SanDisk Corporation (NASDAQ:SNDK), a global leader in flash
storage solutions, today announced results for the first quarter
ended April 3, 2016. First quarter revenue of $1.37 billion
increased 3 percent on a year-over-year basis and decreased
11 percent sequentially.
On a GAAP(1) basis, first quarter net income was $78 million, or
$0.37 per share, compared to net income of $39 million,
or $0.17 per share, in the first quarter of 2015 and net
income of $135 million, or $0.65 per share, in the fourth
quarter of 2015.
On a non-GAAP(2)(3) basis, first quarter net income was
$167 million, or $0.82 per share, compared to net income
of $134 million, or $0.62 per share, in the first quarter
of 2015 and net income of $257 million, or $1.26 per
share, in the fourth quarter of 2015. For a reconciliation of
non-GAAP to GAAP results, see accompanying financial tables and
footnotes.
“Our first quarter results mark a solid start to 2016,” said
Sanjay Mehrotra, president and chief executive officer of SanDisk.
“We delivered year-over-year growth in revenue, earnings and cash
flow, and are pleased with the strength of our Q1 revenue in
enterprise solutions, client SSDs and removable products. We are
excited about the opportunities ahead as the combination of SanDisk
and Western Digital will provide our customers with a tremendous
breadth of solutions and deep expertise in storage across a range
of applications.”
KEY FINANCIAL RESULTS
(in millions, except percentages and per
share amounts)
GAAP (1)
Non-GAAP (2)
Q1’16
Q1’15 Q4’15 Q1’16
Q1’15 Q4’15 Revenue $1,366
$1,332 $1,543 $1,366 $1,332
$1,543
Gross profitpercent of revenue
$54340%
$54541%
$62541%
$57742%
$57443%
$65843%
Operating incomepercent of revenue
$13710%
$574%
$21814%
$23417%
$19815%
$33322%
EPS (3) $0.37 $0.17 $0.65 $0.82
$0.62 $1.26
OTHER FINANCIAL INFORMATION
(in millions)
Q1’16 Q1’15
Q4’15 Cash, cash equivalents, short and long-term marketable
securities $ 4,633 $ 4,394
$ 4,123 Less: aggregate principal amount of
convertible senior notes outstanding (2,497 )
(2,497 ) (2,497 ) Net cash (4)
$ 2,137 $ 1,898 $ 1,627
Net cash provided by operating activities $ 355
$ 309 $ 434 Less acquisition of
property and equipment, net (59 )
(98 ) (131 ) Change in investment and notes
receivable activity with Flash Ventures 189
(11 ) (27 ) Free cash flow (5)
$ 484 $ 200 $ 276
NEWS HIGHLIGHTS
- SanDisk and IBM announced a
collaboration to bring out a unique class of next-generation,
software-defined, all-flash storage solutions for the data center
utilizing SanDisk’s InfiniFlash™ System and software defined
storage featuring IBM Spectrum Scale™ filesystem from IBM. The
joint solution addresses the escalating datacenter challenges of
scale, performance, agility and break-through economics.
- SanDisk expanded its automotive
solutions with an automotive grade SD™ card featuring a new suite
of smart features including enhanced power failure protection, and
a memory health status monitor. SanDisk also extended these new
smart features to its SanDisk Industrial and SanDisk Industrial XT
SD cards.
- SanDisk introduced new retail removable
products, including introducing the world’s fastest microSD™ card,
featuring transfer speeds of up to 275MB/s*, and the SanDisk Ultra®
USB Type-C™ Flash Drive designed specifically for next-generation
devices with USB Type-C connectors.
In light of the pending acquisition of SanDisk by Western
Digital Corporation (“Western Digital”), SanDisk will not hold a
conference call to discuss its financial results. Concurrent with
this press release, SanDisk has published business and financial
commentary along with earnings presentation materials on its
website at www.sandisk.com/ir.
