25 million for technology acquisition, prototype expenditures and non-recurring engineering costs. Sales and Marketing. FY 2014 Percent Change FY 2013 Percent Change FY 2012 (In millions, except percentages) Sales and marketing ...% of revenue ... $ 383.3 6% 39% $ 276.3 5% 23...

  • Page 124
    ... certain foreign countries. In addition, we recorded other expense related to the acquisition of Fusion-io, which primarily consisted of legal, banker, accounting and tax fees, certain employee change of control charges and employee retention bonus payments, and litigation and integration expenses...

  • Page 125
    ... and the U.S. statutory tax rate. Annual Report We are subject to U.S. federal income tax as well as income taxes in multiple state and foreign jurisdictions. In August 2014, we received and signed the closing agreement from the IRS relating to our federal income tax returns for the fiscal years...

  • Page 126
    ...Net Income. FY 2014 Fiscal years ended FY 2013 FY 2012 (In millions except per share amounts) Net income ...Share-based compensation ...Amortization of acquisition-related intangible assets Inventory step-up expense ...Impairment of acquisition-related intangible assets . Convertible debt interest...

  • Page 127
    ... intangible assets in connection with acquisitions. Since we do not acquire businesses on a predictable cycle, we exclude these items in order to provide investors and others with a consistent basis for comparison across accounting periods. • Inventory Step-up. Acquired inventory in a business...

  • Page 128
    ... impact of the convertible bond hedges is excluded from GAAP dilutive shares. 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...

  • Page 129
    ... Ventures of $75 million. Financing Activities. Net cash used in financing activities for fiscal year 2014 was primarily related to share repurchases of $1.30 billion and dividends paid of $235 million, partially offset by cash received from employee stock programs of $181 million. Annual Report...

  • Page 130
    ... value greater than the principal amount of the 1.5% Notes due 2017. Based on the last closing price of the quarter ended December 28, 2014 of $101.31 for our common stock, if all of the 1.5% Notes due 2017 then outstanding were converted, 9.6 million shares would be distributed to the holders...

  • Page 131
    ... holders of record on March 23, 2015. We expect to continue to pay quarterly dividends subject to declaration by our Board of Directors. Our short-term liquidity is impacted in part by our ability to maintain compliance with covenants in the outstanding Flash Ventures' master lease agreements. Flash...

  • Page 132
    ... in other companies, or purchase or license technologies. These activities may require us to raise additional financing, which could be difficult to obtain, and which if not obtained in satisfactory amounts, could prevent us from funding Flash Ventures, increasing our wafer supply, developing or...

  • Page 133
    ...Supplementary Data'' of this report. From time-to-time, we and Toshiba mutually approve the purchase of equipment for Flash Ventures in order to convert to new process technologies or add wafer capacity. Flash Partners' share of Fab 3 and Flash Alliance's share of Fab 4 have been previously equipped...

  • Page 134
    ... to provide space to convert Flash Ventures' current 2D NAND capacity to 3D NAND, with expected readiness for production in 2016. The cost of the wafers we purchase from Flash Ventures is recorded in inventory and ultimately cost of revenue. Entities within Flash Ventures are variable interest...

  • Page 135
    ... our cost of revenue. As of December 28, 2014, none of our expected Japanese yen denominated wafer purchases for the first quarter of fiscal year 2015 have been hedged. See Item 7A, ''Quantitative and Qualitative Disclosures About Market Risk - Foreign Currency Risk'' for more information about our...

  • Page 136
    ... available rating and the risk of additional future downgrades or related downgrades by recognized credit rating agencies, the investment choices for our cash and marketable securities portfolio could be reduced, which could negatively impact our non-operating results. As of December 28, 2014, we...

  • Page 137
    ... reported within the time periods specified in the SEC's rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. Report of Management on Internal Control...

  • Page 138
    ...changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 28, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Not...

