SanDisk Announces First Quarter Results

SanDisk Announces First Quarter Results

    Business Editors/High-Tech Editors

    SUNNYVALE, Calif.--(BUSINESS WIRE)--April 21, 2005--SanDisk(R) Corporation (Nasdaq:SNDK)

--	Revenue of $451 million up 17% year-over-year
--	Net Income of $75 million up 17% year-over-year; EPS $0.39
--	Operating Margin of 25% driven by strong product gross margin
--	Successful 90-nanometer transition

    SanDisk(R) Corporation (Nasdaq:SNDK), the world's largest supplier of flash storage card products, today announced results for the first quarter ended April 3, 2005. Total first quarter revenues increased 17% on a year-over-year basis to $451 million. First quarter net income was $75 million, up 17% compared to $64 million in the first quarter of 2004. Fully diluted earnings per share were $0.39, up 15% compared with $0.34 in the first quarter of 2004.
    "The first quarter was another good quarter for SanDisk coming off of the strong fourth quarter holiday sales. We are particularly pleased with this quarter's profitability. Shipments from 90-nanometer chips increased to more than 80% of our first quarter's captive supply as 90-nanometer yields exceeded our expectations. Our product gross margins grew to 37%, driven by our increased 90-nanometer output and a modest 10% sequential decline in the average price per megabyte. Industry-wide supply for NAND memory is currently well balanced with growing demand from existing applications and new markets. Demand in the first quarter was exceptionally strong for our high capacity cards, and royalty revenues grew nicely reflecting the continuing growth of the NAND flash market for our licensees," said SanDisk CEO Eli Harari. "As we move forward in 2005, we believe SanDisk is well positioned to continue expanding into new markets such as the emerging market for our flash cards in handsets, the digital flash music player market and the exciting market for our cards in video game consoles such as the Sony PlayStation Portable."

    Financial Results and Highlights

    -- Product revenue grew 18% and royalty revenue grew 7%
    year-over-year.

    -- Megabytes sold in the first quarter increased 189%
    year-over-year and were down approximately 13% from the
    seasonally strong fourth quarter of 2004.

    -- Average density per card sold in retail was 411 megabytes, up
    125% from the first quarter of 2004 and up 15% sequentially.

    -- Average price per megabyte sold in the first quarter declined
    at a moderate pace of 10% sequentially and 59% from the first
    quarter of 2004.

    -- Product gross margin in the first quarter increased 5 points
    both year-over-year and sequentially to a record 37.2%.

    -- Operating income was $114 million and 25% of revenue compared
    to $99 million and 25% of revenue in the first quarter of 2004
    and $126 million and 23% of revenue in the fourth quarter of
    2004.

    -- Cash flow from operations was $134 million compared to $76
    million in the first quarter of 2004 and $12 million in the
    fourth quarter of 2004.

    -- The SanDisk Sansa(TM) line of digital music players began
    shipping at the end of the first quarter. These players have
    embedded flash of 512 megabyte or 1 gigabyte capacities and
    they have a SD(TM) card slot for expandable storage.

    -- Gaming cards began shipping in Memory Stick PRO Duo(TM) and SD
    formats to support new generation portable game consoles that
    now incorporate features such as digital audio, video playback
    and photo viewing. These features demand high capacity memory
    storage cards.

    -- SanDisk Ultra(R) and SanDisk Extreme(TM) high performance
    product lines were among our fastest growing products
    year-over-year.

    -- Retail presence almost doubled year-over-year to 114,000
    storefronts. Most recent additions have been in mobile
    handset, convenience and gaming stores.

    -- The new Flash Partners 300-millimeter Fab 3 began running
    initial test wafers in the first quarter and in February we
    announced the 8Gigabit chip that is being jointly developed
    with Toshiba on 70-nanometer technology.

    Scheduled Interview

    SanDisk Corporation Executive Vice President and Chief Operating Officer, Sanjay Mehrotra, is scheduled to appear on CNBC's "Wake-Up Call", April 22, 2005 at approximately 6:50 a.m. EDT. Judy Bruner, SanDisk's Executive Vice President, Administration and CFO is scheduled to appear on Bloomberg TV "Market Line", April 22, 2005 at approximately 1:45 p.m. EDT.

