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Exhibit 99.2
CONTACT: Investor Contact: Media Contact:
Lori Barker Mike Wong
(408) 542-9565 (408) 548-0223
SANDISK ANNOUNCES RECORD FOURTH QUARTER REVENUES AND OPERATING EARNINGS
ANNUAL REVENUES INCREASE 99% YEAR-OVER-YEAR TO EXCEED $1 BILLION; ANNUAL
EARNINGS PER SHARE INCREASE 298% YEAR-OVER-YEAR
SUNNYVALE, CA, January 21, 2004 -- SanDisk Corporation (NASDAQ:SNDK),
the world's largest supplier of flash storage card products, today announced
results for the fourth quarter ended December 28, 2003. Total fourth quarter
revenues grew 116% to $389 million compared to the fourth quarter of 2002 and
increased 38% sequentially. Income from license and royalties grew to $36
million, up 63% from $22 million in the prior quarter. Fourth quarter net income
was $88 million compared to $20 million and $15 million for the fourth quarter
of 2002 and the third quarter of 2003, respectively. Earnings per share grew
262% for the fourth quarter of 2003 and were $0.94 per diluted share compared
with $0.26 per diluted share in the same quarter of 2002.
Total revenue for fiscal 2003 was $1.1 billion, up 99% from $541
million in 2002. Product revenues were $982 million, up 99% from $493 million in
2002. Net income was $169 million, compared to net income of $36 million in
2002. Earnings per share for fiscal 2003 were $2.03 per diluted share, which
compared to net earnings of $0.51 per diluted share in 2002.
"Our excellent performance in the fourth quarter capped an outstanding
year for SanDisk," said Eli Harari, President and CEO of SanDisk Corporation.
"In the fourth quarter we were able to meet the strong surge in holiday season
demand and increased our megabyte shipments by 39%, primarily from increased
production of .13 micron NAND at our FlashVision joint venture. In the past two
quarters alone, we shipped almost as many megabytes of flash memory as in the
prior fifteen years combined. Royalty income increased dramatically in the
fourth quarter, reflecting the industry-wide growth of flash memory shipments by
our licensees. This is a testimony to the value of SanDisk's broad based patents
in these growing markets."
"I am grateful to our worldwide employees for their fantastic team
execution, our global customers for making this our first billion dollar year,
and our partners and suppliers. In particular, we are privileged to have Toshiba
as our steadfast FlashVision joint venture partner. We are also appreciative of
the excellent support we are receiving from Samsung in consistently meeting
their supply commitments in the face of tight capacity."
"We are optimistic about our business prospects, based on projected
continuing strong growth in our target markets for digital cameras and portable
digital consumer electronics, the growing adoption of our cards in camera cell
phones, and our growing market share in USB flash drives. Flash storage
technology and product innovations are enabling numerous other emerging
industrial, telecom, automotive and medical applications. Market research
reports are forecasting flash cards to grow from $3.5 billion in 2003 to more
than $10 billion by 2007. SanDisk is the market leader for flash cards worldwide
and we believe we are exceptionally well positioned to be a major participant as
this very large opportunity unfolds. We expect to face competition from new
flash memory chip suppliers starting late in 2004 or in 2005. This will
challenge us to relentlessly drive down our costs through our technology
transitions and economies of scale, create new and exciting storage products,
and expand our global sales reach and brand awareness among consumers."
Q4 FINANCIAL/BUSINESS HIGHLIGHTS
- Product revenues were a record $353 million, a growth rate of
36% sequentially and 123% year-over-year.
- Income from license and royalties increased to $36 million,
up 63% from $22 million in the third quarter and up 70% from
the corresponding quarter last year.
- Sales of CompactFlash and SD cards each exceeded $100 million
in the fourth quarter. SanDisk also experienced strong sales
growth of Cruzer Mini, miniSD, xD Picture Card and TriFlash
products.
- Total megabytes sold in the fourth quarter were a record and
increased 39% sequentially and 250% year-over-year. Total
megabytes sold in 2003 were approximately 235% higher than in
2002.
- Average price per megabyte sold in the fourth quarter declined
1.7% sequentially and 36% compared to the corresponding
quarter of last year. Average price per megabyte sold in 2003
declined by 40% compared to 2002.
- Total gross margin was 42.3% of total revenues and product
gross margin was 36.4%, up from 35.3% in the third quarter of
2003.
