0001000180-15-000035.txt : 20150722 0001000180-15-000035.hdr.sgml : 20150722 20150722160555 ACCESSION NUMBER: 0001000180-15-000035 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20150722 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20150722 DATE AS OF CHANGE: 20150722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SANDISK CORP CENTRAL INDEX KEY: 0001000180 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER STORAGE DEVICES [3572] IRS NUMBER: 770191793 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-26734 FILM NUMBER: 151000050 BUSINESS ADDRESS: STREET 1: 951 SANDISK DRIVE CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 408-801-1000 MAIL ADDRESS: STREET 1: 951 SANDISK DRIVE CITY: MILPITAS STATE: CA ZIP: 95035 8-K 1 form8-kxq215earningsrelease.htm FORM 8-K Q2'15 EARNINGS RELEASE Form 8-K - Q2'15 Earnings Release


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 22, 2015

SANDISK CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
000-26734
77-0191793
(State or other jurisdiction
of incorporation)
(Commission File No.)
(I.R.S. Employer
Identification No.)

951 SanDisk Drive, Milpitas, California 95035
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 801-1000

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








 






TABLE OF CONTENTS


Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EXHIBIT 99.1







Item 2.02 Results of Operations and Financial Condition

On July 22, 2015, SanDisk Corporation (the “Registrant”) issued a press release to report its financial results for its second quarter ended June 28, 2015.

The press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference. In addition to the preliminary condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), the attached press release contains 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 the Registrant’s current financial performance and its prospects for the future. Specifically, the Registrant believes the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that it believes are not indicative of its core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Registrant. For example, because the non-GAAP results exclude the expenses the Registrant recorded for share-based compensation, 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, impairment of acquisition-related in-process research and development intangible assets, non-cash economic interest expense associated with the Registrant’s 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, the Registrant believes the inclusion of non-GAAP financial measures provides consistency in its financial reporting. In addition, the Registrant’s non-GAAP diluted shares are adjusted for the impact of expensing share-based compensation and include the impact of the Registrant’s call options which, when exercised, will offset the issuance of dilutive shares from the Registrant’s convertible senior notes, while the Registrant’s 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 the Registrant’s performance, allocating resources, and planning and forecasting future periods. Further, management uses non-GAAP information that excludes certain non-cash charges, such as share-based compensation, amortization of acquisition-related intangible assets, impairment of acquisition-related in-process research and development intangible assets, 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, 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.

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing. The information in this report, including the exhibit hereto, shall be deemed to be “furnished” and therefore shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits
Exhibit
Number
Description of Document
99.1
Press release of SanDisk Corporation dated July 22, 2015 to report its financial results for its second quarter ended June 28, 2015.








SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
SANDISK CORPORATION
 
 
 
 
Date:
July 22, 2015
By:
/s/ Judy Bruner
 
 
 
Judy Bruner
 
 
 
Executive Vice President, Administration and
Chief Financial Officer
(Principal Financial Officer)






EXHIBIT INDEX


Exhibit
Number
Description of Document
99.1
Press release of SanDisk Corporation dated July 22, 2015 to report its financial results for its second quarter ended June 28, 2015.





 EX-99.1 2 exhibit991-q215earningsrel.htm EXHIBIT 99.1 PRESS RELEASE AND FINANCIALS Exhibit 99.1 - Q2'15 Earnings Release


EXHIBIT 99.1

    
NEWS RELEASE
SanDisk Corporation
951 SanDisk Drive
Milpitas, CA 95035-7932
Phone: 408-801-1000

SanDisk Announces Second Quarter 2015 Results

MILPITAS, Calif., July 22, 2015 - SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, today announced results for the second quarter ended June 28, 2015. Second quarter revenue of $1.24 billion decreased 24 percent on a year-over-year basis and decreased 7 percent sequentially.

On a GAAP(1) basis, second quarter net income was $81 million, or $0.38 per share, compared to net income of $274 million, or $1.14 per share, in the second quarter of 2014 and $39 million, or $0.17 per share, in the first quarter of 2015.

