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SanDisk 8-K 2012

Documents found in this filing:

  1. 8-K
  2. Ex-99.1
  3. Graphic
  4. Graphic
Exhibit 99.1 - Q1 '12


EXHIBIT 99.1

    
    
SanDisk Corporation
601 McCarthy Boulevard
Milpitas, CA 95035-7932
Phone: 408-801-1000
Fax: 408-801-8657



SANDISK ANNOUNCES FIRST QUARTER 2012 FINANCIAL RESULTS

Milpitas, CA, April 19, 2012 - SanDisk Corporation (NASDAQ:SNDK), a global leader in flash memory storage solutions, announced today results for the first quarter ended April 1, 2012. Total first quarter revenue of $1.21 billion declined 7% on a year-over-year basis and declined 24% on a sequential basis.

On a GAAP(1) basis, first quarter net income was $114 million, or $0.46 per diluted share, compared to net income of $224 million, or $0.92, per diluted share in the first quarter of fiscal 2011 and $281 million, or $1.14 per diluted share, in the fourth quarter of fiscal 2011.

On a non-GAAP(2) basis, first quarter net income was $156 million, or $0.63 per diluted share, compared to net income of $251 million, or $1.03 per diluted share, in the first quarter of fiscal 2011 and net income of $317 million, or $1.29 per diluted share, in the fourth quarter of fiscal 2011. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“Our first quarter results were adversely impacted by lower-than-expected pricing and demand weakness in certain segments and we expect similar trends in the second quarter as well,” said Sanjay Mehrotra, president and chief executive officer. “We believe a seasonally stronger demand environment in the second half of the year, combined with our diversifying portfolio of mobile and SSD solutions, will allow us to deliver strong sequential revenue growth in the third and fourth quarters.”

FIRST QUARTER 2012 KEY FINANCIAL METRICS
Metric
in millions of US$, except %
GAAP
Non-GAAP
Q112
Q111
Q411
Q112
Q111
Q411
Revenue
$1,206
$1,294
$1,577
$1,206
$1,294
$1,577
Gross Profit
% of revenue
$417
34.5% 
$552
42.6%
$662
42.0% 
$432
35.8% 
$558
43.1% 
$676
42.9% 
Operating Income
% of revenue
$192
15.9%
$349
27.0%
$416
26.4%
$227
18.8%
$369
28.5%
$449
28.5%


CONFERENCE CALL
SanDisk’s first quarter of fiscal 2012 conference call is scheduled for 2:00 P.M., Pacific Time, Thursday, April 19, 2012. The conference call will be webcast and can be accessed live, and throughout the quarter, at SanDisk’s website at http://www.sandisk.com/IR. To participate in the call via telephone, the dial-in number is 719-234-0008 and the dial-in password is 4015842. 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.






FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements, including statements about our business prospects and our expectations regarding our business, financial results, and pricing, seasonality and demand trends for the second quarter and second half of fiscal 2012, including the potential benefits of our diversifying portfolio of mobile and SSD products, that are based on our current expectations and are subject to numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly harm our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others:
competitive pricing pressures, resulting in lower average selling prices and lower or negative product gross margins;
unpredictable or changing demand for our products, particularly for certain form factors, such as embedded flash memory, or capacities, or the mix of X2 and X3 technologies;
excess captive memory output or capacity which could result in write-downs for excess inventory, lower of cost or market charges, fixed costs associated with under-utilized capacity, or other consequences;
increased memory component and other costs as a result of currency exchange rate fluctuations to the U.S. dollar, particularly with respect to the Japanese yen;
lower than anticipated demand, including due to general economic weakness in our markets;
expansion of industry supply, including low-grade supply useable in limited markets, creating excess supply, causing our average selling prices to decline faster than our costs;
insufficient supply from captive flash memory sources, inability to obtain non-captive flash memory supply of the right product mix and quality in the time frame necessary to meet demand, or inability to realize a positive margin on non-captive purchases; and
the 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 January 1, 2012.

