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SanDisk
Corporation (NASDAQ: SNDK),
a global leader in flash memory storage solutions, announced today
results for the fourth quarter and fiscal year ended December 30, 2012.
Total fourth quarter revenue of $1.54 billion decreased 2% on a
year-over-year basis and increased 21% on a sequential basis. Total
revenue for fiscal 2012 of $5.05 billion decreased 11% from $5.66
billion in fiscal 2011.
On a GAAP(1) basis, fourth quarter net income was
$214 million, or $0.87 per diluted share, compared to net income of
$281 million, or $1.14 per diluted share, in the fourth quarter of
fiscal 2011 and $77 million, or $0.31 per diluted share, in the third
quarter of fiscal 2012. Net income for fiscal 2012 was $417 million, or
$1.70 per diluted share compared to $987 million, or $4.04 per diluted
share in fiscal 2011.
On a non-GAAP(2) basis, fourth quarter net income was
$257 million, or $1.05 per diluted share, compared to net income of
$317 million, or $1.29 per diluted share, in the fourth quarter of
fiscal 2011 and net income of $118 million, or $0.48 per diluted share,
in the third quarter of fiscal 2012. Net income for fiscal 2012 was
$582 million, or $2.38 per diluted share compared to $1.14 billion, or
$4.65 per diluted share in fiscal 2011. For reconciliation of non-GAAP
to GAAP results, see accompanying financial tables and footnotes.
“SanDisk ended 2012 with strong momentum in our SSD business, which
contributed 10% of our Q4 revenue. We are now supplying client SSDs to
ten leading PC OEMs and our enterprise SSDs are qualified at a fourth
storage OEM,” said Sanjay Mehrotra, president and chief executive
officer of SanDisk. “We drove solid sequential growth in our embedded
mobile products and continued to execute well in our retail business. We
believe that our broadening customer engagements and expanding product
portfolio position us well for strong profitability in 2013.”
FOURTH QUARTER 2012 KEY FINANCIAL METRICS
Metric
GAAP
Non-GAAP
in millions of US$, except %
Q412
Q411
Q312
Q412
Q411
Q312
Revenue
$1,542
$1,577
$1,273
$1,542
$1,577
$1,273
Gross Profit
$603
$662
$383
$615
$676
$395
% of revenue
39.1%
42.0%
30.1%
39.9%
42.9%
31.0%
Operating Income
$336
$416
$132
$368
$449
$164
% of revenue
21.8%
26.4%
10.4%
23.9%
28.5%
12.9%
At the end of the fourth quarter, SanDisk’s cash and short and long-term
marketable investments totaled $5.71 billion.
CONFERENCE CALL
SanDisk’s fourth quarter of fiscal 2012 conference call is scheduled for
2:00 P.M., Pacific Time, Wednesday, January 23, 2013. The conference
call will be webcast and can be accessed live, and throughout the
quarter, at SanDisk’s website at www.sandisk.com/IR.
To participate in the call via telephone, the dial-in number is
719-457-2679 and the dial-in password is 5242141. 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.
ABOUT SANDISK
SanDisk Corporation (NASDAQ: SNDK) 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 market. 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.
This press release contains certain forward-looking statements,
including statements about our business prospects, including our
expectations regarding strong profitability in 2013, continued growth of
our SSD business as a result of increased customer engagements, our
expanding product portfolio, our business and expected financial
performance in fiscal 2013, 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. We
undertake no obligation to update the information contained in this
press release. 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;
inability to reduce our manufacturing costs to keep pace with
reductions in average selling prices;
potential delays in product development or lack of customer acceptance
of our solutions, particularly OEM products such as our embedded flash
storage solutions, and client and enterprise SSD solutions;
inability to maintain or gain market share in client and enterprise
SSD markets;
unpredictable or changing demand for our products, including for
different form factors, capacities and underlying memory technologies;
excess or mismatched captive memory output or capacity, which could
result in write-downs for excess inventory, lower of cost or market
charges, lower average selling prices, fixed costs associated with
under-utilized capacity or other consequences; 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 Quarterly
Report on Form 10-Q for the third fiscal quarter ended September 30,
2012.