On a non-GAAP(2)(3) basis, second quarter net income was $136 million, or $0.66 per share, compared to net income of $329 million, or $1.41 per share, in the second quarter of 2014 and net income of $134 million, or $0.62 per share, in the first quarter of 2015. For a reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“During the second quarter, we strengthened our portfolio with several new product launches in both the retail and commercial channels,” said Sanjay Mehrotra, president and chief executive officer, SanDisk. “We are making steady progress on all operational fronts, and remain focused on enhancing our financial performance.”

KEY FINANCIAL RESULTS
 
GAAP (1)
 
Non-GAAP (2)
(in millions, except percentages and per share amounts)
Q2’15
Q2’14
Q1’15
 
Q2’15
Q2’14
Q1’15
Revenue
$1,237
$1,634
$1,332
 
$1,237
$1,634
$1,332
Gross profit
$484
$760
$545
 
$518
$783
$574
percent of revenue
39
%
46
%
41
%
 
42
%
48
%
43
%
Operating income
$104
$417
$57
 
$191
$472
$198
percent of revenue
8
%
25
%
4
%
 
15
%
29
%
15
%
EPS (3)
$0.38
$1.14
$0.17
 
$0.66
$1.41
$0.62





OTHER FINANCIAL INFORMATION
(in millions)
Q2’15
Q2’14
Q1’15
Cash, cash equivalents, short and long-term marketable securities
$
4,003

$
6,249

$
4,394

Less: aggregate principal amount of convertible senior notes outstanding
(2,497
)
(2,500
)
(2,497
)
Net cash (4)
$
1,506

$
3,749

$
1,897

Net cash provided by operating activities
$
29

$
241

$
309

Less: acquisition of property and equipment, net
(96
)
(44
)
(98
)
Change in investment and notes receivable activity with Flash Ventures
15

—

(11
)
Free cash flow (5)
$
(52
)
$
197

$
200



NEWS HIGHLIGHTS

•
SanDisk announced the availability of its new Fusion ioMemoryTM PCIe application accelerators which utilize SanDisk NAND and dramatically improve performance compared to the previous generation ioDrive®2, enabling datacenter consolidation and lower total cost of ownership. These application accelerators also feature updated Virtual Storage Layer (VSL) data access acceleration software.
•
SanDisk announced its new CloudSpeed Eco™ Gen. II enterprise SATA SSD for cloud service providers, with up to 2TB* capacity, based on 15 nanometer NAND flash. The CloudSpeed Eco Gen. II delivers greater storage density with three times the streaming bandwidth versus hard disk drives (HDDs).
•
SanDisk announced the SanDisk Extreme® 500 and the SanDisk Extreme® 900 families of high-performance portable SSDs at capacities up to 480GB and 1.92TB respectively. These SSDs feature significantly faster transfer speeds than a portable hard drive.
•
SanDisk introduced the new SanDisk Z400s SSD, a cost-effective 15 nanometer-based SSD designed to replace HDDs in computing platforms and embedded applications, such as digital signage, security surveillance, and point of sale or kiosk environments.
•
SanDisk announced today a third quarter 2015 dividend of $0.30 per share of common stock, payable on August 25, 2015 to stockholders of record as of the close of business on August 3, 2015.

CONFERENCE CALL
SanDisk’s second quarter 2015 conference call is scheduled for today at 2:00 P.M., Pacific Time, Wednesday, July 22, 2015. The conference call will be on live webcast and can be accessed from SanDisk’s investor relations website at www.sandisk.com/IR. To dial into the live call, please dial 719-325-4800 and provide the password 3235993. Participants are encouraged to dial in at least 10 minutes before the call commences. Supplemental information and slides that accompany the web broadcast will be available on the SanDisk’s investor relations website at www.sandisk.com/IR after the prepared remarks. 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.

© 2015 SanDisk Corporation. All rights reserved. SanDisk, the SanDisk logo, ioDrive and SanDisk Extreme are trademarks of SanDisk Corporation, registered in the United States and other countries.CloudSpeed Eco and Fusion ioMemory are trademarks of SanDisk Corporation. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holder(s).




