M Systems Flash Disk (NASDAQ:FLSH)
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msystems™ (Nasdaq: FLSH), a leader in
smart personal storage, today announced financial results for the third
quarter ended September 30, 2006.
GAAP financial highlights for the third
quarter:
Revenues totaled $217.1 million, reflecting a 41 percent increase
compared with revenues of $153.9 million in the third quarter of 2005
and a 4 percent increase compared with revenues of $209.5 million in
the second quarter of 2006.
Gross margins were 25.8 percent, 250 basis points higher than gross
margins of 23.3 percent in the second quarter of 2006.
Net income was $5.8 million, or $0.14 per share on a fully diluted
basis, compared with net income of $3.1 million, or $0.08 per share on
a fully diluted basis, in the second quarter of 2006.
Non GAAP financial highlights for the
third quarter:
Revenues totaled $217.1 million.
Non GAAP gross margins were 26.0 percent, 260 basis points higher than
non GAAP gross margins of 23.4 percent in the second quarter of 2006.
Non GAAP net income was $13.6 million, or $0.32 per share on a fully
diluted basis, compared with non GAAP net income of $10.8 million, or
$0.26 per share on a fully diluted basis, in the second quarter of
2006.
Non GAAP adjustments for the third quarter of 2006 (and, to the extent
applicable, the second quarter of 2006) exclude the effects of
stock-based compensation, amortization of intangible assets related to
an acquisition, expenses attributable to the proposed merger with
SanDisk Corporation, expenses attributable to the review of prior stock
option grants and related withholding tax expenses. A reconciliation of
all non GAAP results to the comparable GAAP results is set forth below.
Commenting on the results, Dov Moran, Chief Executive Officer of
msystems said, “The third quarter of 2006 was
a unique quarter for msystems, as we announced our acquisition by
SanDisk at the end of July. Nonetheless, we grew our revenues
significantly compared to the third quarter of 2005 and also grew our
revenues compared to the previous quarter. Our results in this past
quarter demonstrated the continued strength of our OEM business model
and the customer relationships we have built as demand in the quarter
from our major OEM customers remained strong. We expect demand to
continue to grow in the fourth quarter, typical for the holiday season.
“msystems has shown phenomenal growth over the
past 5 years – in the third quarter of 2001,
we sold less than $10 million compared with $217 million in the third
quarter, representing over 20 times growth. In the first nine months of
2006, our revenues were $646 million, higher than our full year 2005
revenues.”
Mr. Moran continued, “As proud as I am of our
achievements, I am very pleased with the acquisition as I believe that
msystems and SanDisk are a great match with strong synergies in
technology, channels and products. But most important, at SanDisk we
found great people who truly share our first and foremost value: ‘People
First’.”
Mr. Moran concluded, “I would like to take
this opportunity to thank all the employees of msystems who helped build
this company and create its innovation, technology and tremendous
success through their commitment to excellence, hard work and loyalty.
In addition to the great team at msystems, I would like to thank our
shareholders, suppliers and customers – you
are all our partners in this successful journey.”
Conference call
msystems’ management will host a conference
call to discuss its third quarter financial results at 10:00 a.m. EDT
today, October 23, 2006. In light of the pending transaction with
SanDisk, there will be no question and answer session following
management’s prepared comments on the call.
A replay of the call will be available beginning at approximately 12:00
p.m. EDT, October 23, 2006, until October 30, 2006 at 11:59 p.m. To
listen to the replay, please call +1 (973) 341-3080; ID code: 7984983.
About msystems
msystems has been transforming raw flash material into smarter storage
solutions since 1989. From embedded flash drives deployed in millions of
mobile handsets to U3 USB smart drives designed for leading global
brands, msystems creates, develops, manufactures and markets smart
personal storage solutions for a myriad of applications targeting high
growth markets.
More information is available online at www.msystems.com.
msystems. made smarter.
All company and product names mentioned may be trademarks or
registered trademarks of their respective holders and are used for
identification purposes only. msystems is a trademark of msystems Ltd.;
MegaSIM is a trademark of msystems Ltd. in the United States and other
countries and registered in Israel and Japan. U3 is a trademark of U3,
LLP.
