EX-99.1 3 dex991.htm PRESS RELEASE DATED JANUARY 22, 2003 Press Release dated January 22, 2003
 
Exhibit 99.1
 
CONTACT:    Michael Gray, Senior Vice President Finance, CFO
 (408) 542-0585
 
SANDISK ANNOUNCES FOURTH QUARTER AND FISCAL 2002 EARNINGS
 
Record Quarterly Revenues Driven By Strong Growth In Retail Sales And Royalties
 
SUNNYVALE, CA, January 22, 2003 . . . SanDisk Corporation (NASDAQ:SNDK), the world’s largest supplier of flash memory data storage products, today announced results for its fourth quarter ended December 31, 2002. Total fourth quarter revenues were a record $179.8 million, up 27% sequentially from the prior quarter. Product revenues were $158.7 million, up 20% sequentially. Retail sales increased 35% and represented 69% of product sales, while OEM/Industrial sales declined 4% relative to the prior quarter due to continuing weakness in the Industrial/Telecom sector. Fourth quarter revenues from licenses and royalties were $21.1 million, up 133% sequentially due primarily to increased royalty-bearing sales by licensees. Product gross margin was a record 37%, up from 34% in the prior quarter. The average price per megabyte sold declined 15% sequentially. Fourth quarter units sold increased 21% and megabytes sold increased 43% compared to the previous quarter, both representing new record levels. Fourth quarter net income was $19.6 million, up 73% sequentially. Earnings per share were $0.26 per diluted share, up 63% sequentially and are net of unrealized losses of $15.8 million, before tax, or $0.20 per share, due to revaluation of the Company’s equity investments in Tower Semiconductor and Divio.
 
Total revenue for fiscal 2002 was $541.3 million, up 48% from $366.3 million in 2001. Product revenues were $492.9 million, up 56% from $316.9 million in 2001. Revenues from licenses and royalties were $48.4 million, down 2% from $49.4 million in 2001. Net income was $36.2 million, compared to a net loss of $297.9 million in 2001. The net loss in 2001 included other-than-temporary impairment charges of $302.3 million, or $188.1 million net of tax. Earnings per share for fiscal 2002 were $0.51 per diluted share, which compared to a net loss of $4.37 per diluted share in 2001.
 
Product revenues for the fourth quarter of 2002 increased 90% and the average selling price per megabyte declined 31% compared to the fourth quarter of 2001. The increase in revenue was driven by growth in units sold of 112% and in megabytes sold of 203% over the comparable period in 2001. Operating income totaled $42.6 million for the fourth quarter of 2002, compared to an operating loss of $14.7 million for the fourth quarter of 2001.

 
Net cash from operations was $40.9 million and $105.7 million for the fourth quarter and fiscal 2002, respectively. The Company’s cash and short-term investment position increased $96.8 million or 33% from the prior year.
 
In the fourth quarter, retail revenues showed particularly strong growth in the US and Pacific Rim regions, with strong contributions from Compact Flash (CF), Secure Digital (SD) and Smart Media cards. SD card sales increased 82% from the prior quarter. Digital cameras were one of the hottest consumer electronics sellers this holiday season and SanDisk was a direct beneficiary because of its broad line of card products and its global distribution channels.
 
The product gross margin improvement in the fourth quarter was attributable to cost efficiencies from higher sales levels, increased sales of MLC (Multi Level Cell) flash, as well as the sale of $3.6 million of NOR flash inventory that was previously written off, which represented 2% of product gross margin contribution.
 
“We are exceptionally pleased with the fourth quarter results,” said Eli Harari, President and CEO of SanDisk Corporation. “The outlook for 2003 is encouraging despite an anticipated seasonal decline in the first quarter sales compared to the traditionally strong fourth quarter. We believe the markets that we address are relatively young and according to market forecasts are projected to grow at a fast pace in the next few years, thus spurring sales growth for our products. We plan to launch in 2003 a number of new and exciting products, some of which were announced at the January Consumer Electronics Show in Las Vegas. In addition to the growing markets for our cards used in digital cameras and other digital consumer products, we continue to see strong design win activities, which we believe will give us increased penetration into new markets in 2003, such as advanced cell phones and embedded flash components. We believe that our ongoing transition from .16 micron to .13 micron NAND flash and MLC technology will allow us to continue our focus on aggressive cost reductions to give us a competitive cost structure. Despite the potential for near term pricing pressures, we are optimistic about the prospects for positive growth in our business in 2003.”
 