This news release contains certain forward-looking statements, including those regarding 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, 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:

•
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 gross 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;
•
weakness in demand in one or more of our product categories, such as embedded products or SSDs, or adverse changes in our product or customer mix;
•
potential delays in product development or lack of customer acceptance and qualification of our solutions, including on new technology nodes, particularly OEM products such as our embedded flash storage and SSD solutions;
•
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;
•
inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable yields, new technologies or the failure of new technologies to effectively compete with those of our competitors;
•
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 or perform as expected;
•
failure to manage the risks associated with our ventures and strategic partnerships with Toshiba;
•
inability to achieve the expected benefits from acquisitions in a timely manner, or at all;
•
industry and technology trends not occurring in the timeline we anticipate or at all; 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 Quarterly Report on Form 10-Q for the quarter ended March 29, 2015.

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.

(1) 
GAAP represents U.S. Generally Accepted Accounting Principles.
(2) 
Non-GAAP represents GAAP excluding the impact of share-based compensation, amortization and impairment of acquisition-related intangible assets, 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 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.
*
1GB=1,000,000,000 bytes. 1TB=1,000,000,000,000 bytes. Actual user storage may be less.


Investor Contacts:
Jay Iyer
408-801-2067, jay.iyer@sandisk.com

Brendan Lahiff
408-801-1732, brendan.lahiff@sandisk.com

Media Contact:
Michael Diamond
408-801-1108, michael.diamond@sandisk.com

# # # # #





SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)

 
Three months ended
 
Six months ended
 
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Revenue
$
1,237,196

 
$
1,634,011

 
$
2,569,437

 
$
3,145,956

 
 
 
 
 
 
 
 
Cost of revenue
723,995

 
854,640

 
1,486,478

 
1,595,679

Amortization of acquisition-related intangible assets
28,822

 
19,721

 
53,578

 
39,337

Total cost of revenue
752,817

 
874,361

 
1,540,056

 
1,635,016

Gross profit
484,379

 
759,650

 
1,029,381

 
1,510,940

Operating expenses:
 
 
 
 
 
 
 
Research and development
218,418

 
204,030

 
441,144

 
402,859

Sales and marketing
96,681

 
83,398

 
198,501

 
160,370

General and administrative
41,932

 
54,085

 
89,979

 
102,754

Amortization of acquisition-related intangible assets
13,681

 
1,481

 
27,362

 
3,127

Impairment of acquisition-related intangible assets
—

 
—

 
61,000

 
—

Restructuring and other
9,746

 
—

 
50,287

 
—

Total operating expenses
380,458

 
342,994

 
868,273

 
669,110

Operating income
103,921

 
416,656

 
161,108

 
841,830

Other income (expense), net
(12,777
)
 
(13,579
)
 
(36,347
)
 
(29,214
)
Income before income taxes
91,144

 
403,077

 
124,761

 
812,616

Provision for income taxes
10,171

 
129,131

 
4,763

 
269,722

Net income
$
80,973

 
$
273,946

 
$
119,998

 
$
542,894

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.39

 
$
1.21

 
$
0.57

 
$
2.41

Diluted
$
0.38

 
$
1.14

 
$
0.55

 
$
2.28

Shares used in computing net income per share:
 
 
 
 
 
 
 
Basic
206,737

 
225,544

 
209,083

 
225,694

Diluted
212,712

 
240,756

 
218,490

 
238,463







SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, except per share data, unaudited)

 
Three months ended
 
Six months ended
 
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
SUMMARY RECONCILIATION OF NET INCOME:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP NET INCOME
$
80,973

 
$
273,946

 
$
119,998

 
$
542,894

Share-based compensation (a)
44,422

 
34,449

 
85,832

 
64,479

Amortization of acquisition-related intangible assets (b)
42,503

 
21,202

 
80,940

 
42,464

Impairment of acquisition-related intangible assets (c)
—

 
—

 
61,000

 
—

Convertible debt interest (d)
22,603

 
21,125

 
44,737

 
42,089

Income tax adjustments (e)
(54,045
)
 