ABOUT SANDISK
SanDisk Corporation (NASDAQ: SNDK), a Fortune 500 and S&P
500 company, is a global leader in flash storage solutions. For
more than 25 years, SanDisk has expanded the possibilities of
storage, providing trusted and innovative products that have
transformed the electronics industry. Today, SanDisk’s quality,
state-of-the-art solutions are at the heart of many of the world's
largest data centers, and embedded in advanced smartphones, tablets
and PCs. SanDisk’s consumer products are available at hundreds of
thousands of retail stores worldwide. For more information, visit
www.sandisk.com.
©2016 SanDisk Corporation. All rights reserved. SanDisk and
SanDisk Ultra are trademarks of SanDisk Corporation, registered in
the United States and other countries. InfiniFlash is a trademark
of SanDisk Corporation. SD is a trademark of SD-3C, LLC. USB Type-C
is a trademark of USB Implementers Forum. Other brand names
mentioned herein are for identification purposes only and may be
the trademarks of their respective holder(s).
* Up to 275 MB/s read; up to 100 MB/s write. Based on
internal testing; performance may be lower depending upon host
device, interface, usage conditions and other factors. 1 MB =
1,000,000 bytes
(1) GAAP represents U.S. Generally Accepted Accounting
Principles. (2) Non-GAAP represents GAAP excluding the impact of
share-based compensation, inventory step-up expense, amortization
and impairment of acquisition-related intangible assets, Western
Digital acquisition-related expenses, gains and losses related to
the shortened duration and expected liquidation prior to their
effective maturity of marketable securities due to the pending
acquisition of SanDisk by Western Digital, gains and losses due to
the modifications and terminations of warrants, non-cash economic
interest expense associated with the convertible senior notes,
non-cash change in fair value of the liability component of the
convertible senior notes due to the conversion of a portion of the
1.5% Convertible Senior Notes due 2017 and related tax adjustments.
(3) Non-GAAP diluted shares are adjusted for the impact of
expensing share-based compensation and include the impact of
offsetting shares from the call options related to the convertible
senior notes. (4) Net cash is defined as cash, cash equivalents,
short and long-term marketable securities, minus the aggregate
principal amount of the outstanding convertible senior notes. (5)
Free cash flow is defined as net cash provided by operating
activities less (a) acquisition of property and equipment, net, and
(b) net investment and notes receivables activity with Flash
Ventures. Calculation of free cash flow may not agree to the sum of
the components presented due to rounding.
This news release contains certain forward-looking statements,
including those regarding our pending acquisition by Western
Digital, industry environment, our business prospects, our intended
financial, operational and strategic plans and priorities, our
future financial performance and market share, our customer base,
customer qualifications and product mix, technology trends and
adoption, strategic relationships, and new products and
technologies, that are based on our current expectations and
involve numerous risks and uncertainties that may cause these
forward-looking statements to be inaccurate.
Risks that may cause these forward-looking statements to be
inaccurate include, among others:
- the announcement and pendency of our
agreement to be acquired by Western Digital or the failure of our
pending acquisition by Western Digital to be completed on a timely
basis, or at all, or any materially burdensome conditions that may
be imposed, or inability to achieve the expected benefits from the
acquisition;
- failure to effectively or efficiently
execute on our financial, operational or strategic plans or
priorities, which may change, may not have the effects that we
anticipate or otherwise be successful on the timeline that we
expect or at all or may have unanticipated consequences;
- changes in industry supply and demand
environment, and production and pricing levels being different than
what we anticipate;
- competitive pricing pressures or
product mix changes, resulting in lower average selling prices,
lower revenues and reduced margins;
- excess or mismatched captive memory
output, capacity or inventory, resulting in lower average selling
prices, financial charges and impairments, lower gross margin or
other consequences, or insufficient or mismatched captive memory
output, capacity or inventory, resulting in lost revenue and growth
opportunities;
- inability to develop, or unexpected
difficulties or delays in developing or ramping with acceptable
yields, new technologies, such as 3D NAND technology, 3D ReRAM, or
the failure of new technologies to effectively compete with those
of our competitors;
- inability to reduce product costs to
keep pace with reductions in average selling prices, resulting in
lower or negative product gross margin;
- potential delays in product development
or lack of customer acceptance and qualification of our solutions,
including on new technologies, particularly our 3D NAND technology,
enterprise solutions, client SSDs and embedded flash storage
solutions;
- slower than anticipated growth, lower