This press release includes forward-looking statements including
statements regarding the proposed merger with SanDisk Corporation, the
future market for the companies’ products, as
defined in the Private Securities Litigation Reform Act of 1995,
including statements about our business outlook for the future, that our
based on our current expectations. Readers are cautioned not to place
undue reliance on these forward-looking statements, as they are subject
to various risks and uncertainties which may cause actual results to
vary significantly. These risks include, but are not limited to: that
the businesses of msystems and SanDisk will not be integrated
successfully and that any synergies from the proposed transaction may
not be fully realized or may take longer to realize than expected; all
risk associated with the development and implementation of x4 technology
, including difficulties in utilization or implementation of 4-bit/cell
NAND flash, any failure we may experience in perfecting and/or
protecting our intellectual property rights related to x4 technology,
and the risk that flash manufacturers may opt to utilize such other
technologies and not our x4 technology; the risk that msystems business
may not perform as expected, risks relating to msystems prior stock
option grants, the effect of global economic conditions in general and
conditions in msystems’ industry and target
markets in particular, shifts in supply and demand, difficulty in
predicting the level of sales by our venture with a flash partner,
market acceptance, the impact of competitive products and pricing,
product development, commercialization and technological difficulties,
and capacity and supply constraints including dependence on flash
component suppliers; changes in msystems’ and
its customers’ inventory levels and inventory
valuations; timely product and technology development/upgrades and the
ability to manage changes in market conditions as needed; market
acceptance of new products and continuing product demand; the impact of
competitive products and pricing on msystems’
and its customers’ products and markets; the
development, release and sale of new products by strategic suppliers and
customers; the development and growth of anticipated markets for msystems’
and its customers’ products; and other risk
factors detailed from time to time in msystems’
filings with the Securities and Exchange Commission. msystems assumes no
obligation to update the information in this press release and disclaims
any obligation to publicly update or revise any such forward-looking
statements to reflect any change in its expectations or in events,
conditions, or circumstances on which any such statements may be based,
or that may affect the likelihood that actual results will differ from
those set forth in the forward-looking statements. Reference to msystems’
website above does not constitute incorporation of any of the
information thereon into this press release.
You may register to receive msystems’ future
press releases or to download a complete Digital Investor Kit™
including press releases, regulatory filings and corporate materials by
clicking on the “Digital Investor Kit™”
icon at www.kcsa.com.
Condensed Consolidated Balance Sheet(U.S. Dollars in
thousands)
September 30,
June 30,
2006
2006
ASSETS
Cash, cash equivalents, short-term bank deposits and marketable
securities
160,660
179,044
Trade receivables, net
129,750
106,052
Related party trade receivables
1,061
750
Inventories
117,871
84,110
Other accounts receivable and prepaid expenses
12,193
12,608
Severance pay funds
6,412
5,579
Long-term investments and long-term receivables
7,137
5,294
Investment in equity method affiliate
649
615
Property and equipment, net
41,871
35,723
Deferred purchase credits
85,583
89,658
Other assets, net
46,957
42,030
Total assets
610,144
561,463
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables
93,719
80,768
Deferred revenues
3,214
6,567
Other accounts payable and accrued expenses
37,623
32,039
Total current liabilities
134,556
119,374
LONG-TERM LIABILITIES:
Convertible Senior Notes
71,457
71,431
Accrued severance pay
8,372
7,458
Other long-term liabilities
7,418
6,533
Total long-term liabilities
87,247
85,422
MINORITY INTEREST IN SUBSIDIARY
14,933
590
SHAREHOLDERS' EQUITY
Share capital
10
10
Additional paid-in capital
350,318
341,208
Accumulated other comprehensive income
6,656
4,228
Retained earnings
16,424
10,631
Total shareholders' equity
373,408
356,077
Total liabilities and shareholders' equity
610,144
561,463
Condensed Consolidated Statements of Operations(U.S.
