SanDisk 2014 Annual Report Download - page 167

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amount of interest cost recognized relating to the contractual interest
coupon, amortization of bond issuance costs and amortization of the bond discount on the liability
component of the 1% Notes due 2013 that was settled upon maturity in the second quarter of fiscal year
2013 (in thousands):
Fiscal years ended
December 29, December 30,
2013 2012
Contractual interest coupon ....................................... $ 3,481 $ 9,280
Amortization of bond issuance costs .................................. 1,013 2,783
Amortization of bond discount ..................................... 21,022 53,599
Total interest cost recognized ................................... $ 25,516 $ 65,662
The effective interest rate on the liability component of the 1% Notes due 2013 was 7.4% for the fiscal
years ended December 29, 2013 and December 30, 2012.
1.5% Convertible Senior Notes Due 2017. In August 2010, the Company issued and sold $1.0 billion in
aggregate principal amount of 1.5% Convertible Senior Notes due August 15, 2017 (‘‘1.5% Notes due
2017’’) at par. The 1.5% Notes due 2017 may be converted, under certain circumstances described below,
based on an initial conversion rate of 19.0931 shares of common stock per $1,000 principal amount of
notes (which represents 19.1 million shares at an initial conversion price of approximately $52.37 per
share). The 1.5% Notes due 2017 contain provisions where 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 stock per $1,000 principal amount of notes (which represents
19.4 million shares at a conversion price of approximately $51.36 per share). The net proceeds to the
Company from the sale of the 1.5% Notes due 2017 were $981.0 million.
The Company separately accounts for the liability and equity components of the 1.5% Notes due 2017.
The principal amount of the liability component of $706.0 million as of the date of issuance was recognized
at the present value of its cash flows using a discount rate of 6.85%, the Company’s borrowing rate at the
date of the issuance for a similar debt instrument without the conversion feature. As of the date of
issuance, the carrying value of the equity component was $294.0 million.
The following table presents the amount of interest cost recognized relating to the contractual interest
coupon, amortization of bond issuance costs and amortization of the bond discount on the liability
component of the 1.5% Notes due 2017 (in thousands):
Fiscal years ended
December 28, December 29, December 30,
2014 2013 2012
Contractual interest coupon ............................. $ 14,984 $ 15,000 $ 15,000
Amortization of bond issuance costs ....................... 2,666 2,667 2,666
Amortization of bond discount ........................... 41,848 39,095 36,364
Total interest cost recognized ......................... $ 59,498 $ 56,762 $ 54,030
The effective interest rate on the liability component of the 1.5% Notes due 2017 was 6.85% for each
of the three fiscal years ended December 28, 2014. The remaining unamortized bond discount of
$127.1 million as of December 28, 2014 will be amortized over the remaining life of the 1.5% Notes due
2017, which is approximately 2.6 years.
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Annual Report