Exhibit 99.1
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SanDisk Corporation
601 McCarthy Boulevard
Milpitas, CA 95035-7932
Phone: 408-801-1000
Fax: 408-801-8657
601 McCarthy Boulevard
Milpitas, CA 95035-7932
Phone: 408-801-1000
Fax: 408-801-8657
CONTACT: | Investor Contacts: | Media Contact: | ||
Lori Barker Padon | Mike Wong | |||
(408) 801-1384 | (408) 801-1240 | |||
Jay Iyer | ||||
(408) 801-2067 |
SANDISK ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
Milpitas, CA, April 17, 2008 — SanDisk®Corporation (NASDAQ:SNDK), the world’s largest supplier of flash storage card products, today announced results for the first quarter ended March 30, 2008. Total first-quarter revenue increased 8% on a year-over-year basis to $850 million and net income, in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was $18 million, or $0.08 per diluted share, compared to a GAAP net loss of $0.6 million, or $0.00 per diluted share, in the first quarter of 2007.
Excluding the impact of acquisition-related charges, share-based compensation expense and the related tax effect, first quarter non-GAAP net income increased to $48 million, or $0.21 per diluted share, compared to first quarter 2007 non-GAAP net income of $45 million, or $0.19 per diluted share.
“Product sales were solid on the strength of our international business, Sansa® MP3 players and sales to the mobile handset and GPS markets. Pricing was challenging throughout the quarter due to industry-wide excess supply which adversely impacted our product gross margin,” said Eli Harari, Chairman and CEO. “We expect demand to increase seasonally during the second quarter and price declines to moderate; however, product margins are expected to continue to be under pressure in Q2 with the anticipated benefit of low cost 43-nanometer and 3-bits per cell coming in the second half of the year. We are focused on cost controls and expense reductions and we continue to believe that the cumulative impact of price declines in recent quarters will accelerate the creation of new markets for Flash storage.”
Key Metrics for First Quarter of 2008
• | Product revenue was $724 million, up 5% year-over-year. |
• | License and royalty revenue was $126 million, up 30% year-over-year. |
• | Total megabytes sold increased 189% year-over-year and decreased 9% from the record fourth quarter of 2007. |
• | Average price per megabyte sold declined 61% on a year-over-year basis and 29% sequentially. |
• | Average retail card capacity of 2.06 gigabytes increased 71% on a year-over-year basis and 16% sequentially. |
• | GAAP product gross margin increased to 18.4% from 14.2% in the first quarter of 2007. Non-GAAP product gross margin increased to 20.9% from 18.5% in the first quarter of 2007. |
• | GAAP operating income was $5 million compared to a loss of $20 million in the first quarter of 2007. Non-GAAP operating income was $47 million, or 6% of revenue, compared to $47 million, or 6% of revenue, in the first quarter of 2007. |
• | SanDisk announced an increase in the capacity of its embedded iNAND product to 16 Gigabytes for mobile handset storage. |
• | SanDisk unveiled the Sansa® Fuze™, a feature rich MP3 player. |
Scheduled Interview
SanDisk Corporation Chairman and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC’s “Closing Bell with Maria Bartiromo,” on April 17, 2008 at approximately 1:15 p.m. P.D.T.
Conference Call
SanDisk’s first quarter 2008 conference call is scheduled for 2:00 p.m. P.D.T., Thursday, April 17, 2008. The conference call will be webcast by CCBN and can be accessed live, and throughout the quarter, at SanDisk’s website at www.sandisk.com/IR and at www.streetevents.com for registered streetevents.com users. To participate in the call via telephone, the dial-in number is (913) 312-0941. The dial-in password is 3645393. A copy of this press release will be furnished to the Securities and Exchange Commission on a current report on Form 8-K and will be posted to our website prior to the conference call.
A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in the attached tables.