(22,023
)
 
(122,364
)
 
(33,197
)
NON-GAAP NET INCOME
$
136,456

 
$
328,699

 
$
270,143

 
$
658,729

 
 
 
 
 
 
 
 
GAAP COST OF REVENUE
$
752,817

 
$
874,361

 
$
1,540,056

 
$
1,635,016

Share-based compensation (a)
(5,022
)
 
(3,507
)
 
(9,084
)
 
(6,117
)
Amortization of acquisition-related intangible assets (b)
(28,822
)
 
(19,721
)
 
(53,578
)
 
(39,337
)
NON-GAAP COST OF REVENUE
$
718,973

 
$
851,133

 
$
1,477,394

 
$
1,589,562

 
 
 
 
 
 
 
 
GAAP GROSS PROFIT
$
484,379

 
$
759,650

 
$
1,029,381

 
$
1,510,940

Share-based compensation (a)
5,022

 
3,507

 
9,084

 
6,117

Amortization of acquisition-related intangible assets (b)
28,822

 
19,721

 
53,578

 
39,337

NON-GAAP GROSS PROFIT
$
518,223

 
$
782,878

 
$
1,092,043

 
$
1,556,394

 
 
 
 
 
 
 
 
GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
218,418

 
$
204,030

 
$
441,144

 
$
402,859

Share-based compensation (a)
(22,309
)
 
(17,500
)
 
(43,352
)
 
(33,175
)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
196,109

 
$
186,530

 
$
397,792

 
$
369,684

 
 
 
 
 
 
 
 
GAAP SALES AND MARKETING EXPENSES
$
96,681

 
$
83,398

 
$
198,501

 
$
160,370

Share-based compensation (a)
(9,948
)
 
(7,204
)
 
(19,483
)
 
(13,461
)
NON-GAAP SALES AND MARKETING EXPENSES
$
86,733

 
$
76,194

 
$
179,018

 
$
146,909

 
 
 
 
 
 
 
 
GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
41,932

 
$
54,085

 
$
89,979

 
$
102,754

Share-based compensation (a)
(7,143
)
 
(6,238
)
 
(13,913
)
 
(11,726
)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
34,789

 
$
47,847

 
$
76,066

 
$
91,028

 
 
 
 
 
 
 


GAAP TOTAL OPERATING EXPENSES
$
380,458

 
$
342,994

 
$
868,273

 
$
669,110

Share-based compensation (a)
(39,400
)
 
(30,942
)
 
(76,748
)
 
(58,362
)
Amortization of acquisition-related intangible assets (b)
(13,681
)
 
(1,481
)
 
(27,362
)
 
(3,127
)
Impairment of acquisition-related intangible assets (c)
—

 
—

 
(61,000
)
 
—

NON-GAAP TOTAL OPERATING EXPENSES
$
327,377

 
$
310,571

 
$
703,163

 
$
607,621

 
 
 
 
 
 
 
 
GAAP OPERATING INCOME
$
103,921

 
$
416,656

 
$
161,108

 
$
841,830

Cost of revenue adjustments (a) (b)
33,844

 
23,228

 
62,662

 
45,454

Operating expense adjustments (a) (b) (c)
53,081

 
32,423

 
165,110

 
61,489

NON-GAAP OPERATING INCOME
$
190,846

 
$
472,307

 
$
388,880

 
$
948,773

 
 
 
 
 
 
 
 
GAAP OTHER INCOME (EXPENSE), NET
$
(12,777
)
 
$
(13,579
)
 
$
(36,347
)
 
$
(29,214
)
Convertible debt interest (d)
22,603

 
21,125

 
44,737

 
42,089

NON-GAAP OTHER INCOME (EXPENSE), NET
$
9,826

 
$
7,546

 
$
8,390

 
$
12,875

 
 
 
 
 
 
 
 