    Conference Call

    SanDisk's first quarter 2005 conference call is scheduled for 2:00 p.m. Pacific Time, Thursday, April 21, 2005. The conference call will be web cast by CCBN and can be accessed live, and throughout the quarter, at SanDisk's website at www.sandisk.com/IR and at www.streetevents.com for registered streetevents.com users. To participate in the call via telephone, the dial in number is (913) 981-4903. The call will also be available by telephone replay through Wednesday, April 27, 2005, by dialing (719) 457-0820 and entering the pass code 3497353. A copy of this press release will be filed with 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.

    Forward-Looking Statements

    This news release contains certain forward-looking statements, including statements about our business outlook, expectations for new product introductions, applications, markets and customers and scheduled appearances by certain of our executives 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 or a slower adoption rate for these products in current and new markets that we are targeting, slower than expected expansion of our global sales channels, fluctuations in operating results, unexpected yield variances and longer than expected low yields and other possible delays related to our conversion to 90-nanometer and 70-nanometer NAND flash technology or the ramp-up of the new 300-millimeter flash fabrication facility, any interruption of or delay in supply from any of the semiconductor manufacturing facilities that supply products to us, our inability to make additional planned smaller geometry conversions in a timely manner, future average selling price erosion that may be more severe than our expectations due to possible excess industry capacity of flash memory either from existing suppliers or from new competitors or decreased demand, price increases from non-captive flash memory sources and third-party subcontractors, higher than expected operating expenses, higher than anticipated capital equipment expenditures, adverse global economic and geo-political conditions, including adverse currency exchange rates and acts of terror, the timely development, internal qualification and customer acceptance of new products that are based on the 90-nanometer and 70-nanometer NAND technologies, fluctuations in license and royalty revenues, business interruption due to earthquakes or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products, scheduled appearances by our executives could be cancelled or delayed by us or the network and the other risks detailed from time-to-time in our Securities and Exchange Commission filings and reports, including, but not limited to, the Form 10-K for the year ended January 2, 2005 and our 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 is the original inventor of flash storage cards and is the world's largest supplier of flash data storage card products using its patented, high-density flash memory and controller technology. SanDisk is headquartered in Sunnyvale, CA and has operations worldwide, with more than half its sales outside the U.S.

    www.sandisk.com

    SanDisk and SanDisk Ultra are trademarks of SanDisk Corporation, registered in the United States and other countries. Sansa and SanDisk Extreme are trademarks of SanDisk Corporation. SanDisk is an authorized licensee of the SD trademark. Memory Stick PRO Duo is a trademark of Sony Corporation. Other brand names mentioned herein are for identification purposes only and may be the trademarks of their respective holders.

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

Three Months Ended ------------------------- April 3, March 28, 2005 2004 --------- --------- Revenues: Product $399,679 $338,779 License and royalty 51,296 48,151 -------- -------- Total revenue 450,975 386,930

Cost of product revenues 251,188 231,012 -------- -------- Gross profits 199,787 155,918

Operating expenses: Research and development 45,947 26,762 Sales and marketing 24,597 19,661 General and administrative 15,724 10,936 -------- -------- Total operating expenses 86,268 57,359

Operating income 113,519 98,559

Other income (expense), net 4,761 2,390 -------- --------

Income before taxes 118,280 100,949

Provision for income taxes 43,764 37,381 -------- -------- Net income $ 74,516 $ 63,568 ======== ========

Shares used in computing net income per share Basic 180,631 161,207 Diluted 189,999 189,403

Net income per share Basic $ 0.41 $ 0.39 Diluted $ 0.39 $ 0.34

SanDisk Corporation Condensed Consolidated Balance Sheets (In thousands)

April 3, January 2, 2005 2005(a) ASSETS (unaudited) ----------- -----------

Current Assets: Cash and cash equivalents $ 571,805 $ 463,795 Short-term investments 842,095 859,175 Investment in foundries 18,448 20,398 Accounts receivable, net 208,810 194,535 Inventories 223,783 196,422 Deferred tax asset 92,746 83,150 Prepaid expenses, other current assets and tax receivable 23,839 62,653 ---------- ---------- Total current assets 1,981,526 1,880,128

