SanDisk 2014 Annual Report Download - page 125

Other Income (Expense), net.
Percent Percent
FY 2014 Change FY 2013 Change FY 2012
(In millions, except percentages)
Interest income ...................... $ 51.8 6% $ 48.8 (17%) $ 59.0
Interest expense ...................... (113.1) 24% (91.5) (24%) (119.7)
Other income (expense), net ............. (7.6) ** (3.4) ** (8.5)
Total other income (expense), net ........ $ (68.9) ** $ (46.1) ** $ (69.2)
** Amount not meaningful
‘‘Total other income (expense), net’’ for fiscal year 2014 reflected a higher net expense, compared to
fiscal year 2013, due primarily to higher interest expense as a result of higher average convertible debt
balances, partially offset by increased interest income due primarily to realized gains on sales of
marketable securities. ‘‘Other income (expense), net’’ was a higher expense in fiscal year 2014, compared
to fiscal year 2013, due to an impairment charge on a loan provided to io-Control, a product line of
Fusion-io which we divested in the fourth quarter of fiscal year 2014.
‘‘Total other income (expense), net’’ for the fiscal year 2013 reflected a lower net expense, compared
to fiscal year 2012, due primarily to lower interest expense as a result of lower average convertible debt
balances, lower interest income due to lower average interest income yield on our cash and investments, a
non-recurring charge incurred by Flash Ventures of $9 million and losses on non-designated foreign
exchange contracts included in other income (expense) in fiscal year 2012 that did not recur in fiscal year
2013.
Provision for Income Taxes.
Percent Percent
FY 2014 Change FY 2013 Change FY 2012
(In millions, except percentages)
Provision for income taxes ............... $ 481.6 2% $ 473.4 126% $ 209.5
Effective tax rate ..................... 32.3% 31.2% 33.4%
Our fiscal year 2014, 2013 and 2012 provisions for income taxes differ from the U.S. statutory tax rate
due primarily to the tax impact of earnings from foreign operations, state taxes, non-deductibility of certain
share-based compensation, tax audit settlements and tax-exempt interest income. In addition, fiscal year
2014 included the 2014 federal R&D credit, while fiscal year 2013 included both the 2013 federal R&D
credit and retroactive inclusion of the 2012 federal R&D credit. Earnings and taxes resulting from foreign
operations are largely attributable to our Chinese, Irish, Israeli and Japanese entities. Earnings in these
countries where tax rates are lower than the U.S. notional rate contributed to majority of the difference
between the rate of our tax provision and the U.S. statutory tax rate.
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 2005 through 2008. In fiscal year 2014, we recorded a benefit
of $25 million as a result of several audit settlements.
The IRS is currently conducting an examination of our federal income tax returns for fiscal years 2009
through 2011. Though we can reasonably expect the current cycle to be resolved within the next 12 months,
the timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing
of tax payments that are part of any audit settlement process. In addition, we are currently under audit by
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Annual Report