than anticipated demand or weakness in demand in one or more of our
product categories, such as enterprise, embedded products or SSDs,
or adverse changes in our product or customer mix;
- failure to successfully sell enterprise
solutions on the timelines or in the quantities we expect or
transition our enterprise customers to our leading edge
solutions;
- failure or delays in making new
products or technologies available in the manner and capacities we
anticipate, whether due to technology or supply chain difficulties
or other factors;
- our 15-nanometer process technology,
our X3 NAND memory architecture, our 3D NAND technology or our
solutions utilizing these new technologies may not be available
when we expect, in the capacities that we expect or perform as
expected;
- failure to continue to expand or manage
the risks associated with our ventures, strategic partnerships and
commercial relationships, such as with Toshiba, including the risk
of early termination;
- inability to achieve the expected
benefits from acquisitions and strategic relationships in a timely
manner, or at all;
- industry and technology trends not
occurring in the timeline we anticipate or at all;
- capital investments requiring
additional cash or the unavailability of lease financing on terms
acceptable to us;
- the failure of all-flash storage
systems to achieve the various functionality, performance and cost
benefits currently anticipated, potential delays in product
development or lack of customer acceptance of all-flash storage
systems, and failure to manage and continue the collaboration with
IBM; 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 Annual Report on Form 10-K for the year
ended January 3, 2016.
All statements made in this news release are made only as of the
date of this release. We undertake no obligation to update the
information in this release in the event facts or circumstances
change after the date of this release.
All references to annual and quarterly periods refer to our
fiscal year and fiscal quarters.
Forward-Looking Statements
All statements included or incorporated by reference in this
document, other than statements or characterizations of historical
fact, are forward-looking statements within the meaning of the
federal securities laws, including Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. These forward-looking statements are based
on SanDisk Corporation’s (“SanDisk”) current expectations,
estimates and projections about the proposed merger, its business
and industry, management’s beliefs, and certain assumptions made by
SanDisk and Western Digital, all of which are subject to change.
Forward-looking statements can often be identified by words such as
“anticipates,” “expects,” “intends,” “plans,” “predicts,”
“believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,”
“could,” “potential,” “continue,” “ongoing,” similar expressions,
and variations or negatives of these words. Examples of such
forward-looking statements include, but are not limited to,
references to the anticipated benefits of the proposed merger and
the expected date of closing of the merger with Western Digital’s
wholly-owned subsidiary, Schrader Acquisition Corporation. These
forward-looking statements are not guarantees of future results and
are subject to risks, uncertainties and assumptions that could
cause actual results to differ materially and adversely from those
expressed in any forward-looking statement.
Important risk factors that may cause such a difference in
connection with the proposed merger include, but are not limited
to, the following factors: (1) the failure to satisfy conditions to
completion of the merger, including the receipt of all regulatory
approvals related to the merger; (2) uncertainties as to the timing
of the consummation of the merger and the ability of each party to
consummate the merger; (3) risks that the proposed merger disrupts
the current plans and operations of Western Digital or SanDisk; (4)
the ability of Western Digital and SanDisk to retain and hire key
personnel; (5) competitive responses to the proposed merger; (6)
unexpected costs, charges or expenses resulting from the merger;
(7) the outcome of any legal proceedings that could be instituted
against Western Digital, SanDisk or their respective directors
related to the merger agreement; (8) potential adverse reactions or
changes to business relationships resulting from the announcement
or completion of the merger; (9) the inability to obtain, or delays
in obtaining, cost savings and synergies from the merger; (10)
delays, challenges and expenses associated with integrating the
combined companies’ existing businesses and the indebtedness
planned to be incurred in connection with the merger; and (11)
legislative, regulatory and economic developments. These risks, as
well as other risks associated with the proposed merger, are more
fully discussed in the joint proxy statement/prospectus that is
included in the Registration Statement on Form S-4 filed with the
Securities and Exchange Commission (“SEC”) in connection with the
proposed merger. The forward-looking statements in this document
speak only as of the date of the particular statement. Neither
SanDisk nor Western Digital undertakes any obligation to revise or
update publicly any forward-looking statement to reflect future
events or circumstances.
