SanDisk 2000 Annual Report Download - page 39

3 7 . Sa n D is k C o r p o r a t io n . 2 0 0 0 A n n u a l Re p o rt
M ay 1999 , the stockho ld e rs inc re ase d the share s avail-
ab le fo r futu re issuanc e und e r the 199 5 N o n- Em p lo ye e
Direc tors Sto c k Op tio n Plan b y 4 0 0,000 and ap p ro ve d
an auto m atic share incre ase fe ature p ursuant to w hich
the num b e r of share s availab le for issuance und er the
p lan w ill autom atic ally inc re ase o n the first trading day
in January e ac h c ale nd ar year, b e g innin g w ith calend ar
year 2 002 and continuing o ver the rem aining te rm of
the plan, b y an am o unt equal to 0.2% o f the to tal num -
b er o f shares o utstand ing o n the last trading day in
Dec em b e r in the im m e d iately prec e d ing c ale nd ar year,
b ut in no eve nt w ill any such annual increase e xc e ed
200 ,0 0 0 shares. At Decem b er 31, 200 0, the Com p any
had reserve d 80 0,0 00 shares for issuance under the
Direc tors’ Plan and a to tal o f 4 48,000 optio ns had b e en
g ranted at exercise p ric e s rang ing from $ 5.0 0 to
$70 .06 3 p e r share .
A sum m ary o f activity und e r all stoc k optio n p lans
fo llo w s (shares in tho usand s):
Tota l
Av aila b le W e ig h te d
fo r Future Ave rag e
Grant/ Total Exerc ise
Issu anc e Out stand ing Pric e
Balanc e at De ce m b e r 31, 19 97 4 ,2 10 7,10 6 $ 4 .79
Granted (4,4 44 ) 4,44 4 $ 5.9 7
Exe rc is e d – ( 1,2 6 0 ) $ 0 .74
Ca nc e le d 2 ,0 3 8 (2 ,0 3 8) $ 10 .0 4
Balanc e at De ce m b e r 31, 19 98 1,8 04 8,25 2 $ 4.75
Inc re ase in autho rized sha re s 7,4 00 –
Granted (3,0 00 ) 3,00 0 $ 31.0 0
Exe rc is e d – ( 1,76 6 ) $ 3 .4 7
Ca nc e le d 3 08 (3 08 ) $ 9 .6 9
Balanc e at De ce m b e r 31, 19 99 6 ,5 12 9 ,178 $ 9 .50
Granted (2,2 90 ) 2,29 0 $ 53.57
Exe rc is e d – ( 2,14 7) $ 4 .8 5
Ca nc e le d 4 69 (4 69 ) $ 9 .6 9
Balanc e at De ce m b e r 31, 2 00 0 4,6 91 8,85 2 $ 2 5.29
At Decem b er 31, 20 0 0, optio ns o utstand ing w ere as follow s:
Op tions Outstand ing Opt ions Ex ercisa ble
W e ig hte d
Ave rag e W e ig ht e d W eig hte d
N u m b e r Re m aining Ave ra g e N u m b er Ave rag e
Rang e o f Outstan ding as o f C ontrac tual Exe rc ise Exerc isab le as o f Exerc ise
Exerc ise Pric e s De c e m b er 31, 19 99 Life Price De ce m b e r 31, 19 99 Pric e
$ 0.18 8 - $ 5.00 0 1,75 2,23 3 6.77 $ 4.270 1,08 8,4 08 $ 3 .96 3
$ 5.0 94 - $ 6.25 0 1,80 1,78 5 7.2 7 $ 6 .122 1,119,8 48 $ 6 .078
$ 6.43 8 - $ 15.219 52 6,0 06 7.52 $ 10 .30 4 3 16 ,6 48 $ 10 .5 63
$ 16.75 0 - $ 29.919 64 7,778 8.59 $ 2 3.5 17 172,42 6 $ 2 3.3 40
$ 30 .00 0 - $ 41.03 1 3 ,119 ,53 7 9.32 $ 3 5.14 4 4 85 ,48 6 $ 34 .778
$ 43 .43 8 - $ 13 9.50 0 1,0 04 ,515 9.4 0 $ 74 .707 9 0,000 $ 6 9.16 7
$ 0.18 8 - $ 139 .50 0 8,85 1,85 4 8.25 $ 2 5.2 88 3,33 0,4 57 $ 12 .85 8
Em p lo ye e S to c k P u r c h a s e P la n
In Aug ust 19 95, the Co m pany ad o p te d the Em ployee
Sto c k Purc has e Plan (the Purc hase Plan). In M ay 19 9 9,
the sto c kho ld ers inc rease d the shares availab le fo r
future issuanc e und er the Em p lo yee Sto c k Purc hase
