SUNNYVALE, CA, April 20, 2006 - SanDisk® Corporation (NASDAQ:SNDK), the world's largest supplier of flash storage card products, today announced results for the first quarter ended April 2, 2006. Total first quarter revenues increased 38% on a year-over-year basis to $623 million. First quarter net income as reported in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was $35 million, or $0.17 per fully diluted share. First quarter 2006 GAAP results reflect the impact of implementing SFAS 123(R) and the acquisition of Matrix Semiconductor, Inc. in January 2006.
Excluding the impact of amortization of acquisition related intangible assets, the write-off of acquired in-process technology, stock compensation expense and the related tax effect, first quarter non-GAAP net income was $90 million, or $0.44 per fully diluted share, which compares to the first quarter 2005 GAAP results of $75 million, or $0.39 per fully diluted share.
"First quarter revenues were, as expected, seasonally soft in U.S. retail. We believe that the pricing actions we implemented in the quarter are beginning to have the intended effect of shifting consumer preferences to 1 and 2 gigabyte capacities, where we are strongest. Sales of our mobile cards for handsets continued to be strong and accounted for 30% of first quarter product revenues, up from 7% in the corresponding quarter one year ago. Pricing overall was under pressure as NAND components supply exceeded demand due primarily to weaker than expected sales of Flash audio players following a phenomenally strong fourth quarter," said Eli Harari, president and chief executive officer of SanDisk Corporation. "For the second quarter we plan on somewhat more moderate pricing actions designed to further accelerate consumption of higher capacity cards and to stoke demand from new markets helping to restore industry wide balance between demand and supply in the second half of 2006. We expect our mobile card revenues to continue strong in the second quarter, and we expect second quarter retail revenues to improve moderately due to price elasticity, favorable seasonality and new products that we expect to ship in volume in the second quarter, such as our exciting Sansa™ e200 audio player. Product gross margins are expected to improve into the second half as we continue to ramp our highly cost-effective captive production at fab 3 while temporarily flexing down our non-captive purchases."
Metrics and Highlights
SanDisk Corporation President and Chief Executive Officer, Eli Harari, is scheduled to appear on CNBC's "Squawk Box", April 21, 2006 at approximately 4:00 a.m. PDT. Judy Bruner, SanDisk's Executive Vice President, Administration and CFO is scheduled to appear on Bloomberg TV's "Bloomberg On The Markets", April 21, 2006 at approximately 5:39 a.m. PDT.
SanDisk's first quarter 2006 conference call is scheduled for 2:00 p.m. PDT, Thursday, April 20, 2006. The conference call will be webcast 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) 981-4901. 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.
This news release contains certain forward-looking statements, including statements about our business outlook for the second quarter and second half of 2006, planned price reductions, market supply and demand, expected continued strength in the handset market moderately improved retail revenues, new product shipments, improved product gross margins, the intention of SanDisk and Toshiba to build a new 300mm wafer fabrication facility and scheduled appearances by our CEO and CFO 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, 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, decreased availability of test and assembly capacity and increased prices for such services, 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 70-nanometer NAND flash technology or the ramp-up of the 300mm flash fabrication facility, unexpected delays in the ramp-up of volume production of our new 70-nanometer 8 gigabit NAND/MLC chip, our inability to make additional planned smaller geometry conversions in a timely manner, we and Toshiba may be unable to successfully negotiate and enter into definitive agreements for the new 300mm wafer fabrication facility or begin initial production at the new facility as scheduled, future average selling price erosion that may be more severe than our expectations due to decreased demand or possible excess industry capacity of flash memory from ourselves as well as from existing suppliers or from new competitors that are planning to aggressively increase supply in 2006, 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 70-nanometer NAND technology, fluctuations in license and royalty revenues, business interruption due to earthquakes, hurricanes, pandemics, power outages or other natural disasters, particularly in areas in the Pacific Rim and Japan where we manufacture and assemble products, potential impact of high energy prices and other global events outside of our control which could adversely impact consumer confidence and hence reduce demand for our 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 under the caption "Risk Factors" and elsewhere in our Securities and Exchange Commission filings and reports, including, but not limited to, our Form 10-K for the fiscal year ended January 1, 2006 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.
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.
SanDisk and Matrix are trademarks of SanDisk Corporation, registered in the United States and other countries. Sansa is a trademark of SanDisk Corporation. SanDisk Corporation is an authorized licensee of the SD trademark.
Lori Barker Padon