In addition, actual results are subject to other risks and
uncertainties that relate more broadly to SanDisk’s overall
business, including those more fully described in SanDisk’s filings
with the SEC including its annual report on Form 10-K for the
fiscal year ended January 3, 2016, and its quarterly reports filed
on Form 10-Q for fiscal year 2015, and Western Digital’s overall
business and financial condition, including those more fully
described in Western Digital’s filings with the SEC including its
annual report on Form 10-K for the fiscal year ended July 3, 2015
and its quarterly reports filed on Form 10-Q for the current fiscal
year.
Additional Information and Where to Find It
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. Western Digital filed with the SEC a
Registration Statement on Form S-4 which includes a joint proxy
statement/prospectus of SanDisk and Western Digital. The
Registration Statement on Form S-4 was declared effective on
February 5, 2016. Each of SanDisk and Western Digital are providing
the joint proxy statement/prospectus to their respective
stockholders. SanDisk and Western Digital also plan to file other
documents with the SEC regarding the proposed merger. This document
is not a substitute for the joint proxy statement/prospectus or
registration statement or any other document which SanDisk or
Western Digital may file with the SEC in connection with the
proposed merger. INVESTORS AND SECURITY HOLDERS OF SANDISK AND
WESTERN DIGITAL ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER. You may obtain copies of all documents filed with
the SEC regarding this merger, free of charge, at the SEC’s website
(www.sec.gov). In addition, copies of the documents filed with the
SEC by SanDisk will be available free of charge on SanDisk’s
website at http://www.sandisk.com. Copies of the documents filed
with the SEC by Western Digital will be available free of charge on
Western Digital’s website at http://www.westerndigital.com.
SanDisk Corporation Preliminary Condensed
Consolidated Statements of Operations (in thousands, except
per share amounts, unaudited)
Three months ended April 3, 2016
March 29, 2015 Revenue $ 1,365,736 $ 1,332,241
Cost of revenue 794,135 762,483 Amortization of
acquisition-related intangible assets 28,276
24,756 Total cost of revenue 822,411
787,239 Gross profit 543,325 545,002 Operating
expenses: Research and development 244,187 222,726 Sales and
marketing 96,030 101,820 General and administrative 40,590 48,047
Amortization of acquisition-related intangible assets 6,397 13,681
Impairment of acquisition-related intangible assets
―
61,000 Restructuring and other 47 40,541 Western Digital
acquisition-related expenses 18,963
―
Total operating expenses 406,214
487,815 Operating income 137,111 57,187 Other income
(expense), net (15,350 ) (23,570 ) Income before
income taxes 121,761 33,617 Provision for (benefit from)
income taxes 43,408 (5,408 ) Net income $
78,353 $ 39,025 Net income per share: Basic $
0.39 $ 0.18 Diluted $ 0.37 $ 0.17 Shares used in computing
net income per share: Basic 201,928 211,428 Diluted 209,923 224,049
SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating
Results (1) (in thousands, except per share data,
unaudited) Three months ended April 3,
2016 March 29, 2015 SUMMARY RECONCILIATION OF
NET INCOME: GAAP NET INCOME $ 78,353 $ 39,025
Share-based compensation (a) 43,699 41,410 Amortization of
acquisition-related intangible assets (b) 34,673 38,437 Impairment
of acquisition-related intangible assets (c)
―
61,000 Western Digital acquisition-related expenses (d) 18,987 ―
Convertible debt interest (e) 23,333 22,134 Income tax adjustments
(f) (31,753 ) (68,319 )
NON-GAAP NET INCOME $
167,292 $ 133,687
GAAP COST OF REVENUE
$ 822,411 $ 787,239 Share-based compensation (a) (5,376 ) (4,062 )
Amortization of acquisition-related intangible assets (b)
(28,276 ) (24,756 )
NON-GAAP COST OF REVENUE $
788,759 $ 758,421
GAAP GROSS PROFIT $
543,325 $ 545,002 Share-based compensation (a) 5,376 4,062
Amortization of acquisition-related intangible assets (b)
28,276 24,756
NON-GAAP GROSS PROFIT $
576,977 $ 573,820