  • Page 139
    ... CORPORATE GOVERNANCE The information required by this item is set forth under ''Business-Executive Officers'' in this report and will be included under ''Election of Directors'' and ''Compliance with Section 16(a) of the Securities Exchange Act of 1934'' in our Proxy Statement for our 2015 Annual...

  • Page 140
    ... AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report 1) All financial statements Index to Financial Statements Page Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets ...Consolidated Statements of Operations ...Consolidated Statements of...

  • Page 141
    SANDISK CORPORATION INDEX TO FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets ...Consolidated Statements of Operations...... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... F-2 F-4 F-5 F-6 F-7 F-8 F-9 Annual Report F-1

  • Page 142
    ..., in accordance with the standards of the Public Company Accounting Oversight Board (United States), SanDisk Corporation's internal control over financial reporting as of December 28, 2014, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring...

  • Page 143
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of SanDisk Corporation We have audited SanDisk Corporation's internal control over financial reporting as of December 28, 2014, based on criteria established in Internal Control - Integrated Framework issued...

  • Page 144
    SANDISK CORPORATION CONSOLIDATED BALANCE SHEETS December 28, 2014 December 29, 2013 (In thousands, except for share and per share amounts) ASSETS Current assets: Cash and cash equivalents ...Short-term marketable securities Accounts receivable, net ...Inventory ...Deferred taxes ...Other current...

  • Page 145
    ... 2014 Fiscal years ended December 29, December 30, 2013 2012 (In thousands, except per share amounts) Revenue ...Cost of revenue ...Amortization of acquisition-related intangible assets ...Total cost of revenue ...Gross profit ...Operating expenses: Research and development ...Sales and marketing...

  • Page 146
    SANDISK CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME December 28, 2014 Fiscal years ended December 29, December 30, 2013 2012 (In thousands) Net income ...Other comprehensive loss, before tax: Unrealized holding gain (loss) on marketable securities... tax benefit related to items of...

  • Page 147
    ...-controlling interests Issuance of shares pursuant to equity plans ...Issuance of shares pursuant to employee stock purchase plan ...Share-based compensation expense ...Income tax benefit from share-based plans ...Dividends and dividend equivalent rights declared ...Stock repurchases ...Equity value...

  • Page 148
    ... senior notes, net Purchase of convertible bond hedge ...Proceeds from sale of warrants ...Repayment of debt financing ...Distribution to non-controlling interests ...Proceeds from employee stock programs ...Excess tax benefit from share-based plans ...Dividends paid ...Stock repurchases ...Net cash...

  • Page 149
    .... SanDisk Corporation (together with its subsidiaries, the ''Company'') was incorporated in the State of Delaware on June 1, 1988. The Company designs, develops, markets and manufactures data storage solutions in a variety of form factors using its flash memory, controller and firmware technologies...

  • Page 150
    ... life of the license. The Company records estimated reductions of revenue 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...

  • Page 151
    ... Cash equivalents consist of short-term, highly liquid financial instruments with insignificant interest rate risk that are readily convertible to cash and have maturities of three months or less from the date of purchase. Marketable securities with original maturities greater than three months from...

  • Page 152
    ... about changes in average selling prices. If actual market conditions are less favorable than those projected by management, additional reductions in inventory valuation may be required. The Company's finished goods inventory includes consigned inventory held at customer locations as well as at...

  • Page 153
    ... the distributors or retailers sell the merchandise to their end customer. Under the new standard, the Company's sales made to distributors and retailers are expected to be recognized upon transfer of inventory to the distributor or retailer resulting in earlier revenue recognition than per existing...

  • Page 154
    ...securities represent quoted prices in active markets, and therefore do not require significant management judgment. Instruments that are classified within Level 2 of the fair value hierarchy primarily include U.S. government-sponsored agency securities, international government securities, corporate...

  • Page 155
    ... from independent pricing vendors, quoted market prices or other sources to determine the ultimate fair value of the Company's assets and liabilities. The inputs and fair value are reviewed for reasonableness and may be further validated by comparison to publicly available information or compared...

