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PRESS RELEASE: SanDisk announces fourth quarter and fiscal 2002 earnings
Record Quarterly Revenues Driven By Strong Growth In Retail Sales And
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
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(First posted on Thursday, January 23, 2003 at 14:45 EST)