SanDisk Corporation : SanDisk Announces Second Quarter 2012 Financial Results
07/19/2012| 04:10pm US/Eastern
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SanDiskCorporation (NASDAQ:SNDK), a global leader in flash
memory storage solutions, announced today results for the second quarter
ended July 1, 2012. Total second quarter revenue of $1.03 billion
declined 25% on a year-over-year basis and declined 14% on a sequential
basis.
On a GAAP(1) basis, second quarter net income was $13
million, or $0.05 per diluted share, compared to net income of $248
million, or $1.02 per diluted share, in the second quarter of fiscal
2011 and $114 million, or $0.46 per diluted share, in the first quarter
of fiscal 2012.
On a non-GAAP(2) basis, second quarter net income was $51
million, or $0.21 per diluted share, compared to net income of
$278 million, or $1.14 per diluted share, in the second quarter of
fiscal 2011 and net income of $156 million, or $0.63 per diluted share,
in the first quarter of fiscal 2012. For reconciliation of non-GAAP to
GAAP results, see accompanying financial tables and footnotes.
"We delivered second quarter results in line with our forecast,
reflecting short-term weakness in our mobile OEM sales, strength in
retail, especially in international markets, and growth in our
enterprise and client SSD products," said Sanjay Mehrotra, president and
chief executive officer of SanDisk. "I am pleased to report that our SSD
revenues achieved 10% of second quarter sales with growing adoption of
our solutions by major OEMs. We also made good progress on our embedded
product roadmap for mobile customers. We believe that strengthening
industry fundamentals and our expanding portfolio of solutions will
contribute to improving financial results in the second half of 2012."
SECOND QUARTER 2012 KEY FINANCIAL METRICS
Metric in millions of US$, except %
GAAP
Non-GAAP
Q212
Q211
Q112
Q212
Q211
Q112
Revenue
$1,032
$1,375
$1,206
$1,032
$1,375
$1,206
Gross Profit % of revenue
$281
27.2%
$613
44.6%
$417
34.5%
$292
28.3%
$623
45.3%
$432
35.8%
Operating Income % of revenue
$36
3.5%
$379
27.6%
$192
15.9%
$68
6.6%
$402
29.3%
$227
18.8%
CONFERENCE CALL
SanDisk's second quarter of fiscal 2012 conference call is scheduled for
2:00 P.M., Pacific Time, Thursday, July 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
647-438-1131 and the dial-in password is 1091224. 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, our belief that our OEM sales will improve and our
industry will strengthen in the second half of 2012, our belief that
industry supply/demand fundamentals are improving, our expanded product
portfolio, expected financial results, and pricing and demand trends
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;
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;
unpredictable or changing demand for our products, including form
factors, capacities and underlying memory technologies;
excess 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;
inability to maintain or gain market share in client and enterprise
SSD markets; 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 fiscal quarter ended April 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).
SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Three months ended
Six months ended
July 1, 2012
July 3, 2011
July 1, 2012
July 3, 2011
Revenues:
Product
$
945,204
$
1,281,960
$
2,051,626
$
2,492,207
License and royalty
87,051
93,033
186,190
176,986
Total revenues
1,032,255
1,374,993
2,237,816
2,669,193
Cost of product revenues
742,297
753,307
1,517,617
1,490,799
Amortization of acquisition-related intangible assets
9,181
8,254
22,912
13,370
Total cost of product revenues
751,478
761,561
1,540,529
1,504,169
Gross profit
280,777
613,432
697,287
1,165,024
Operating expenses:
Research and development
152,397
145,332
293,354
264,874
Sales and marketing
52,261
48,200
101,296
95,657
General and administrative
37,692
40,154
70,283
75,453
Amortization of acquisition-related intangible assets
2,244
730
4,307
730
Total operating expenses
244,594
234,416
469,240
436,714
Operating income
36,183
379,016
228,047
728,310
Other income (expense), net
(17,197
)
(14,273
)
(42,513