GAAP NET INCOME
$
80,973

 
$
273,946

 
$
119,998

 
$
542,894

Cost of revenue adjustments (a) (b)
33,844

 
23,228

 
62,662

 
45,454

Operating expense adjustments (a) (b) (c)
53,081

 
32,423

 
165,110

 
61,489

Other income (expense) adjustments (d)
22,603

 
21,125

 
44,737

 
42,089

Income tax adjustments (e)
(54,045
)
 
(22,023
)
 
(122,364
)
 
(33,197
)
NON-GAAP NET INCOME
$
136,456

 
$
328,699

 
$
270,143

 
$
658,729

 
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
 
GAAP
$
0.38

 
$
1.14

 
$
0.55

 
$
2.28

Non-GAAP
$
0.66

 
$
1.41

 
$
1.27

 
$
2.84

 
 
 
 
 
 
 
 
Shares used in computing diluted net income per share:
 
 
 
 
 
 
 
GAAP
212,712

 
240,756

 
218,490

 
238,463

Non-GAAP (f)
208,093

 
232,808

 
212,351

 
231,570






SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, unaudited)
 
Three months ended
 
Six months ended
 
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
SUMMARY RECONCILIATION OF DILUTED SHARES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
212,712

 
240,756

 
218,490

 
238,463

Adjustments for share-based compensation
89

 
336

 
107

 
266

Offsetting shares from call options
(4,708
)
 
(8,284
)
 
(6,246
)
 
(7,159
)
Non-GAAP (f)
208,093

 
232,808

 
212,351

 
231,570

 
 
(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 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, impairment of acquisition-related in-process research and development intangible assets, 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, 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 non-cash charges, such as share-based compensation, amortization of acquisition-related intangible assets, impairment of acquisition-related in-process research and development intangible assets, 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, 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., 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 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.
(e) 
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.
(f) 
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)
 
June 28, 2015
 
December 28, 2014
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
685,790

 
$
809,003

Short-term marketable securities
1,078,221

 
1,455,509

Accounts receivable, net
640,842

 
842,476

Inventory
780,773

 
698,011

Deferred taxes
160,935

 
180,134

Other current assets
310,795

 
214,992

Total current assets
3,657,356

 
4,200,125

Long-term marketable securities
2,239,072

 
2,758,475

Property and equipment, net
804,764

 
724,357

Notes receivable and investments in Flash Ventures
936,392

 
962,817

Deferred taxes
158,506

 
161,827

Goodwill
831,328

 
831,328

Intangible assets, net
390,355

 
542,351

Other non-current assets
131,658

 
108,677

Total assets
$
9,149,431

 
$
10,289,957

 
 
 
 
LIABILITIES, CONVERTIBLE SHORT-TERM DEBT CONVERSION OBLIGATION AND EQUITY
Current liabilities:
 
 
 
Accounts payable trade
$
412,403

 
$
404,237

Accounts payable to related parties
139,771

 
136,051

Convertible short-term debt (1)
892,054

 
869,645

Other current accrued liabilities
356,480

 
506,293

Deferred income on shipments to distributors and retailers and deferred revenue
236,352

 
274,657

Total current liabilities
2,037,060

 
2,190,883

Convertible long-term debt
1,222,642

 
1,199,696

Non-current liabilities
163,080

 
245,554

Total liabilities
3,422,782

 
3,636,133

 
 
 
 
Convertible short-term debt conversion obligation (1)
104,666

 
127,143

 
 
 
 
Stockholders' equity:
 
 
 
Common stock
5,141,172

 
5,236,982

Retained earnings
704,389

 
1,499,149

Accumulated other comprehensive loss
(223,578
)
 
(208,072
)
Total stockholders' equity
5,621,983

 
6,528,059

Non-controlling interests
—

 
(1,378
)
Total equity
5,621,983

 
6,526,681

Total liabilities, convertible short-term debt conversion obligation and equity
$
9,149,431

 
$
10,289,957

 
 
(1) 
The 1.5% Convertible Senior Notes due 2017 were convertible through June 30, 2015 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 June 28, 2015. Based upon the Company's stock price not exceeding the trigger price set forth in the indenture at June 30, 2015, the 1.5% Convertible Senior Notes due 2017 will not be convertible during the calendar quarter ending September 30, 2015. 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
 
