UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 21, 2015

SANDISK CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
000-26734
77-0191793
(State or other jurisdiction
of incorporation)
(Commission File No.)
(I.R.S. Employer
Identification No.)

951 SanDisk Drive, Milpitas, California 95035
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (408) 801-1000

N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))








 







TABLE OF CONTENTS


Item 2.02 Results of Operations and Financial Condition
Item 9.01 Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
EXHIBIT 99.1








Item 2.02 Results of Operations and Financial Condition

On January 21, 2015, SanDisk Corporation (the “Registrant”) issued a press release to report its financial results for its fourth quarter and fiscal year ended December 28, 2014.

The press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference. In addition to the preliminary condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), the attached press release contains non-GAAP measures of operating results, net income and net income per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Registrant’s current financial performance and its prospects for the future. Specifically, the Registrant believes the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that it believes are not indicative of its core operating results and because they are consistent with the financial models and estimates published by many analysts who follow the Registrant. For example, because the non-GAAP results exclude the expenses the Registrant recorded for share-based compensation, amortization of acquisition-related intangible assets related to acquisitions of Pliant Technology, Inc. in May 2011, FlashSoft Corporation in February 2012, Schooner Information Technology, Inc. in June 2012, SMART Storage Systems in August 2013 and Fusion-io, Inc. in July 2014, inventory step-up expense, non-cash economic interest expense associated with the Registrant’s convertible debt, non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, the Registrant believes the inclusion of non-GAAP financial measures provides consistency in its financial reporting. In addition, the Registrant’s non-GAAP diluted shares include the impact of the Registrant’s call options which, when exercised, will offset the issuance of dilutive shares from the Registrant’s 1.5% Convertible Senior Notes due 2017 and 0.5% Convertible Senior Notes due 2020, while the Registrant’s GAAP diluted shares exclude the anti-dilutive impact of these call options. These non-GAAP results are some of the primary indicators management uses for assessing the Registrant’s performance, allocating resources, and planning and forecasting future periods. Further, management uses non-GAAP information that excludes certain non-cash charges, such as share-based compensation, amortization of acquisition-related intangible assets, inventory step-up expense, non-cash economic interest expense associated with the convertible debt, non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, as these non-GAAP charges do not reflect the cash operating results of the business or the ongoing results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies.

The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to this or such filing. The information in this report, including the exhibit hereto, shall be deemed to be “furnished” and therefore shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits
Exhibit
Number
Description of Document
99.1
Press release of SanDisk Corporation dated January 21, 2015 to report its financial results for its fourth quarter and fiscal year ended December 28, 2014.









SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
SANDISK CORPORATION
 
 
 
 
Date:
January 21, 2015
By:
/s/ Judy Bruner
 
 
 
Judy Bruner
 
 
 
Executive Vice President, Administration and
Chief Financial Officer
(Principal Financial Officer)







EXHIBIT INDEX


Exhibit
Number
Description of Document
99.1
Press release of SanDisk Corporation dated January 21, 2015 to report its financial results for its fourth quarter and fiscal year ended December 28, 2014.









EXHIBIT 99.1

    
NEWS RELEASE
SanDisk Corporation
951 SanDisk Drive
Milpitas, CA 95035-7932
Phone: 408-801-1000

SanDisk Announces Fourth Quarter and Fiscal 2014 Results

MILPITAS, Calif., Jan 21, 2015 - SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, today announced results for the fourth quarter and fiscal year ended December 28, 2014. Fourth quarter revenue of $1.74 billion was slightly higher on a year-over-year basis and decreased 1 percent sequentially. Total revenue for fiscal 2014 was a record $6.63 billion, a 7 percent increase from $6.17 billion in fiscal 2013.

On a GAAP(1) basis, fourth quarter net income was $202 million, or $0.86 per share, compared to net income of $338 million, or $1.45 per share, in the fourth quarter of fiscal 2013 and $263 million, or $1.09 per share, in the third quarter of fiscal 2014. Net income for fiscal 2014 was $1.01 billion, or $4.23 per share, compared to $1.04 billion, or $4.34 per share, in fiscal 2013.

