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Share Name | Share Symbol | Market | Type |
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Sandisk Corp. | NASDAQ:SNDK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 76.18 | 0 | 01:00:00 |
Delivers Record Quarterly Revenue
SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, today announced results for the third quarter ended September 28, 2014. Third quarter revenue of $1.75 billion increased 7 percent on a year-over-year basis and increased 7 percent sequentially.
On a GAAP(1) basis, third quarter net income was $263 million, or $1.09 per share, compared to net income of $277 million, or $1.18 per share, in the third quarter of fiscal 2013 and $274 million, or $1.14 per share, in the second quarter of fiscal 2014.
On a non-GAAP(2)(3) basis, third quarter net income was $336 million, or $1.45 per share, compared to net income of $371 million, or $1.59 per share, in the third quarter of fiscal 2013 and net income of $329 million, or $1.41 per share, in the second quarter of fiscal 2014. For reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.
“Third quarter results reflect the strength of our diversified product portfolio, broad customer engagements and solid execution,” said Sanjay Mehrotra, president and chief executive officer. “Demand for NAND flash continues to be strong across mobile, client and enterprise, where SanDisk’s innovations are creating significant opportunities. As we focus on closing a record 2014, we also look forward to building upon our success in 2015.”
KEY FINANCIAL METRICS
Metrics GAAP(1) Non-GAAP(2) (in millions, except percentages and per share amounts) Q3’14 Q3’13 Q2’14 Q3’14 Q3’13 Q2’14 Revenue $1,746 $1,625 $1,634 $1,746 $1,625 $1,634 Gross profit $817 $802 $760 $855 $815 $783 percent of revenue 47% 49% 46% 49% 50% 48% Operating income $388 $408 $417 $481 $533 $472 percent of revenue 22% 25% 25% 28% 33% 29% EPS(3) $1.09 $1.18 $1.14 $1.45 $1.59 $1.41OTHER HIGHLIGHTS
CONFERENCE CALL
SanDisk’s third quarter of fiscal 2014 conference call is scheduled for 2:00 P.M., Pacific Daylight Time, Thursday, October 16, 2014. The conference call will be webcast and can be accessed live, and throughout the quarter, at SanDisk’s website at www.sandisk.com/IR. To participate in the call via telephone, the dial in number is 719-325-4758 and the dial-in password is 9292176. 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 SanDisk’s website prior to the conference call.
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.
© 2014 SanDisk Corporation. All rights reserved. SanDisk, SanDisk Ultra and SanDisk Extreme PRO are trademarks of SanDisk Corporation, registered in the United States and other countries. ULLtraDIMM is a trademark of SanDisk Enterprise IP LLC. The SD, microSD, microSDXC and SDXC marks are trademarks of SD-3C, LLC.
This news release contains certain forward-looking statements, including those regarding our business prospects and opportunities, market growth, demand for our products, our innovations, and our performance for the remainder of 2014 and in 2015, 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:
(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 of acquisition-related intangible assets, non-cash economic interest expense associated with our convertible debt and related tax adjustments.
(3) Non-GAAP shares include the impact of offsetting shares from the call options related to the 1.5% Sr. Convertible Notes due 2017 and 0.5% Sr. Convertible Notes due 2020, and the impact of share-based compensation.