)
(32,639
)
Income before income taxes
18,986
364,743
185,534
695,671
Provision for income taxes
6,017
116,353
58,180
223,157
Net income
$
12,969
$
248,390
$
127,354
$
472,514
Net income per share:
Basic
$
0.05
$
1.04
$
0.53
$
1.98
Diluted
$
0.05
$
1.02
$
0.52
$
1.94
Shares used in computing net income per share:
Basic
242,276
238,851
242,579
238,162
Diluted
244,570
243,862
246,026
243,718
SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, except per share data, unaudited)
Three months ended
Six months ended
July 1, 2012
July 3, 2011
July 1, 2012
July 3, 2011
SUMMARY RECONCILIATION OF NET INCOME
GAAP NET INCOME
$
12,969
$
248,390
$
127,354
$
472,514
Share-based compensation (a)
20,253
14,358
39,333
28,949
Amortization of acquisition-related intangible assets (b)
11,425
8,984
27,219
14,100
Convertible debt interest (c)
22,355
23,833
44,242
47,198
Income tax adjustments (d)
(15,889
)
(17,520
)
(30,719
)
(34,136
)
NON-GAAP NET INCOME
$
51,113
$
278,045
$
207,429
$
528,625
GAAP COST OF PRODUCT REVENUES
$
751,478
$
761,561
$
1,540,529
$
1,504,169
Share-based compensation (a)
(1,923
)
(1,089
)
(3,460
)
(2,032
)
Amortization of acquisition-related intangible assets (b)
(9,181
)
(8,254
)
(22,912
)
(13,370
)
NON-GAAP COST OF PRODUCT REVENUES
$
740,374
$
752,218
$
1,514,157
$
1,488,767
GAAP GROSS PROFIT
$
280,777
$
613,432
$
697,287
$
1,165,024
Share-based compensation (a)
1,923
1,089
3,460
2,032
Amortization of acquisition-related intangible assets (b)
9,181
8,254
22,912
13,370
NON-GAAP GROSS PROFIT
$
291,881
$
622,775
$
723,659
$
1,180,426
GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
152,397
$
145,332
$
293,354
$
264,874
Share-based compensation (a)
(10,623
)
(7,684
)
(20,650
)
(14,928
)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
141,774
$
137,648
$
272,704
$
249,946
GAAP SALES AND MARKETING EXPENSES
$
52,261
$
48,200
$
101,296
$
95,657
Share-based compensation (a)
(3,634
)
(2,868
)
(7,263
)
(5,042
)
NON-GAAP SALES AND MARKETING EXPENSES
$
48,627
$
45,332
$
94,033
$
90,615
GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
37,692
$
40,154
$
70,283
$
75,453
Share-based compensation (a)
(4,073
)
(2,717
)
(7,960
)
(6,947
)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
33,619
$
37,437
$
62,323
$
68,506
GAAP TOTAL OPERATING EXPENSES
$
244,594
$
234,416
$
469,240
$
436,714
Share-based compensation (a)
(18,330
)
(13,269
)
(35,873
)
(26,917
)
Amortization of acquisition-related intangible assets (b)
(2,244
)
(730
)
(4,307
)
(730
)
NON-GAAP TOTAL OPERATING EXPENSES
$
224,020
$
220,417
$
429,060
$
409,067
GAAP OPERATING INCOME
$
36,183
$
379,016
$
228,047
$
728,310
Cost of product revenues adjustments (a) (b)
11,104
9,343
26,372
15,402
Operating expense adjustments (a) (b)
20,574
13,999
40,180
27,647
NON-GAAP OPERATING INCOME
$
67,861
$
402,358
$
294,599
$
771,359
GAAP OTHER INCOME (EXPENSE), NET
$
(17,197
)
$
(14,273
)
$
(42,513
)
$
(32,639
)
Convertible debt interest (c)
22,355
23,833
44,242
47,198
NON-GAAP OTHER INCOME (EXPENSE), NET
$
5,158
$
9,560
$
1,729
$
14,559
GAAP NET INCOME
$
12,969
$
248,390
$
127,354
$
472,514
Cost of product revenues adjustments (a) (b)
11,104
9,343
26,372
15,402
Operating expense adjustments (a) (b)
20,574
13,999
40,180
27,647
Convertible debt interest (c)
22,355
23,833
44,242
47,198
Income tax adjustments (d)
(15,889
)
(17,520
)
(30,719
)
(34,136
)
NON-GAAP NET INCOME
$
51,113
$
278,045
$
207,429
$
528,625
Diluted net income per share:
GAAP
$
0.05
$
1.02
$
0.52
$
1.94
Non-GAAP
$
0.21
$
1.14
$
0.84
$
2.17
Shares used in computing diluted net income per share:
GAAP
244,570
243,862
246,026
243,718
Non-GAAP
244,701
243,889
246,026
243,727
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, FlashSoft
Corporation in February 2012 and Schooner Information Technology,
Inc. in June 2012, non-cash economic interest expense associated
with 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 of purchased intangible
assets, share-based compensation, non-cash economic interest expense
associated with 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 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.
(d)
Income taxes associated with certain non-GAAP to GAAP adjustments.
SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands, unaudited)
July 1, 2012
January 1, 2012
ASSETS
Current assets:
Cash and cash equivalents
$
1,070,454
$
1,167,496
Short-term marketable securities
1,468,206
1,681,492
Accounts receivable from product revenues, net
281,822
521,763
Inventory
862,518
678,382
Deferred taxes
97,733
100,409
Other current assets
356,146
206,419
Total current assets
4,136,879
4,355,961
Long-term marketable securities
2,724,382
2,766,263
Property, land and equipment, net
512,734
344,897
Notes receivable and investments in Flash Ventures
1,871,148
1,943,295
Deferred taxes
186,925
199,027
Goodwill
197,878
154,899
Intangible assets, net
284,181
287,691
Other non-current assets
161,622
122,615
Total assets
$
10,075,749
$
10,174,648
LIABILITIES
Current liabilities:
Accounts payable trade
$
255,173
$
258,583
Accounts payable to related parties
234,843
276,275
Convertible short-term debt
878,929
?
Other current accrued liabilities
237,237
337,517
Deferred income on shipments to distributors and retailers and
deferred revenue
218,213
220,999
Total current liabilities
1,824,395
1,093,374
Convertible long-term debt
771,098
1,604,911
Non-current liabilities
442,375
415,524
Total liabilities
3,037,868
3,113,809
EQUITY
Stockholders' equity:
Common stock
4,956,959
4,934,808
Retained earnings
1,829,364
1,796,849
Accumulated other comprehensive income
255,521
332,701
Total stockholders' equity
7,041,844
7,064,358
Non-controlling interests
(3,963
)
(3,519
)
Total equity
7,037,881
7,060,839
Total liabilities and equity
$
10,075,749
$
10,174,648
SanDisk Corporation
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
Three months ended
Six months ended
July 1, 2012
July 3, 2011
July 1, 2012
July 3, 2011
Cash flows from operating activities:
Net income
$
12,969
$
248,390
$
127,354
$
472,514
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred taxes
460
(13,398
)
5,963
(7,224
)
Depreciation
36,525
27,862
69,703
57,637
Amortization
41,303
40,511
86,449
73,350
Provision for doubtful accounts
(439
)
(209
)
(1,724
)
(2,954
)
Share-based compensation expense
20,253
14,358
39,333
28,949
Excess tax benefit from share-based compensation
(2,424
)
(5,399
)
(11,021
)
(11,811
)
Impairment, restructuring and other
(1,333
)
(6,268
)
(6,787
)
(19,445
)
Other non-operating
22,525
21,235
52,187
41,683
Changes in operating assets and liabilities:
Accounts receivable from product revenues, net
81,197
(132,051
)
241,671
(587
)
Inventory
(98,503
)
(50,380
)
(183,715
)
(34,001
)
Other assets
(52,594
)
(47,620
)
13,112
(71,369
)
Accounts payable trade
30,883
32,852
(3,410
)
(3,457
)
Accounts payable to related parties
33,771
64,363
(41,432
)
33,867
Other liabilities
(105,478
)
75,000
(301,394
)
110,733
Total adjustments
6,146
20,856
(41,065
)
195,371
Net cash provided by operating activities
19,115
269,246
86,289
667,885
Cash flows from investing activities:
Purchases of short and long-term marketable securities
(605,709
)
(972,067
)
(1,362,066
)
(1,609,568
)
Proceeds from sale of short and long-term marketable securities
547,444
974,177
1,173,180
1,471,780
Proceeds from maturities of short and long-term marketable securities
214,588
206,570
407,430
323,810
Acquisition of property, land and equipment
(96,076
)
(27,608
)
(240,294
)
(61,353
)
Investment in Flash Ventures
(37,913
)
(18,272
)
(50,439
)
(18,333
)
Notes receivable issuances to Flash Ventures
(91,186
)
(152,811
)
(142,316
)
(366,762
)
Notes receivable proceeds from Flash Ventures
147,953
?
211,786
85,096
Purchased technology and other assets
(194
)
?
(222
)
(100,000
)
Acquisitions, net of cash acquired
(14,666
)
(302,649
)
(69,204
)
(317,649
)
Net cash provided by (used in) investing activities
64,241
(292,660
)
(72,145
)
(592,979
)
Cash flows from financing activities:
Proceeds from employee stock programs
5,354
16,458
50,672
58,606
Excess tax benefit from share-based compensation
2,424
5,399
11,021
11,811
Share repurchase program
(93,164
)
?
(154,075
)
?
Net cash received (paid) for share repurchase contracts
(20,000
)
?
(18,858
)
?
Net cash provided by (used in) financing activities
(105,386
)
21,857
(111,240
)
70,417
Effect of changes in foreign currency exchange rates on cash
(779
)
1,961
54
382
Net increase (decrease) in cash and cash equivalents
(22,809
)
404
(97,042
)
145,705
Cash and cash equivalents at beginning of period
1,093,263
974,450
1,167,496
829,149
Cash and cash equivalents at end of period
$
1,070,454
$
974,854
$
1,070,454
$
974,854
SanDiskCorporation Investor Contact: Jay Iyer,
408-801-2067 Media Contact: Lee Flanagin, 408-801-2463
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