SanDisk 2003 Annual Report Download - page 93

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
The Company had invested in Tower's rights oÅering during 2002 and received a warrant to purchase
Tower ordinary shares. The fair value as of December 28, 2003 was approximately $1.2 million, as determined
using a Black-Scholes option pricing model with the following assumptions: dividend yield of 0.0%; expected
life of 2.75 years; volatility factor of 0.70; and risk free interest rate of 2.32%. The fair value of the Tower
warrant was approximately $537 thousand as of December 29, 2002, with the following assumptions: dividend
yield of 0.0%; expected life of 3.75 years; volatility factor of 0.845; and risk free interest rate of 2.38%. The fair
value of the Tower warrant will continue to Öuctuate and additional adjustments to the warrant's fair value will
be recorded in future periods.
Note 10: Restructuring Charge and Related Activities
During the third quarter of Ñscal 2001, the Company adopted a plan to transfer all of its card assembly
and test manufacturing operations from its Sunnyvale location to oÅshore subcontractors. The Company also
adopted a plan to reduce its workforce by a total of 193 employees through involuntary employee separations
from October 2001 through April 2002. In connection with this restructuring, the Company recorded a
restructuring charge of $8.5 million in the third quarter of 2001. The charge included $1.4 million of severance
and employee related-costs for a reduction in workforce, equipment write-oÅ charges of $6.0 million and lease
commitments of $1.1 million related to the abandonment of a warehouse facility. As of December 28, 2003,
with the exception of leases related to the abandoned excess leased facilities, the Company had made all
payments associated with the restructuring. Amounts related to the abandonment of excess leased facilities
will be paid as the lease payments are due in 2004 and forward. In the Ñrst quarter of 2003, the Company
entered into a sublease for a portion of the abandoned warehouse facility, which will expire in July of 2005.
The applicable sublease income will partially oÅset the restructuring reserve balance until completely utilized
in 2004.
The following table summarizes the restructuring activity from inception of the plan through the end
of 2003:
Workforce Lease
Equipment Reduction Commitments Total
(In thousands)
Restructuring ChargeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,383 $1,094 $1,033 $ 8,510
Non-cash charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (6,027) Ì Ì (6,027)
Cash payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (805) Ì (805)
Accrual balance, December 30, 2001ÏÏÏÏÏÏÏÏÏÏ 356 289 1,033 1,678
Non-cash charges ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (17) Ì Ì (17)
Adjustments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (339) 321 18 Ì
Cash payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (610) (471) (1,081)
Accrual balance, December 29, 2002ÏÏÏÏÏÏÏÏÏÏ Ì Ì 580 580
Cash receiptsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì 223 223
Cash payments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì (615) (615)
Accrual balance, December 28, 2003ÏÏÏÏÏÏÏÏÏÏ $ Ì $ Ì $ 188 $ 188
Note 11: Geographic Information and Major Customers
The Company operates in one segment, Öash memory products. The Company markets and sells its
products in the United States and in foreign countries through its sales personnel, dealers, distributors,
retailers and its subsidiaries. The Company's chief decision maker, the Chief Executive OÇcer, evaluates
performance of the Company and makes decisions regarding allocation of resources based on total Company
results. Revenue is evaluated based on geographic region and product category. Since the Company operates
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