  • Page 156
    ... Unrealized Fair Value Loss Greater than 12 months Gross Unrealized Fair Value Loss U.S. Treasury securities ...U.S. government-sponsored agency securities International government securities ...Corporate notes and bonds ...Asset-backed securities ...Mortgage-backed securities ...Municipal notes...

  • Page 157
    ...'s intent and ability to hold an investment for a period of time sufficient to allow for any anticipated recovery in market value. For debt security investments, the Company considered additional factors including the Company's intent to sell the investments or whether it is ''more likely than...

  • Page 158
    ... and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. Changes in fair value (i.e., gains or losses) of the derivatives are recorded as cost of revenue, operating expense, other income (expense), or as other comprehensive income...

  • Page 159
    ... were outstanding to buy and sell U.S. dollarequivalents of approximately $182.4 million and $135.2 million in foreign currencies, respectively, based upon the exchange rates at December 28, 2014. The amounts in the tables below include fair value adjustments related to the Company's own credit risk...

  • Page 160
    ...511) Note 5. Balance Sheet Information Accounts Receivable, net. Accounts receivable, net was as follows (in thousands): December 28, 2014 December 29, 2013 Accounts receivable ...Allowance for doubtful accounts ...Promotions, price protection and other activities ...Total accounts receivable, net...

  • Page 161
    SANDISK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Inventory. Inventory was as follows (in thousands): December 28, 2014 December 29, 2013 Raw material ...Work-in-process ...Finished goods ...Total inventory... million in fiscal years 2014, 2013 and 2012, respectively. Annual Report F-21

  • Page 162
    ... Guarantees - Flash Ventures'' and Note 15, ''Related Parties and Strategic Investments.'' The Company assesses financing receivable credit quality through financial and operational reviews of the borrower and creditworthiness, including credit rating agency ratings, of significant investors of the...

  • Page 163
    ... future cost related to warranty expense is recorded at the time of customer invoice. The Company's warranty liability is affected by customer and consumer returns, product failures, number of units sold and repair or replacement costs incurred. Should actual product failure rates, or repair...

  • Page 164
    ...$ During the fiscal year ended December 28, 2014, goodwill increased by $513.2 million, due primarily to the Company's acquisition of Fusion-io, Inc. (''Fusion-io'') during the third quarter of fiscal year 2014. For additional information regarding the Fusion-io acquisition, see Note 17, ''Business...

  • Page 165
    ... to developed product technology and commenced amortization during the second quarter of fiscal year 2014. In fiscal year 2013, the Company performed impairment tests on the amortizable intangible and IPR&D assets from the Pliant Technology, Inc. (''Pliant'') acquisition due to the SMART Storage...

  • Page 166
    ... are reviewed for impairment at least annually until technological feasibility is achieved or development is complete. Upon completion of development, the acquired IPR&D is considered an amortizable finite-lived intangible asset. Amortization expense of technology licenses and patents is recorded to...

  • Page 167
    ... the conversion rate and conversion price are adjusted if the Company pays a cash dividend or makes a distribution to all or substantially all holders of its common stock. Accordingly, as of December 28, 2014, the conversion rate was adjusted for dividends paid to date to 19.4714 shares of common...

  • Page 168
    ... the calendar quarter ended December 31, 2014, the 1.5% Notes due 2017 were convertible at the holders' option beginning on January 1, 2015 and ending March 31, 2015 as the last reported sales price of the Company's stock exceeded 130% of the conversion price for more than 20 days in a period of 30...

  • Page 169
    ... the number of shares to be sold under the convertible bond hedge transaction and the conversion price will be adjusted if the Company pays a cash dividend or makes a distribution to all or substantially all holders of its common stock. Adjusting for dividends paid through December 28, 2014, the...

