SanDisk 2014 Annual Report Download - page 168

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The 1.5% Notes due 2017 may be converted on any day prior to the close of business on the scheduled
trading day immediately preceding May 15, 2017, in multiples of $1,000 principal amount at the option of
the holder under any of the following circumstances: 1) during the five business-day period after any five
consecutive trading-day period (the ‘‘measurement period’’) in which the trading price per note for each
day of such measurement period was less than 98% of the product of the last reported sale price of the
Company’s common stock and the conversion rate on each such day; 2) during any calendar quarter after
the calendar quarter ending September 30, 2010, if the last reported sale price of the Company’s common
stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day
of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect
on the last trading day of the immediately preceding calendar quarter; or 3) upon the occurrence of
specified corporate transactions. On and after May 15, 2017 until the close of business on the second
scheduled trading day immediately preceding the maturity date of August 15, 2017, holders may convert
their notes at any time, regardless of the foregoing circumstances.
Upon conversion, a holder will receive the conversion value of the 1.5% Notes due 2017 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 1.5%
Note due 2017 will be paid in: 1) cash equal to the lesser of the principal amount of the note or the
conversion value, as defined, and 2) to the extent the conversion value exceeds the principal amount of the
note, common stock (plus cash in lieu of any fractional shares of common stock). The conversion price will
be subject to adjustment in some events but will not be adjusted for accrued interest. Upon a ‘‘fundamental
change’’ at any time, as defined, the Company will in some cases increase the conversion rate for a holder
who elects to convert its 1.5% Notes due 2017 in connection with such fundamental change. In addition,
the holders may require the Company to repurchase for cash all or a portion of their notes upon a
‘‘designated event’’ at a price equal to 100% of the principal amount of the notes being repurchased plus
accrued and unpaid interest, if any.
As of 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 consecutive trading days prior to December 31, 2014. Accordingly, the carrying value of the 1.5%
Notes due 2017 was classified as a current liability and the difference between the principal amount
payable in cash upon conversion and the carrying value of the equity component of $127.1 million of the
1.5% Notes due 2017 was reclassified from Stockholders’ equity to Convertible short-term debt conversion
obligation on the Company’s Consolidated Balance Sheet as of December 28, 2014, and will remain so
while the notes are convertible. The determination of whether or not the 1.5% Notes due 2017 are
convertible must continue to be performed on a calendar-quarter basis. Consequently, the 1.5% Notes due
2017 may be reclassified as long-term debt if the conversion threshold is not met in future quarters. Based
on the last closing price of the quarter ended December 28, 2014 of $101.31 for the Company’s 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.
During the fiscal year ended December 28, 2014, $3.2 million aggregate principal amount of the 1.5%
Notes due 2017 (‘‘Converted Notes’’) was converted at the holders’ option, and the Company delivered
cash of $3.2 million and 26,626 shares of the Company’s common stock with respect to any conversion
value greater than the principal amount of the Converted Notes. The Company recorded a loss of
$0.4 million during the quarter ended December 28, 2014 related to the extinguishment of the Converted
F-28