SanDisk Announces Third Quarter 2010 Financial Results
Thursday, October 21, 2021 4:05 PM

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Oct. 21, 2010 (Business Wire) -- SanDisk Corporation (NASDAQ:SNDK), the global leader in flash memory cards, today announced results for the third quarter ended October 3, 2010. Total third quarter revenue of $1.23 billion increased 32% on a year-over-year basis and increased 5% on a sequential basis. Net income, in accordance with U.S. Generally Accepted Accounting Principles (GAAP), was $322 million, or $1.34 per diluted share, compared to GAAP net income of $231 million, or $0.99 per diluted share, in the third quarter of 2009 and GAAP net income of $258 million, or $1.08 per diluted share, in the second quarter of 2010.

On a non-GAAP basis, which excludes the impact of share-based compensation expense, amortization of acquisition-related intangible assets, non-cash economic interest expense associated with the cash-settled convertible notes, and related tax adjustments and valuation allowance, third-quarter net income was $311 million, or $1.30 per diluted share, compared to net income of $176 million, or $0.75 per diluted share, in the third quarter of 2009 and net income of $258 million, or $1.08 per diluted share, in the second quarter of 2010. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“SanDisk delivered outstanding results for the third quarter, driven by continued strength in our OEM and retail businesses. Solid execution, stable pricing and substantial cost reductions led to record high operating and net income and our highest ever total gross margin of 52%. For 2011, we are bullish about continuing growth in our diversified channels, including further substantial inroads for our embedded storage products in smartphones, tablet PC’s and other mobile devices,” said Eli Harari, Chairman and CEO of SanDisk.

THIRD QUARTER 2010 METRICS & HIGHLIGHTS

  • Total revenue was $1.23 billion, up 32% year-over-year and up 5% sequentially.
  • Product revenue was $1.14 billion, up 40% year-over-year and up 4% sequentially.
  • License and royalty revenue was $96 million, down 21% year-over-year and up 9% sequentially.
  • Total gross profit, product gross profit and operating income compared on a year-over-year and sequential basis are shown in the table below:
Metric

in millions of US$, except %

    GAAP       Non-GAAP
    Q310     Q309     Q210       Q310     Q309     Q210
Total gross profit

% of total revenue

    $639

51.8%

    $436

46.7%

    $546

46.3%

      $644

52.2%

    $442

47.2%

    $551

46.7%

Product gross profit

% of product revenue

    $543

47.7%

    $315

38.7%

    $459

42.0%

      $548

48.1%

    $320

39.4%

    $463

42.4%

Operating income

% of total revenue

    $432

35.0%

    $240

25.7%

    $359

30.4%

      $457

37.0%

    $263

28.1%

    $377

32.0%

  • Cash flow from operations was $379 million and free cash flow was $416 million.
  • Total cash and equivalents, short and long-term marketable securities at the end of the third quarter were $5.1 billion compared to $2.6 billion at the end of the third quarter of 2009 and $3.7 billion at the end of the second quarter of 2010.
  • SanDisk completed a $1.0 billion senior unsecured convertible notes offering due 2017. The notes will pay interest semi-annually at a rate of 1.5% per annum.
  • Average price per gigabyte sold declined 20% on a year-over-year basis and declined 5% sequentially.

OTHER RECENT KEY ANNOUNCEMENTS

  • SanDisk introduced the industry’s first embedded solid state drive (SSD), the SanDisk® integrated SSD (iSSD), a high-capacity storage solution for use in fast-growing mobile computing platforms such as tablet PCs and ultra-thin notebooks, in capacities ranging from 4 gigabytes to 64 gigabytes.
  • SanDisk launched a new sub-$100 media player, Sansa® Fuze+, with a microSDHC card slot that is compatible with the SanDisk® slotRadio pre-loaded music card or with any other microSD card containing music, videos and photos.

CONFERENCE CALL

SanDisk’s third quarter 2010 conference call is scheduled for 2:00 P.M., Pacific Daylight Time, Thursday, October 21, 2010. 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 719-325-4827 and the dial-in password is 9488738. 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.

SCHEDULED INTERVIEW

SanDisk Corporation Chairman and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC’s “Closing Bell with Maria Bartiromo,” on Thursday, October 21, 2010, at approximately 1:20 P.M., Pacific Daylight Time.