Six months ended
 
June 28, 2015
 
June 29, 2014
 
June 28, 2015
 
June 29, 2014
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
80,973

 
$
273,946

 
$
119,998

 
$
542,894

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Deferred taxes
(2,232
)
 
641

 
(3,197
)
 
7,592

Depreciation
70,074

 
61,364

 
139,155

 
121,453

Amortization
86,358

 
72,996

 
169,732

 
145,594

Provision for doubtful accounts
310

 
388

 
640

 
(159
)
Share-based compensation expense
44,422

 
34,449

 
85,832

 
64,479

Excess tax benefit from share-based plans
(1,476
)
 
(10,552
)
 
(10,341
)
 
(28,012
)
Impairment and other
—

 
—

 
63,709

 
—

Other non-operating
(2,909
)
 
(312
)
 
(7,096
)
 
708

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable, net
(51,190
)
 
(163,687
)
 
201,709

 
(76,998
)
Inventory
(67,707
)
 
48,562

 
(81,652
)
 
6,445

Other assets
(12,379
)
 
(55,066
)
 
(107,052
)
 
(519
)
Accounts payable trade
3,733

 
49,795

 
(22,357
)
 
13,249

Accounts payable to related parties
(8,099
)
 
(9,292
)
 
3,720

 
4,280

Other liabilities
(111,014
)
 
(62,372
)
 
(215,071
)
 
(178,067
)
Total adjustments
(52,109
)
 
(33,086
)
 
217,731

 
80,045

Net cash provided by operating activities
28,864

 
240,860

 
337,729

 
622,939

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of short and long-term marketable securities
(580,930
)
 
(1,511,635
)
 
(1,273,586
)
 
(2,778,534
)
Proceeds from sales of short and long-term marketable securities
877,931

 
1,078,061

 
1,923,028

 
2,093,666

Proceeds from maturities of short and long-term marketable securities
106,811

 
249,875

 
206,692

 
379,495

Acquisition of property and equipment, net
(95,562
)
 
(44,149
)
 
(193,849
)
 
(78,666
)
Investment in Flash Ventures
—

 
(24,296
)
 
—

 
(24,296
)
Notes receivable issuances to Flash Ventures
(71,347
)
 
(63,607
)
 
(171,846
)
 
(87,959
)
Notes receivable proceeds from Flash Ventures
86,463

 
87,952

 
176,156

 
112,304

Purchased technology and other assets
(5,374
)
 
(684
)
 
(6,874
)
 
(1,553
)
Acquisitions, net of cash acquired
—

 
—

 
—

 
2,368

Other
(866
)
 
—

 
(866
)
 
—

Net cash provided by (used in) investing activities
317,126

 
(228,483
)
 
658,855

 
(383,175
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Repayment of debt financing
—

 
—

 
(68
)
 
—

Proceeds from employee stock programs
4,855

 
51,682

 
35,699

 
103,564

Excess tax benefit from share-based plans
1,476

 
10,552

 
10,341

 
28,012

Dividends paid
(62,596
)
 
(50,838
)
 
(127,099
)
 
(102,398
)
Share repurchases (1)
(253,576
)
 
(256,996
)
 
(1,037,475
)
 
(371,448
)
Net cash used in financing activities
(309,841
)
 
(245,600
)
 
(1,118,602
)
 
(342,270
)
Effect of changes in foreign currency exchange rates on cash
(299
)
 
1,400

 
(1,195
)
 
1,375

Net increase (decrease) in cash and cash equivalents
35,850

 
(231,823
)
 
(123,213
)
 
(101,131
)
Cash and cash equivalents at beginning of period
649,940

 
1,116,938

 
809,003

 
986,246

Cash and cash equivalents at end of period
$
685,790

 
$
885,115

 
$
685,790

 
$
885,115

 
 
(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 Corporation
Preliminary Quarterly Metrics


Revenue Mix by Category (1) 
 