This news release contains certain forward-looking statements including our expectations for future design wins, new product introductions, future product revenues and bookings, earnings and profitability, product demand, average selling prices, and gross margins that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate and may significantly and adversely affect our business, financial condition and results of operations. Risks that may cause these forward-looking statements to be inaccurate include among others: future average selling price erosion due to excess industry capacity and extreme price competition; increased expenses and fluctuations in operating results and yields related to the startup of .13 micron flash memory wafer production for FlashVision at the Yokkaichi facility in Japan; our increased exposure to interruption of supply due to our increased dependence on a principal source at Yokkaichi for our supply

of NAND flash memory; the current global economic conditions in general and in our markets in particular; the timely development, internal qualification and customer acceptance of new products based on the NAND MLC .13 micron flash chips that SanDisk is obligated to purchase from FlashVision; fluctuations in royalty revenues due to industry wide changes in demand for flash memory products which impact royalty bearing sales of our licensees; the timely introduction and acceptance of new consumer products that incorporate our flash storage devices; slower than expected growth in the emerging markets for our products which may result in reduced sales and increased inventory; successful management of assembly operations in China and Taiwan; the unknown economic impact of terrorist attacks and the military response thereto, or a war with Iraq or in the Korean peninsula; seasonality of product sales; market acceptance of our Secure Digital, Cruzer, Memory Stick and Ultra CompactFlash card products; our ability to prevail in patent litigation proceedings; further impairment of our investments in Tower Semiconductor Ltd. and Divio, Inc. due to further decline in the stock valuation of either of these companies and the other risks detailed from time to time in our Securities and Exchange Commission filings and reports, including, but not limited to, our Form 10Q for the quarters ended September 30, 2002, and the Annual Report on Form 10-K/A for the year ended December 31, 2001. Future results may differ materially from those previously reported. We assume no obligation to update the information contained in this release.
 
SanDisk Corporation, the world’s largest supplier of flash data storage products, designs, manufactures and markets industry-standard, solid-state data, digital imaging and audio storage products using its patented, high density flash memory and controller technology. SanDisk is based in Sunnyvale, CA.
 
SanDisk’s fourth quarter and fiscal 2002 conference call is scheduled for 2:00 p.m. Pacific Time, Wednesday, January 22nd. The phone number is (800) 500-0177. The conference call is being webcast by CCBN and can be accessed at SanDisk’s website at www. sandisk.com/IR and at www. streetevents.com for institutional investors. The webcast will be available through Wednesday, January 29, 2003. The call will also be available by replay after 6:00 p.m. Pacific Time through Sunday, January 26, 2003, by dialing (888) 203-1112 and entering the pass code 517561.
 
SanDisk’s web site / home page address: http:/ / www. sandisk.com
 
All trade names are either registered trademarks or trademarks of their respective holders.

 
SanDisk Corporation
Condensed Consolidated Statement of Operations
(In thousands, except per share data, unaudited)
 
    
Three Months Ended
December 31,
     
Twelve Months Ended
December 31,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues:
                                    
Product
   
$
158,714
 
   
$
83,364
 
   
$
492,900
 
   
$
316,867
 
License and royalty
   
 
21,114
 
   
 
8,575
 
   
 
48,373
 
   
 
49,434
 
    
  
  
  
Total revenue
   
 
179,828
 
   
 
91,939
 
   
 
541,273
 
   
 
366,301
 
Cost of product sales
   
 
99,882
 
   
 
77,335
 
   
 
352,452
 
   
 
392,293
 
    
  
  
  
Gross profit (loss)
   
 
79,946
 
   
 
14,604
 
   
 
188,821
 
   
 
(25,992
)
Operating expenses:
                                    
Research and development
   
 
17,328
 
   
 
13,700
 
   
 
63,177
 
   
 
58,931
 
Sales and marketing
   
 
11,800
 
   
 
11,161
 
   
 
40,407
 
   
 
42,576
 
General and administrative
   
 
8,168
 
   
 
4,407
 
   
 
27,086
 
   
 
16,981
 
Restructuring
   
 
—  
 
   
 
—  
 
   
 
—  
 
   
 
8,510
 
    
  
  
  
Total operating expenses
   
 
37,296
 
   
 
29,268
 
   
 
130,670
 
   
 
126,998
 
Operating profit (loss)
   
 
42,650
 
   
 
(14,664
)
   
 
58,151
 
   
 
(152,990
)
Equity in income of joint ventures
   
 
572
 
   
 