dollars in thousands, except share and per share data)
Three months ended September 30,
Three months ended June 30,
Nine months ended September 30,
2006
2005
2006
2005
2006
2005
Revenues
217,076
153,910
209,493
121,635
645,679
392,540
Costs and expenses:
Costs of goods sold (1) (2)
161,001
115,870
160,779
87,476
496,160
288,717
Research and development, net (1)
13,920
10,635
12,996
9,274
38,206
28,084
Selling and marketing (1)
13,161
8,186
13,666
8,580
40,748
25,250
General and administrative (1)
9,873
2,905
9,199
4,037
24,045
9,405
Total costs and expenses
197,955
137,596
196,640
109,367
599,159
351,456
Operating income
19,121
16,314
12,853
12,268
46,520
41,084
Financial income, net
601
2,373
1,512
2,988
3,479
6,923
Other income, net
-
-
-
-
1,184
-
Income before taxes on income (income tax benefit)
19,722
18,687
14,365
15,256
51,183
48,007
Taxes on income (income tax benefit)
(1,885)
-
1,112
-
641
-
Income after taxes on income (income tax benefit)
21,607
18,687
13,253
15,256
50,542
48,007
Equity in losses of an affiliate
1,471
675
1,334
656
4,013
2,294
Minority interest in earnings of a subsidiary
14,343
5,204
8,786
7,976
31,952
21,264
Net income
$5,793
$12,808
$3,133
$6,624
$14,577
$24,449
Basic net earnings per share
$0.15
$0.35
$0.08
$0.18
$0.38
$0.68
Diluted net earnings per share
$0.14
$0.31
$0.08
$0.17
$0.36
$0.62
Weighted average number of shares used in computing basic earnings
per share
38,168,586
36,246,109
37,957,382
36,039,809
37,907,373
36,011,603
Weighted average number of shares used in computing diluted earnings
per share
42,773,561
41,591,548
42,465,375
41,070,719
42,194,638
40,380,426
(1) Stock based compensation expense is
included in the following line items:
Cost of goods sold
$329
$49
$187
$45
$720
$143
Research and development, net
1,525
245
726
225
3,072
715
Selling and marketing
1,304
320
691
296
2,973
937
General and administrative
1,167
172
710
156
2,891
500
Total
$4,325
$786
$2,314
$722
$9,656
$2,295
(2) Costs of goods sold for the three
months and nine months ended September 30, 2006, include an
extraordinary credit for flash components which were purchased in Q3
and prior periods.
Reconciliation of GAAP to Non GAAP Operating Results(U.S.
dollars in thousands, except share and per share data)
Three months ended September 30,
Three months ended June 30,
Nine months ended September 30,
2006
2005
2006
2005
2006
2005
GAAP costs of goods sold
$161,001
$115,870
$160,779
$87,476
$496,160
$288,717
Stock based compensation
(329)
(49)
(187)
(45)
(720)
(143)
Amortization of intangible assets
(93)
-
(92)
-
(275)
-
Withholding taxes related to stock option grants
(10)
-
(104)
-
(131)
-
Non GAAP costs of goods sold
$160,569
$115,821
$160,396
$87,431
$495,034
$288,574
GAAP research and development, net
$13,920
$10,635
$12,996
$9,274
$38,206
$28,084
Stock based compensation
(1,525)
(245)
(726)
(225)
(3,072)
(715)
Withholding taxes related to stock option grants
(43)
-
(417)
-
(529)
-
Non GAAP research and development, net
$12,352
$10,390
$11,853
$9,049
$34,605
$27,369
GAAP selling and marketing
$13,161
$8,186
$13,666
$8,580
$40,748
$25,250
Stock based compensation
(1,304)
(320)
(691)
(296)
(2,973)
(937)
Amortization of intangible assets
(333)
-
(329)
-
(983)
-
Withholding taxes related to stock option grants
(21)
(296)
(856)
(296)
(1,317)
(888)
Non GAAP selling and marketing
$11,503
$7,570
$11,790
$7,988
$35,475
$23,425
GAAP general and administrative
$9,873
$2,905
$9,199
$4,037
$24,045
$9,405
Stock based compensation
(1,167)
(172)
(710)
(156)
(2,891)
(500)
Certain G&A expenses*
(3,039)
-
(3,176)
-
(6,215)
-
Withholding taxes related to stock option grants
(52)
-
(515)
-
(652)
-
Non GAAP general and administrative
$5,615
$2,733
$4,798
$3,881
$14,287
$8,905
GAAP operating income
$19,121
$16,314
$12,853
$12,268
$46,520
$41,084
Stock based compensation
4,325
786
2,314
722
9,656
2,295
Amortization of intangible assets
426
-
421
-
1,259
-
Certain G&A expenses*
3,039
-
3,176
-
6,215
-
Withholding taxes related to stock option grants