  • Page 170
    ... holders of its common stock. Adjusting for dividends paid through December 28, 2014, holders of the warrants may acquire up to approximately 19.5 million shares of the Company's common stock at a strike price of $71.9005 per share as of December 28, 2014. The warrants mature on 40 different dates...

  • Page 171
    .... Upon conversion, a holder will receive the conversion value of the 0.5% Notes due 2020 to be converted equal to the conversion rate multiplied by the volume-weighted-average price of the Company's common stock during a specified period following the conversion date. The conversion value of each...

  • Page 172
    ... holders of its common stock. Adjusting for dividends paid through December 28, 2014, holders of the warrants may acquire up to approximately 16.3 million shares of the Company's common stock at a strike price of $122.7218 per share as of December 28, 2014. The warrants mature on 40 different dates...

  • Page 173
    ...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, its President and Chief Executive Officer...

  • Page 174
    ... in Flash Ventures and other equity investments, and attributes those investments to the location of the investee's primary operations. Customer and Supplier Concentrations. A limited number of customers or licensees have accounted for a substantial portion of the Company's revenue. Revenue from...

  • Page 175
    ... 0.300 February 3, 2014 May 5, 2014 August 4, 2014 November 3, 2014 $51.7 52.0 68.5 67.5 February 24, 2014 May 27, 2014 August 25, 2014 November 24, 2014 Annual Report On January 21, 2015, the Company's Board of Directors declared a dividend of $0.30 per share for holders of record as of March...

  • Page 176
    ..., 2014. The ESPP allows eligible employees to purchase shares of the Company's common stock at the end of each six-month offering period at a purchase price equal to 85% of the lower of the fair market value per share on the start date of the offering period or the fair market value per share F-36

  • Page 177
    ... dividend and the share price at each dividend declaration date. The risk-free interest rate is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. Option Plan Shares. The fair value of the Company's stock options granted to employees, officers and non-employee board...

  • Page 178
    ... Employee Stock Purchase Plan Shares. The fair value of shares issued under the Company's ESPP program was estimated using the following weighted-average assumptions: December 28, 2014 Fiscal years ended December 29, 2013 December 30, 2012 Dividend yield ...Expected volatility ...Risk-free...

  • Page 179
    ... value of the Company's common stock on the date of grant, and compensation is recognized on a straight-line basis over the requisite vesting period. A summary of the changes in RSUs outstanding under the Company's share-based compensation plans during the three fiscal years ended December 28, 2014...

  • Page 180
    ..., respectively. In the fiscal year ended December 28, 2014, the Company recognized $10.8 million in share-based compensation expense related to acceleration of equity awards held by former Fusion-io employees. The total grant date fair value of options and RSUs vested during the three fiscal years...

  • Page 181
    ... of $9.1 million primarily consisted of expenses incurred for legal, banker, accounting and tax fees. The remaining costs incurred were primarily related to certain employee change of control charges, employee retention bonus payments and litigation and integration expenses. Annual Report F-41

  • Page 182
    ... taxes differs from the amount computed by applying the federal statutory rates to income before taxes as follows: December 28, 2014 Fiscal years ended December 29, December 30, 2013 2012 U.S. federal statutory rate ...State taxes, net of federal benefit ...Non-deductible share-based compensation...

  • Page 183
    ... fiscal years 2014, 2013 and 2012, based on weighing both the positive and negative evidence available, including but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company determined that it is able to...

  • Page 184
    ... jurisdictions. In August 2014, the Company received and signed the Internal Revenue Service (''IRS'') relating to its federal income tax returns 2008. In fiscal year 2014, the Company recorded a benefit of $25.2 million settlements. taxes in multiple state and closing agreement with the for the...

  • Page 185
    ...Denominator for diluted net income per share: Weighted-average common shares outstanding ...Incremental common shares attributable to exercise of outstanding employee stock options, SARs and ESPP (assuming proceeds would be used to purchase common stock), and RSUs ...1.5% Notes due 2017 ...Warrants...

