SANDISK ANNOUNCES FOURTH QUARTER AND FISCAL 2008 FINANCIAL RESULTS
Milpitas, CA, February 2, 2009 – SanDisk Corporation (NASDAQ:SNDK), the world’s largest supplier of flash storage card products, today announced results for the fourth quarter ended December 28, 2008. Total fourth quarter revenue of $864 million declined 31% on a year-over-year basis and increased 5% on a quarter-over-quarter basis. Total revenue for fiscal 2008 of $3.35 billion declined 14% from $3.90 billion in fiscal 2007.
Fourth quarter net loss, in accordance with U.S. Generally Accepted Accounting Principles (GAAP), was $(1.86) billion, or a loss of $(8.25) per share, compared to GAAP net income of $106 million, or $0.45 per share, in the fourth quarter of fiscal 2007. The GAAP net loss for fiscal 2008 was $(2.07) billion, or $(9.19) per share, compared to net income of $219 million, or $0.93 per share in fiscal 2007.
“Despite a very difficult pricing environment, macroeconomic turmoil and the impact on consumer purchasing, we delivered sequential revenue growth in the fourth quarter. However, we are very disappointed with our fourth quarter bottom line results, which included significant asset impairment and inventory related charges. We are focused on managing our business through the difficult global economic climate and limited visibility in 2009. We are taking significant steps to curtail our captive output, conserve cash, and reduce capital and operating expenditures. We continue to invest in technology leadership while creating new demand with the exciting products we announced at the January 2009 Consumer Electronics Show,” said Eli Harari, Chairman and CEO. “We believe that drastic industry-wide capital expenditure cuts announced for 2009 will contribute to a better balance between supply and demand and an improved pricing environment in our markets later in 2009 and into 2010.”
Fourth quarter 2008 GAAP results include:
A combined pre-tax goodwill and intangible asset impairment charge of $1.02 billion, due to a sustained decline in SanDisk’s market capitalization, among other factors.
A valuation allowance of $464 million recorded against net deferred tax assets, due primarily to the fiscal 2008 net loss.
Charges to cost of sales of $388 million including inventory related charges of $184 million, idle capacity costs of $121 million for reduced fab output in Q109, and an impairment of fab investments of $83 million partially offsetting the foreign exchange appreciation of these Japanese yen denominated investments in the fabs. These cost of sales charges are also included in the non-GAAP results.
Restructuring and other charges of $31 million. These charges are also included in the non-GAAP results.
These charges in the aggregate amounted to $1.91 billion in the fourth quarter of fiscal 2008.
FOURTH QUARTER 2008 METRICS
Total cash, short-term, and long-term investments at the end of fiscal 2008 was $2.5 billion, compared to $2.9 billion at the end of fiscal 2007.
Cash flow from operations for the fourth quarter was $65 million, compared to $149 million in the fourth quarter of 2007.
Product revenue was $742 million, down 34% year-over-year and up 8% quarter-over-quarter.
License and royalty revenue of $122 million, was down 5% year-over-year and down 8% quarter-over-quarter.
Total megabytes sold in the fourth quarter increased 123% year-over-year and 49% sequentially.
Average price per megabyte sold in the fourth quarter declined 70% on a year-over-year basis and 28% sequentially.
Average retail card capacity in the fourth quarter was 3.79 gigabytes, an increase of 114% on a year-over-year basis and 31% sequentially.
For fiscal 2008 total megabytes sold increased 125% and average price per megabyte sold declined 62%, both on a year-over-year basis.
Non-GAAP net income (loss) was ($372) million in the fourth quarter, compared to $162 million in the fourth quarter of 2007 and ($132) million in the third quarter of fiscal 2008.
Non-GAAP earnings per share were $(1.65) compared to $0.69 per share in the fourth quarter of fiscal 2007 and $(0.59) per share in the third quarter of fiscal 2008.
