SanDisk Announces First Quarter Results; Year-over-Year Increase in Revenues of 122% and Operating Income of 184%.Business Editors/High-Tech Writers SUNNYVALE Sunnyvale, city (1990 pop. 117,229), Santa Clara co., W Calif., near San Francisco; settled 1849, inc. 1912. A city in Silicon Valley, its many manufactures include semiconductors; machinery and instruments; electrical, electronic, and aerospace products; , Calif.--(BUSINESS WIRE)--April 14, 2004 SanDisk This article is about SanDisk Corporation. For Computer Storage Device in Storage Area Network (SAN), see Storage Area Network. SanDisk Corporation (NASDAQ: SNDK), formerly SunDisk Corporation (Nasdaq:SNDK), the world's largest supplier of flash storage card products, today announced results for the first quarter ended March 28, 2004. First quarter total revenues increased 122% to $387 million compared to the first quarter of 2003 and were essentially unchanged from the seasonally strong fourth quarter. First quarter product sales were up 118% year-over-year and down 4% to $339 million compared to $353 million in the fourth quarter. Income from license and royalties increased to $48 million, up 153% and 34% year-over-year and sequentially. First quarter operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $99 million, compared to $35 million and $109 million for the first quarter of 2003 and the fourth quarter of 2003, respectively. The first quarter effective tax rate was 37% compared to 20% in the fourth quarter of 2003. Earnings per share were $0.34 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share compared with $0.17 per diluted share in the same quarter of 2003 and $0.47 per diluted share in the fourth quarter of 2003. "The first quarter was another good quarter for SanDisk given the traditional first quarter seasonality. Royalty income significantly exceeded our expectations due to strong sales of flash memory by our licensees in the fourth quarter. During the first quarter, we introduced a number of important products that are expected to materially contribute to our revenues in 2004 and in future years. Specifically, these include Shoot and Store(TM) consumable A material that is used up and needs continuous replenishment, such as paper and toner. "The low-tech end of the high-tech field!" flash cards targeted for sales through supermarkets and convenience stores The following is a list of convenience stores organized by geographical location. Stores are grouped by the lowest heading that contains all locales in which the brands have significant presence. , TransFlash SanDisk's earlier name for the microSD card, the miniaturized version of the SD card. It was also called "T-Flash." See SD card. (TM) for semi-embedded storage in new models of camera cell phones, Reduced-Size MultiMediaCard A flash memory card that provides storage for cellphones, PDAs and other handheld devices. Introduced in 1997 with a 4MB capacity, the 32x24x1.4mm card weighs less than two grams. By 2005, storage increased to 2GB. for removable storage primarily in European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. multimedia camera phones, a broad lineup A criminal investigation technique in which the police arrange a number of individuals in a row before a witness to a crime and ask the witness to identify which, if any, of the individuals committed the crime. of new Cruzer USB USB in full Universal Serial Bus Type of serial bus that allows peripheral devices (disks, modems, printers, digitizers, data gloves, etc.) to be easily connected to a computer. flashdrives, and the industry's broadest lineup of MemoryStick Pro and Pro Duo," said Eli Harari Harari may refer to:
"Supply and demand were in balance throughout the first quarter which resulted in stable pricing. Early in the second quarter we announced the world's first 4 gigabit NAND (Not AND) A Boolean logic operation that is true if any single input is false. Two-input NAND gates are often used as the sole logic element on gate array chips, because all Boolean operations can be created from NAND gates. See flash memory. MLC (MultiLevel Cell) A flash memory technology that stores more than one bit per cell. Traditional flash memory defines a 0 or 1 bit based on a single voltage threshold. monolithic Single object. Self contained. One unit. chip, which employs the new 90-nanometer technology that we developed jointly with Toshiba. This chip is expected to start production in the third quarter of 2004 and we expect this will allow us to build highly cost effective 512 megabyte One million bytes, or more precisely 1,048,576 bytes. Also MB, Mbyte and M-byte. See mega and space/time. (unit) megabyte - (MB, colloquially "meg") 2^20 = 1,048,576 bytes = 1024 kilobytes. 