- Net cash provided by operating activities was approximately
$109 million in the fourth quarter and SanDisk completed an
underwritten public offering in the fourth quarter adding $522
million in net proceeds. SanDisk's cash and short-term
investment position was $1.3 billion at year-end.
- SanDisk signed an agreement with Fujifilm enabling the Company
to manufacture xD-Picture Cards for Fuji and to sell cards
under the Fuji label through SanDisk's global retail
distribution channels.
- SanDisk was added to the prestigious NASDAQ -100(R) Index.
- Toshiba and SanDisk announced that they intend to accelerate
construction of a new 300-millimeter Fab 3 wafer fabrication
facility at Toshiba's Yokkaichi operations in order to meet
projected growing demand for NAND flash memory in the second
half of the decade.
SEPARATE ANNOUNCEMENT
SanDisk separately announced today that its Board of Directors approved
a two-for-one stock split of its common stock to be effected in the form of a
stock dividend to each stockholder of record at the close of business on
February 3, 2004.
BUSINESS OUTLOOK FOR 2004
SanDisk is optimistic about business prospects in 2004 and expects:
- Total annual revenues between $1.5 billion and $1.75 billion
- License and royalty revenue of approximately $30 million per
quarter with potential upside in the first and fourth quarters
- Average change in selling price per megabyte comparable to the
overall decline in 2003 rates at approximately 40%. Price
declines are expected to be more moderate in the first half
and in the second half of the year price declines are expected
to reflect new capacity increases
- Product gross margins in the first half of approximately
32-36%, and 28-32% in the second half
- Operating expenses are expected to increase as the business
grows and average approximately 15% of total revenues
- Effective tax rate of approximately 37%
- Capital equipment outlays of approximately $75 million
primarily for SanDisk test equipment and $175 million in
equipment loans to FlashVision.
In the first quarter of 2004 SanDisk projects:
- Modest seasonal decline in product revenues of 5%-10%
sequentially. License and royalty revenues comparable with the
fourth quarter of 2003
- Product gross margins of between 33% and 35%
- Operating expense sequential growth of approximately 12%-14%
due to volume increases, additional research and development
hiring, and increases in marketing expenses.
These projections could vary significantly depending on a number of factors
primarily related to growth in demand and the growth in supply, both of which
are difficult to forecast accurately for any particular quarter in 2004.
FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements,
including our business outlook, expectations for new product introductions,
capacity, future product revenues, average selling prices, gross margins,
operating margins and tax rates, 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: market
demand for our products that may grow more slowly than our expectations or a
slower adoption rate for our products in new markets that we are targeting,
fluctuations in operating results, yields and possible delays related to our
planned conversion to 90 nanometer NAND flash currently planned to start in the
second half of the year, any interruption of or delay in supply from any of the
semiconductor manufacturing facilities that supply products to us, future
average selling price erosion that may be more severe than our expectations due
to possible excess industry capacity of flash memory either from existing
suppliers or from new competitors, price increases from non-captive flash memory
sources and third-party subcontractors, higher than expected operating expenses
due to unanticipated hiring and marketing expenses, higher than anticipated
capital expenditures due to unexpected outlays for test equipment and
FlashVision, adverse global economic and geo-political conditions, including
adverse currency exchange rates, the timely development, internal qualification
and customer acceptance of new products that are based on the 90 nanometer NAND
technology, fluctuations in license and royalty revenues, business interruption
due to earthquakes or other natural disasters, particularly in areas in the
Pacific Rim where we manufacture and assemble products, further impairment of
our investments in Tower Semiconductor Ltd. due to any decline in stock
valuations, and the other risks detailed from time-to-time in our Securities and
Exchange Commission filings and reports, including, but not limited to, the Form
10-Q for the quarter ended September 28, 2003 and the Annual Report on Form 10-K
for the year ended December 29, 2002. Future results may differ materially from
those previously reported. We assume no obligation to update the information
contained in this release.
ABOUT SANDISK
SanDisk Corporation, the world's largest supplier of flash storage card
products, designs, manufactures and markets industry-standard, solid-state data,
digital imaging and audio storage products using its patented, high-density
flash memory and controller technology. SanDisk is based in Sunnyvale, CA.