Forward-Looking Statements
This news release contains certain forward-looking statements, including statements about our business prospects and outlook, anticipated increased demand for products, anticipated price declines, our expectation for product margins in Q2 2008, the expected cost benefits of 43-nm and 3-bit per cell manufacturing output in the second half of 2008 and the anticipated emergence of new markets for Flash storage, that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others:
• | slower than expected growth in market demand for our products including our solid state drives, or a slower adoption rate for our products in current and new markets that we are targeting including the mobile phone market, |
• | future average selling price erosion that may be more severe than our expectations due to decreased demand or excess industry capacity of flash memory from ourselves as well as from existing suppliers or from new competitors, |
• | adverse global economic and geo-political conditions, including continued declines in the global economy, particularly in the U.S. and Europe, or continued adverse currency exchange rates particularly related to the Japanese yen, |
• | any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us, |
• | slower than expected expansion of our global sales channels, |
• | fluctuations in operating results, unexpected yield variances and delays related to our conversion to 43-nanometer NAND flash technology or the ramp-up of the 300-millimeter flash fabrication facility, |
• | unexpected yield variances in, or delays related to the ramp-up of, 3-bits per cell manufacturing, |
• | less than expected growth in the average megabyte capacity per card, |
• | fluctuations in license and royalty revenues, |
• | higher than anticipated operating expenses, |
• | business interruption due to earthquakes, hurricanes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products, |
• | adverse results in litigation or regulatory actions affecting us, and |
• | other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Annual Report on |
Form 10-K for the fiscal year ended December 30, 2007 and our Forms 10-Q. |
Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.
About SanDisk
SanDisk Corporation, the inventor and world’s largest supplier of flash storage cards, is a global leader in flash memory — from research, manufacturing and product design to consumer branding and retail distribution. SanDisk’s product portfolio includes flash memory cards for mobile phones, digital cameras and camcorders, digital audio/video players, USB flash drives for consumers and the enterprise, embedded memory for mobile devices, and solid state drives for computers. SanDisk (www.sandisk.com/corporate) is a Silicon Valley-based S&P 500 company, with more than half its sales outside the United States.
SanDisk, the SanDisk logo, and Sansa are trademarks of SanDisk Corporation, registered in the United States and other countries. Sansa Fuze is a trademark of SanDisk Corporation.
SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Three months ended | ||||||||
March 30, 2008 | April 1, 2007 | |||||||
Revenues: | ||||||||
Product | $ | 724,051 | $ | 689,357 | ||||
License and royalty | 125,916 | 96,729 | ||||||
Total revenues | 849,967 | 786,086 | ||||||
Cost of product revenues | 576,604 | 570,088 | ||||||
Amortization of acquisition-related intangible assets | 14,582 | 21,062 | ||||||
Total cost of product revenues | 591,186 | 591,150 | ||||||
Gross profit | 258,781 | 194,936 | ||||||
Operating expenses: | ||||||||
Research and development | 111,434 | 95,640 | ||||||
Sales and marketing | 80,156 | 56,206 | ||||||
General and administrative | 57,804 | 46,991 | ||||||
Restructuring | — | 6,516 | ||||||