On a non-GAAP(2)(3) basis, fourth quarter net income was $294 million, or $1.30 per share, compared to net income of $390 million, or $1.71 per share, in the fourth quarter of fiscal 2013 and net income of $336 million, or $1.45 per share, in the third quarter of fiscal 2014. Net income for fiscal 2014 was $1.29 billion, or $5.60 per share, compared to $1.27 billion, or $5.31 per share, in fiscal 2013. For a reconciliation of non-GAAP to GAAP results, see accompanying financial tables and footnotes.

“We delivered record revenue in 2014 with continued progress in shifting our portfolio towards high value solutions,” said Sanjay Mehrotra, president and chief executive officer of SanDisk. “Our SSD solutions reached 29 percent of revenue in 2014, with strong growth from both client and enterprise SSDs. We are disappointed with our fourth quarter results, which were impacted primarily by supply constraints. We believe that NAND flash industry fundamentals are healthy, and we expect our financial results to improve as we move through 2015.”

FOURTH QUARTER KEY FINANCIAL METRICS
Metrics
GAAP (1)
 
Non-GAAP (2)
(in millions, except percentages and per share amounts)
Q4’14
Q4’13
Q3’14
 
Q4’14
Q4’13
Q3’14
Revenue
$1,735
$1,728
$1,746
 
$1,735
$1,728
$1,746
Gross profit
$740
$857
$817
 
$780
$880
$855
percent of revenue
43
%
50
%
47
%
 
45
%
51
%
49
%
Operating income
$328
$507
$388
 
$419
$556
$481
percent of revenue
19
%
29
%
22
%
 
24
%
32
%
28
%
EPS (3)
$0.86
$1.45
$1.09
 
$1.30
$1.71
$1.45






FISCAL 2014 KEY FINANCIAL METRICS
Metrics
GAAP (1)
 
Non-GAAP (2)
(in millions, except percentages and per share amounts)
FY’14
FY’13
 
FY’14
FY’13
Revenue
$6,628
$6,170
 
$6,628
$6,170
Gross profit
$3,068
$2,867
 
$3,191
$2,927
percent of revenue
46
%
46
%
 
48
%
47
%
Operating income
$1,558
$1,562
 
$1,848
$1,806
percent of revenue
24
%
25
%
 
28
%
29
%
EPS (3)
$4.23
$4.34
 
$5.60
$5.31

OTHER HIGHLIGHTS
SanDisk announced today that its Board of Directors has authorized a $2.5 billion increase in the company’s existing share repurchase program. With the additional authorization, the company has approximately $3.0 billion remaining available for stock repurchases under the program.
SanDisk announced today a first quarter 2015 dividend of $0.30 per share of common stock, payable on March 23, 2015 to shareholders of record as of the close of business on March 2, 2015.
SanDisk celebrated the receipt of its 5,000th patent and was named a Thomson Reuters 2014 Top 100 Global Innovator for the fourth consecutive year.
SanDisk introduced the iXpand™ Flash Drive, the company’s first USB Flash Drive designed specifically for iPhone and iPad, allowing quick photo and video transfers from an iPhone or iPad to a Mac or PC.

CONFERENCE CALL
SanDisk’s fourth quarter of fiscal 2014 conference call is scheduled for 2:00 P.M., Pacific Standard Time, Wednesday, January 21, 2015. The conference call will be webcast and can be accessed live, and throughout the quarter, at SanDisk’s website at www.sandisk.com/IR. To participate in the call via telephone, the dial-in number is 785-830-7989 and the password is 9225981. Participants are encouraged to dial in at least 10 minutes before the call commences. 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 SanDisk’s website prior to the conference call.

ABOUT SANDISK
SanDisk Corporation (NASDAQ: SNDK), a Fortune 500 and S&P 500 company, is a global leader in flash storage solutions. For more than 25 years, SanDisk has expanded the possibilities of storage, providing trusted and innovative products that have transformed the electronics industry. Today, SanDisk’s quality, state-of-the-art solutions are at the heart of many of the world’s largest data centers, and embedded in advanced smartphones, tablets and PCs. SanDisk’s consumer products are available at hundreds of thousands of retail stores worldwide. For more information, visit www.sandisk.com.