CONFERENCE CALL
SanDisk's fourth quarter 2003 conference call is scheduled for 2:00
p.m. Pacific Time, Wednesday, January 21, 2004. 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 (888) 515-2781 or (719) 457-2605 for international callers.
The call will also be available by telephone replay through Sunday, January 25,
2004, by dialing (888) 203-1112 or, for international callers, (719) 457-0820
and entering the pass code 565670. A copy of this press release will be filed
with 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.
SanDisk's web site / home page address: http:/ / www.sandisk.com
All trade names are either registered trademarks or trademarks of their
respective holders.
SANDISK CORPORATION
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
Three Months Ended Twelve Months Ended
--------------------------- -----------------------------
December 28, December 29, December 28, December 29,
2003 2002 2003 2002
----------- ----------- ------------ -----------
Revenues:
Product $ 353,403 $ 158,714 $ 982,341 $ 492,900
License and royalty 35,892 21,114 97,460 48,373
--------- --------- ----------- ---------
Total revenue 389,295 179,828 1,079,801 541,273
Cost of product revenues 224,681 99,882 641,189 352,452
--------- --------- ----------- ---------
Gross profits 164,614 79,946 438,612 188,821
Operating expenses:
Research and development 25,263 17,328 84,200 63,177
Sales and marketing 21,251 11,800 66,317 40,407
General and administrative 9,210 8,168 31,057 27,086
--------- --------- ----------- ---------
Total operating expenses 55,724 37,296 181,574 130,670
Operating income 108,890 42,650 257,038 58,151
Equity in income of joint ventures 88 572 178 856
Interest income 3,243 2,124 8,865 8,675
Interest expense (1,687) (1,593) (6,750) (6,700)
Gain (loss) in investment in foundries 667 (13,962) 3,746 (15,163)
Loss on unauthorized sale of UMC shares -- -- (18,339) --
Loss in equity investment -- (1,800) (148) (2,700)
Other loss, net (1,705) (518) (2,709) (3,140)
--------- --------- ----------- ---------
Income before taxes 109,496 27,473 241,881 39,979
Provision for income taxes 21,658 7,863 73,022 3,739
--------- --------- ----------- ---------
Net income $ 87,838 $ 19,610 $ 168,859 $ 36,240
========= ========= =========== =========
Net income per share:
Basic $ 1.10 $ 0.28 $ 2.33 $ 0.53
Diluted $ 0.94 $ 0.26 $ 2.03 $ 0.51
Shares used in computing net income per share:
Basic 79,942 69,057 72,391 68,805
Diluted 95,126 80,213 85,808 71,230
SANDISK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
December 28, 2003 December 29, 2002*
----------------- ------------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 734,479 $ 220,785
Short-term investments 528,117 235,706
Investment in foundries 36,976 110,069
Accounts receivable, net 184,236 81,086
Inventories 116,896 88,595
Deferred tax asset 70,806 --
Prepaid expenses, other current assets and tax receivable 53,394 18,489
---------- ---------
Total current assets 1,724,904 754,730
Property and equipment, net 59,470 30,307
Investment in foundries 40,446 24,197
Investment in FlashVision 144,616 142,825
Deferred tax asset 7,927 6,922
Deposits and other non-current assets 46,151 14,598
---------- ---------
Total Assets $2,023,514 $ 973,579
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 88,737 $ 28,294
Accounts payable to related parties 45,013 26,349
Accrued payroll and related expenses 28,233 11,690
Income taxes payable 37,254 15,978
Deferred tax liability -- 6,922
Research and development liability, related party 11,800 10,507
Other accrued liabilities 36,661 26,780
Deferred income on shipments to distributors and retailers and deferred revenue 99,136 43,760
---------- ---------
Total current liabilities 346,834 170,280
Convertible subordinated notes payable 150,000 150,000
Deferred revenue and other non-current liabilities 25,992 25,579
---------- ---------
Total Liabilities 522,826 345,859
Commitments and contingencies
Stockholders' Equity:
Preferred stock -- --
Common stock 1,207,958 585,968
Retained earnings 253,624 84,765
Accumulated other comprehensive income (loss) 39,106 (43,013)
---------- ---------
Total stockholders' equity 1,500,688 627,720
Total Liabilities and Stockholders' Equity $2,023,514 $ 973,579
========== =========
*Information derived from the audited Consolidated Financial Statements.