Amortization of acquisition-related intangible assets | 4,475 | 9,100 | ||||||
Total operating expenses | 253,869 | 214,453 | ||||||
Operating income (loss) | 4,912 | (19,517 | ) | |||||
Total other income | 25,882 | 36,259 | ||||||
Income before provision for income taxes | 30,794 | 16,742 | ||||||
Provision for income taxes | 12,914 | 12,157 | ||||||
Income after taxes | 17,880 | 4,585 | ||||||
Minority interest | — | 5,160 | ||||||
Net income (loss) | $ | 17,880 | $ | (575 | ) | |||
Net income (loss) per share calculation: | ||||||||
Net income (loss) used in computing basic net income (loss) per share | $ | 17,880 | $ | (575 | ) | |||
Tax-effected interest costs related to convertible long term debt | 117 | — | ||||||
Net income (loss) used in computing diluted net income (loss) per share | $ | 17,997 | $ | (575 | ) | |||
Net income (loss) per share: | ||||||||
Basic | $ | 0.08 | $ | (0.00 | ) | |||
Diluted | $ | 0.08 | $ | (0.00 | ) | |||
Shares used in computing net income (loss) per share: | ||||||||
Basic | 224,518 | 227,455 | ||||||
Diluted | 229,480 | 227,455 |
SanDisk Corporation
Reconciliation of GAAP to Non-GAAP Operating Results(1)
(in thousands, except per share data, unaudited)
Reconciliation of GAAP to Non-GAAP Operating Results(1)
(in thousands, except per share data, unaudited)
Three months ended | ||||||||
March 30, 2008 | April 1, 2007 | |||||||
SUMMARY RECONCILIATION OF NET INCOME | ||||||||
GAAP NET INCOME (LOSS) | $ | 17,880 | $ | (575 | ) | |||
Adjustments: | ||||||||
Share-based compensation (a) | 23,226 | 31,219 | ||||||
Amortization of acquisition-related intangible assets (b) | 19,057 | 30,162 | ||||||
Inventory step-up expense related to msystems acquisition (c) | — | 4,947 | ||||||
Income tax adjustments (d) | (12,377 | ) | (20,918 | ) | ||||
NON-GAAP NET INCOME | $ | 47,786 | $ | 44,835 | ||||
GAAP COST OF PRODUCT REVENUES | $ | 591,186 | $ | 591,150 | ||||
Share-based compensation (a) | (3,629 | ) | (3,214 | ) | ||||
Amortization of acquisition-related intangible assets (b) | (14,582 | ) | (21,062 | ) | ||||
Inventory step-up expense related to msystems acquisition (c) | — | (4,947 | ) | |||||
NON-GAAP COST OF PRODUCT REVENUES | $ | 572,975 | $ | 561,927 | ||||
GAAP GROSS PROFIT | $ | 258,781 | $ | 194,936 | ||||
Share-based compensation (a) | 3,629 | 3,214 | ||||||
Amortization of acquisition-related intangible assets (b) | 14,582 | 21,062 | ||||||
Inventory step-up expense related to msystems acquisition (c) | — | 4,947 | ||||||
NON-GAAP GROSS PROFIT | $ | 276,992 | $ | 224,159 | ||||
GAAP RESEARCH AND DEVELOPMENT EXPENSES | $ | 111,434 | $ | 95,640 | ||||
Share-based compensation (a) | (8,826 | ) | (12,687 | ) | ||||
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES | $ | 102,608 | $ | 82,953 | ||||
GAAP SALES AND MARKETING EXPENSES | $ | 80,156 | $ | 56,206 | ||||
Share-based compensation (a) | (3,511 | ) | (6,923 | ) | ||||
NON-GAAP SALES AND MARKETING EXPENSES | $ | 76,645 | $ | 49,283 | ||||
GAAP GENERAL AND ADMINISTRATIVE EXPENSES | $ | 57,804 | $ | 46,991 | ||||
Share-based compensation (a) | (7,260 | ) | (8,395 | ) | ||||
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES | $ | 50,544 | $ | 38,596 | ||||
GAAP TOTAL OPERATING EXPENSES | $ | 253,869 | $ | 214,453 | ||||
Share-based compensation (a) | (19,597 | ) | (28,005 | ) | ||||
Amortization of acquisition-related intangible assets (b) | (4,475 | ) | (9,100 | ) | ||||
NON-GAAP TOTAL OPERATING EXPENSES | $ | 229,797 | $ | 177,348 | ||||
GAAP OPERATING INCOME (LOSS) | $ | 4,912 | $ | (19,517 | ) | |||
Cost of product revenues adjustments (a)(b)(c) | 18,211 | 29,223 | ||||||
Operating expense adjustments (a)(b) | 24,072 | 37,105 | ||||||
NON-GAAP OPERATING INCOME | $ | 47,195 | $ | 46,811 | ||||
