The July earnings press release, just for future reference.
SanDisk Announces Record Revenues and Operating Income
Wednesday July 14, 4:18 pm ET
Year-over-Year Increase in Revenues of 85% and Operating Income of 136%
SUNNYVALE, Calif.--(BUSINESS WIRE)--July 14, 2004--SanDisk Corporation (NASDAQ:SNDK - News), the world's largest supplier of flash storage card products, today announced results for the second quarter ended June 27, 2004. Second quarter total revenues increased 85% to $433 million compared to the second quarter of 2003 and increased 12% from the first quarter of 2004. Second quarter net income was $71 million, compared to $41 million and $64 million for the second quarter of 2003 and the first quarter of 2004, respectively. Earnings per share were $0.38 per diluted share compared with $0.26 per diluted share in the same quarter of 2003 and $0.34 per diluted share in the first quarter of 2004.
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"Record results for our second quarter are a testimony to the success of SanDisk's strategy and unique business model, which combines vertical integration of leading edge technology, rapid introduction of differentiated products targeted at new applications, expanding worldwide retail distribution and a strong portfolio of patents to generate significant operating margins," said Eli Harari, President and CEO of SanDisk Corporation.
"The pricing moves that we initiated early in the second quarter stimulated consumer demand and resulted in 38% sequential quarterly growth in total megabytes and 24% sequential growth in average capacity per card sold in retail. Product gross margins improved to 35%, despite a 16% decline in average selling price per megabyte, because of a favorable mix of MLC and captive flash, and the positive impact of our product segmentation strategy; fully 25% of the retail revenue in the second quarter came from highly differentiated products. Late in the quarter we shipped first production cards employing our new 4Gbit NAND/MLC chip, and as planned we are starting to ramp 90 nanometer production in the third quarter," added Harari.
"I am particularly encouraged by the growing acceptance of flash cards and modules in dozens of new generation cell phones sporting mega pixel cameras, music players, video clips, video games and internet access, which we expect will be one of the major catalysts for strong growth in demand for our products in the next several years," said Harari.
Second Quarter Highlights
Product sales were $391 million, a growth of 16% sequentially and 83% year-over-year.
Total gross margin grew to 41% of revenues compared to 40% in the first quarter of 2004 and 38% in the second quarter of 2003.
Product gross margin increased to 35%, compared to 32% in both the first quarter of 2004 and in the second quarter of 2003.
Operating income was $110 million, a growth of 12% sequentially and 136% year-over-year.
Total megabytes sold in the second quarter were a record and increased 38% sequentially and 144% year-over-year.
Average price per megabyte sold in the second quarter declined 16% sequentially and 25% year-over-year.
Average density per card sold in retail increased sequentially to 236MB from 189MB.
Retail sales grew to 81% of product revenues and were particularly strong in North America and Europe.
Storefronts grew to approximately 80,000 with the rapid acceptance of our Shoot & Store(TM) products into the food and drug channel and with expansion into China.
Mobile phone products, including miniSD(TM), TransFlash(TM), RS-MMC(TM), and Memory Stick PRO Duo(TM) rolled out to retail customers in the worldwide mobile phone channel.
SanDisk Extreme(TM) and SanDisk Ultra® II high performance cards took top awards in independent performance tests and were among our fastest growing product lines.
Sales of the Cruzer® line of USB Flashdrive products continued strong growth, and productivity software is now shipping with the Cruzer Titanium.
Judy Bruner joined SanDisk as Executive Vice President and CFO and Catherine Lego rejoined SanDisk's Board of Directors and Audit Committee.