SanDisk Corporation Preliminary Condensed Consolidated Statements of Operations (in thousands, except per share amounts, unaudited) Three months ended Nine months ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 Revenue $ 1,746,491 $ 1,625,153 $ 4,892,447 $ 4,442,145 Cost of revenue 900,830 812,904 2,496,509 2,401,901 Amortization of acquisition-related intangible assets 28,523 10,256 67,860 29,916 Total cost of revenue 929,353 823,160 2,564,369 2,431,817 Gross profit 817,138 801,993 2,328,078 2,010,328 Operating expenses: Research and development 223,309 183,821 626,168 526,987 Sales and marketing 111,392 72,237 271,762 194,965 General and administrative 60,044 49,171 162,798 141,152 Amortization of acquisition-related intangible assets 9,615 5,088 12,742 9,199 Impairment of acquisition-related intangible assets ― 83,228 ― 83,228 Restructuring and other 24,984―
24,984 ― Total operating expenses 429,344 393,545 1,098,454 955,531 Operating income 387,794 408,448 1,229,624 1,054,797 Other income (expense), net (14,875 ) (4,892 ) (44,089 ) (33,890 ) Income before income taxes 372,919 403,556 1,185,535 1,020,907 Provision for income taxes 110,258 126,697 379,980 316,030 Net income $ 262,661 $ 276,859 $ 805,555 $ 704,877 Net income per share: Basic $ 1.18 $ 1.20 $ 3.59 $ 2.96 Diluted $ 1.09 $ 1.18 $ 3.37 $ 2.91 Shares used in computing net income per share: Basic 222,201 230,253 224,530 238,097 Diluted 240,685 235,032 239,275 242,270 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 September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 SUMMARY RECONCILIATION OF NET INCOME: GAAP NET INCOME $ 262,661 $ 276,859 $ 805,555 $ 704,877 Share-based compensation (a) 50,195 25,930 114,674 72,325 Amortization of acquisition-related intangible assets (b) 38,138 15,344 80,602 39,115 Inventory step-up expense (c) 4,903 - 4,903 - Impairment of acquisition-related intangible assets (d) - 83,228 - 83,228 Convertible debt interest (e) 21,493 9,859 63,582 50,202 Income tax adjustments (f) (41,888 ) (40,473 ) (75,085 ) (73,131 ) NON-GAAP NET INCOME $ 335,502 $ 370,747 $ 994,231 $ 876,616 GAAP COST OF REVENUE $ 929,353 $ 823,160 $ 2,564,369 $ 2,431,817 Share-based compensation (a) (4,001 ) (2,716 ) (10,118 ) (6,880 ) Amortization of acquisition-related intangible assets (b) (28,523 ) (10,256 ) (67,860 ) (29,916 ) Inventory step-up expense (c) (4,903 ) - (4,903 ) - NON-GAAP COST OF REVENUE $ 891,926 $ 810,188 $ 2,481,488 $ 2,395,021 GAAP GROSS PROFIT $ 817,138 $ 801,993 $ 2,328,078 $ 2,010,328 Share-based compensation (a) 4,001 2,716 10,118 6,880 Amortization of acquisition-related intangible assets (b) 28,523 10,256 67,860 29,916 Inventory step-up expense (c) 4,903 - 4,903 - NON-GAAP GROSS PROFIT $ 854,565 $ 814,965 $ 2,410,959 $ 2,047,124 GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 223,309 $ 183,821 $ 626,168 $ 526,987 Share-based compensation (a) (21,469 ) (13,142 ) (54,644 ) (37,486 ) NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 201,840 $ 170,679 $ 571,524 $ 489,501 GAAP SALES AND MARKETING EXPENSES $ 111,392 $ 72,237 $ 271,762 $ 194,965 Share-based compensation (a) (13,800 ) (5,241 ) (27,261 ) (13,813 ) NON-GAAP SALES AND MARKETING EXPENSES $ 97,592 $ 66,996 $ 244,501 $ 181,152 GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 60,044 $ 49,171 $ 162,798 $ 141,152 Share-based compensation (a) (10,925 ) (4,831 ) (22,651 ) (14,146 ) NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 49,119 $ 44,340 $ 140,147 $ 127,006 GAAP TOTAL OPERATING EXPENSES $ 429,344 $ 393,545 $ 1,098,454 $ 955,531 Share-based compensation (a) (46,194 ) (23,214 ) (104,556 ) (65,445 ) Amortization of acquisition-related intangible assets (b) (9,615 ) (5,088 ) (12,742 ) (9,199 ) Impairment of acquisition-related intangible assets (d) - (83,228 ) - (83,228 ) NON-GAAP TOTAL OPERATING EXPENSES $ 373,535 $ 282,015 $ 981,156 $ 797,659 GAAP OPERATING INCOME $ 387,794 $ 408,448 $ 1,229,624 $ 1,054,797 Cost of revenue adjustments (a) (b) (c) 37,427 12,972 82,881 36,796 Operating expense adjustments (a) (b) (d) 55,809 111,530 117,298 157,872 NON-GAAP OPERATING INCOME $ 481,030 $ 532,950 $ 1,429,803 $ 1,249,465 GAAP OTHER INCOME (EXPENSE), NET $ (14,875 ) $ (4,892 ) $ (44,089 ) $ (33,890 ) Convertible debt interest (e) 21,493 9,859 63,582 50,202 NON-GAAP OTHER INCOME (EXPENSE), NET $ 