% of revenue (unaudited)
Percentages may not add to 100% due to rounding
 
Q1'14
 
Q2'14
 
Q3'14
 
Q4'14
 
Q1'15
 
Q2'15
 
FY'14
 
FY'15 YTD
Embedded (2)
20%
 
19%
 
24%
 
26%
 
25
%
 
20
%
 
23
%
 
23
%
Removable (3)
40%
 
40%
 
38%
 
33%
 
38
%
 
44
%
 
38
%
 
41
%
Client SSD Solutions (4)
22%
 
21%
 
17%
 
16%
 
13
%
 
10
%
 
19
%
 
12
%
Enterprise Solutions (5)
6%
 
8%
 
10%
 
15%
 
14
%
 
14
%
 
10
%
 
14
%
Other (6)
11%
 
12%
 
11%
 
10%
 
10
%
 
11
%
 
11
%
 
11
%
Total Revenue
100%
 
100%
 
100%
 
100%
 
100
%
 
100
%
 
100
%
 
100
%

(1) 
Revenue by category is estimated based on analysis of the information the company collects in its sales reporting processes.
(2) 
Embedded includes products that attach to a host system board.
(3) 
Removable includes products such as cards, USB flash drives and audio/video players.
(4) 
Client SSD Solutions includes SSDs used in client devices and associated software.
(5) 
Enterprise Solutions includes SSDs, system solutions and software used in data center applications.
(6) 
Other includes wafers, components, accessories and license and royalty.


Revenue Mix by Channel
 
% of revenue (unaudited)
 
Q1'14
 
Q2'14
 
Q3'14
 
Q4'14
 
Q1'15
 
Q2'15
 
FY'14
 
FY'15 YTD
Retail
35
%
 
33
%
 
32
%
 
31
%
 
35
%
 
39
%
 
33
%
 
37
%
Commercial (1)
65
%
 
67
%
 
68
%
 
69
%
 
65
%
 
61
%
 
67
%
 
63
%
Total Revenue
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%
 
100
%

(1) 
Commercial includes revenue from OEMs, system integrators, value-added resellers, direct sales and license and royalties.






SanDisk Corporation
Preliminary Quarterly Metrics
(unaudited)


 
Q1'14
 
Q2'14
 
Q3'14
 
Q4'14
 
Q1'15
 
Q2'15
 
Q/Q Change in Gigabytes Sold
-10
 %
 
+31
 %
 
+9
 %
 
+4
 %
 
-15
 %
 
-1
 %
 
Y/Y Change in Gigabytes Sold
+20
 %
 
+51
 %
 
+43
 %
 
+32
 %
 
+24
 %
 
-6
 %
 
Q/Q Change in ASP/Gigabyte
-3
 %
 
-16
 %
 
-3
 %
 
-4
 %
 
-10
 %
 
-6
 %
 
Y/Y Change in ASP/Gigabyte
-7
 %
 
-26
 %
 
-26
 %
 
-24
 %
 
-29
 %
 
-21
 %
 
Q/Q Change in Cost/Gigabyte (1)
-3
 %
 
-12
 %
 
-3
 %
 
+3
 %
 
-6
 %
 
-4
 %
 
Y/Y Change in Cost/Gigabyte (1)
-23
 %
 
-28
 %
 
-23
 %
 
-15
 %
 
-17
 %
 
-10
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Gigabyte/Unit Capacity
13.9

 
14.1

 
16.5

 
22.3

 
20.8

 
19.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of end of period:
 
 
 
 
 
 
 
 
 
 
 
 
Factory Headcount (2)(3)
1,366

 
2,874

 
3,276

 
3,284

 
3,149

 
3,149

 
Non-Factory Headcount (4)
4,490

 
4,664

 
5,461

 
5,412

 
5,490

 
5,371

(5) 
Total Headcount
5,856

 
7,538

 
8,737

 
8,696

 
8,639

 
8,520

 

(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.
(5) 
Headcount at the end of Q2’15 included 107 employees who had been notified of reduction-in-force but were still on the payroll as of the end of Q2’15.


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