OTHER RECENT ANNOUNCEMENTS
SanDisk and Toshiba signed a definitive agreement to transfer more than 20% of SanDisk’s captive fab capacity to Toshiba for a total value of approximately $890 million. This considerably strengthens SanDisk’s financial position, lowers inventory commitments, and enables a more rapid return to a captive/non captive supply model.
SanDisk introduced ExtremeFFS™, a new Flash Management System for improving SSD performance and reliability. ExtremeFFS technology is being implemented on SanDisk’s 3rd generation MLC SSDs, launched at the January 2009 Consumer Electronics Show (CES), at 60 gigabyte, 120 gigabyte, and 240 gigabyte (GB)* capacities.
SanDisk launched slotMusic™ cards in the U.S. in conjunction with the four major record labels. slotMusic is a new physical format for music – high-fidelity, DRM-free MP3 music on a microSD™ card – which gives consumers the ability to easily listen to their favorite songs among a mobile phone, PC, and MP3 player with a microSD slot.
SanDisk unveiled the Sansa® slotRadio™ player and companion line of slotRadio music cards designed especially for the casual music consumer. Available in Spring 2009, the small, stylish device comes bundled with a slotRadio card preloaded with 1,000 songs, professionally arranged into genre-themed playlists. The plug-and-play model offered by the (microSD) card-plus-player format dramatically lowers barriers and ushers in a new way for consumers to easily and immediately enjoy music.
SanDisk was named an International CES Innovations 2009 Design and Engineering Awards Honoree for its 16 gigabyte microSDHC™ and Memory Stick Micro™ (M2™) mobile phone memory cards.
CONFERENCE CALL
SanDisk’s fourth quarter 2008 conference call is scheduled for 2:00 p.m. PST, Monday, February 2, 2009. The conference call will be webcast and can be accessed live, and throughout the quarter, at SanDisk’s website at http://www.sandisk.com/IR. To participate in the call via telephone, the dial-in number is 913-312-0835. The dial-in password is 4452969. 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 our website prior to the conference call.
A complete reconciliation between GAAP and non-GAAP information referred to in this release is provided in the attached tables.
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking statements, including statements about our business prospects and outlook, anticipated increased demand for products including our mobile products, our expectations of a more balanced supply/demand environment and improved pricing environment and expected growth in international retail, 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:
slower than expected growth in market demand for our products including, for example, our solid state drives, or a slower adoption rate for our products in current and new markets that we are targeting including, for example, the mobile phone market,
level of demand and consumer confidence due to a continuing global economic downturn,
continued significant over-supply in the markets that we serve,
continued significant declines in average selling prices,
any interruption of or delay in supply from any of the semiconductor manufacturing or subcontracting facilities, including test and assembly facilities that supply products to us,
slower than expected expansion of our global sales channels,
fluctuations in operating results, unexpected yield variances and delays related to our conversion to smaller geometries of NAND flash technology or the ramp-up of the 300 millimeter flash fabrication facility,
failure of or delays in the closing of our recently announced joint venture restructuring with Toshiba,
increased memory component and other costs as a result of currency exchange rate fluctuations to the U.S. dollar, particularly with respect to the Japanese yen,
business interruption due to earthquakes, hurricanes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products,
adverse results in litigation or regulatory actions affecting us, and
other risks detailed from time-to-time under the caption “Risk Factors” and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 and our subsequently filed fiscal 2008 quarterly reports on Form 10-Q.
Future results may differ materially from those previously reported. We do not intend to update the information contained in this release.
ABOUT SANDISK
SanDisk Corporation, the inventor and world’s largest supplier of flash storage cards, is a global leader in flash memory – from research, manufacturing and product design to consumer branding and retail distribution. SanDisk’s product portfolio includes flash memory cards for mobile phones, digital cameras and camcorders, digital audio/video players, USB flash drives for consumers and the enterprise, embedded memory for mobile devices, and solid state drives for computers. SanDisk (www.sandisk.com/corporate) is a Silicon Valley-based S&P 500 company, with more than half its sales outside the United States.
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