126
296
1,892
296
2,629
888
Non GAAP operating income
$27,037
$17,396
$20,656
$13,286
$66,279
$44,267
GAAP other income, net
$0
$0
$0
$0
$1,184
$0
Other income
-
-
-
-
(1,184)
-
Non GAAP other income, net
$0
$0
$0
$0
$0
$0
GAAP taxes on income (income tax benefit)
($1,885)
$0
$1,112
$0
$641
$0
Amortization of intangible assets
149
-
144
-
293
-
Other income
-
-
-
-
(367)
-
Non GAAP taxes on income (income tax benefit)
($1,736)
$0
$1,256
$0
$567
$0
GAAP net income
$5,793
$12,808
$3,133
$6,624
$14,577
$24,449
Stock based compensation
4,325
786
2,314
722
9,656
2,295
Amortization of intangible assets
277
-
277
-
966
-
Certain G&A expenses*
3,039
-
3,176
-
6,215
-
Withholding taxes related to stock option grants
126
296
1,892
296
2,629
888
Other income
-
-
-
-
(817)
-
Non GAAP net income
$13,560
$13,890
$10,792
$7,642
$33,226
$27,632
Basic earnings per share
GAAP
$0.15
$0.35
$0.08
$0.18
$0.38
$0.68
Non GAAP
$0.36
$0.38
$0.28
$0.21
$0.88
$0.77
Diluted earnings per share
GAAP
$0.14
$0.31
$0.08
$0.17
$0.36
$0.62
Non GAAP
$0.32
$0.34
$0.26
$0.19
$0.79
$0.69
Weighted average number of shares used in computing basic earnings
per share
GAAP
38,168,586
36,246,109
37,957,382
36,039,809
37,907,373
36,011,603
Non GAAP
38,168,586
36,246,109
37,957,382
36,039,809
37,907,373
36,011,603
Weighted average number of shares used in computing diluted earnings
per share
GAAP
42,773,561
41,591,548
42,465,375
41,070,719
42,194,638
40,380,426
Non GAAP
43,300,709
41,898,049
42,842,218
41,262,582
42,914,699
40,692,177
* Certain G&A expenses include expenses attributable to proposed
merger with SanDisk Corporation and the review of prior stock option
grants.
msystems(TM) (Nasdaq: FLSH), a leader in smart personal storage,
today announced financial results for the third quarter ended
September 30, 2006.
GAAP financial highlights for the third quarter:
-- Revenues totaled $217.1 million, reflecting a 41 percent
increase compared with revenues of $153.9 million in the third
quarter of 2005 and a 4 percent increase compared with
revenues of $209.5 million in the second quarter of 2006.
-- Gross margins were 25.8 percent, 250 basis points higher than
gross margins of 23.3 percent in the second quarter of 2006.
-- Net income was $5.8 million, or $0.14 per share on a fully
diluted basis, compared with net income of $3.1 million, or
$0.08 per share on a fully diluted basis, in the second
quarter of 2006.
Non GAAP financial highlights for the third quarter:
-- Revenues totaled $217.1 million.
-- Non GAAP gross margins were 26.0 percent, 260 basis points
higher than non GAAP gross margins of 23.4 percent in the
second quarter of 2006.
-- Non GAAP net income was $13.6 million, or $0.32 per share on a
fully diluted basis, compared with non GAAP net income of
$10.8 million, or $0.26 per share on a fully diluted basis, in
the second quarter of 2006.
Non GAAP adjustments for the third quarter of 2006 (and, to the
extent applicable, the second quarter of 2006) exclude the effects of
stock-based compensation, amortization of intangible assets related to
an acquisition, expenses attributable to the proposed merger with
SanDisk Corporation, expenses attributable to the review of prior
stock option grants and related withholding tax expenses. A
reconciliation of all non GAAP results to the comparable GAAP results
is set forth below.
Commenting on the results, Dov Moran, Chief Executive Officer of
msystems said, "The third quarter of 2006 was a unique quarter for
msystems, as we announced our acquisition by SanDisk at the end of
July. Nonetheless, we grew our revenues significantly compared to the
third quarter of 2005 and also grew our revenues compared to the
previous quarter. Our results in this past quarter demonstrated the
continued strength of our OEM business model and the customer
relationships we have built as demand in the quarter from our major
OEM customers remained strong. We expect demand to continue to grow in
the fourth quarter, typical for the holiday season.