GAAP RESEARCH AND
DEVELOPMENT EXPENSES $ 244,187 $ 222,726 Share-based
compensation (a) (21,960 ) (21,043 )
NON-GAAP
RESEARCH AND DEVELOPMENT EXPENSES $ 222,227 $ 201,683
GAAP SALES AND MARKETING EXPENSES $ 96,030 $
101,820 Share-based compensation (a) (9,355 ) (9,535
)
NON-GAAP SALES AND MARKETING EXPENSES $ 86,675 $
92,285
GAAP GENERAL AND ADMINISTRATIVE
EXPENSES $ 40,590 $ 48,047 Share-based compensation (a)
(7,008 ) (6,770 )
NON-GAAP GENERAL AND ADMINISTRATIVE
EXPENSES $ 33,582 $ 41,277
GAAP TOTAL
OPERATING EXPENSES $ 406,214 $ 487,815 Share-based compensation
(a) (38,323 ) (37,348 ) Amortization of acquisition-related
intangible assets (b) (6,397 ) (13,681 ) Impairment of
acquisition-related intangible assets (c)
―
(61,000 ) Western Digital acquisition-related expenses (d)
(18,963 ) ―
NON-GAAP TOTAL OPERATING EXPENSES $
342,531 $ 375,786
GAAP OPERATING INCOME
$ 137,111 $ 57,187 Cost of revenue adjustments (a) (b) 33,652
28,818 Operating expense adjustments (a) (b) (c) (d) 63,683
112,029
NON-GAAP OPERATING INCOME $
234,446 $ 198,034
GAAP OTHER INCOME
(EXPENSE), NET $ (15,350 ) $ (23,570 ) Western Digital
acquisition-related expenses (d) 24 ― Convertible debt interest (e)
23,333 22,134
NON-GAAP OTHER INCOME
(EXPENSE), NET $ 8,007 $ (1,436 )
GAAP NET
INCOME $ 78,353 $ 39,025 Cost of revenue adjustments (a) (b)
33,652 28,818 Operating expense adjustments (a) (b) (c) (d) 63,683
112,029 Other income (expense) adjustments (d) (e) 23,357 22,134
Income tax adjustments (f) (31,753 ) (68,319 )
NON-GAAP NET INCOME $ 167,292 $ 133,687
Diluted net income per share: GAAP $ 0.37 $ 0.17 Non-GAAP $ 0.82 $
0.62 Shares used in computing diluted net income per share:
GAAP 209,923 224,049 Non-GAAP (g) 204,001 216,842
SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating
Results (1) (in thousands, unaudited)
Three months ended April 3, 2016 March 29,
2015 SUMMARY RECONCILIATION OF DILUTED SHARES:
GAAP 209,923 224,049 Adjustments for share-based
compensation (64 ) 220 Offsetting shares from call options (5,858 )
(7,427 )
Non-GAAP (g) 204,001 216,842
(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 they are consistent with the
financial models and estimates published by many analysts who
follow us. For example, because the non-GAAP results exclude the
expenses we recorded for share-based compensation, amortization of
acquisition-related intangible assets related to acquisitions of
FlashSoft Corporation in February 2012, Schooner Information
Technology, Inc. in June 2012, SMART Storage Systems in August 2013
and Fusion-io, Inc. in July 2014, inventory step-up expense,
impairment of acquisition-related in-process research and
development intangible assets, Western Digital Corporation
acquisition-related expenses, gains and losses related to the
shortened duration or liquidation prior to their effective maturity
of marketable securities due to the pending acquisition of SanDisk
by Western Digital, non-cash economic interest expense associated
with the convertible senior notes, non-cash change in fair value of
the liability component of the convertible senior notes due to the
conversion of a portion of the 1.5% Convertible Senior Notes due
2017, gains and losses related to modifications and terminations of
warrants and related tax adjustments, we believe the inclusion of
non-GAAP financial measures provides consistency in our financial
reporting. In addition, our non-GAAP diluted shares are adjusted
for the impact of expensing share-based compensation and include
the impact of the call options which, when exercised, will offset
the issuance of dilutive shares from the convertible senior notes,
while our GAAP diluted shares exclude the anti-dilutive impact of
these call options. 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
charges, such as share-based compensation, amortization of
acquisition-related intangible assets, inventory step-up expense,
impairment of acquisition-related in-process research and
development intangible assets, Western Digital acquisition-related
expenses, gains and losses related to the shortened duration or
liquidation prior to their effective maturity of marketable