© 2015 SanDisk Corporation. All rights reserved. SanDisk is a trademark of SanDisk Corporation, registered in the United States and other countries. iXpand is a trademark of SanDisk Corporation. iPhone, iPad and Mac are trademarks of Apple Inc., registered in the US and other countries.

This news release contains certain forward-looking statements, including those regarding our business prospects, continued favorable portfolio mix shift, market growth, industry supply-demand environment, product introductions, our intended financial plans and our performance for 2015, that are based on our current expectations and involve numerous risks and uncertainties that may cause these forward-looking statements to be inaccurate.

Risks that may cause these forward-looking statements to be inaccurate include, among others:

competitive pricing pressures or product mix changes, resulting in lower average selling prices, lower revenues and reduced gross margins;
insufficient or mismatched captive memory output, capacity, or inventory, resulting in lost revenue and growth opportunities, or excess or mismatched captive memory output or capacity, resulting in lower average selling prices, financial charges and impairments, lower gross margin or other consequences;
weakness in demand in one or more of our product categories, such as embedded products or SSDs, or adverse changes in our product or customer mix;
potential delays in product development or lack of customer acceptance and qualification of our solutions, including on new technology nodes, particularly OEM products such as our embedded flash storage and SSD solutions;





inability to develop, or unexpected difficulties or delays in developing or ramping with acceptable yields, new technologies or the failure of new technologies to effectively compete with those of our competitors;
our 1Z-nanometer process technology, our X3 NAND memory architecture, our 3D NAND technology or our solutions utilizing these new technologies may not be available when we expect;
delays in the successful integration of Fusion-io or our inability to achieve the expected benefits from the acquisition in a timely manner, or at all; 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 Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2014.

(1)
GAAP represents U.S. Generally Accepted Accounting Principles.
(2)
Non-GAAP represents GAAP excluding the impact of share-based compensation, amortization of acquisition-related intangible assets, inventory step-up expense, non-cash economic interest expense associated with our convertible debt, non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments.
(3)
Non-GAAP shares include the impact of offsetting shares from the call options related to the 1.5% Convertible Senior Notes due 2017 and 0.5% Convertible Senior Notes due 2020, and the impact of share-based compensation.

Investor Contacts:
Jay Iyer
408-801-2067
jay.iyer@sandisk.com

Brendan Lahiff
408-801-1732
brendan.lahiff@sandisk.com

or

Media Contact:
Michael Diamond
408-801-1108
michael.diamond@sandisk.com

# # # # #







SanDisk Corporation
Preliminary Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)

 
Three months ended
 
Twelve months ended
 
December 28, 2014
 
December 29, 2013
 
December 28, 2014
 
December 29, 2013
Revenue
$
1,735,254

 
$
1,727,858

 
$
6,627,701

 
$
6,170,003

 
 
 
 
 
 
 
 
Cost of revenue
962,445

 
851,087

 
3,458,954

 
3,252,988

Amortization of acquisition-related intangible assets
33,039

 
19,616

 
100,899

 
49,532

Total cost of revenue
995,484

 
870,703

 
3,559,853

 
3,302,520

Gross profit
739,770

 
857,155

 
3,067,848

 
2,867,483

Operating expenses:
 
 
 
 
 
 
 
Research and development
226,142

 
215,281

 
852,310

 
742,268

Sales and marketing
111,526

 
81,347

 
383,288

 
276,312

General and administrative
52,104

 
51,158

 
214,902

 
192,310

Amortization of acquisition-related intangible assets
13,681

 
1,956

 
26,423

 
11,155

Impairment of acquisition-related intangible assets

 

 

 
83,228

Restructuring and other
8,007

 

 
32,991

 

Total operating expenses
411,460

 
349,742

 
1,509,914

 
1,305,273

Operating income
328,310

 
507,413

 
1,557,934

 
1,562,210

Other income (expense), net
(24,815
)
 
(12,171
)
 
(68,904
)
 
(46,061
)
Income before income taxes
303,495

 
495,242

 
1,489,030

 
1,516,149

Provision for income taxes
101,604

 
157,462

 
481,584

 
473,492

Net income
$
201,891

 
$
337,780

 
$
1,007,446

 
$
1,042,657

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.93

 
$
1.50

 
$
4.52

 
$
4.44

Diluted
$
0.86

 
$
1.45

 
$
4.23

 
$
4.34

Shares used in computing net income per share:
 