"msystems has shown phenomenal growth over the past 5 years - in
the third quarter of 2001, we sold less than $10 million compared with
$217 million in the third quarter, representing over 20 times growth.
In the first nine months of 2006, our revenues were $646 million,
higher than our full year 2005 revenues."
Mr. Moran continued, "As proud as I am of our achievements, I am
very pleased with the acquisition as I believe that msystems and
SanDisk are a great match with strong synergies in technology,
channels and products. But most important, at SanDisk we found great
people who truly share our first and foremost value: 'People First'."
Mr. Moran concluded, "I would like to take this opportunity to
thank all the employees of msystems who helped build this company and
create its innovation, technology and tremendous success through their
commitment to excellence, hard work and loyalty. In addition to the
great team at msystems, I would like to thank our shareholders,
suppliers and customers - you are all our partners in this successful
journey."
Conference call
msystems' management will host a conference call to discuss its
third quarter financial results at 10:00 a.m. EDT today, October 23,
2006. In light of the pending transaction with SanDisk, there will be
no question and answer session following management's prepared
comments on the call.
A replay of the call will be available beginning at approximately
12:00 p.m. EDT, October 23, 2006, until October 30, 2006 at 11:59 p.m.
To listen to the replay, please call +1 (973) 341-3080; ID code:
7984983.
About msystems
msystems has been transforming raw flash material into smarter
storage solutions since 1989. From embedded flash drives deployed in
millions of mobile handsets to U3 USB smart drives designed for
leading global brands, msystems creates, develops, manufactures and
markets smart personal storage solutions for a myriad of applications
targeting high growth markets.
More information is available online at www.msystems.com.
msystems. made smarter.
All company and product names mentioned may be trademarks or
registered trademarks of their respective holders and are used for
identification purposes only. msystems is a trademark of msystems
Ltd.; MegaSIM is a trademark of msystems Ltd. in the United States and
other countries and registered in Israel and Japan. U3 is a trademark
of U3, LLP.
This press release includes forward-looking statements including
statements regarding the proposed merger with SanDisk Corporation, the
future market for the companies' products, as defined in the Private
Securities Litigation Reform Act of 1995, including statements about
our business outlook for the future, that our based on our current
expectations. Readers are cautioned not to place undue reliance on
these forward-looking statements, as they are subject to various risks
and uncertainties which may cause actual results to vary
significantly. These risks include, but are not limited to: that the
businesses of msystems and SanDisk will not be integrated successfully
and that any synergies from the proposed transaction may not be fully
realized or may take longer to realize than expected; all risk
associated with the development and implementation of x4 technology ,
including difficulties in utilization or implementation of 4-bit/cell
NAND flash, any failure we may experience in perfecting and/or
protecting our intellectual property rights related to x4 technology,
and the risk that flash manufacturers may opt to utilize such other
technologies and not our x4 technology; the risk that msystems
business may not perform as expected, risks relating to msystems prior
stock option grants, the effect of global economic conditions in
general and conditions in msystems' industry and target markets in
particular, shifts in supply and demand, difficulty in predicting the
level of sales by our venture with a flash partner, market acceptance,
the impact of competitive products and pricing, product development,
commercialization and technological difficulties, and capacity and
supply constraints including dependence on flash component suppliers;
changes in msystems' and its customers' inventory levels and inventory
valuations; timely product and technology development/upgrades and the
ability to manage changes in market conditions as needed; market
acceptance of new products and continuing product demand; the impact
of competitive products and pricing on msystems' and its customers'
products and markets; the development, release and sale of new
products by strategic suppliers and customers; the development and
growth of anticipated markets for msystems' and its customers'
products; and other risk factors detailed from time to time in
msystems' filings with the Securities and Exchange Commission.
msystems assumes no obligation to update the information in this press
release and disclaims any obligation to publicly update or revise any
such forward-looking statements to reflect any change in its
expectations or in events, conditions, or circumstances on which any
such statements may be based, or that may affect the likelihood that
actual results will differ from those set forth in the forward-looking
statements. Reference to msystems' website above does not constitute
incorporation of any of the information thereon into this press
release.
You may register to receive msystems' future press releases or to
download a complete Digital Investor Kit(TM) including press releases,
regulatory filings and corporate materials by clicking on the "Digital
Investor Kit(TM)" icon at www.kcsa.com.