FORWARD LOOKING STATEMENTS

This news release contains certain forward-looking statements, including statements about our business prospects and outlook, and our expectations regarding our business, including expected growth in flash memory demand, including overall growth in our diversified sales channels and growth in the demand for embedded storage products in smartphones, tablets and other mobile devices, 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;
  • less than anticipated demand, including due to economic weakness in our markets and among consumers generally;
  • unpredictable or changing demand for our products, particularly for certain form factors or capacities;
  • excess captive memory output or capacity which could result in write-downs for excess inventory, lower of cost or market reserves, fixed costs associated with under-utilized capacity, or other consequences;
  • insufficient captive and non-captive memory supply to meet demand;
  • insufficient non-memory materials or capacity from our suppliers and contract manufacturers to meet demand; or increases in cost of non-memory materials or capacity;
  • our products may not perform as expected; and
  • 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 second quarter of fiscal 2010.

ABOUT SANDISK

SanDisk Corporation is the global leader in flash memory cards, from research, manufacturing and product design to consumer branding and retail distribution. SanDisk’s product portfolio includes flash memory cards for mobile phones, digital cameras and camcorders; digital audio/video players; USB flash drives for consumers and the enterprise; embedded memory for mobile devices; and solid state drives for computers. SanDisk is a Silicon Valley-based S&P 500 company, with more than half its sales outside the United States.

SanDisk, the SanDisk logo and Sansa Fuze are trademarks of SanDisk Corporation, registered in the United States and other countries. SDHC is a trademark of SD-3C LLC. 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
October 3, 2021 September 27, 2021 October 3, 2021 September 27, 2021
Revenues:
Product $ 1,137,593 $ 813,811 $ 3,222,103 $ 2,012,342
License and royalty 96,080 121,360 277,301 312,873
Total revenues 1,233,673 935,171 3,499,404 2,325,215
 
Cost of product revenues 591,296 495,769 1,804,203 1,631,691
Amortization of acquisition-related intangible assets 3,132 3,132 9,396 9,396
Total cost of product revenues 594,428 498,901 1,813,599 1,641,087
Gross profit 639,245 436,270 1,685,805 684,128
 
Operating expenses:
Research and development 111,518 94,925 309,970 273,080
Sales and marketing 50,390 55,750 150,985 144,037
General and administrative 44,524 45,350 118,647 122,311
Amortization of acquisition-related intangible assets 1,089 292 1,672 875
Restructuring and other

-

-

-

765
Total operating expenses 207,521 196,317 581,274 541,068
Operating income 431,724 239,953 1,104,531 143,060
 
Other income (expense) (3,168) (2,538) 5,794 (16,515)
Income before provision for income taxes 428,556 237,415 1,110,325 126,545
Provision for income taxes 106,464 6,122 295,648 50,740
Net income $ 322,092 $ 231,293 $ 814,677 $ 75,805
 
Net income per share:
Basic $ 1.38 $ 1.02 $ 3.52 $ 0.33
Diluted $ 1.34 $ 0.99 $ 3.41 $ 0.33
 
Shares used in computing net income per share:
Basic 233,918 227,771 231,631 227,092
Diluted 240,717 232,724 239,249 230,936
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
October 3, 2021 September 27, 2021 October 3, 2021 September 27, 2021
 
SUMMARY RECONCILIATION OF NET INCOME
GAAP NET INCOME $ 322,092 $ 231,293 $ 814,677 $ 75,805
Share-based compensation (a) 20,944 19,374 52,791 58,058
Amortization of acquisition-related intangible assets (b) 4,221 3,424 11,068 10,271
Convertible debt interest (c) 17,983 13,410 46,112 39,495
Income tax adjustments (d)   (54,387 )   (91,990 )   (130,953 )   (33,633 )
NON-GAAP NET INCOME $ 310,853   $ 175,511   $ 793,695   $ 149,996  
 
GAAP COST OF PRODUCT REVENUES $ 594,428 $ 498,901 $ 1,813,599 $ 1,641,087
Share-based compensation (a) (1,205 ) (2,347 ) (4,972 ) (7,167 )
Amortization of acquisition-related intangible assets (b)   (3,132 )   (3,132 )   (9,396 )   (9,396 )
NON-GAAP COST OF PRODUCT REVENUES $ 590,091   $ 493,422   $ 1,799,231   $ 1,624,524  
 
GAAP GROSS PROFIT $ 639,245 $ 436,270 $ 1,685,805 $ 684,128
Share-based compensation (a) 1,205 2,347 4,972 7,167
Amortization of acquisition-related intangible assets (b)   3,132     3,132     9,396     9,396  
NON-GAAP GROSS PROFIT $ 643,582   $ 441,749   $ 1,700,173   $ 700,691  
 
GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 111,518 $ 94,925 $ 309,970 $ 273,080
Share-based compensation (a)   (6,629 )   (7,137 )   (19,975 )   (22,341 )
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 104,889   $ 87,788   $ 289,995   $ 250,739  
 
GAAP SALES AND MARKETING EXPENSES $ 50,390 $ 55,750 $ 150,985 $ 144,037
Share-based compensation (a)   (2,959 )   (3,918 )   (8,300 )   (11,153 )
NON-GAAP SALES AND MARKETING EXPENSES $ 47,431   $ 51,832   $ 142,685   $ 132,884  
 
GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 44,524 $ 45,350 $ 118,647 $ 122,311
Share-based compensation (a)   (10,151 )   (5,972 )   (19,544 )   (17,397 )
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 34,373   $ 39,378   $ 99,103   $ 104,914  
 
GAAP TOTAL OPERATING EXPENSES $ 207,521 $ 196,317 $ 581,274 $ 541,068
Share-based compensation (a) (19,739 ) (17,027 ) (47,819 ) (50,891 )
Amortization of acquisition-related intangible assets (b)   (1,089 )   (292 )   (1,672 )   (875 )
NON-GAAP TOTAL OPERATING EXPENSES $ 186,693   $ 178,998   $ 531,783   $ 489,302  
 
GAAP OPERATING INCOME $ 431,724 $ 239,953 $ 1,104,531 $ 143,060
Cost of product revenues adjustments (a) (b) 4,337 5,479 14,368 16,563
Operating expense adjustments (a) (b)   20,828     17,319     49,491     51,766  
NON-GAAP OPERATING INCOME $ 456,889   $ 262,751   $ 1,168,390   $ 211,389  
 
GAAP OTHER INCOME (EXPENSE) $ (3,168 ) $ (2,538 ) $ 5,794 $ (16,515 )
Convertible debt interest (c)   17,983     13,410     46,112     39,495  
NON-GAAP OTHER INCOME (EXPENSE) $ 14,815   $ 10,872   $ 51,906   $ 22,980  
 
GAAP NET INCOME $ 322,092 $ 231,293 $ 814,677 $ 75,805
Cost of product revenues adjustments (a) (b) 4,337 5,479 14,368 16,563
Operating expense adjustments (a) (b) 20,828 17,319 49,491 51,766
Convertible debt interest (c) 17,983 13,410 46,112 39,495
Income tax adjustments (d)   (54,387 )   (91,990 )   (130,953 )   (33,633 )
NON-GAAP NET INCOME $ 310,853   $ 175,511   $ 793,695   $ 149,996  
 
Diluted net income per share:
GAAP $ 1.34 $ 0.99 $ 3.41 $ 0.33
Non-GAAP $ 1.30 $ 0.75 $ 3.33 $ 0.65
 
Shares used in computing diluted net income per share:
GAAP 240,717 232,724 239,249 230,936
Non-GAAP 239,798 232,961 238,302 231,424
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, the amortization of acquisition-related intangible assets related to acquisitions of Matrix Semiconductor, Inc. in January 2006 and MusicGremlin, Inc. in June 2008, and non-cash economic interest expense associated with our cash-settled convertible notes, we believe the inclusion of non-GAAP financial measures provide 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 and non-cash economic interest expense associated with our cash-settled convertible notes, 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 and developed technology, related to the acquisitions of Matrix Semiconductor, Inc. (January 2006) and MusicGremlin, Inc. (June 2008).
 
(c) Incremental interest expense relating to the non-cash economic interest expense associated with the Company's cash-settled 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 and a valuation allowance on deferred taxes.
     
SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
 
October 3, 2021   January 3, 2022
 
ASSETS
Current assets:
Cash and cash equivalents $ 865,388 $ 1,100,364
Short-term marketable securities 2,038,430 819,002
Accounts receivable from product revenues, net 339,806 234,407
Inventory 526,861 596,493
Deferred taxes 94,204 66,869
Other current assets   63,406     97,639  
Total current assets 3,928,095 2,914,774
 
Long-term marketable securities 2,147,227 1,097,095
Property and equipment, net 248,995 300,997
Notes receivable and investments in the flash ventures with Toshiba 1,619,551 1,507,550
Deferred taxes 76,400 21,210
Intangible assets, net 41,690 58,076
Other non-current assets   54,180     102,017  
Total assets $ 8,116,138   $ 6,001,719  
 