6,618 $ 4,967 $ 19,493 $ 16,312 GAAP NET INCOME $ 262,661 $ 276,859 $ 805,555 $ 704,877 Cost of revenue adjustments (a) (b) (c) 37,427 12,972 82,881 36,796 Operating expense adjustments (a) (b) (d) 55,809 111,530 117,298 157,872 Other income (expense) adjustments (e) 21,493 9,859 63,582 50,202 Income tax adjustments (f) (41,888 ) (40,473 ) (75,085 ) (73,131 ) NON-GAAP NET INCOME $ 335,502 $ 370,747 $ 994,231 $ 876,616 Diluted net income per share: GAAP $ 1.09 $ 1.18 $ 3.37 $ 2.91 Non-GAAP $ 1.45 $ 1.59 $ 4.29 $ 3.63 Shares used in computing diluted net income per share: GAAP 240,685 235,032 239,275 242,270 Non-GAAP (g) 230,863 233,256 231,567 241,408 SanDisk Corporation Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1) (in thousands, unaudited) Three months ended Nine months ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 SUMMARY RECONCILIATION OF DILUTED SHARES GAAP 240,685 235,032 239,275 242,270 Adjustments for share-based compensation 333 363 253 248 Offsetting shares from call option (10,155 ) (2,139 ) (7,961 ) (1,110 ) Non-GAAP (g) 230,863 233,256 231,567 241,408 (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, inventory step-up expense, amortization of acquisition-related intangible assets related to acquisitions of Pliant Technology, Inc. in May 2011, 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, non-cash economic interest expense associated with the convertible debt 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 include the impact of the call options which, when exercised, will offset the issuance of dilutive shares from the 1.5% Sr. Convertible Notes due 2017 and 0.5% Sr. Convertible Notes due 2020, while the 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 non-cash charges, such as amortization of acquisition-related intangible assets, inventory step-up expense, share-based compensation, non-cash economic interest expense associated with the convertible debt 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 Pliant Technology, Inc. (May 2011), FlashSoft Corporation (February 2012), Schooner Information Technology, Inc. (June 2012), SMART Storage Systems (August 2013) and Fusion-io, Inc. (July 2014). (c) Inventory step-up expense related to acquisition of Fusion-io, Inc. (July 2014). (d) Impairment of acquisition-related intangible assets and in-process research and development related to the Schooner Information Technology, Inc. (June 2012) and Pliant Technology, Inc. (May 2011) acquisitions. (e) Incremental interest expense related to the non-cash economic interest expense associated with the 1% Sr. Convertible Notes due 2013, 1.5% Sr. Convertible Notes due 2017, and 0.5% Sr. Convertible Notes due 2020. (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 our non-GAAP tax rate. (g) Non-GAAP diluted shares include the impact of offsetting shares from the call options related to the 1.5% Sr. Convertible Notes due 2017 and 0.5% Sr. Convertible Notes due 2020, and the impact of share-based compensation. SanDisk Corporation Preliminary Condensed Consolidated Balance Sheets (in thousands, unaudited) September 28, 2014 December 29, 2013 ASSETS Current assets: Cash and cash equivalents $ 930,835 $ 986,246 Short-term marketable securities 1,370,257 1,919,611 Accounts receivable, net 870,552 682,809 Inventory 782,128 756,975 Deferred taxes 169,548 138,192 Other current assets 230,814 166,885 Total current assets 4,354,134 4,650,718 Long-term marketable securities 2,843,933 3,179,471 Property and equipment, net 692,362 655,794 Notes receivable and investments in Flash Ventures 1,119,669 1,134,620 Deferred taxes 147,690 134,669 Goodwill 860,620 318,111 Intangible assets, net 594,239 247,904 Other non-current assets 95,614 167,430 Total assets $ 10,708,261 $ 10,488,717 LIABILITIES, CONVERTIBLE SHORT-TERM DEBT CONVERSION OBLIGATION AND EQUITY Current liabilities: Accounts payable trade $ 412,328 $ 282,582 Accounts payable to related parties 134,817 146,964 Convertible short-term debt (1) 861,628 ― Other current accrued liabilities 480,188 509,732 Deferred income on shipments to distributors and retailers and deferred revenue 325,985 291,302Total current liabilities