-0-
*T
Condensed Consolidated Balance Sheet
(U.S. Dollars in thousands)
September 30, June 30,
-------------------------
2006 2006
------------- -----------
ASSETS
Cash, cash equivalents, short-term bank
deposits and marketable securities 160,660 179,044
Trade receivables, net 129,750 106,052
Related party trade receivables 1,061 750
Inventories 117,871 84,110
Other accounts receivable and prepaid
expenses 12,193 12,608
Severance pay funds 6,412 5,579
Long-term investments and long-term
receivables 7,137 5,294
Investment in equity method affiliate 649 615
Property and equipment, net 41,871 35,723
Deferred purchase credits 85,583 89,658
Other assets, net 46,957 42,030
------------- -----------
Total assets 610,144 561,463
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables 93,719 80,768
Deferred revenues 3,214 6,567
Other accounts payable and accrued
expenses 37,623 32,039
------------- -----------
Total current liabilities 134,556 119,374
------------- -----------
LONG-TERM LIABILITIES:
Convertible Senior Notes 71,457 71,431
Accrued severance pay 8,372 7,458
Other long-term liabilities 7,418 6,533
------------- -----------
Total long-term liabilities 87,247 85,422
------------- -----------
MINORITY INTEREST IN SUBSIDIARY 14,933 590
------------- -----------
SHAREHOLDERS' EQUITY
Share capital 10 10
Additional paid-in capital 350,318 341,208
Accumulated other comprehensive income 6,656 4,228
Retained earnings 16,424 10,631
------------- -----------
Total shareholders' equity 373,408 356,077
------------- -----------
Total liabilities and shareholders' equity 610,144 561,463
============= ===========
*T
-0-
*T
Condensed Consolidated Statements of Operations
(U.S. dollars in thousands, except share and per share data)
Three months ended
September 30,
-------------------------
2006 2005
----------- -----------
Revenues 217,076 153,910
----------- -----------
Costs and expenses:
Costs of goods sold (1)
(2) 161,001 115,870
Research and development,
net (1) 13,920 10,635
Selling and marketing (1) 13,161 8,186
General and administrative
(1) 9,873 2,905
----------- -----------
Total costs and expenses 197,955 137,596
----------- -----------
Operating income 19,121 16,314
Financial income, net 601 2,373
Other income, net - -
----------- -----------
Income before taxes on income
(income tax benefit) 19,722 18,687
Taxes on income (income tax
benefit) (1,885) -
----------- -----------
Income after taxes on income
(income tax benefit) 21,607 18,687
Equity in losses of an
affiliate 1,471 675
Minority interest in earnings
of a subsidiary 14,343 5,204
----------- -----------
Net income $5,793 $12,808
=========== ===========
Basic net earnings per share $0.15 $0.35
=========== ===========
Diluted net earnings per
share $0.14 $0.31
=========== ===========
Weighted average number of
shares used in computing
basic earnings per share 38,168,586 36,246,109
=========== ===========
Weighted average number of
shares used in computing
diluted earnings per share42,773,561 41,591,548
=========== ===========
(1) Stock based compensation expense is included in the following line
items:
Cost of goods sold $329 $49
Research and development,
net 1,525 245
Selling and marketing 1,304 320
General and administrative 1,167 172
----------- -----------
Total $4,325 $786
=========== ===========
Three months ended June Nine months ended
30, September 30,
------------------------------------------------
2006 2005 2006 2005
------------ ----------- ----------- -----------
Revenues 209,493 121,635 645,679 392,540
------------ ----------- ----------- -----------
Costs and expenses:
Costs of goods sold
(1) (2) 160,779 87,476 496,160 288,717
Research and
development, net
(1) 12,996 9,274 38,206 28,084
Selling and
marketing (1) 13,666 8,580 40,748 25,250
General and
administrative (1) 9,199 4,037 24,045 9,405
------------ ----------- ----------- -----------
Total costs and
expenses 196,640 109,367 599,159 351,456
------------ ----------- ----------- -----------
Operating income 12,853 12,268 46,520 41,084
Financial income, net 1,512 2,988 3,479 6,923
Other income, net - - 1,184 -
------------ ----------- ----------- -----------
Income before taxes on
income (income tax
benefit) 14,365 15,256 51,183 48,007