Property and equipment, net 166,079 147,231 Investment in foundries 11,557 14,377 Investment in FlashVision 172,493 178,681 Investment in FlashPartners 23,272 24,192 Deferred tax asset 6,696 1,861 Note receivable, Flash Vision 55,504 35,413 Deposits and other non-current assets 32,937 38,297 ---------- ----------

Total Assets $2,450,064 $2,320,180 ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current Liabilities:

Accounts payable $ 94,482 $ 82,974 Accounts payable to related parties 64,500 48,115 Accrued payroll and related expenses 25,579 41,785 Income taxes payable 45,868 39,139 Research and development liability, related party 6,149 5,549 Other accrued liabilities 33,178 45,584 Deferred income on shipments to distributors and retailers and deferred revenue 130,326 90,307 ---------- ---------- Total current liabilities 400,082 353,453

Deferred tax liability 6,131 - Deferred revenue and non-current liabilities 18,217 26,577 ---------- ---------- Total Liabilities 424,430 380,030

Commitments and contingencies

Stockholders' Equity: Preferred stock -- -- Common stock 1,423,255 1,406,553 Retained earnings 594,756 520,240 Accumulated other comprehensive income 12,640 18,893 Deferred compensation (5,017) (5,536) ---------- ---------- Total stockholders' equity 2,025,634 1,940,150 ---------- ----------

Total Liabilities and Stockholders' Equity $2,450,064 $2,320,180 ========== ==========

(a) Information derived from the audited Consolidated Financial Statements.

SanDisk Corporation Condensed Consolidated Comparative Statement of Cash Flows March 2005 (in thousands, unaudited)

Three months ended ---------------------- April 3, March 28, 2005 2004 ----------- ---------- Cash flows from Operating activities: Net income 74,516 63,568 Adjustments to reconcile net income to net cash provided by operating activities: Deferred Taxes 1,088 0 Loss (gain) investment in foundries 4,029 573 Depreciation and amortization 14,462 7,999 Provision for doubtful accounts 0 1,681 Other non-cash charges (212) (388) FlashVision wafer cost adjustment (487) (321) Changes in operating assets and liabilities: Accounts receivable (14,275) 47,120 Prepaid expenses, deposits and other assets 43,972 28,847 Inventories (27,361) (42,814) Income taxes payable and other accounts payable (4,788) (32,236) Other current liabilities (12,406) 1,752 Other current liabilities, related party 16,985 2,951 Deferred income on shipments and deferred revenue 38,415 (2,698) Other non-current liabilities 338 0 --------- --------- Total adjustments 59,760 12,466 --------- ---------

Net cash provided by operating activities 134,276 76,034 --------- ---------

Cash flows from Investing activities: Purchases of short term investments (139,198) (241,277) Proceeds from sale of short term investments 153,450 192,157 Acquisition of capital equipment, net (30,151) (9,410) Loan to FlashVision (22,222) (21,637) --------- --------- Net cash used in investing activities (38,121) (80,167) --------- ---------

Cash flows from financing activities: Employee stock programs 11,272 6,015 --------- --------- Net cash provided by financing activities 11,272 6,015 --------- --------- Effect of changes in foreign currency exchange rates on cash 583 0 --------- ---------

Net increase in cash and cash equivalents 108,010 1,882

Cash and cash equivalents at beginning of period 463,795 734,479

--------- --------- Cash and cash equivalents at end of period 571,805 736,361 ========= =========

Additional information: Net change in cash and cash equivalents $ 108,010 $ 1,882 Net change in short-term investments (17,080) 48,651 --------- --------- Net change in cash, cash equivalents and short-term investments $ 90,930 $ 50,533 ========= =========

--30--ALX/sf*

CONTACT: SanDisk Corporation Lori Barker Padon, 408-542-0585 (Investors) Mike Wong, 408-548-0223 (Media)

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: HARDWARE SOFTWARE EARNINGS CONFERENCE CALLS SOURCE: SanDisk Corporation

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