 
 
 
 
 
 
Basic
217,264

 
225,252

 
222,714

 
234,886

Diluted
234,794

 
232,812

 
238,209

 
240,236








SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, except per share data, unaudited)

 
Three months ended
 
Twelve months ended
 
December 28, 2014
 
December 29, 2013
 
December 28, 2014
 
December 29, 2013
SUMMARY RECONCILIATION OF NET INCOME:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP NET INCOME
$
201,891

 
$
337,780

 
$
1,007,446

 
$
1,042,657

Share-based compensation (a)
40,639

 
27,431

 
155,313

 
99,756

Amortization of acquisition-related intangible assets (b)
46,720

 
21,572

 
127,322

 
60,687

Inventory step-up expense (c)
2,931

 

 
7,834

 

Impairment of acquisition-related intangible assets (d)

 

 

 
83,228

Convertible debt interest (e)
22,152

 
17,402

 
85,734

 
67,604

Income tax adjustments (f)
(20,388
)
 
(13,840
)
 
(95,474
)
 
(86,971
)
NON-GAAP NET INCOME
$
293,945

 
$
390,345

 
$
1,288,175

 
$
1,266,961

 
 
 
 
 
 
 
 
GAAP COST OF REVENUE
$
995,484

 
$
870,703

 
$
3,559,853

 
$
3,302,520

Share-based compensation (a)
(4,601
)
 
(2,940
)
 
(14,719
)
 
(9,820
)
Amortization of acquisition-related intangible assets (b)
(33,039
)
 
(19,616
)
 
(100,899
)
 
(49,532
)
Inventory step-up expense (c)
(2,931
)
 

 
(7,834
)
 

NON-GAAP COST OF REVENUE
$
954,913

 
$
848,147

 
$
3,436,401

 
$
3,243,168

 
 
 
 
 
 
 
 
GAAP GROSS PROFIT
$
739,770

 
$
857,155

 
$
3,067,848

 
$
2,867,483

Share-based compensation (a)
4,601

 
2,940

 
14,719

 
9,820

Amortization of acquisition-related intangible assets (b)
33,039

 
19,616

 
100,899

 
49,532

Inventory step-up expense (c)
2,931

 

 
7,834

 

NON-GAAP GROSS PROFIT
$
780,341

 
$
879,711

 
$
3,191,300

 
$
2,926,835

 
 
 
 
 
 
 
 
GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
226,142

 
$
215,281

 
$
852,310

 
$
742,268

Share-based compensation (a)
(20,198
)
 
(14,035
)
 
(74,842
)
 
(51,521
)
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES
$
205,944

 
$
201,246

 
$
777,468

 
$
690,747

 
 
 
 
 
 
 
 
GAAP SALES AND MARKETING EXPENSES
$
111,526

 
$
81,347

 
$
383,288

 
$
276,312

Share-based compensation (a)
(8,953
)
 
(5,380
)
 
(36,214
)
 
(19,193
)
NON-GAAP SALES AND MARKETING EXPENSES
$
102,573

 
$
75,967

 
$
347,074

 
$
257,119

 
 
 
 
 
 
 
 
GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
52,104

 
$
51,158

 
$
214,902

 
$
192,310

Share-based compensation (a)
(6,887
)
 
(5,076
)
 
(29,538
)
 
(19,222
)
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES
$
45,217

 
$
46,082

 
$
185,364

 
$
173,088

 
 
 
 
 
 
 


GAAP TOTAL OPERATING EXPENSES
$
411,460

 
$
349,742

 
$
1,509,914

 
$
1,305,273

Share-based compensation (a)
(36,038
)
 
(24,491
)
 
(140,594
)
 
(89,936
)
Amortization of acquisition-related intangible assets (b)
(13,681
)
 
(1,956
)
 
(26,423
)
 
(11,155
)
Impairment of acquisition-related intangible assets (d)

 

 

 
(83,228
)
NON-GAAP TOTAL OPERATING EXPENSES
$
361,741

 
$
323,295

 
$
1,342,897

 
$
1,120,954

 
 
 
 
 
 
 
 