Plan b y 600 ,00 0 and approved an auto m atic share
inc re ase fe ature p ursuant to w hic h the num b er o f
shares availab le for iss uance under the plan w ill auto -
m atically increase o n the first trad ing day in January
eac h c ale nd ar year, b eginning w ith c alendar ye ar 200 2
and c o ntinuing o ver the rem aining te rm of the plan, b y
an am o unt equal to fo rty- thre e hund redths o f o ne p er-
c ent (0.43% ) o f the total num b er of share s o utstand ing
o n the last trading d ay in Decem b er in the im m e d iately
p reced ing c alendar ye ar, b ut in no eve nt w ill any such
annual inc re ase exc ee d 40 0 ,0 00 shares. Und e r the
Purchase Plan, q ualified e m p lo yees are entitle d to p ur-
c hase shares thro ug h p ayro ll d educ tio ns at 85 % o f th e
fair m arket value at the b eginning o r end o f the o ffer-
ing p erio d , w hic he ver is lo w er. As o f Decem b e r 31,
200 0, the C o m p any had reserved 2,3 66,66 6 share s of
c o m m o n stock fo r issuanc e und er the Purchase Plan
and a to tal o f 1,0 34,293 share s had b een issue d .
Ac c o u ntin g fo r S t o c k B a s e d C o m p e n s a tio n
The Com p any has e lec te d to follow APB 2 5 and re lat-
ed interp re tatio ns in ac c o unting for its e m p lo yee stock
o p tio ns b e c ause, as d isc usse d belo w , the alternative
fair value ac c o unting p ro vid ed for und er SFAS 12 3
“ Accounting fo r Sto c k- Based Co m pensation,” re q uire s
use of o p tio n valuatio n m o d e ls that w ere not d evel-
o p ed for use in valuing e m p lo yee stock o ptio ns. Under
APB 25, b e c ause the exercise p ric e o f the Com pany’s
sto c k o p tions equals the m arke t p ric e o f the underlying
sto c k o n the d ate o f g rant, no com p ensatio n exp ense
is rec o g nized .
Pro fo rm a info rm ation re g ard ing net inc o m e and
earning s p e r share is re q uired b y SFAS 123, w hic h also
req uires that the inform atio n b e d e te rm ine d as if the
Co m p any has ac c o unte d fo r its em p lo ye e sto c k
o p tio ns g rante d sub se q uent to Decem ber 31, 19 94
und er the fair value m etho d o f this Statem ent. Fo r all
g rants sub seq uent to De c em ber 31, 19 94 that w ere
g ranted p rio r to the Co m p any’s initial p ublic o ffe ring in
N o vem ber 19 95, the fair value o f these o p tio ns w as
d eterm ined using the m inim um value m etho d w ith a
w eighte d average risk fre e intere st rate o f 6.3 2% and
an exp ec ted life o f 5 ye ars. The fair value for the
o p tio ns g rante d sub se q uent to the Co m p any’s initial
p ub lic o ffering in N o ve m b er 19 9 5 w as e stim ate d at the
d ate of g rant using a B lac k- Sc holes single o p tio n p ric -
ing m o d el w ith the follow ing w eighte d average
assum p tions: risk- free inte res t rate s of 6.16 %, 5.52%
and 4.8 4% fo r 20 0 0, 1999 and 1998 , resp e c tively; a
d ivid end yie ld of 0.0%, a vo latility fac tor o f the exp ect-
ed m arket p ric e o f the Com pany’s c o m m o n sto c k o f
0.951, 0.8 88 and 0.6 00 fo r 200 0, 1999 and 19 98
resp ectively; and a w eig hted- ave rag e e xp e c te d life o f