SanDisk 2013 Annual Report Download - page 218

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15: Business Acquisition
SMART Storage Systems.
On August 22, 2013, the Company completed its acquisition of SMART Storage, a developer of
enterprise SSDs. The Company expects this acquisition to enhance its enterprise storage product portfolio.
The Company acquired 100% of the outstanding shares of SMART Storage through an all-cash
transaction. The total purchase price was comprised of the following (in thousands):
Purchase Price
Cash consideration ....................................................... $ 304,982
Estimated fair value of replacement stock options related to pre-combination service .......... 136
Total purchase price ................................................... $ 305,118
The Company assumed all unvested outstanding SMART Storage stock options, which were converted
into options to purchase an aggregate of 0.2 million shares of the Company’s common stock. The fair value
of these unvested stock options was determined using the Black-Scholes-Merton valuation model. The
Company records the fair value of unvested replacement stock options that relate to post-combination
services as operating expense over the remaining service periods.
Net Tangible Assets. The allocation of the SMART Storage purchase price to the tangible assets acquired
and liabilities acquired as of August 22, 2013 is summarized below (in thousands):
Acquired Tangible
Assets and Liabilities
Cash ............................................................. $ 804
Accounts receivable, net ............................................... 7,827
Inventory ......................................................... 29,331
Deferred taxes – current ............................................... 921
Other current assets .................................................. 28,002
Property and equipment ............................................... 5,734
Deferred taxes – non-current ............................................ 3,338
Other non-current assets ............................................... 149
Total assets ..................................................... 76,106
Accounts payable .................................................... (11,746)
Other current liabilities ................................................ (34,538)
Non-current liabilities ................................................. (8,979)
Total liabilities ................................................... (55,263)
Net tangible assets ................................................... $ 20,843
An existing $25.5 million liability that SMART Storage owed SMART Holdings, (the ‘‘Seller’’), was
not settled prior to the closing of the acquisition of SMART Storage in accordance with the purchase
agreement and remained outstanding as of December 29, 2013. The Seller is contractually obligated to
refund $25.5 million of the purchase price for this unsettled liability. The purchase price refund receivable
and unsettled liability are recorded gross in Other current assets and Other current liabilities of the
acquired tangible assets and liabilities of SMART Storage, respectively, as the Company does not have the
legal right to offset. The Company expects these amounts to be settled in the first quarter of fiscal year
2014.
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