securities due to the pending acquisition of SanDisk by Western
Digital, non-cash economic interest expense associated with the
convertible senior notes, non-cash change in fair value of the
liability component of the convertible senior notes due to the
conversion of a portion of the 1.5% Convertible Senior Notes due
2017, gains and losses related to modifications and terminations of
warrants 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 of acquisition-related
intangible assets, primarily developed technology, customer
relationships, and trademarks and trade names related to the
acquisitions of FlashSoft Corporation, Schooner Information
Technology, Inc., SMART Storage Systems and Fusion-io, Inc.
(c)
Impairment of acquisition-related
in-process research and development intangible assets related to
the acquisition of Fusion-io, Inc.
(d)
Incremental expense related to the pending
acquisition of SanDisk by Western Digital, primarily for
transaction, legal, employee-related and other costs, gains and
losses related to the shortened duration and expected liquidation
prior to their effective maturity date of marketable securities,
and gains and losses related to modifications and terminations of
warrants.
(e)
Incremental interest expense related to
the non-cash economic interest expense associated with the
convertible senior notes and the non-cash change in fair value of
the liability component of the convertible senior notes due to the
conversion of a portion of the 1.5% Convertible Senior Notes due
2017.
(f)
Income taxes associated with certain
non-GAAP to GAAP adjustments and the effects of one-time income tax
adjustments recorded in a specific quarter for GAAP purposes are
reflected on a forecast basis in the non-GAAP tax rate but not in
the forecasted GAAP tax rate.
(g)
Non-GAAP diluted shares are adjusted for
the impact of expensing share-based compensation and include the
impact of offsetting shares from the call options related to the
convertible senior notes.
SanDisk Corporation Preliminary Condensed
Consolidated Balance Sheets (in thousands, unaudited)
April 3, 2016 January 3, 2016
ASSETS Current assets: Cash and cash equivalents $
3,271,927 $ 1,478,948 Short-term marketable securities 1,249,367
2,527,245 Accounts receivable, net 497,183 618,191 Inventory
881,056 809,395 Other current assets 253,847
226,007 Total current assets 6,153,380 5,659,786
Long-term marketable securities 112,195 117,142 Property and
equipment, net 790,402 817,130 Notes receivable and investments in
Flash Ventures 899,419 1,009,989 Deferred taxes 310,724 325,033
Goodwill 831,328 831,328 Intangible assets, net 266,644 296,726
Other non-current assets 147,764 173,627
Total assets $ 9,511,856 $ 9,230,761
LIABILITIES, CONVERTIBLE SHORT-TERM DEBT CONVERSION OBLIGATION
AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable
trade $ 292,797 $ 323,280 Accounts payable to related parties
194,580 177,510 Convertible short-term debt (1) 2,175,578 913,178
Terminated warrant liability 417,934 ― Other current accrued
liabilities 405,922 353,940 Deferred income on shipments to
distributors and retailers and deferred revenue 205,798
235,572 Total current liabilities 3,692,609
2,003,480 Convertible long-term debt (1) ― 1,237,776
Non-current liabilities 179,419 170,093
Total liabilities 3,872,028 3,411,349
Convertible short-term debt conversion obligation (1)
309,753 80,488 Stockholders' equity: Common stock 4,612,183
5,203,926 Retained earnings 812,225 733,937 Accumulated other
comprehensive loss (94,333 ) (198,939 ) Total
stockholders' equity 5,330,075 5,738,924
Total liabilities, convertible short-term debt conversion
obligation and stockholders' equity $ 9,511,856 $ 9,230,761
(1) As of April 3, 2016, the convertible debt is convertible due to
the pending acquisition of SanDisk by Western Digital Corporation
and as a result is classified as short term. The convertible
short-term debt conversion obligation represents the difference
between the carrying values prior to debt issuance costs and the
principal amounts of the convertible debt due in cash upon
conversion.