781
 
   
 
856
 
   
 
2,082
 
Interest income
   
 
2,124
 
   
 
2,496
 
   
 
8,675
 
   
 
12,404
 
Interest expense
   
 
(1,593
)
   
 
(109
)
   
 
(6,700
)
   
 
(138
)
Loss in investment in foundries
   
 
(13,962
)
   
 
(5,942
)
   
 
(15,163
)
   
 
(302,293
)
Loss in equity investment
   
 
(1,800
)
   
 
—  
 
   
 
(2,700
)
   
 
—  
 
Other(expense) income, net
   
 
(518
)
   
 
1,616
 
   
 
(3,140
)
   
 
(1,009
)
    
  
  
  
Income (loss) before taxes
   
 
27,473
 
   
 
(15,822
)
   
 
39,979
 
   
 
(441,944
)
Provision for (benefit from) income taxes
   
 
7,863
 
   
 
(41,450
)
   
 
3,739
 
   
 
(144,000
)
    
  
  
  
Net income (loss)
   
$
19,610
 
   
$
25,628
 
   
$
36,240
 
   
($
297,944
)
    
  
  
  
Net income (loss) per share
                                    
Basic
   
$
0.28
 
   
$
0.37
 
   
$
0.53
 
   
$
(4.37
)
Diluted
   
$
0.26
 
   
$
0.36
 
   
$
0.51
 
   
$
(4.37
)
Shares used in computing net income (loss) per share
                                    
Basic
   
 
69,057
 
   
 
68,401
 
   
 
68,805
 
   
 
68,148
 
Diluted
   
 
80,213
 
   
 
70,716
 
   
 
71,230
 
   
 
68,148
 

 
SanDisk Corporation
Condensed Consolidated Balance Sheets
(In thousands)
 
    
December 31, 2002
     
December 31,
2001*
ASSETS
   
(unaudited)
       
Curent Assets:
                
Cash and cash equivalents
   
$
266,635
 
   
$
189,499
Short-term investments
   
 
189,856
 
   
 
105,501
Investment in foundries
   
 
110,069
 
   
 
105,364
Accounts receivable, net
   
 
81,086
 
   
 
45,223
Inventories
   
 
91,195
 
   
 
57,881
Tax refund receivable
   
 
1,563
 
   
 
28,473
Prepaid expenses and other current assets
   
 
16,926
 
   
 
12,129
    
  
Total current assets
   
 
757,330
 
   
 
544,070
Restricted cash and cash equivalents
   
 
—  
 
   
 
64,734
Property and equipment, net
   
 
30,307
 
   
 
33,730
Investment in foundries
   
 
24,197
 
   
 
41,380
Restricted investment in UMC
   
 
—  
 
   
 
64,734
Investment in FlashVision
   
 
142,825
 
   
 
153,168
Deferred tax asset
   
 
6,922
 
   
 
18,842
Deposits and other non-current assets
   
 
14,598
 
   
 
13,603
    
  
Total Assets
   
$
976,179
 
   
$
934,261
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY:
                
Current Liabilities:
                
Accounts payable
   
$
29,323
 
   
$
19,938
Accounts payable to related parties
   
 
29,113
 
   
 
24,008
Accrued payroll and related expenses
   
 
11,690
 
   
 
5,279
Income taxes payable
   
 
15,978
 
   
 
12,269
Deferred tax liability
   
 
6,922
 
   
 
18,842
Research & development liability, related party
   
 
6,714
 
   
 
15,256
Other accrued liabilities
   
 
29,380
 
   
 
22,484
Deferred income on shipments to distributors and retailers and deferred revenue
   
 
43,760
 
   
 
11,613
    
  
Total current liabilities
   
 
172,880
 
   
 
129,689
Convertible subordinated notes payable
   
 
150,000
 
   
 
125,000
Other non-current liabilities
   
 
2,404
 
   
 
—  
Deferred revenue
   
 
23,175
 
   
 
4,193
    
  
Total Liabilities
   
 
348,459
 
   
 
258,882
Stockholders’ Equity:
                
Common stock
   
 
585,968
 
   
 
580,431
Retained earnings
   
 
84,765
 
   
 
48,525
Accumulated other comprehensive (loss) income
   
 
(43,013
)
   
 
46,423
    
  
Total stockholders’ equity
   
 
627,720
 
   
 
675,379
Total Liabilities and Stockholders’ Equity
   
$
976,179
 
   
$
934,261