SanDisk Announces Third Quarter 2012 Financial Results

SanDisk Announces Third Quarter 2012 Financial Results

MILPITAS, Calif.--(BUSINESS WIRE)-- SanDiskCorporation (NAS: SNDK) , a global leader in flash memory storage solutions, announced today results for the third quarter ended September 30, 2012. Total third quarter revenue of $1.27 billion declined 10% on a year-over-year basis and increased 23% on a sequential basis.

On a GAAP(1) basis, third quarter net income was $77 million, or $0.31 per diluted share, compared to net income of $233 million, or $0.96 per diluted share, in the third quarter of fiscal 2011 and $13 million, or $0.05 per diluted share, in the second quarter of fiscal 2012.


On a non-GAAP(2) basis, third quarter net income was $118 million, or $0.48 per diluted share, compared to net income of $292 million, or $1.20 per diluted share, in the third quarter of fiscal 2011 and net income of $51 million, or $0.21 per diluted share, in the second quarter of fiscal 2012. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

"Our retail business delivered strong results in Q3 and we believe we gained share across all major geographies worldwide on the strength of the SanDisk brand," said Sanjay Mehrotra, president and chief executive officer of SanDisk. "Our results also reflect a solid recovery in our mobile embedded business and we made good progress toward expanding our SSD product roadmap. We believe we are well positioned to build on our business momentum and improved industry fundamentals to deliver strong sequential growth in the fourth quarter."

THIRD QUARTER 2012 KEY FINANCIAL METRICS

Metric

GAAP

Non-GAAP

in millions of US$, except %

Q312

Q311

Q212

Q312

Q311

Q212

Revenue

$1,273

$1,416

$1,032

$1,273

$1,416

$1,032

Gross Profit

$383

$612

$281

$395

$627

$292

% of revenue

30.1

%

43.2

%

27.2

%

31.0

%

44.3

%

28.3

%

Operating Income

$132

$386

$36

$164

$417

$68

% of revenue

10.4

%

27.3

%

3.5

%

12.9

%

29.4

%

6.6

%

CONFERENCE CALL

SanDisk's third quarter of fiscal 2012 conference call is scheduled for 2:00 P.M., Pacific Time, Thursday, October 18, 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 719-457-2086 and the dial-in password is 1746867. 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, including our expectations regarding our business, industry fundamentals and expected financial performance in the fourth quarter of fiscal 2012, supply/demand balance, and our expectations for our 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;

  • 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 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;

  • 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 July 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, 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.

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

Nine months ended

September 30, 2012

October 2, 2011

September 30, 2012

October 2, 2011

Revenues:

Product

$

1,182,159

$

1,321,904

$

3,233,785

$

3,814,111

License and royalty

91,031

94,128

277,221

271,114

Total revenues

1,273,190

1,416,032

3,511,006

4,085,225

Cost of product revenues

880,469

790,465

2,398,086

2,281,264

Amortization of acquisition-related intangible assets

9,800

13,186

32,712

26,556

Total cost of product revenues

890,269

803,651

2,430,798

2,307,820

Gross profit

382,921

612,381

1,080,208

1,777,405

Operating expenses:

Research and development

150,336

135,271

443,690

400,145

Sales and marketing

57,938

48,538

159,234

144,195

General and administrative

40,205

40,567

110,488

116,020

Amortization of acquisition-related intangible assets

2,369

1,878

6,676

2,608

Total operating expenses

250,848

226,254

720,088

662,968

Operating income

132,073

386,127

360,120

1,114,437

Other income (expense), net

(13,695

)

(23,578

)

(56,208

)

(56,217

)

Income before income taxes

118,378

362,549

303,912

1,058,220

Provision for income taxes

41,871

129,296

100,051

352,453

Net income

$

76,507

$

233,253

$

203,861

$

705,767

Net income per share:

Basic

$

0.32

$

0.97

$

0.84

$

2.96

Diluted

$

0.31

$

0.96

$

0.83

$

2.90

Shares used in computing net income per share:

Basic

241,694

239,836

242,284

238,720

Diluted

244,221

243,680

245,502

243,782

SanDisk Corporation

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

(in thousands, except per share data, unaudited)

Three months ended

Nine months ended

September 30, 2012

October 2, 2011

September 30, 2012

October 2, 2011

SUMMARY RECONCILIATION OF NET INCOME

GAAP NET INCOME

$

76,507

$

233,253

$

203,861

$

705,767

Share-based compensation (a)

19,950

15,729

59,283

44,678

Amortization of acquisition-related intangible assets (b)

12,169

15,064

39,388

29,164

Convertible debt interest (c)

22,685

42,840

66,927

90,038

Income tax adjustments (d)

(13,547

)

(14,644

)

(44,266

)

(48,780

)

NON-GAAP NET INCOME

$

117,764

$

292,242

$

325,193

$

820,867

GAAP COST OF PRODUCT REVENUES

$

890,269

$

803,651

$

2,430,798

$

2,307,820

Share-based compensation (a)

(1,929

)

(1,284

)

(5,389

)

(3,316

)

Amortization of acquisition-related intangible assets (b)

(9,800

)

(13,186

)

(32,712

)

(26,556

)

NON-GAAP COST OF PRODUCT REVENUES

$

878,540

$

789,181

$

2,392,697

$

2,277,948

GAAP GROSS PROFIT

$

382,921

$

612,381

$

1,080,208

$

1,777,405

Share-based compensation (a)

1,929

1,284

5,389

3,316

Amortization of acquisition-related intangible assets (b)

9,800

13,186

32,712

26,556

NON-GAAP GROSS PROFIT

$

394,650

$

626,851

$

1,118,309

$

1,807,277

GAAP RESEARCH AND DEVELOPMENT EXPENSES

$

150,336

$

135,271

$

443,690

$

400,145

Share-based compensation (a)

(10,379

)

(8,320

)

(31,029

)

(23,248

)

NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES

$

139,957

$

126,951

$

412,661

$

376,897

GAAP SALES AND MARKETING EXPENSES

$

57,938

$

48,538

$

159,234

$

144,195

Share-based compensation (a)

(3,794

)

(2,704

)

(11,057

)

(7,746

)

NON-GAAP SALES AND MARKETING EXPENSES

$

54,144

$

45,834

$

148,177

$

136,449

GAAP GENERAL AND ADMINISTRATIVE EXPENSES

$

40,205

$

40,567