1024 megabytes are one gigabyte. (MB) capacity cards using just one NAND chip and one controller chip. We recently initiated price reductions averaging approximately 20% for many of our products, primarily focusing on 256MB and higher capacities. The new lower pricing is intended to proactively drive demand elasticity and accelerate the retail consumer market transition towards 512MB and higher capacity cards in the second half of 2004. We expect overall year-over-year price reductions to be approximately at the previously stated 40%, which we consider healthy for stimulating the rapid growth and continuing adoption of flash storage in new mega market applications." Additional Q1 Financial/Business Highlights -- Sales of the Cruzer(TM) line of USB Flashdrive products increased 76% sequentially. -- Total megabytes sold in the first quarter were about the same as the fourth quarter of 2003 and increased 172% year-over-year. -- Average price per megabyte sold in the first quarter declined 4% sequentially and 19% compared to the corresponding quarter of last year. -- Total gross margin was 40% of revenues compared to 42% in the fourth quarter of 2003. Product gross margin was 32%, compared to 36% in the fourth quarter of 2003. Average price per megabyte sold declined, and incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. conversion and start-up Start-up The earliest stage of a new business venture. costs were partially offset by increased sourcing from captive supply Captive supply is a term for that part of the supply that is not owned by a company but is used by the company to maximize its own profits often at the unknowing expense of those who actually own those supplies. and increased MLC output. -- Net cash provided by operating activities was approximately $54 million in the first quarter and SanDisk's cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investment position increased to $1.3 billion at quarter-end. Business Outlook for the Second Quarter and 2004 SanDisk continues to be optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about business prospects in 2004 and expects: -- Total annual revenues between $1.6 and $1.8 billion, with second quarter total revenues in the range of $400-$420 million driven by the newly implemented price reductions, as well as the traditional pick-up in retail sales heading into the early summer promotional season. -- License and royalty revenues in the range of $40-$42 million in the second quarter. This is due to an expected increase in the level of royalty bearing sales which will be partially offset by a reduction in the royalty rates for some of our licensees. -- Product gross margins for the remainder of the year of approximately 30%. This forecast is based on the following expectations: price reductions, Yokkaichi startup costs associated with the addition of new 90 nanometer One billionth of a meter. Nanometers are used to measure the wavelengths of light. See angstrom and metric system. capacity in the second half of 2004, lower costs due to increased utilization of cost effective MLC, increase in captive supply, and cost savings associated with 90 nanometer NAND flash See flash memory. technology. -- Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. of approximately 15% of total revenues for the year and approximately $65 million in the second quarter reflecting accelerated R&D and product development activities and our corporate branding Corporate branding is the practice of using a company's name as a product brand name. It is an attempt to leverage corporate brand equity to create product brand recognition. It is a type of family branding or umbrella brand. program which is expected to commence in the second quarter. -- Effective tax rate of approximately 37%. -- Capital equipment outlays Outlays Payments on obligations in the form of cash, checks, the issuance of bonds or notes, or the maturing of interest coupons. for 2004 of approximately $75 million primarily for SanDisk test equipment and $175 million in equipment loans to FlashVision, primarily for conversions of additional 200-millimeter capacity. Second quarter capital spending is projected at approximately $20 million. These projections could vary significantly depending on a number of factors primarily related to growth in market demand and supply, the success of our recent price actions, start-up costs and capital outlays capital outlay See capital expenditure. , and incremental supply and yields from our new 90 nanometer NAND MLC technology, all of which are difficult to forecast accurately for any particular quarter in 2004. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This news release contains certain forward-looking statements, including our business outlook, expectations for new product introductions, capacity, future revenues, average selling prices The average sales price of goods or commodities. Especially used in the retail sector and technology distribution. , gross margins, operating expenses, capital equipment expenditures and tax rates that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others: market demand for our products may grow more slowly than our expectations or a slower adoption rate for these products in new markets that we are targeting, our recent price reductions may not result in strengthening demand as we anticipate, fluctuations in operating results, yields and possible delays related to our planned conversion to 90 nanometer NAND flash currently planned to start in the second half of the year, any interruption INTERRUPTION. The effect of some act or circumstance which stops the course of a prescription or act of limitation's. 2. Interruption of the use of a thing is natural or civil. of or delay in supply from any of the semiconductor manufacturing facilities that supply products to us, future average selling price erosion that may be more severe than our expectations due to possible excess industry capacity of flash memory either from existing suppliers or from new competitors, decreased demand, price increases from non-captive flash memory sources and third-party subcontractors, higher than expected operating expenses due to unanticipated hiring and marketing expenses, higher than anticipated capital expenditures due to unexpected outlays