SanDisk Corporation Preliminary
Condensed Consolidated Statements of Cash Flows (in
thousands, unaudited) Three
months ended April 3, 2016 March 29, 2015
Cash flows from operating activities: Net income $ 78,353 $
39,025 Adjustments to reconcile net income to net cash
provided by operating activities: Deferred taxes 14,553 (965 )
Depreciation 68,356 69,081 Amortization 70,991 83,374 Provision for
doubtful accounts (443 ) 330 Share-based compensation expense
43,699 41,410 Excess tax benefit from share-based plans (5,743 )
(8,865 ) Impairment and other 641 63,709 Other non-operating
(23,733 ) (4,187 ) Changes in operating assets and liabilities:
Accounts receivable, net 121,451 252,899 Inventory (71,799 )
(13,945 ) Other assets (5,294 ) (94,673 ) Accounts payable trade
(16,209 ) (26,090 ) Accounts payable to related parties 17,070
11,819 Other liabilities 63,250 (104,057 )
Total adjustments 276,790 269,840 Net
cash provided by operating activities 355,143
308,865
Cash flows from investing activities:
Purchases of short and long-term marketable securities (299,154 )
(692,656 ) Proceeds from sales of short and long-term marketable
securities 1,361,719 1,045,097 Proceeds from maturities of short
and long-term marketable securities 207,896 99,881 Acquisition of
property and equipment, net (59,458 ) (98,287 ) Notes receivable
issuances to Flash Ventures (45,723 ) (100,499 ) Notes receivable
proceeds from Flash Ventures 234,524 89,693 Purchased technology
and other assets 16,628 (1,500 ) Net cash
provided by investing activities 1,416,432
341,729
Cash flows from financing activities:
Repayment of debt financing ― (68 ) Proceeds from employee stock
programs 39,344 30,844 Excess tax benefit from share-based plans
5,743 8,865 Dividends paid (2,574 ) (64,503 ) Repurchase of common
stock ― (750,140 ) Taxes paid related to net share settlement of
equity awards (30,525 ) (33,759 ) Net cash provided
by (used in) financing activities 11,988
(808,761 ) Effect of changes in foreign currency exchange
rates on cash 9,416 (896 ) Net increase
(decrease) in cash and cash equivalents 1,792,979 (159,063 )
Cash and cash equivalents at beginning of period 1,478,948 809,003
Cash and cash equivalents at end of period $
3,271,927 $ 649,940
SanDisk
Corporation Preliminary Quarterly Metrics
(unaudited) Revenue Mix by Category (1)
% of
revenue Percentages may not add to 100% due to rounding
Q1'14 Q2'14
Q3'14 Q4'14
Q1'15 Q2'15
Q3'15 Q4'15
Q1'16 Removable (2) 40 % 40 % 38 % 33 % 38 % 44
% 37 % 41 % 39 % Embedded (3) 20 % 19 % 24 % 26 % 25 % 20 %
27 % 22 % 16 % Enterprise Solutions (4) 6 % 8 % 10 % 15 % 14
% 14 % 11 % 13 % 16 % Client SSD Solutions (5) 22 % 21 % 17
% 16 % 13 % 10 % 10 % 12 % 13 % Other (6) 11 % 12 % 11 % 10
% 10 % 11 % 15 % 12 % 16 % Total Revenue 100 % 100 % 100 %
100 % 100 % 100 % 100 % 100 %
100
%
(1) Revenue is estimated based on analysis
of the information the company collects in its sales reporting
processes.