2,214,946 1,230,580 Convertible long-term debt 1,188,356 1,985,363 Non-current liabilities 242,491 307,083 Total liabilities 3,645,793 3,523,026 Convertible short-term debt conversion obligation (1) 138,372 ― Stockholders' equity: Common stock 5,243,119 5,040,242 Retained earnings 1,780,420 2,004,089 Accumulated other comprehensive loss (97,205 ) (76,459 ) Total stockholders' equity 6,926,334 6,967,872 Non-controlling interests (2,238 ) (2,181 ) Total equity 6,924,096 6,965,691 Total liabilities, convertible short-term debt conversion obligation and equity $ 10,708,261 $ 10,488,717 (1) The 1.5% Sr. Convertible Notes due 2017 are convertible through December 31, 2014 as a result of the Company’s common stock price exceeding the trigger price set forth in the indenture. Accordingly, the carrying value of the notes is reported as short-term debt as of September 28, 2014 and will remain so while the notes are convertible. The convertible short-term debt conversion obligation represents the difference between the carrying value of the convertible debt and the principal amount due in cash upon conversion. SanDisk Corporation Preliminary Condensed Consolidated Statements of Cash Flows (in thousands, unaudited) Three months ended Nine months ended September 28, 2014 September 29, 2013 September 28, 2014 September 29, 2013 Cash flows from operating activities: Net income $ 262,661 $ 276,859 $ 805,555 $ 704,877 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes (808 ) (12,240 ) 6,784 53,254 Depreciation 66,198 57,650 187,651 165,862 Amortization 85,393 50,710 230,987 171,956 Provision for doubtful accounts 836 (644 ) 677 498 Share-based compensation expense 50,195 25,930 114,674 72,325 Excess tax benefit from share-based plans (10,764 ) (4,238 ) (38,776 ) (19,899 ) Impairment and other 520 81,774 520 76,258 Other non-operating (365 ) 1,134 343 774 Changes in operating assets and liabilities: Accounts receivable, net (68,999 ) (40,539 ) (145,997 ) (51,749 ) Inventory 46,111 (23,411 ) 52,556 4,096 Other assets 10,900 (44,666 ) 10,381 (23,093 ) Accounts payable trade 48,869 66,824 62,118 82,194 Accounts payable to related parties (16,427 ) (4,188 ) (12,147 ) (50,975 ) Other liabilities 113,376 (48,542 ) (64,691 ) 60,479 Total adjustments 325,035 105,554 405,080 541,980 Net cash provided by operating activities 587,696 382,413 1,210,635 1,246,857 Cash flows from investing activities: Purchases of short and long-term marketable securities (597,716 ) (507,392 ) (3,376,250 ) (2,504,479 ) Proceeds from sales of short and long-term marketable securities 1,527,752 1,277,691 3,621,418 3,125,350 Proceeds from maturities of short and long-term marketable securities 184,395 127,695 563,890 634,600 Acquisition of property and equipment, net (86,975 ) (50,866 ) (165,641 ) (170,715 ) Investment in Flash Ventures ― ― (24,296 ) ― Notes receivable issuances to Flash Ventures (43,733 ) ― (131,692 ) ― Notes receivable proceeds from Flash Ventures 14,451 ― 126,755 73,388 Purchased technology and other assets (3,036 ) (5,353 ) (4,589 ) (9,261 ) Acquisitions, net of cash acquired (1,066,166 ) (304,178 ) (1,063,798 ) (304,320 ) Net cash provided by (used in) investing activities (71,028 ) 537,597 (454,203 ) 844,563 Cash flows from financing activities: Repayment of debt financing ― ― ― (928,061 ) Distribution to non-controlling interests ― ― ― (87 ) Proceeds from employee stock programs 55,480 43,036 159,044 206,052 Excess tax benefit from share-based plans 10,764 4,238 38,776 19,899 Dividends paid (67,045 ) (50,638 ) (169,443 ) (50,638 ) Share repurchases (1) (466,622 ) (1,069,545 ) (838,070 ) (1,439,539 ) Net cash used in financing activities (467,423 ) (1,072,909 ) (809,693 ) (2,192,374 ) Effect of changes in foreign currency exchange rates on cash (3,525 ) 1,533 (2,150 ) 8,249 Net increase (decrease) in cash and cash equivalents 45,720 (151,366 ) (55,411 ) (92,705 ) Cash and cash equivalents at beginning of period 885,115 1,054,131 986,246 995,470 Cash and cash equivalents at end of period $ 930,835 $ 902,765 $ 930,835 $ 902,765 (1) Share repurchases include cash used to repurchase common stock and cash used to settle employee tax withholding obligations due upon the vesting of restricted stock units.
SanDisk CorporationInvestor Contacts:Jay Iyer, 408-801-2067jay.iyer@sandisk.comBrendan Lahiff, 408-801-1732brendan.lahiff@sandisk.comMedia Contact:Michael Diamond, 408-801-1108michael.diamond@sandisk.com
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