(1)
GAAP represents U.S. Generally Accepted Accounting Principles.
(2)
Non-GAAP represents GAAP excluding the impact of share-based
compensation expense, amortization and write-off of
acquisition-related intangible assets, non-cash economic interest
expense associated with the Company’s convertible debt, the non-cash
change in fair value of the liability component associated with the
repurchased portion of SanDisk’s convertible debt and related tax
adjustments.
SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Three months ended
Twelve months ended
December 30, 2012
January 1, 2012
December 30, 2012
January 1, 2012
Revenues:
Product
$
1,444,719
$
1,473,444
$
4,678,504
$
5,287,555
License and royalty
96,784
103,476
374,005
374,590
Total revenues
1,541,503
1,576,920
5,052,509
5,662,145
Cost of product revenues
928,661
901,993
3,326,747
3,183,257
Amortization of acquisition-related intangible assets
9,830
13,186
42,542
39,742
Total cost of product revenues
938,491
915,179
3,369,289
3,222,999
Gross profit
603,012
661,741
1,683,220
2,439,146
Operating expenses:
Research and development
159,075
147,228
602,765
547,373
Sales and marketing
64,820
55,227
224,054
199,422
General and administrative
39,913
41,746
150,401
157,766
Amortization and write-off of acquisition-related intangible assets
3,229
1,877
9,905
4,485
Total operating expenses
267,037
246,078
987,125
909,046
Operating income
335,975
415,663
696,095
1,530,100
Other income (expense), net
(12,971
)
2,871
(69,179
)
(53,346
)
Income before income taxes
323,004
418,534
626,916
1,476,754
Provision for income taxes
109,461
137,311
209,512
489,764
Net income
$
213,543
$
281,223
$
417,404
$
986,990
Net income per share:
Basic
$
0.88
$
1.16
$
1.72
$
4.12
Diluted
$
0.87
$
1.14
$
1.70
$
4.04
Shares used in computing net income per share:
Basic
241,451
241,775
242,076
239,484
Diluted
244,161
246,543
245,253
244,553
SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, except per share data, unaudited)
Three months ended
Twelve months ended
December 30, 2012
January 1, 2012
December 30, 2012
January 1, 2012
SUMMARY RECONCILIATION OF NET INCOME
GAAP NET INCOME
$
213,543
$
281,223
$
417,404
$
986,990
Share-based compensation (a)
19,160
18,432
78,443
63,110
Amortization and write-off of acquisition-related intangible assets
(b)
13,059
15,063
52,447
44,227
Convertible debt interest (c)
23,036
21,316
89,963
111,354
Income tax adjustments (d)
(11,582
)
(18,893
)
(55,848
)
(67,673
)
NON-GAAP NET INCOME
$
257,216
$
317,141
$
582,409
$
1,138,008
GAAP COST OF PRODUCT REVENUES
$
938,491
$
915,179
$
3,369,289
$
3,222,999
Share-based compensation (a)
(2,070
)
(1,358
)
(7,459
)
(4,674
)
Amortization of acquisition-related intangible assets (b)
(9,830
)
(13,186
)
(42,542
)
(39,742
)
NON-GAAP COST OF PRODUCT REVENUES
$
926,591
$
900,635
$
3,319,288
$
3,178,583
GAAP GROSS PROFIT
$
603,012
$
661,741
$
1,683,220
$
2,439,146
Share-based compensation (a)
2,070
1,358
7,459
4,674
Amortization of acquisition-related intangible assets (b)
9,830
13,186
42,542
39,742
NON-GAAP GROSS PROFIT
$
614,912
$
676,285
$
1,733,221
$
2,483,562
GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
159,075
$
147,228
$
602,765
$
547,373
Share-based compensation (a)
(9,981
)
(10,929
)
(41,010
)
(34,177
)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