  • Page 186
    ... Company accounts for its ownership position in each Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its provided three-month forecast of Flash Ventures' NAND wafer supply, which generally equals 50% of Flash Ventures' output. The Company is not able...

  • Page 187
    ...'s ''New Fab 2'' fabrication facility, which is primarily intended to provide space to convert Flash Ventures' current 2D NAND capacity to 3D NAND, with expected readiness for production in 2016. Inventory Purchase Commitments with Flash Ventures. Purchase orders placed under Flash Ventures for up...

  • Page 188
    ...rate at December 28, 2014: Master Lease Agreements by Execution Date Lease Type Lease Amounts (Japanese yen) (U.S. dollar) Expiration Flash Partners: March 2012 ...March 2014 ...December 2014 ... Refinanced Initial Initial ¥ 1.9 4.6 3.2 9.7 $ 16,074 37,967 26,932 80,973 2015 2019 2019 Flash...

  • Page 189
    ... under which, in many cases, the Company will share in the expenses associated with the defense and cost of settlement associated with such claims. This agreement provides limited protection for the Company against third-party claims that NAND flash memory products manufactured F-49 Annual Report

  • Page 190
    ...2020. The Company will pay cash interest on the outstanding notes at an annual rate of 0.5%, payable semi-annually on April 15 and October 15 of each year until October 15, 2020. Includes Flash Ventures, related party vendors and other silicon source vendor purchase commitments. (2) (3) (4) F-50

  • Page 191
    ...translated using the exchange rate at December 28, 2014. Excludes amounts related to the master lease agreements' purchase option exercise price at final lease term. Excludes $119.2 million in capital expenditures not yet paid in cash. Excludes amounts in accounts payable and accrued liabilities not...

  • Page 192
    ... of accounting. The Company's obligations with respect to Flash Ventures' master lease agreements, take-or-pay supply arrangements and R&D cost sharing are described in Note 14, ''Commitments, Contingencies and Guarantees.'' The financial and other support provided by the Company in all periods...

  • Page 193
    ... share of common stock of the Company held by stockholders of record as of the close of business on September 25, 2003. In November 2006, the Company extended the term of the rights plan, such that the rights will expire on April 28, 2017 unless redeemed or exchanged. Under the new rights agreement...

  • Page 194
    ... of Fusion-io's outstanding unvested stock option awards with an exercise price less than or equal to the acquisition price of $11.25 per share and unvested RSU awards. The assumed unvested stock options converted into 427,388 options to purchase the Company's common stock and the assumed unvested...

  • Page 195
    ... to, the Fusion-io acquisition as of July 23, 2014, and reflects adjustments made during the open measurement period to finalize the purchase accounting (in thousands): Cash ...Accounts receivable, net ...Inventory ...Deferred tax asset, net ...Finite-lived intangible assets . IPR&D ...Goodwill...

  • Page 196
    ... year 2014 in the Company's Consolidated Statement of Operations. SMART Storage Systems. On August 22, 2013, the Company completed its acquisition of SMART Storage, a developer of enterprise solid state drives (''SSDs''). The Company expects this acquisition to enhance its enterprise storage product...

  • Page 197
    ... Company for the same amount in the first quarter of fiscal year 2014. The following table presents the fair value of the intangible assets acquired (in thousands): Weighted-Average Useful Lives Fair Value Intangible assets: Developed technology ...Trademark and trade names Customer relationships...

  • Page 198
    ... in the two patents, all of the asserted claims in those two patents are invalid. On February 4, 2015, the court issued an order granting summary judgment that five of the six asserted claims of another asserted patent are invalid. On March 19, 2014, the Company filed an action against Round Rock...

  • Page 199
    ... for flash memory products. The lawsuit captioned Ritz Camera & Image, LLC v. SanDisk Corporation, Inc. and Eliyahou Harari, former SanDisk Corporation Chief Executive Officer, purports to be on behalf of direct purchasers of flash memory products sold by the Company and joint ventures controlled by...