GAAP NET INCOME (LOSS) | $ | 17,880 | $ | (575 | ) | |||
Cost of product revenues adjustments (a)(b)(c) | 18,211 | 29,223 | ||||||
Operating expense adjustments (a)(b) | 24,072 | 37,105 | ||||||
Income tax adjustments (d) | (12,377 | ) | (20,918 | ) | ||||
NON-GAAP NET INCOME | $ | 47,786 | $ | 44,835 | ||||
Net income (loss) per share calculation: GAAP | ||||||||
Net income (loss) used in computing basic GAAP net income per share | $ | 17,880 | $ | (575 | ) | |||
Tax-effected interest costs related to convertible long term debt | 117 | — | ||||||
Net income (loss) used in computing diluted net income per share | $ | 17,997 | $ | (575 | ) | |||
Net income per share calculation: Non-GAAP | ||||||||
Net income used in computing basic Non-GAAP net income per share | $ | 47,786 | $ | 44,835 | ||||
Tax-effected interest costs related to convertible long term debt | 117 | 117 | ||||||
Net income used in computing diluted net income per share | $ | 47,903 | $ | 44,952 | ||||
Diluted net income (loss) per share: | ||||||||
GAAP | $ | 0.08 | $ | (0.00 | ) | |||
Non-GAAP | $ | 0.21 | $ | 0.19 | ||||
Shares used in computing diluted net income (loss) per share: | ||||||||
GAAP | 229,480 | 227,455 | ||||||
Non-GAAP | 229,383 | 236,426 |
SanDisk Corporation
Reconciliation of GAAP to Non-GAAP Operating Results(1)
Reconciliation of GAAP to Non-GAAP Operating Results(1)
(1) | To supplement our consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP measures of operating results, net income and earnings per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user’s overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because it is consistent with the financial models and estimates published by many analysts who follow the Company. For example, because the non-GAAP results exclude the expenses we recorded for share-based compensation in accordance with SFAS 123(R) effective January 2, 2006 and the acquisition of Matrix Semiconductor, Inc. in January 2006 and msystems Ltd. in November 2006, we believe the inclusion of non-GAAP financial measures provide consistency in our financial reporting. These non-GAAP results are some of the primary indicators management uses for assessing our performance, allocating resources and planning and forecasting future periods. Further, management uses non-GAAP information as certain non-cash charges such as amortization of purchased intangibles and share-based compensation do not reflect the cash operating results of the business and certain one-time expenses such as write-off of acquired in-process technology do not reflect the ongoing results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies. | |
(a) | Share-based compensation expense. | |
(b) | Amortization of acquisition-related intangible assets, primarily core and developed technology, related to the acquisition of Matrix (January 2006) and msystems (November 2006). | |
(c) | Inventory step-up expense related to msystems acquisition. | |
(d) | Income taxes associated with certain non-GAAP adjustments. |
SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands)
Preliminary Condensed Consolidated Balance Sheets
(in thousands)
March 30, 2008 | December 30, 2007 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,225,285 | $ | 833,749 | ||||
Short-term investments | 628,416 | 1,001,641 | ||||||
Accounts receivable from product revenues, net | 180,273 | 462,983 | ||||||
Inventory | 694,823 | 555,077 | ||||||
Deferred taxes | 190,839 | 212,255 | ||||||
Other current assets | 117,570 | 233,952 | ||||||
Total current assets | 3,037,206 | 3,299,657 | ||||||
Long-term investments | 1,169,993 | 1,060,393 | ||||||
Property and equipment, net | 457,666 | 422,895 | ||||||