LIABILITIES
Current liabilities:
Accounts payable trade $ 151,677 $ 134,427
Accounts payable to related parties 163,907 182,091
Convertible short-term debt

-

75,000
Other current accrued liabilities 332,713 234,079
Deferred income on shipments to distributors and retailers and deferred revenue   253,480     245,513  
Total current liabilities 901,777 871,110
 
Convertible long-term debt 1,687,752 934,722
Non-current liabilities   344,334     287,478  
Total liabilities 2,933,863 2,093,310
 
EQUITY
Stockholders' equity:
Common stock 4,630,513 4,269,074
Retained earnings (accumulated deficit) 327,188 (487,489 )
Accumulated other comprehensive income   227,732     128,713  
Total stockholders' equity 5,185,433 3,910,298
Non-controlling interests   (3,158 )   (1,889 )
Total equity   5,182,275     3,908,409  
Total liabilities and equity $ 8,116,138   $ 6,001,719  
         
 
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
 
Three months ended Nine months ended
October 3, 2021 September 27, 2021 October 3, 2021 September 27, 2021
Cash flows from operating activities:
Net income $ 322,092 $ 231,293 $ 814,677 $ 75,805
Adjustments to reconcile net income to net cash flows from operating activities:
Deferred taxes (16,940 ) 218 (95,849 ) 2,521
Depreciation 32,970 37,943 102,075 114,595
Amortization 24,761 19,576 65,349 56,686
Provision for doubtful accounts (205 ) 2,454 (2,804 ) 1,675
Share-based compensation expense 20,944 19,374 52,791 58,058
Excess tax benefit from share-based compensation (6,232 )

-

(19,960 )

-

Impairments, restructuring and other (11,349 ) (1,432 ) (27,587 ) 5,701
Other non-operating 6,769 1,950 25,708 983
Changes in operating assets and liabilities:
Accounts receivable from product revenues 5,663 (131,300 ) (104,272 ) (159,260 )
Inventory (33,256 ) (98,699 ) 66,974 (37,151 )
Other assets (21,928 ) 68,467 1,649 339,275
Accounts payable trade 36,431 7,061 17,359 (117,625 )
Accounts payable to related parties (33,137 ) 45,994 (18,184 ) (77,269 )
Other liabilities   52,567     35,473     214,569     (164,170 )
Total adjustments   57,058     7,079     277,818     24,019  
Net cash provided by operating activities   379,150     238,372     1,092,495     99,824  
 
Cash flows from investing activities:
Purchases of short and long-term marketable securities (2,788,994 ) (701,768 ) (4,231,953 ) (1,237,877 )
Proceeds from sale of short and long-term marketable securities 944,838 285,088 1,636,549 857,718
Proceeds from maturities of short and long-term marketable securities 148,790 55,477 317,805 143,117
Proceeds from sale of assets

-

-

17,767

-

Acquisition of property and equipment (22,314 ) (10,687 ) (59,728 ) (43,354 )
Distribution from FlashVision Ltd.

-

-

122 12,713
Notes receivable issuance, Flash Partners Ltd. and Flash Alliance Ltd.

-

-

-

(377,923 )
Notes receivable proceeds, Flash Partners Ltd. and Flash Alliance Ltd. 59,664

-

59,664 330,149
Purchased technology and other assets  

-

    (7,500 )   (1,982 )   (10,653 )
Net cash used in investing activities   (1,658,016 )   (379,390 )   (2,261,756 )   (326,110 )
 
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs 982,500

-

982,500

-

Purchase of convertible bond hedge (292,900 )

-

(292,900 )

-

Proceeds from issuance of warrants 188,100

-

188,100

-

Repayment of debt financing

-

-

(75,000 )

-

Proceeds from employee stock programs 23,615 7,723 107,971 13,998
Excess tax benefit from share-based compensation   6,232    

-

    19,960    

-

 
Net cash provided by financing activities   907,547     7,723     930,631     13,998  
 
Effect of changes in foreign currency exchange rates on cash   (304 )   1,251     3,654     2,710  
 
Net decrease in cash and cash equivalents (371,623 ) (132,044 ) (234,976 ) (209,578 )
 
Cash and cash equivalents at beginning of period 1,237,011 884,527 1,100,364 962,061
       
Cash and cash equivalents at end of period $ 865,388   $ 752,483   $ 865,388   $ 752,483  

SanDisk Corporation
Jay Iyer, 408-801-2067 (Investor)
Ryan Donovan, 408-801-2857 (Media)


(Source: Business Wire )
(Source: Quotemedia)
 

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