for test equipment and FlashVision, adverse global economic and geo-political conditions, including adverse currency exchange rates, the timely development, internal qualification and customer acceptance of new products that are based on the 90 nanometer NAND technology, fluctuations in license and royalty revenues, higher than anticipated tax rates, business interruption due to earthquakes or other natural disasters, particularly in areas in the Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. where we manufacture and assemble products, further impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of our investments in Tower Semiconductor Ltd. due to any decline in stock valuations, and the other risks detailed from time-to-time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 28, 2003 and our quarterly reports on Form 10-Q Form 10-Q See 10-Q. . Future results may differ materially from those previously reported. We assume no obligation to update the information contained in this release. About SanDisk SanDisk Corporation, the world's largest supplier of flash storage card products, designs, manufactures and markets industry-standard, solid-state data, digital imaging and audio storage products using its patented, high-density flash memory and controller technology. SanDisk is based in Sunnyvale, CA. Conference Call SanDisk's first quarter 2004 conference call is scheduled for 2:00 p.m. Pacific Time, Wednesday, April 14, 2004. The conference call will be webcast by CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network and can be accessed live, and throughout the quarter, at SanDisk's website at www.sandisk.com/IR and at www.streetevents.com for registered streetevents.com users. To participate in the call via telephone, the dial in number is 800-811-0667 or 913-981-4901 for international callers. The call will also be available by telephone replay through Wednesday, April 21, 2004, by dialing 888-203-1112 or, for international callers, 719-457-0820 and entering the pass code 545822. A copy of this press release will be filed with the Securities and Exchange Commission on a current report on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and will be posted to our website prior to the conference call. SanDisk's web site / home page address: http://www.sandisk.com All trade names are either registered trademarks or trademarks of their respective holders.
SanDisk Corporation
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
Three Months Ended
----------------------
March 28, March 30,
2004 2003
--------- ---------
Revenues:
Product $338,779 $155,448
License and royalty 48,151 19,032
-------- --------
Total revenues 386,930 174,480
Cost of product revenues 231,012 102,889
-------- --------
Gross profits 155,918 71,591
Operating expenses:
Research and development 26,762 17,578
Sales and marketing 19,661 12,642
General and administrative 10,936 6,685
-------- --------
Total operating expenses 57,359 36,905
Operating income 98,559 34,686
Equity in income of joint ventures 647 139
Interest income 3,960 2,188
Interest expense (1,688) (1,688)
Loss in investment in foundries (573) (2,166)
Loss in equity investment - (4,500)
Other income (loss), net 44 (1,016)
-------- --------
Income before taxes 100,949 27,643
Provision for income taxes 37,381 2,718
-------- --------
Net income $ 63,568 $ 24,925
======== ========
Net income per share:
Basic $ 0.39 $ 0.18
Diluted $ 0.34 $ 0.17
Shares used in computing net income per share:
Basic 161,207 138,577
Diluted 189,403 159,912
SanDisk Corporation
Condensed Consolidated Balance Sheets
(In thousands)
March 28, December 28,
2004 2003*
----------- -----------
ASSETS (unaudited)
Current Assets:
Cash and cash equivalents $ 736,361 $ 734,479
Short-term investments 576,768 528,117
Investment in foundries 36,648 36,976
Accounts receivable, net 135,435 184,236
Inventories 159,710 116,896
Deferred tax asset 71,054 70,806
Other receivable 11,274 11,352
Prepaid expenses, other current assets
and tax receivable 16,643 42,042
---------- ----------
Total current assets 1,743,893 1,724,904
Property and equipment, net 62,062 59,470
Investment in foundries 43,955 40,446
Investment in FlashVision 145,584 144,616
Deferred tax asset 7,927 7,927
Other receivable 30,938 33,751
Note receivable, related party 22,164 -
Deposits and other non-current assets 6,121 12,400
---------- ----------
Total Assets $2,062,644 $2,023,514
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 77,346 $ 88,737
Accounts payable to related parties 51,664 45,013
Accrued payroll and related expenses 18,319 28,233
Income taxes payable 26,323 37,254
Research and development liability,
related party 8,100 11,800
Other accrued liabilities 38,421 36,661
Deferred income on shipments to
distributors and retailers and deferred
revenue 97,992 99,136
---------- ----------
Total current liabilities 318,165 346,834
Convertible subordinated notes payable 150,000 150,000
Other liabilities 503 511
Deferred revenue 23,927 25,481
---------- ----------
Total Liabilities 492,595 522,826
Commitments and contingencies
Stockholders' Equity:
Preferred stock - -
Common stock 1,213,973 1,207,958
Retained earnings 317,192 253,624
Accumulated other comprehensive income 38,884 39,106
---------- ----------
Total stockholders' equity 1,570,049 1,500,688
Total Liabilities and
Stockholders' Equity $2,062,644 $2,023,514
========== ==========
*Information derived from the audited Consolidated Financial
Statements.
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