Notes receivable and investments in flash ventures with Toshiba | 1,299,225 | 1,108,905 | ||||||
Deferred taxes | 123,666 | 117,130 | ||||||
Goodwill | 840,853 | 840,870 | ||||||
Intangibles, net | 301,208 | 322,023 | ||||||
Other non-current assets | 57,115 | 62,946 | ||||||
Total Assets | $ | 7,286,932 | $ | 7,234,819 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 233,363 | $ | 285,711 | ||||
Accounts payable to related parties | 161,498 | 158,443 | ||||||
Other current accrued liabilities | 277,581 | 286,850 | ||||||
Deferred income on shipments to distributors and retailers and deferred revenue | 158,478 | 182,879 | ||||||
Total current liabilities | 830,920 | 913,883 | ||||||
Convertible long-term debt | 1,225,000 | 1,225,000 | ||||||
Non-current liabilities | 179,894 | 135,252 | ||||||
Total Liabilities | 2,235,814 | 2,274,135 | ||||||
Minority interest | 151 | 1,067 | ||||||
Stockholders’ Equity: | ||||||||
Common stock | 3,825,827 | 3,797,073 | ||||||
Retained earnings | 1,147,949 | 1,130,069 | ||||||
Accumulated other comprehensive income | 77,191 | 32,475 | ||||||
Total Stockholders’ Equity | 5,050,967 | 4,959,617 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 7,286,932 | $ | 7,234,819 | ||||
SanDisk Corporation
Preliminary Condensed Consolidated Statement of Cash Flows
(in thousands, unaudited)
Preliminary Condensed Consolidated Statement of Cash Flows
(in thousands, unaudited)
Three months ended | ||||||||
March 30, 2008 | April 1, 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | 17,880 | $ | (575 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Deferred and other taxes | (4,369 | ) | 11,431 | |||||
(Gain) loss on equity investments | 3,934 | (2,204 | ) | |||||
Depreciation and amortization | 62,883 | 65,096 | ||||||
Provision for doubtful accounts | 5,774 | 913 | ||||||
Share-based compensation expense | 23,226 | 31,219 | ||||||
Excess tax benefit from share-based compensation | (794 | ) | (6,261 | ) | ||||
Other non-cash charges | 5,392 | 5,693 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable from product revenues | 251,138 | 467,030 | ||||||
Inventory | (140,362 | ) | (98,109 | ) | ||||
Other assets | 135,780 | 63,426 | ||||||
Accounts payable trade | (52,348 | ) | (73,234 | ) | ||||
Accounts payable to related parties | 3,055 | 22,547 | ||||||
Other liabilities | (92,556 | ) | (231,723 | ) | ||||
Total adjustments | 200,753 | 255,824 | ||||||
Net cash provided by operating activities | 218,633 | 255,249 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of short and long-term investments | (354,955 | ) | (537,162 | ) | ||||
Proceeds from sale and maturities of short and long-term investments | 624,413 | 549,146 | ||||||
Acquisition of property and equipment, net | (56,774 | ) | (43,799 | ) | ||||
Notes receivable from FlashVision Ltd. | — | 24,777 | ||||||
Notes receivable from Flash Partners Ltd. | (37,418 | ) | — | |||||
Purchased technology and other assets | 1,125 | (13,240 | ) | |||||
Net cash provided by (used in) investing activities | 176,391 | (20,278 | ) | |||||
Cash flows from financing activities: | ||||||||
Repayment from debt financing | (9,785 | ) | — | |||||
Proceeds from employee stock programs | 6,437 | 38,370 | ||||||
Distribution to minority interest | — | (7,485 | ) | |||||
Excess tax benefit from share-based compensation | 794 | 6,261 | ||||||
Share repurchase programs | — | (42,096 | ) | |||||
Net cash used in financing activities | (2,554 | ) | (4,950 | ) | ||||
Effect of changes in foreign currency exchange rates on cash | (934 | ) | 388 | |||||
Net increase in cash and cash equivalents | 391,536 | 230,409 | ||||||
Cash and cash equivalents at beginning of period | 833,749 | 1,580,700 | ||||||
Cash and cash equivalents at end of period | $ | 1,225,285 | $ | 1,811,109 | ||||