Taxes on income
(income tax benefit) 1,112 - 641 -
------------ ----------- ----------- -----------
Income after taxes on
income (income tax
benefit) 13,253 15,256 50,542 48,007
Equity in losses of
an affiliate 1,334 656 4,013 2,294
Minority interest in
earnings of a
subsidiary 8,786 7,976 31,952 21,264
------------ ----------- ----------- -----------
Net income $3,133 $6,624 $14,577 $24,449
============ =========== =========== ===========
Basic net earnings
per share $0.08 $0.18 $0.38 $0.68
============ =========== =========== ===========
Diluted net earnings
per share $0.08 $0.17 $0.36 $0.62
============ =========== =========== ===========
Weighted average
number of shares
used in computing
basic earnings per
share 37,957,382 36,039,809 37,907,373 36,011,603
============ =========== =========== ===========
Weighted average
number of shares
used in computing
diluted earnings
per share 42,465,375 41,070,719 42,194,638 40,380,426
============ =========== =========== ===========
(1) Stock based compensation
expense is included in the
following line items:
Cost of goods sold $187 $45 $720 $143
Research and
development, net 726 225 3,072 715
Selling and
marketing 691 296 2,973 937
General and
administrative 710 156 2,891 500
------------ ----------- ----------- -----------
Total $2,314 $722 $9,656 $2,295
============ =========== =========== ===========
(2) Costs of goods sold for the three months and nine months ended
September 30, 2006, include an extraordinary credit for flash
components which were purchased in Q3 and prior periods.
*T
-0-
*T
Reconciliation of GAAP to Non GAAP Operating Results
(U.S. dollars in thousands, except share and per share data)
Three months ended
September 30,
-------------------------
2006 2005
----------- -----------
GAAP costs of goods sold $161,001 $115,870
Stock based compensation (329) (49)
Amortization of intangible assets (93) -
Withholding taxes related to stock option
grants (10) -
----------- -----------
Non GAAP costs of goods sold $160,569 $115,821
=========== ===========
GAAP research and development, net $13,920 $10,635
Stock based compensation (1,525) (245)
Withholding taxes related to stock option
grants (43) -
----------- -----------
Non GAAP research and development, net $12,352 $10,390
=========== ===========
GAAP selling and marketing $13,161 $8,186
Stock based compensation (1,304) (320)
Amortization of intangible assets (333) -
Withholding taxes related to stock option
grants (21) (296)
----------- -----------
Non GAAP selling and marketing $11,503 $7,570
=========== ===========
GAAP general and administrative $9,873 $2,905
Stock based compensation (1,167) (172)
Certain G&A expenses* (3,039) -
Withholding taxes related to stock option
grants (52) -
----------- -----------
Non GAAP general and administrative $5,615 $2,733
=========== ===========
GAAP operating income $19,121 $16,314
Stock based compensation 4,325 786
Amortization of intangible assets 426 -
Certain G&A expenses* 3,039 -
Withholding taxes related to stock option
grants 126 296
----------- -----------
Non GAAP operating income $27,037 $17,396
=========== ===========
GAAP other income, net $0 $0
Other income - -
----------- -----------
Non GAAP other income, net $0 $0
=========== ===========
GAAP taxes on income (income tax benefit) ($1,885) $0
Amortization of intangible assets 149 -
Other income - -
----------- -----------
Non GAAP taxes on income (income tax benefit) ($1,736) $0
=========== ===========
GAAP net income $5,793 $12,808
Stock based compensation 4,325 786
Amortization of intangible assets 277 -
Certain G&A expenses* 3,039 -
Withholding taxes related to stock option
grants 126 296
Other income - -
----------- -----------
Non GAAP net income $13,560 $13,890
=========== ===========
Basic earnings per share
GAAP $0.15 $0.35
=========== ===========
Non GAAP $0.36 $0.38
=========== ===========
Diluted earnings per share
GAAP $0.14 $0.31
=========== ===========
Non GAAP $0.32 $0.34
=========== ===========
Weighted average number of shares used in computing basic earnings per
share
GAAP 38,168,586 36,246,109
=========== ===========
Non GAAP 38,168,586 36,246,109
=========== ===========
Weighted average number of shares used in computing diluted earnings