(1) 
GAAP represents U.S. Generally Accepted Accounting Principles.
(2) 
Non-GAAP represents GAAP excluding the impact of share-based compensation expense, amortization of acquisition-related intangible assets, non-cash economic interest expense associated with the Company’s convertible debt and related tax adjustments.

ABOUT SANDISK
SanDisk Corporation is a global leader in flash memory storage solutions, from research and development, product design and manufacturing to branding and distribution for OEM and retail channels. Since 1988, SanDisk’s innovations in flash memory and storage system technologies have provided customers with new and transformational digital experiences. SanDisk’s diverse product portfolio includes flash memory cards and embedded solutions used in smart phones, tablets, digital cameras, camcorders, digital media players and other consumer electronic devices, as well as USB flash drives and solid-state drives (SSD) for the computing and enterprise markets. SanDisk’s products are used by consumers and enterprise customers around the world.

SanDisk is a Silicon Valley-based S&P 500 and Fortune 500 company, with more than half its sales outside the United States. For more information, visit www.sandisk.com.

SanDisk and the SanDisk logo are trademarks of SanDisk Corporation, registered in the United States and other countries. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holder(s).

CONTACT:
Investor Contact:
Media Contact:
 
Jay Iyer
Lee Flanagin
 
(408) 801-2067
(408) 801-2463






SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)

 
 
Three months ended
 
 
April 1, 2012
 
April 3, 2011
Revenues:
 
 
 
 
Product
 
$
1,106,422

 
$
1,210,247

License and royalty
 
99,139

 
83,953

Total revenues
 
1,205,561

 
1,294,200

 
 
 
 
 
Cost of product revenues
 
775,320

 
737,492

Amortization of acquisition-related intangible assets
 
13,731

 
5,116

Total cost of product revenues
 
789,051

 
742,608

Gross profit
 
416,510

 
551,592

 
 
 
 
 
Operating expenses:
 
 
 
 
   Research and development
 
140,957

 
119,542

   Sales and marketing
 
49,035

 
47,457

   General and administrative
 
32,591

 
35,299

   Amortization of acquisition-related intangible assets
 
2,063

 

Total operating expenses
 
224,646

 
202,298

Operating income
 
191,864

 
349,294

Other income (expense)
 
(25,316
)
 
(18,366
)
Income before income taxes
 
166,548

 
330,928

Provision for income taxes
 
52,163

 
106,804

Net income
 
$
114,385

 
$
224,124

 
 
 
 
 
Net income per share:
 
 
 
 
   Basic
 
$
0.47

 
$
0.94

   Diluted
 
$
0.46

 
$
0.92

 
 
 
 
 
Shares used in computing net income per share:
 
 
 
 
   Basic
 
242,883

 
237,473

   Diluted
 
247,102

 
243,404







SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, except per share data, unaudited)

 
Three months ended
 
April 1, 2012
 
April 3, 2011
SUMMARY RECONCILIATION OF NET INCOME
 
 
 
GAAP NET INCOME
$
114,385

 
$
224,124

    Share-based compensation (a)
19,080

 
14,591

    Amortization of acquisition-related intangible assets (b)
15,794

 
5,116

    Convertible debt interest (c)
21,887

 
23,365

    Income tax adjustments (d)
(14,830
)
 
(16,616
)
NON-GAAP NET INCOME
$
156,316

 
$
250,580

 
 
 
 
GAAP COST OF PRODUCT REVENUES
$
789,051

 
$
742,608

   Share-based compensation (a)
(1,537
)
 
(943
)
   Amortization of acquisition-related intangible assets (b)
(13,731
)
 
(5,116
)
NON-GAAP COST OF PRODUCT REVENUES
$
773,783

 
$
736,549

 
 
 
 
GAAP GROSS PROFIT
$
416,510

 
$
551,592

  Share-based compensation (a)
1,537

 
943

  Amortization of acquisition-related intangible assets (b)
13,731

 
5,116

NON-GAAP GROSS PROFIT
$
431,778

 
$
557,651

 
 
 
 
GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
140,957

 
$
119,542

  Share-based compensation (a)
(10,027
)
 
(7,244
)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
130,930

 
$
112,298

 
 
 
 
GAAP SALES AND MARKETING EXPENSES
$
49,035

 
$
47,457

  Share-based compensation (a)
(3,629
)
 
(2,174
)
NON-GAAP SALES AND MARKETING EXPENSES
$
45,406

 
$
45,283

 
 
 
 
GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
32,591

 
$
35,299

  Share-based compensation (a)
(3,887
)
 
(4,230
)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
28,704

 
$
31,069

 
 
 
 
GAAP TOTAL OPERATING EXPENSES
$
224,646

 
$
202,298

  Share-based compensation (a)
(17,543
)
 
(13,648
)
  Amortization of acquisition-related intangible assets (b)
(2,063
)
 

NON-GAAP TOTAL OPERATING EXPENSES
$
205,040

 
$
188,650

 
 
 
 
GAAP OPERATING INCOME
$
191,864

 
$
349,294

  Cost of product revenues adjustments (a) (b)
15,268

 
6,059

  Operating expense adjustments (a) (b)
19,606

 
13,648

NON-GAAP OPERATING INCOME
$
226,738

 
$
369,001

 
 
 
 
GAAP OTHER INCOME (EXPENSE)
$
(25,316
)
 
$
(18,366
)
    Convertible debt interest (c)
21,887

 
23,365

NON-GAAP OTHER INCOME (EXPENSE)
$
(3,429
)
 
$
4,999

 
 
 
 
GAAP NET INCOME
$
114,385

 
$
224,124

  Cost of product revenues adjustments (a) (b)
15,268

 
6,059

  Operating expense adjustments (a) (b)
19,606

 
13,648

  Convertible debt interest (c)
21,887

 
23,365

  Income tax adjustments (d)
(14,830
)
 
(16,616
)
NON-GAAP NET INCOME
$
156,316

 
$
250,580

 
 
 
 
Diluted net income per share:
 
 
 
  GAAP
$
0.46

 
$
0.92

  Non-GAAP
$
0.63

 
$
1.03

 
 
 
 
Shares used in computing diluted net income per share:
 
 
 
  GAAP
247,102

 
243,404

  Non-GAAP
247,192

 
243,441






SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1) 


(1)
To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP measures of operating results, net income and net income 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, amortization of acquisition-related intangible assets related to acquisitions of Matrix Semiconductor, Inc. in January 2006, Pliant Technology, Inc. in May 2011 and FlashSoft Corporation in February 2012, non-cash economic interest expense associated with the convertible debt and related tax adjustments, 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 that excludes certain non-cash charges, such as amortization of purchased intangible assets, share-based compensation, non-cash economic interest expense associated with our convertible debt and related tax adjustments, as these non-GAAP charges do not reflect the cash operating results of the business or 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 technology, developed technology, customer relationships and trademarks related to the acquisitions of Matrix Semiconductor, Inc. (January 2006), Pliant Technology, Inc. (May 2011) and FlashSoft Corporation (February 2012).
(c)
Incremental interest expense relating to the non-cash economic interest expense associated with the Company’s 1% Sr. Convertible Notes due 2013 and 1.5% Sr. Convertible Notes due 2017.
(d)
Income taxes associated with certain non-GAAP to GAAP adjustments.






SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands, unaudited)

 
 