Conference Call and Guidance
SanDisk's second quarter 2004 conference call with guidance is scheduled for 2:00 p.m. Pacific Time, Wednesday, July 14, 2004. Today's teleconference prepared remarks, including third quarter guidance, will be posted to http:// www.corporate-ir.net/ireye/ir_site.zhtml?ticker=sndk&script=2100. The conference call will be web cast by CCBN 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) 314-7867 or (719) 867-0640 for international callers. The call will also be available by telephone replay through Wednesday, July 21, 2004, by dialing (888) 203-1112 or, for international callers, (719) 457-0820 and entering the pass code 229067. A copy of this press release will be filed with 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 our business outlook, expectations for new product introductions, capacity plans, future revenues, average selling prices, 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, fluctuations in operating results, unexpected yield variances and longer than expected low yields and other possible delays related to our conversion to 90 nanometer NAND flash technology, any interruption of or delay in supply from any of the semiconductor manufacturing facilities that supply products to us, our inability to make additional planned smaller geometry conversions in a timely manner, 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 where we manufacture and assemble products, further impairment 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 for the year ended December 28, 2003 and our quarterly reports on Form 10-Q. Future results may differ materially from those previously reported. We do not intend 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. www.sandisk.com
SanDisk, Cruzer and SanDisk Ultra are trademarks of SanDisk Corporation, registered in the United States and other countries. SanDisk Extreme, Shoot & Store and TransFlash are trademarks of SanDisk Corporation. Memory Stick PRO Duo is a trademark of Sony Corporation. RS-MMC is a trademark of the MultiMediaCard Association. SanDisk Corporation is an authorized licensee of the miniSD trademark. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holders.
SanDisk Corporation
Condensed Consolidated Statements of Income
(In thousands, except per share data, unaudited)
Three Months Ended Six Months Ended
------------------- -------------------
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Product $391,327 $214,044 $730,106 $369,492
License and royalty 41,961 20,582 90,112 39,614
--------- --------- --------- ---------
Total revenue 433,288 234,626 820,218 409,106
Cost of product revenues 254,635 145,854 485,647 248,743
--------- --------- --------- ---------
Gross profits 178,653 88,772 334,571 160,363
Operating expenses:
Research and development 32,468 19,349 59,230 36,927
Sales and marketing 24,942 15,525 44,603 28,167
General and administrative 10,912 7,239 21,848 13,924
--------- --------- --------- ---------
Total operating expenses 68,322 42,113 125,681 79,018
Operating income 110,331 46,659 208,890 81,345
Equity in income (loss) of
joint ventures (233) (100) 414 39
Interest income 4,240 1,823 8,200 4,011
Interest expense (1,687) (1,687) (3,375) (3,375)
Income (loss) in investment in
foundries 22 (1,417) (551) (3,583)
Loss in equity investment - - - (4,500)
Other income (loss), net (361) 161 (317) (855)
--------- --------- --------- ---------
Total other income (expense) 1,981 (1,220) 4,371 (8,263)
Income before taxes 112,312 45,439 213,261 73,082
Provision for income taxes 41,701 4,113 79,082 6,831
--------- --------- --------- ---------
Net income $70,611 $41,326 $134,179 $66,251
========= ========= ========= =========
Net income per share
calculation:
Net income used in computing
basic net income per share $70,611 $41,326 $134,179 $66,251
Tax-effected interest and bond
amortization costs related to
convertible subordinated notes 1,208 1,744 2,410 3,464
--------- --------- --------- ---------
Net income used in computing
diluted net income per share $71,819 $43,070 $136,589 $69,715
========= ========= ========= =========
Shares used in computing net
income per share
Basic 161,756 139,203 161,481 138,890
Diluted 188,745 164,737 189,100 162,325
Net income per share
Basic $0.44 $0.30 $0.83 $0.48
Diluted $0.38 $0.26 $0.72 $0.43
SanDisk Corporation
Condensed Consolidated Balance Sheets
(In thousands)
June 27, March 28, Dec. 28,
2004 2004 2003*
----------- ----------- -----------
ASSETS (unaudited) (unaudited)
Current Assets:
Cash and cash equivalents $613,964 $736,361 $734,479
Short-term investments 686,599 576,768 528,117
Investment in foundries 30,294 36,648 36,976
Accounts receivable, net 198,817 135,435 184,236
Inventories 163,487 159,710 116,896
Deferred tax asset 70,806 71,054 70,806
Other current assets 60,220 27,917 53,394
----------- ----------- -----------
Total current assets 1,824,187 1,743,893 1,724,904
Property and equipment, net 69,327 62,062 59,470
Investment in foundries 43,985 43,955 40,446
Investment in FlashVision 145,671 145,584 144,616
Deferred tax asset 7,927 7,927 7,927
Note receivable, related party 21,895 22,164 -
Deposits and other non-current
assets 36,759 37,059 46,151
----------- ----------- -----------
Total Assets $2,149,751 $2,062,644 $2,023,514
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $78,830 $77,346 $88,737
Accounts payable to related
parties 51,083 51,664 45,013
Accrued payroll and related
expenses 28,518 18,319 28,233
Income taxes payable 11,483 26,323 37,254
Research and development
liability, related party 13,900 8,100 11,800
Other accrued liabilities 36,872 38,421 36,661
Deferred income on shipments to
distributors and retailers and
deferred revenue 122,353 97,992 99,136
----------- ----------- -----------
Total current liabilities 343,039 318,165 346,834
Convertible subordinated notes
payable 150,000 150,000 150,000
Deferred revenue and non-current
other liabilities 24,317 24,430 25,992
----------- ----------- -----------
Total Liabilities 517,356 492,595 522,826
Commitments and contingencies
Stockholders' Equity:
Preferred stock - - -
Common stock 1,216,831 1,213,973 1,207,958
Retained earnings 387,803 317,192 253,624
Accumulated other comprehensive
income 27,761 38,884 39,106
----------- ----------- -----------
Total stockholders' equity 1,632,395 1,570,049 1,500,688
Total Liabilities and
Stockholders' Equity $2,149,751 $2,062,644 $2,023,514
=========== =========== ===========
*Information derived from the audited
Consolidated Financial Statements.
