EX-99.1 2 exhibit991-q412earningsrel.htm EXHIBIT 99.1 PRESS RELEASE AND FINANCIALS Exhibit 99.1 - Q4'12 Earnings Release


EXHIBIT 99.1

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

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

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$, 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.

© 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.
(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.







Investor Contacts:
Jay Iyer
408-801-2067
jay.iyer@sandisk.com

Brendan Lahiff
408-801-1732
brendan.lahiff@sandisk.com

Media Contact:
Lee Flanagin
408-801-2463
lee.flanagin@sandisk.com


# # # # #







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
(115,015
)
 
92,646

 
(172,026
)
 
338,347

Cash and cash equivalents at beginning of period
1,110,485

 
1,074,850

 
1,167,496

 
829,149

Cash and cash equivalents at end of period
$
995,470

 
$
1,167,496

 
$
995,470

 
$
1,167,496