(2) Removable includes products such as
cards, USB flash drives and audio/video players.
(3) Embedded includes products that attach
to a host system board.
(4) Enterprise Solutions includes SSDs,
system solutions and software used in data center applications.
(5) Client SSD Solutions includes SSDs
used in client devices and associated software.
(6) Other includes wafers, components,
accessories, and license and royalties.
Revenue Mix by Channel (1) % of revenue
Q1'14 Q2'14
Q3'14 Q4'14
Q1'15 Q2'15
Q3'15 Q4'15
Q1'16 Commercial (2) 65 % 67 % 68 % 69 %
65 % 61 % 67 % 61 % 64 % Retail 35 % 33 % 32 % 31 % 35 % 39
% 33 % 39 % 36 % Total Revenue 100 % 100 % 100 % 100 % 100 %
100 % 100 % 100 % 100 %
(1) Revenue is estimated based on analysis
of the information the company collects in its sales reporting
processes.
(2) Commercial includes revenue from OEMs,
system integrators, value-added resellers, direct sales, and
license and royalties.
SanDisk Corporation Preliminary Quarterly
and Annual Metrics (unaudited)
Q1'14 Q2'14
Q3'14 Q4'14
Q1'15 Q2'15
Q3'15 Q4'15
Q1'16 Q/Q Change in Gigabytes
Sold -10 % +31 % +9 % +4 % -15 % -1 % +49 % +23 % -6 % Y/Y
Change in Gigabytes Sold +20 % +51 % +43 % +32 % +24 % -6 % +30 %
+53 % +71 % Q/Q Change in ASP/Gigabyte -3 % -16 % -3 % -4 %
-10 % -6 % -22 % -10 % -8 % Y/Y Change in ASP/Gigabyte -7 %
-26 % -26 % -24 % -29 % -21 % -37 % -41 % -40 % Q/Q Change
in Cost/Gigabyte(1) -3 % -12 % -3 % +3 % -6 % -4 % -24 % -12 % -6 %
Y/Y Change in Cost/Gigabyte(1) -23 % -28 % -23 % -15 % -17 %
-10 % -29 % -40 % -39 % Average Gigabyte/Unit Capacity 13.9
14.1 16.5 22.3 20.8 19.2 23.5 23.9 25.6 As of end of period:
Factory Headcount(2)(3) 1,366 2,874 3,276 3,284 3,149 3,149 3,322
3,456 3,536 Non-Factory Headcount(4)
4,490
4,664 5,461
5,412 5,490
5,371 5,292
5,334 5,333 Total Headcount
5,856 7,538 8,737 8,696 8,639 8,520 8,614 8,790 8,869
(1) Cost per gigabyte and cost reduction
are non-GAAP and are computed from non-GAAP cost of revenue.
(2) Reflects SanDisk China and Malaysia
factory employees, excluding temporary and contract workers.
(3) During 2014, 1,505 employees were
converted from contractor to employee status in SanDisk's assembly
and test facility in China.
(4) Reflects SanDisk non-factory
employees, excluding temporary and contract workers.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160427006591/en/
SanDisk CorporationInvestor Contacts:Jay Iyer,
408-801-2067jay.iyer@sandisk.comBrendan Lahiff,
408-801-1732brendan.lahiff@sandisk.comorMedia Contact:Laura
Bakken, 408-801-7653laura.bakken@sandisk.com
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