SanDisk Corporation
Condensed Consolidated Comparative Statements of Cash Flows
(in thousands)
Three months ended Six months ended
June 27, June 29, June 27, June 29,
2004 2003 2004 2003
-------------------- --------------------
Cash flows from Operating
activities:
Net income $70,611 $41,326 $134,179 $66,251
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 8,603 5,071 16,602 9,921
Loss (gain) on investment
in foundries (22) 1,417 551 3,583
Loss on equity investment 0 0 0 4,500
Equity in (income) loss of
joint ventures 233 100 (414) (39)
Other non-cash adjustments 874 (8,625) 2,694 (13,719)
Changes in operating
assets and liabilities:
Accounts receivable (63,971) (21,942) (16,851) (21,827)
Inventories (3,777) 13,578 (46,591) 14,115
Other current and non-
current assets (31,440) (14,432) (2,593) (4,525)
Investment in
FlashVision (321) 237 (642) 416
Note receivable,
related party 269 0 (21,895) 0
Accounts payable 1,484 21,402 (9,907) 27,048
Accrued payroll and
related expenses 10,199 7,024 285 2,548
Income taxes payable (16,173) 845 (27,104) 2,704
Other current liabilities,
related party (581) 12,217 6,070 9,131
Research and development
liabilities, related
parties 5,800 0 2,100 (6,007)
Deferred revenue and
other liabilities 21,212 4,163 20,266 2,284
---------- --------- --------------------
Total adjustments (67,611) 21,055 (77,429) 30,133
---------- --------- --------------------
Net cash provided by
operating activities 3,000 62,381 56,750 96,384
---------- --------- ---------- ---------
Cash flows from Investing
activities:
Purchases of short term
investments (405,837) (65,615) (646,032) (161,162)
Proceeds from sale of
short term investments 293,295 58,025 485,017 115,322
Investment in foundries 0 (3,600) 0 (3,600)
Acquisition of capital
equipment (15,713) (17,146) 0 (25,095)
Deposit for acquisition
of capital equipment 0 0 (25,155) 0
Proceeds of sale of
fixed assets 0 129 32 129
---------- --------- ---------- ---------
Net cash used in investing
activities (128,255) (28,207) (186,138) (74,406)
---------- --------- ---------- ---------
Cash flows from financing
activities:
Sale of common stock 2,858 4,245 8,873 6,417
---------- --------- ---------- ---------
Net cash provided by
financing activities 2,858 4,245 8,873 6,417
---------- --------- ---------- ---------
Net increase (decrease) in
cash and cash equivalents (122,397) 38,419 (120,515) 28,395
Cash and cash equivalents at
beginning of period 736,361 210,761 734,479 220,785
---------- --------- ---------- ---------
Cash and cash equivalents at
end of period $613,964 $249,180 $613,964 $249,180
========== ========= ========== =========
Additional information:
Net change in cash and cash
equivalents $(122,397) $38,419 $(120,515) $28,395
Net change in short-term
investments 109,831 7,399 158,482 45,452
---------- --------- ---------- ---------
Net change in cash, cash
equivalents and short-term
investments $(12,566) $45,818 $37,967 $73,847
========== ========= ========== =========
--------------------------------------------------------------------------------
Contact:
SanDisk Corporation
Lori Barker Padon, 408-542-9565 (Investor)
Mike Wong, 408-548-0223 (Media)
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