SanDisk 2003 Annual Report Download - page 35

from the sale of 35 million of our UMC shares. Net cash used in investing activities was $104.3 million in
2002 and net cash provided in investing activities was $25.1 million in 2001.
Net cash provided by Ñnancing activities was $576.9 million 2003, which included $521.6 million in net
proceeds from the issuance of common stock in our September 2003 follow-on oÅering, and $55.3 million
from the sale of common stock through our stock option and employee stock purchase plans. Financing
activities provided cash of $29.9 million in 2002 and $130.2 million in 2001.
Depending on the demand for our products, we may decide to make additional investments, which could
be substantial, in assembly and test manufacturing equipment or wafer fabrication foundry capacity to support
our business in the future. We may also invest in or acquire other companies' product lines or assets. Our
operating expenses may increase as a result of the need to hire additional personnel to support our sales and
marketing eÅorts and research and development activities, including our collaboration with Toshiba for the
joint development of 90 nanometer and 70 nanometer NAND Öash memory. We plan to fund our short-term
operations from our current cash and short-term investment balances and cash generated from operations. We
believe our existing cash and cash equivalents and short-term investments will be suÇcient to meet our
currently anticipated working capital and capital expenditure requirements for the next twelve months. We are
currently in discussions with Toshiba regarding cooperating in the construction of a new 300-millimeter wafer
fabrication facility, Fab 3, at Toshiba's Yokkaichi operations. The total investment in Fab 3, excluding the cost
of building construction, is currently estimated at $2.5 billion through the end of 2006, of which our share is
estimated to be approximately $1.3 billion, with initial production currently scheduled for the end of 2005. We
and Toshiba have not yet agreed to the terms of this potential new venture. We and Toshiba will share equally
in the investment, and we may need to raise additional capital for our portion of the investment. However, if
demand for our products declines and we are required to purchase more wafers than we need due to our
FlashVison joint venture commitments and our other supply arrangements, we may not be able to generate
enough cash from our operations and will have to rely solely on our current cash and short-term investment
balances to fund our operating activities.
Convertible Subordinated Notes
On December 24, 2001, we completed a private placement of $125.0 million of 4
1
/ 2 % Convertible
Subordinated Notes due 2006, or Notes, and on January 10, 2002, the initial purchasers completed the
exercise of their option to purchase an additional $25.0 million of Notes, for which we received net proceeds of
approximately $145.9 million. Based on the aggregate principal amount at maturity of $150.0 million, the
Notes provide for semi-annual interest payments of $3.4 million each on May 15 and November 15. The
Notes are convertible into shares of our common stock at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased, at a conversion rate of 108.507 shares per $1,000
principal amount of the Notes, subject to adjustment in certain events. At anytime on or after November 17,
2004, we may redeem the notes in whole or in part at a speciÑed percentage of the principal amount plus
accrued interest. The debt issuance costs are being amortized over the term of the Notes using the interest
method. We intend to fulÑll our debt service obligations from cash generated by our operations, if any, and
from our existing cash and investments. If necessary, among other alternatives, we may add lease lines of
credit to Ñnance capital expenditures and obtain other long-term debt and lines of credit. We may incur
substantial additional indebtedness in the future. There can be no assurance that we will be able to meet our
debt service obligations, including our obligations under the Notes.
Investment in UMC
In January 2000, the USIC foundry was merged into its UMC parent company. In exchange for our
USIC shares, we received 111 million UMC shares. All of the UMC shares we received as a result of the
merger were subject to trading restrictions imposed by UMC and the Taiwan Stock Exchange. As of January
2004, all trading restrictions have been released on the shares currently held by us. We also received
7.1 million, 23.0 million, 20.0 million and 22.2 million shares as stock dividends from UMC in 2003, 2002,
2001 and 2000, respectively. During the third quarter of 2003, we sold 35 million of our UMC shares for gross
proceeds of approximately $30 million. Also during the third quarter, we suÅered a loss of $18.3 million as a
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