  • Page 200
    ...2011, a putative class action captioned Oliver v. SD-3C LLC, et al was filed in the U.S. District Court for the Northern District of California (the ''District Court'') on behalf of a nationwide class of indirect purchasers of SD cards alleging various claims against the Company, SD-3C, LLC (''SD-3C...

  • Page 201
    ...the trade secret information, but granted the motion to stay with respect to the other portion of the order. On November 6, 2014, Hynix removed the case to federal court. On December 8, 2014, the Company filed a motion to remand the case to state court. Federal Securities Class Action Against Fusion...

  • Page 202
    SANDISK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 19. Supplementary Financial Data (Unaudited) March 30, 2014 Fiscal quarters ended June 29, September 28, 2014 2014 (In thousands, except per share data) December 28, 2014 2014 Revenue ...Gross profit ...Operating income Net income...

  • Page 203
    .... SANDISK CORPORATION (Registrant) Dated: February 10, 2015 By: /s/ JUDY BRUNER Judy Bruner Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer) By: /s/ DONALD ROBERTSON Donald Robertson Vice President, Chief Accounting Officer (Principal Accounting...

  • Page 204
    ...Mercer President and Chief Executive Officer and Director (Principal Executive Officer) Executive Vice President, Administration and Chief Financial Officer (Principal Financial Officer) Vice President, Chief Accounting Officer (Principal Accounting Officer) Chairman of the Board February 10, 2015...

  • Page 205
    ...Certificate of Amendment to Certificate of Designations for the Series A Junior Participating Preferred Stock, as filed with the Delaware Secretary of State on September 24, 2003. Amended and Restated Bylaws of the Registrant dated September 11, 2013. Rights Agreement, dated as of September 15, 2003...

  • Page 206
    ... of Stock Option.†2005 Incentive Plan - Form of Notice of Grant of Non-Employee Director Automatic Stock Option (Initial Grant).†2005 Incentive Plan - Form of Notice of Grant of Non-Employee Director Automatic Stock Option (Annual Grant).†2005 Incentive Plan - Form of Stock Option Agreement...

  • Page 207
    ... (Director Grants).†Flash Partners Master Agreement, dated as of September 10, 2004, by and among the Registrant and the other parties thereto.DŽ Operating Agreement of Flash Partners Ltd., dated as of September 10, 2004, by and between SanDisk International Limited and Toshiba Corporation...

  • Page 208
    ... Indemnification Agreement, dated as of July 13, 2010, by and among Toshiba Corporation, the Registrant and SanDisk Flash B.V.Ç„ Patent Indemnification Agreement, dated as of July 13, 2010, by and among Toshiba Corporation, the Registrant and SanDisk Flash B.V.Ç„ Operating Agreement of Flash Forward...

  • Page 209
    ...Alliance Limited.DŽ Pliant Technology, Inc. 2007 Stock Plan.†Form of the Registrant's Clawback Policy Acknowledgement.†FlashSoft Corporation Amended and Restated 2011 Equity Plan.†SMART Storage Systems (Global Holdings), Inc. 2011 Share Incentive Plan†Consultant Services Agreement, dated...

  • Page 210
    Exhibit Number Exhibit Title Form Incorporated by Reference File No. Exhibit No. Filing Date Provided Herewith 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the SarbanesOxley Act of 2002. Certification of Chief Financial Officer Pursuant to Section 302 of the ...

  • Page 211
    NAMED EXECUTIVE OFFICERS Sanjay Mehrotra President and BOARD OF DIRECTORS Irwin Federman Steven J. Gomo Eddy W. Hartenstein Dr. Chenming Hu Catherine P. Lego Michael E. Marks Sanjay Mehrotra D. Scott Mercer CORPORATE OFFICES SanDisk Corporation 951 SanDisk Drive Milpitas, CA 95035 Phone: +1-408-...

  • Page 212