SanDisk Announces Fourth Quarter and 2012 Year-End Results
SanDisk Announces Fourth Quarter and 2012 Year-End Results
* Delivers fourth quarter revenue of $1.54 billion with record SSD &
Embedded sales
* Gross margin improvements drive substantial sequential earnings growth
Business Wire
MILPITAS, Calif. -- January 23, 2013
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 $4.65 per diluted share in fiscal 2011. For
reconciliation of non-GAAP to GAAP results, see accompanying financial tables
and footnotes.
“SanDisk ended 2012 with strong momentum in our SSD business, which
contributed 10% of our Q4 revenue. We are now supplying client SSDs to ten
leading PC OEMs and our enterprise SSDs are qualified at a fourth storage
OEM,” said Sanjay Mehrotra, president and chief executive officer of SanDisk.
“We drove solid sequential growth in our embedded mobile products and
continued to execute well in our retail business. We believe that our
broadening customer engagements and expanding product portfolio position us
well for strong profitability in 2013.”
FOURTH QUARTER 2012 KEY FINANCIAL METRICS
Metric GAAP Non-GAAP
in millions of US$, Q412 Q411 Q312 Q412 Q411 Q312
except %
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.
© 2013 SanDisk Corporation. All rights reserved. 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).
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.
Non-GAAP represents GAAP excluding the impact of share-based
compensation expense, amortization and write-off of acquisition-related
(2) 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, January 1, December 30, January 1,
2012 2012 2012 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 928,661 901,993 3,326,747 3,183,257
revenues
Amortization of
acquisition-related 9,830 13,186 42,542 39,742
intangible assets
Total cost of 938,491 915,179 3,369,289 3,222,999
product revenues
Gross profit 603,012 661,741 1,683,220 2,439,146
Operating expenses:
Research and 159,075 147,228 602,765 547,373
development
Sales and marketing 64,820 55,227 224,054 199,422
General and 39,913 41,746 150,401 157,766
administrative
Amortization and
write-off of 3,229 1,877 9,905 4,485
acquisition-related
intangible assets
Total operating 267,037 246,078 987,125 909,046
expenses
Operating income 335,975 415,663 696,095 1,530,100
Other income (12,971 ) 2,871 (69,179 ) (53,346 )
(expense), net
Income before 323,004 418,534 626,916 1,476,754
income taxes
Provision for 109,461 137,311 209,512 489,764
income taxes
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 January 1, December 30, January 1,
30, 2012 2012 2012 2012
SUMMARY
RECONCILIATION OF
NET INCOME
GAAP NET INCOME $ 213,543 $ 281,223 $ 417,404 $ 986,990
Share-based 19,160 18,432 78,443 63,110
compensation (a)
Amortization and
write-off of
acquisition-related 13,059 15,063 52,447 44,227
intangible assets
(b)
Convertible debt 23,036 21,316 89,963 111,354
interest (c)
Income tax (11,582 ) (18,893 ) (55,848 ) (67,673 )
adjustments (d)
NON-GAAP NET INCOME $ 257,216 $ 317,141 $ 582,409 $ 1,138,008
GAAP COST OF $ 938,491 $ 915,179 $ 3,369,289 $ 3,222,999
PRODUCT REVENUES
Share-based (2,070 ) (1,358 ) (7,459 ) (4,674 )
compensation (a)
Amortization of
acquisition-related (9,830 ) (13,186 ) (42,542 ) (39,742 )
intangible assets
(b)
NON-GAAP COST OF $ 926,591 $ 900,635 $ 3,319,288 $ 3,178,583
PRODUCT REVENUES
GAAP GROSS PROFIT $ 603,012 $ 661,741 $ 1,683,220 $ 2,439,146
Share-based 2,070 1,358 7,459 4,674
compensation (a)
Amortization of
acquisition-related 9,830 13,186 42,542 39,742
intangible assets
(b)
NON-GAAP GROSS $ 614,912 $ 676,285 $ 1,733,221 $ 2,483,562
PROFIT
GAAP RESEARCH AND
DEVELOPMENT $ 159,075 $ 147,228 $ 602,765 $ 547,373
EXPENSES
Share-based (9,981 ) (10,929 ) (41,010 ) (34,177 )
compensation (a)
NON-GAAP RESEARCH
AND DEVELOPMENT $ 149,094 $ 136,299 $ 561,755 $ 513,196
EXPENSES
GAAP SALES AND $ 64,820 $ 55,227 $ 224,054 $ 199,422
MARKETING EXPENSES
Share-based (3,528 ) (2,847 ) (14,585 ) (10,593 )
compensation (a)
NON-GAAP SALES AND $ 61,292 $ 52,380 $ 209,469 $ 188,829
MARKETING EXPENSES
GAAP GENERAL AND
ADMINISTRATIVE $ 39,913 $ 41,746 $ 150,401 $ 157,766
EXPENSES
Share-based (3,581 ) (3,298 ) (15,389 ) (13,666 )
compensation (a)
NON-GAAP GENERAL
AND ADMINISTRATIVE $ 36,332 $ 38,448 $ 135,012 $ 144,100
EXPENSES
GAAP TOTAL $ 267,037 $ 246,078 $ 987,125 $ 909,046
OPERATING EXPENSES
Share-based (17,090 ) (17,074 ) (70,984 ) (58,436 )
compensation (a)
Amortization and
write-off of
acquisition-related (3,229 ) (1,877 ) (9,905 ) (4,485 )
intangible assets
(b)
NON-GAAP TOTAL $ 246,718 $ 227,127 $ 906,236 $ 846,125
OPERATING EXPENSES
GAAP OPERATING $ 335,975 $ 415,663 $ 696,095 $ 1,530,100
INCOME
Cost of product
revenues 11,900 14,544 50,001 44,416
adjustments (a) (b)
Operating expense 20,319 18,951 80,889 62,921
adjustments (a) (b)
NON-GAAP OPERATING $ 368,194 $ 449,158 $ 826,985 $ 1,637,437
INCOME
GAAP OTHER INCOME $ (12,971 ) $ 2,871 $ (69,179 ) $ (53,346 )
(EXPENSE), NET
Convertible debt 23,036 21,316 89,963 111,354
interest (c)
NON-GAAP OTHER
INCOME (EXPENSE), $ 10,065 $ 24,187 $ 20,784 $ 58,008
NET
GAAP NET INCOME $ 213,543 $ 281,223 $ 417,404 $ 986,990
Cost of product
revenues 11,900 14,544 50,001 44,416
adjustments (a) (b)
Operating expense 20,319 18,951 80,889 62,921
adjustments (a) (b)
Convertible debt 23,036 21,316 89,963 111,354
interest (c)
Income tax (11,582 ) (18,893 ) (55,848 ) (67,673 )
adjustments (d)
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)
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
(1) 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.