 
April 1, 2012
 
January 1, 2012
ASSETS
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
 
 
$
1,093,263

 
$
1,167,496

Short-term marketable securities
 
 
1,575,339

 
1,681,492

Accounts receivable from product revenues, net
 
 
362,580

 
521,763

Inventory
 
 
764,003

 
678,382

Deferred taxes
 
 
97,202

 
100,409

Other current assets
 
 
192,159

 
206,419

Total current assets
 
 
4,084,546

 
4,355,961

Long-term marketable securities
 
 
2,803,622

 
2,766,263

Property and equipment, net
 
 
453,032

 
344,897

Notes receivable and investments in Flash Ventures
 
 
1,821,841

 
1,943,295

Deferred taxes
 
 
190,353

 
199,027

Goodwill
 
 
197,669

 
154,899

Intangible assets, net
 
 
287,794

 
287,691

Other non-current assets
 
 
173,250

 
122,615

Total assets
 
 
$
10,012,107

 
$
10,174,648

 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable trade
 
 
$
224,290

 
$
258,583

Accounts payable to related parties
 
 
201,072

 
276,275

Other current accrued liabilities
 
 
299,394

 
337,517

Deferred income on shipments to distributors and retailers and deferred revenue
 
 
179,375

 
220,999

Total current liabilities
 
 
904,131

 
1,093,374

Convertible long-term debt
 
 
1,627,234

 
1,604,911

Non-current liabilities
 
 
451,781

 
415,524

Total liabilities
 
 
2,983,146

 
3,113,809

 
 
 
 
 
 
EQUITY
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
Common stock
 
 
4,988,521

 
4,934,808

Retained earnings
 
 
1,870,356

 
1,796,849

Accumulated other comprehensive income
 
 
173,758

 
332,701

Total stockholders’ equity
 
 
7,032,635

 
7,064,358

Non-controlling interests
 
 
(3,674
)
 
(3,519
)
Total equity
 
 
7,028,961

 
7,060,839

Total liabilities and equity
 
 
$
10,012,107

 
$
10,174,648


SanDisk Corporation
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)

 
 
Three months ended
 
 
April 1, 2012
 
April 3, 2011
Cash flows from operating activities:
 
 
 
 
Net income
 
$
114,385

 
$
224,124

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Deferred taxes
 
5,503

 
6,174

Depreciation
 
33,178

 
29,775

Amortization
 
45,146

 
32,839

Provision for doubtful accounts
 
(1,285
)
 
(2,745
)
Share-based compensation expense
 
19,080

 
14,591

Excess tax benefit from share-based compensation
 
(8,597
)
 
(6,412
)
Impairment, restructuring and other
 
(5,454
)
 
(13,177
)
Other non-operating
 
29,662

 
20,448

Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable from product revenues
 
160,474

 
131,464

Inventory
 
(85,212
)
 
16,379

Other assets
 
65,706

 
(23,749
)
Accounts payable trade
 
(34,293
)
 
(36,309
)
Accounts payable to related parties
 
(75,203
)
 
(30,496
)
Other liabilities
 
(195,916
)
 
35,733

Total adjustments
 
(47,211
)
 
174,515

Net cash provided by operating activities
 
67,174

 
398,639

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of short and long-term marketable securities
 
(756,357
)
 
(637,501
)
Proceeds from sale of short and long-term marketable securities
 
625,736

 
497,603

Proceeds from maturities of short and long-term marketable securities
 
192,842

 
117,240

Acquisition of property, land and equipment
 
(144,218
)
 
(33,745
)
Investment in Flash Ventures
 
(12,526
)
 
(61
)
Notes receivable issuance to Flash Ventures
 
(51,130
)
 
(213,951
)
Notes receivable proceeds from Flash Ventures
 
63,833

 
85,096

Purchased technology and other assets
 
(28
)
 
(100,000
)
Acquisitions, net of cash acquired
 
(54,538
)
 
(15,000
)
Net cash used in investing activities
 
(136,386
)
 
(300,319
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from employee stock programs
 
45,318

 
42,148

Excess tax benefit from share-based compensation
 
8,597

 
6,412

Share repurchase program
 
(60,911
)
 

Net cash received in settlement of stock repurchase contracts
 
1,142

 

Net cash provided by (used in) financing activities
 
(5,854
)
 
48,560

Effect of changes in foreign currency exchange rates on cash
 
833

 
(1,579
)
Net increase (decrease) in cash and cash equivalents
 
(74,233
)
 
145,301

Cash and cash equivalents at beginning of period
 
1,167,496

 
829,149

Cash and cash equivalents at end of period
 
$
1,093,263

 
$
974,450




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