SanDisk Announces Record Revenue and Bookings for Third Quarter 1999 - Company Financial Information

Edge: Work-Group Computing Report, Oct 18, 1999

SanDisk Corporation (NASDAQ:SNDK), the world's largest supplier of flash memory data storage products, Wednesday announced record revenue for its quarter ended September 30, 1999. Total third quarter revenues were $67.5 million, an increase of 29% from the second quarter of 1999 due primarily to increased sales of CompactFlash and MultiMediaCard products. Revenues from licenses and royalties were $9.9 million. Net income for the quarter was $6.5 million, up 11% from $5.7 million in the second quarter of 1999. Diluted earnings per share was $0.21, compared to $0.19 per share for the second quarter of 1999.

Total third quarter revenues increased $35.5 million, or 111%, over total revenues of $32.1 million for the same period last year. Product revenues increased by 139% compared to the same period of the prior year and license and royalty revenues increased by 25%. Current quarter diluted earnings per share was $0.21, compared to $0.09 per share for the third quarter of 1998.

"The third quarter was a very strong quarter for SanDisk" said Dr. Eli Harari, President and CEO of SanDisk. "New records were achieved in product revenues, number of units and megabytes shipped and new bookings. We shipped 24% more units and 52% more megabytes than in the previous record quarter. Bookings have been exceptionally strong in all geographic areas, amounting to 2.5 times the record bookings we recorded in the previous quarter. We are booked for the fourth quarter and have a strong backlog for the first quarter of 2000. Current quarter results include foreign currency transaction gains of $1.3 million.

"During the quarter, we accelerated our 128Mbit flash memory production ramp to meet increased demand. Product gross margins decreased to 24% from 27% in the second quarter. This was primarily due to lower than anticipated yields on our 128Mbit products, and a 19% decline in the average selling price per megabyte shipped. We also experienced higher than anticipated production costs due to spot shortages of critical components. The 128Mbit yields have shown significant improvement recently and are now back on plan. Towards the end of the quarter, we completed internal qualification of the 256Mbit Double Density technology and began customer shipments. We expect product gross margins to improve slightly in the fourth quarter as we begin significant shipments of our 256Mbit products.

"Taiwan is back to normal production. The recent earthquake did not impact our third quarter results. The financial impact of the earthquake is expected to be confined to the fourth quarter and manifest itself primarily in terms of spot shortages and increased expediting costs. We currently believe that the fourth quarter megabytes shipped will exceed megabytes shipped in the third quarter. However, the projected quarter over quarter growth in revenues will be lower than the growth rate experienced in the third quarter. In the first quarter of 2000, we anticipate improved margins due to the higher pricing we instituted on new orders. The shift to the more productive 256Mbit technology should also help to significantly increase product availability in the first quarter of 2000.

"I am particularly pleased with the strategic initiatives which we recently announced, including the 512Mbit and 1 Gigabit flash memory co-development and manufacturing joint venture with Toshiba, the launch of SD (Secure Digital) memory card with Matsushita and Toshiba, the acquisition of the Invox patent portfolio and the PIC (Personal Information Carrier) government award."

SanDisk Corporation designs, develops and markets flash memory data storage products used in a wide variety of electronic systems. The Company has optimized its flash memory storage solution, known as "system flash", to address the needs of many emerging applications in the consumer electronics and industrial/communications markets. The Company's products include removable CompactFlash products and FlashDisk cards, embedded FlashDrives and Flash ChipSet products and MultiMediaCards. SanDisk is based in Sunnyvale, CA. SanDisk's web site/home page address: http://www.sandisk.com

                       SanDisk Corporation
           Condensed Consolidated Statements of Income
              (In thousands, except per share data)

                           Three months ended    Nine months ended
                           Sept. 30,                 Sept. 30,
                             1999      1998      1999        1998
                          --------   --------   --------   --------
Revenues:
Product                   $ 57,624   $ 24,143   $135,850   $ 73,049
License and royalty          9,910      7,935     28,369     24,492
                          --------   --------   --------   --------
Total revenues              67,534     32,078    164,219     97,541
Cost of sales               43,897     18,840    101,264     57,172
                          --------   --------   --------   --------
Gross profits               23,637     13,238     62,955     40,369

Operating expenses:
Research and development     6,943      4,805     18,162     13,610
Sales and marketing          6,647      3,964     17,575     12,163
General and administrative   3,091      1,836      8,381      5,589
                          --------   --------   --------   --------
Total operating expenses    16,681     10,605     44,118     31,362

Operating income             6,956      2,633     18,837      9,007

Interest and other
  income, net                2,753      1,283      5,822      3,900
                          --------   --------   --------   --------
Income before taxes          9,709      3,916     24,659     12,907

Provision for income taxes   3,204      1,410      8,137      4,645
                          ========   ========   ========   ========
Net income                $  6,505   $  2,506   $ 16,522   $  8,262
                          ========   ========   ========   ========

Earnings per share
  Basic                   $   0.24   $   0.09   $   0.61   $   0.32
  Diluted                 $   0.21   $   0.09   $   0.55   $   0.30

Average common shares
  outstanding
  Basic                     27,316     26,411     27,009     26,200
  Diluted                   30,497     27,392     29,775     27,749

                       SanDisk Corporation
              Condensed Consolidated Balance Sheets
                    (In thousands; unaudited)

ASSETS                         September 30,  December 31,
                                     1999        1998
Current Assets:

Cash and cash
  equivalents                       $ 22,469   $ 15,384
Short-term investments               116,717    119,074
Accounts receivable, net              43,700     20,400
Inventories                           20,684      8,922
Deferred tax assets                   15,900     15,900
Prepaid expenses and other
  current assets                       3,888      6,694
                                    --------   --------
Total current assets                 223,358    186,374

Property and equipment, net           28,869     17,542
Investment in foundry                 51,208     51,208
Deposits and other assets              4,768        617
                                    --------   --------
       Total Assets                 $308,203   $255,741
                                    ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable                    $ 25,806   $  6,938
Accrued payroll and
   related expenses                    7,156      3,768
Other accrued liabilities             20,492      9,745
Deferred revenue                      24,103     27,452
                                    --------   --------
Total current liabilities             77,557     47,903

Stockholders' Equity:

Common stock                         193,090    186,120
Retained earnings                     37,556     21,718
                                    --------   --------
Total stockholders' equity           230,646    207,838

    Total Liabilities and
                                    ========   ========
       Stockholders Equity          $308,203   $255,741
                                    ========   ========