149,094
$
136,299
$
561,755
$
513,196
GAAP SALES AND MARKETING EXPENSES
$
64,820
$
55,227
$
224,054
$
199,422
Share-based compensation (a)
(3,528
)
(2,847
)
(14,585
)
(10,593
)
NON-GAAP SALES AND MARKETING EXPENSES
$
61,292
$
52,380
$
209,469
$
188,829
GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
39,913
$
41,746
$
150,401
$
157,766
Share-based compensation (a)
(3,581
)
(3,298
)
(15,389
)
(13,666
)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
36,332
$
38,448
$
135,012
$
144,100
GAAP TOTAL OPERATING EXPENSES
$
267,037
$
246,078
$
987,125
$
909,046
Share-based compensation (a)
(17,090
)
(17,074
)
(70,984
)
(58,436
)
Amortization and write-off of acquisition-related intangible assets
(b)
(3,229
)
(1,877
)
(9,905
)
(4,485
)
NON-GAAP TOTAL OPERATING EXPENSES
$
246,718
$
227,127
$
906,236
$
846,125
GAAP OPERATING INCOME
$
335,975
$
415,663
$
696,095
$
1,530,100
Cost of product revenues adjustments (a) (b)
11,900
14,544
50,001
44,416
Operating expense adjustments (a) (b)
20,319
18,951
80,889
62,921
NON-GAAP OPERATING INCOME
$
368,194
$
449,158
$
826,985
$
1,637,437
GAAP OTHER INCOME (EXPENSE), NET
$
(12,971
)
$
2,871
$
(69,179
)
$
(53,346
)
Convertible debt interest (c)
23,036
21,316
89,963
111,354
NON-GAAP OTHER INCOME (EXPENSE), NET
$
10,065
$
24,187
$
20,784
$
58,008
GAAP NET INCOME
$
213,543
$
281,223
$
417,404
$
986,990
Cost of product revenues adjustments (a) (b)
11,900
14,544
50,001
44,416
Operating expense adjustments (a) (b)
20,319
18,951
80,889
62,921
Convertible debt interest (c)
23,036
21,316
89,963
111,354
Income tax adjustments (d)
(11,582
)
(18,893
)
(55,848
)
(67,673
)
NON-GAAP NET INCOME
$
257,216
$
317,141
$
582,409
$
1,138,008
Diluted net income per share:
GAAP
$
0.87
$
1.14
$
1.70
$
4.04
Non-GAAP
$
1.05
$
1.29
$
2.38
$
4.65
Shares used in computing diluted net income per share:
GAAP
244,161
246,543
245,253
244,553
Non-GAAP
244,081
246,595
245,199
244,568
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 and write-off of
acquisition-related intangible assets related to acquisitions of
Matrix Semiconductor, Inc. in January 2006, Pliant Technology, Inc.
in May 2011, FlashSoft Corporation in February 2012 and Schooner
Information Technology, Inc. in June 2012, non-cash economic
interest expense associated with the convertible debt, non-cash
change in fair value of the liability component of the repurchased
portion of the convertible debt and related tax adjustments, we
believe the inclusion of non-GAAP financial measures provides
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 and
write-off of acquisition-related intangible assets, share-based
compensation, non-cash economic interest expense associated with the
convertible debt, non-cash change in fair value of the liability
component of the repurchased portion of the 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 and write-off 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), FlashSoft Corporation (February 2012) and Schooner
Information Technology, Inc. (June 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 and the
non-cash change in fair value of the liability component of the
repurchased portion of the 1% Sr. Convertible Notes due 2013.
(d)
Income taxes associated with certain non-GAAP to GAAP adjustments.
SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands, unaudited)
December 30, 2012
January 1, 2012
ASSETS
Current assets:
Cash and cash equivalents
$
995,470
$
1,167,496
Short-term marketable securities
1,880,034
1,681,492
Accounts receivable from product revenues, net
588,387
521,763
Inventory
750,075
678,382
Deferred taxes
93,877
100,409
Other current assets
298,517
206,419
Total current assets
4,606,360
4,355,961
Long-term marketable securities
2,835,931
2,766,263
Property and equipment, net
665,542
344,897
Notes receivable and investments in Flash Ventures
1,460,112
1,943,295
Deferred taxes
168,718
199,027
Goodwill
201,735
154,899
Intangible assets, net
246,919
287,691
Other non-current assets
153,810
122,615
Total assets
$
10,339,127
$
10,174,648
LIABILITIES
Current liabilities:
Accounts payable trade
$
254,459
$
258,583
Accounts payable to related parties
214,806
276,275
Convertible short-term debt
906,708
―
Other current accrued liabilities
257,539
337,517
Deferred income on shipments to distributors and retailers and
deferred revenue
248,155
220,999
Total current liabilities
1,881,667
1,093,374
Convertible long-term debt
789,913
1,604,911
Non-current liabilities
407,947
415,524
Total liabilities
3,079,527
3,113,809
EQUITY
Stockholders' equity:
Common stock
5,027,512
4,934,808
Retained earnings
2,071,268
1,796,849
Accumulated other comprehensive income
165,121
332,701
Total stockholders' equity
7,263,901
7,064,358
Non-controlling interests
(4,301
)
(3,519
)
Total equity
7,259,600
7,060,839
Total liabilities and equity
$
10,339,127
$
10,174,648
SanDisk Corporation
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three months ended
Twelve months ended
December 30, 2012
January 1, 2012
December 30, 2012
January 1, 2012
Cash flows from operating activities:
Net income
$
213,543
$
281,223
$
417,404
$
986,990
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred taxes
24,814
3,013
34,368
(74,829
)
Depreciation
49,478
30,025
161,949
114,984
Amortization
43,924
43,895
172,749
161,930
Provision for doubtful accounts
1,382
453
1,452
(1,476
)
Share-based compensation expense
19,160
18,432
78,443
63,110
Excess tax benefit from share-based compensation
(1,899
)
(9,075
)
(16,015
)
(24,895
)
Impairment, restructuring and other
(3,954
)
(24,320
)
(18,366
)
(49,438
)
Other non-operating
21,737
22,889
92,043
86,660
Changes in operating assets and liabilities:
Accounts receivable from product revenues, net
(124,151
)
(57,569
)
(68,070
)
(146,726
)
Inventory
102,534
6,264
(71,260
)
(158,534
)
Other assets
(30,069
)
(43,134
)
5,318
(112,577
)
Accounts payable trade
(63,888
)
35,343
(4,124
)
73,711
Accounts payable to related parties
(11,330
)
17,454
(61,469
)
34,531
Other liabilities
74,345
(115,341
)
(194,568
)
100,331
Total adjustments
102,083
(71,671
)
112,450
66,782
Net cash provided by operating activities
315,626
209,552
529,854
1,053,772
Cash flows from investing activities:
Purchases of short and long-term marketable securities
(1,228,496
)
(973,002
)
(3,178,660
)
(3,473,915
)
Proceeds from sales of short and long-term marketable securities
613,799
572,876
2,197,302
2,849,232
Proceeds from maturities of short and long-term marketable securities
171,585
128,470
650,060
634,390
Acquisition of property and equipment, net
(105,341
)
(78,609
)
(487,973
)
(192,876
)
Investment in Flash Ventures
―
―
(50,439
)
(83,316
)
Notes receivable issuances to Flash Ventures
―
―
(142,316
)
(399,281
)
Notes receivable proceeds from Flash Ventures
153,413
167,872
511,289
416,388
Purchased technology and other assets
(3,755
)
―
(4,000
)
(100,000
)
Acquisitions, net of cash acquired
(212
)
―
(69,629
)
(317,649
)
Net cash used in investing activities
(399,007
)
(182,393
)
(574,366
)
(667,027
)
Cash flows from financing activities:
Proceeds from sale of convertible bond hedge
―
―
―
1,494
Purchase of warrants
―
―
―
(1,158
)
Repayment of debt financing
―
―
―
(211,441
)
Proceeds from employee stock programs
8,532
61,349
86,302
143,140
Excess tax benefit from share-based compensation
1,899
9,075
16,015
24,895
Share repurchase program
(38,577
)
(4,039
)
(230,081
)
(4,039
)
Net cash received for share repurchase contracts
―
―
2,675
―
Net cash provided by (used in) financing activities
(28,146
)
66,385
(125,089
)
(47,109
)
Effect of changes in foreign currency exchange rates on cash
(3,488
)
(898
)
(2,425
)
(1,289
)
Net increase (decrease) in cash and cash equivalents
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