per share
GAAP 42,773,561 41,591,548
=========== ===========
Non GAAP 43,300,709 41,898,049
=========== ===========
Three months ended June Nine months ended
30, September 30,
------------------------------------------------
2006 2005 2006 2005
------------ ----------- ----------- -----------
GAAP costs of goods
sold $160,779 $87,476 $496,160 $288,717
Stock based
compensation (187) (45) (720) (143)
Amortization of
intangible assets (92) - (275) -
Withholding taxes
related to stock
option grants (104) - (131) -
------------ ----------- ----------- -----------
Non GAAP costs of
goods sold $160,396 $87,431 $495,034 $288,574
============ =========== =========== ===========
GAAP research and
development, net $12,996 $9,274 $38,206 $28,084
Stock based
compensation (726) (225) (3,072) (715)
Withholding taxes
related to stock
option grants (417) - (529) -
------------ ----------- ----------- -----------
Non GAAP research and
development, net $11,853 $9,049 $34,605 $27,369
============ =========== =========== ===========
GAAP selling and
marketing $13,666 $8,580 $40,748 $25,250
Stock based
compensation (691) (296) (2,973) (937)
Amortization of
intangible assets (329) - (983) -
Withholding taxes
related to stock
option grants (856) (296) (1,317) (888)
------------ ----------- ----------- -----------
Non GAAP selling and
marketing $11,790 $7,988 $35,475 $23,425
============ =========== =========== ===========
GAAP general and
administrative $9,199 $4,037 $24,045 $9,405
Stock based
compensation (710) (156) (2,891) (500)
Certain G&A
expenses* (3,176) - (6,215) -
Withholding taxes
related to stock
option grants (515) - (652) -
------------ ----------- ----------- -----------
Non GAAP general and
administrative $4,798 $3,881 $14,287 $8,905
============ =========== =========== ===========
GAAP operating income $12,853 $12,268 $46,520 $41,084
Stock based
compensation 2,314 722 9,656 2,295
Amortization of
intangible assets 421 - 1,259 -
Certain G&A
expenses* 3,176 - 6,215 -
Withholding taxes
related to stock
option grants 1,892 296 2,629 888
------------ ----------- ----------- -----------
Non GAAP operating
income $20,656 $13,286 $66,279 $44,267
============ =========== =========== ===========
GAAP other income,
net $0 $0 $1,184 $0
Other income - - (1,184) -
------------ ----------- ----------- -----------
Non GAAP other
income, net $0 $0 $0 $0
============ =========== =========== ===========
GAAP taxes on income
(income tax benefit) $1,112 $0 $641 $0
Amortization of
intangible assets 144 - 293 -
Other income - - (367) -
------------ ----------- ----------- -----------
Non GAAP taxes on
income (income tax
benefit) $1,256 $0 $567 $0
============ =========== =========== ===========
GAAP net income $3,133 $6,624 $14,577 $24,449
Stock based
compensation 2,314 722 9,656 2,295
Amortization of
intangible assets 277 - 966 -
Certain G&A
expenses* 3,176 - 6,215 -
Withholding taxes
related to stock
option grants 1,892 296 2,629 888
Other income - - (817) -
------------ ----------- ----------- -----------
Non GAAP net income $10,792 $7,642 $33,226 $27,632
============ =========== =========== ===========
Basic earnings per
share
GAAP $0.08 $0.18 $0.38 $0.68
============ =========== =========== ===========
Non GAAP $0.28 $0.21 $0.88 $0.77
============ =========== =========== ===========
Diluted earnings per
share
GAAP $0.08 $0.17 $0.36 $0.62
============ =========== =========== ===========
Non GAAP $0.26 $0.19 $0.79 $0.69
============ =========== =========== ===========
Weighted average number of shares used in
computing basic earnings per share
GAAP 37,957,382 36,039,809 37,907,373 36,011,603
============ =========== =========== ===========
Non GAAP 37,957,382 36,039,809 37,907,373 36,011,603
============ =========== =========== ===========
Weighted average number of shares used in
computing diluted earnings per share
GAAP 42,465,375 41,070,719 42,194,638 40,380,426
============ =========== =========== ===========
Non GAAP 42,842,218 41,262,582 42,914,699 40,692,177
============ =========== =========== ===========
* Certain G&A expenses include expenses attributable to proposed
merger with SanDisk Corporation and the review of prior stock option
grants.
*T