Amortization and write-off of acquisition-related intangible assets,
primarily core technology, developed technology, customer relationships
(b) 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).
Incremental interest expense relating to the non-cash economic interest
expense associated with the Company's 1% Sr. Convertible Notes due 2013
(c) 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 588,387 521,763
revenues, net
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 1,460,112 1,943,295
Flash Ventures
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 248,155 220,999
revenue
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, January 1, December 30, January 1,
2012 2012 2012 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 24,814 3,013 34,368 (74,829 )
taxes
Depreciation 49,478 30,025 161,949 114,984
Amortization 43,924 43,895 172,749 161,930
Provision for
doubtful 1,382 453 1,452 (1,476 )
accounts
Share-based
compensation 19,160 18,432 78,443 63,110
expense
Excess tax
benefit from (1,899 ) (9,075 ) (16,015 ) (24,895 )
share-based
compensation
Impairment,
restructuring (3,954 ) (24,320 ) (18,366 ) (49,438 )
and other
Other 21,737 22,889 92,043 86,660
non-operating
Changes in
operating
assets and
liabilities:
Accounts
receivable (124,151 ) (57,569 ) (68,070 ) (146,726 )
from product
revenues, net
Inventory 102,534 6,264 (71,260 ) (158,534 )
Other assets (30,069 ) (43,134 ) 5,318 (112,577 )
Accounts (63,888 ) 35,343 (4,124 ) 73,711
payable trade
Accounts
payable to (11,330 ) 17,454 (61,469 ) 34,531
related
parties
Other 74,345 (115,341 ) (194,568 ) 100,331
liabilities
Total 102,083 (71,671 ) 112,450 66,782
adjustments
Net cash
provided by 315,626 209,552 529,854 1,053,772
operating
activities
Cash flows
from
investing
activities:
Purchases of
short and
long-term (1,228,496 ) (973,002 ) (3,178,660 ) (3,473,915 )
marketable
securities
Proceeds from
sales of
short and 613,799 572,876 2,197,302 2,849,232
long-term
marketable
securities
Proceeds from
maturities of
short and 171,585 128,470 650,060 634,390
long-term
marketable
securities
Acquisition
of property
and (105,341 ) (78,609 ) (487,973 ) (192,876 )
equipment,
net
Investment in
Flash ― ― (50,439 ) (83,316 )
Ventures
Notes
receivable
issuances to ― ― (142,316 ) (399,281 )
Flash
Ventures
Notes
receivable
proceeds from 153,413 167,872 511,289 416,388
Flash
Ventures
Purchased
technology (3,755 ) ― (4,000 ) (100,000 )
and other
assets
Acquisitions,
net of cash (212 ) ― (69,629 ) (317,649 )
acquired
Net cash used
in investing (399,007 ) (182,393 ) (574,366 ) (667,027 )
activities
Cash flows
from
financing
activities:
Proceeds from
sale of ― ― ― 1,494
convertible
bond hedge
Purchase of ― ― ― (1,158 )
warrants
Repayment of
debt ― ― ― (211,441 )
financing
Proceeds from
employee 8,532 61,349 86,302 143,140
stock
programs
Excess tax
benefit from 1,899 9,075 16,015 24,895
share-based
compensation
Share
repurchase (38,577 ) (4,039 ) (230,081 ) (4,039 )
program
Net cash
received for
share ― ― 2,675 ―
repurchase
contracts
Net cash
provided by
(used in) (28,146 ) 66,385 (125,089 ) (47,109 )
financing
activities
Effect of
changes in
foreign (3,488 ) (898 ) (2,425 ) (1,289 )
currency
exchange
rates on cash
Net increase
(decrease) in (115,015 ) 92,646 (172,026 ) 338,347
cash and cash
equivalents
Cash and cash
equivalents 1,110,485 1,074,850 1,167,496 829,149
at beginning
of period
Cash and cash
equivalents $ 995,470 $ 1,167,496 $ 995,470 $ 1,167,496
at end of
period
Contact:
SanDisk Corporation
Investor Contacts:
Jay Iyer, 408-801-2067
jay.iyer@sandisk.com
Brendan Lahiff, 408-801-1732
brendan.lahiff@sandisk.com
or
Media Contact:
Lee Flanagin, 408-801-2463
lee.flanagin@sandisk.com
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