GAAP OPERATING INCOME
$
328,310

 
$
507,413

 
$
1,557,934

 
$
1,562,210

Cost of revenue adjustments (a) (b) (c)
40,571

 
22,556

 
123,452

 
59,352

Operating expense adjustments (a) (b) (d)
49,719

 
26,447

 
167,017

 
184,319

NON-GAAP OPERATING INCOME
$
418,600

 
$
556,416

 
$
1,848,403

 
$
1,805,881

 
 
 
 
 
 
 
 
GAAP OTHER INCOME (EXPENSE), NET
$
(24,815
)
 
$
(12,171
)
 
$
(68,904
)
 
$
(46,061
)
Convertible debt interest (e)
22,152

 
17,402

 
85,734

 
67,604

NON-GAAP OTHER INCOME (EXPENSE), NET
$
(2,663
)
 
$
5,231

 
$
16,830

 
$
21,543

 
 
 
 
 
 
 
 
GAAP NET INCOME
$
201,891

 
$
337,780

 
$
1,007,446

 
$
1,042,657

Cost of revenue adjustments (a) (b) (c)
40,571

 
22,556

 
123,452

 
59,352

Operating expense adjustments (a) (b) (d)
49,719

 
26,447

 
167,017

 
184,319

Other income (expense) adjustments (e)
22,152

 
17,402

 
85,734

 
67,604

Income tax adjustments (f)
(20,388
)
 
(13,840
)
 
(95,474
)
 
(86,971
)
NON-GAAP NET INCOME
$
293,945

 
$
390,345

 
$
1,288,175

 
$
1,266,961

 
 
 
 
 
 
 
 
Diluted net income per share:
 
 
 
 
 
 
 
GAAP
$
0.86

 
$
1.45

 
$
4.23

 
$
4.34

Non-GAAP
$
1.30

 
$
1.71

 
$
5.60

 
$
5.31

 
 
 
 
 
 
 
 
Shares used in computing diluted net income per share:
 
 
 
 
 
 
 
GAAP
234,794

 
232,812

 
238,209

 
240,236

Non-GAAP (g)
225,482

 
228,829

 
230,194

 
238,419







SanDisk Corporation
Reconciliation of Preliminary GAAP to Non-GAAP Operating Results (1)
(in thousands, unaudited)
 
Three months ended
 
Twelve months ended
 
December 28, 2014
 
December 29, 2013
 
December 28, 2014
 
December 29, 2013
SUMMARY RECONCILIATION OF DILUTED SHARES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP
234,794

 
232,812

 
238,209

 
240,236

Adjustments for share-based compensation
260

 
358

 
246

 
271

Offsetting shares from call options
(9,572
)
 
(4,341
)
 
(8,261
)
 
(2,088
)
Non-GAAP (g)
225,482

 
228,829

 
230,194

 
238,419

 
 
(1)
To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles (GAAP), we use non-GAAP measures of operating results, net income and net income per share, which are adjusted from results based on GAAP to exclude certain expenses, gains and losses. These non-GAAP financial measures are provided to enhance the users overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP results provide useful information to both management and investors as these non-GAAP results exclude certain expenses, gains and losses that we believe are not indicative of our core operating results and because they are consistent with the financial models and estimates published by many analysts who follow us. For example, because the non-GAAP results exclude the expenses we recorded for share-based compensation, amortization of acquisition-related intangible assets related to acquisitions of Pliant Technology, Inc. in May 2011, FlashSoft Corporation in February 2012, Schooner Information Technology, Inc. in June 2012, SMART Storage Systems in August 2013 and Fusion-io, Inc. in July 2014, inventory step-up expense, non-cash economic interest expense associated with the convertible debt, non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, we believe the inclusion of non-GAAP financial measures provides consistency in our financial reporting. In addition, our non-GAAP diluted shares include the impact of the call options which, when exercised, will offset the issuance of dilutive shares from the 1.5% Convertible Senior Notes due 2017 and 0.5% Convertible Senior Notes due 2020, while the GAAP diluted shares exclude the anti-dilutive impact of these call options. These non-GAAP results are some of the primary indicators management uses for assessing our performance, allocating resources, and planning and forecasting future periods. Further, management uses non-GAAP information that excludes certain non-cash charges, such as share-based compensation, amortization of acquisition-related intangible assets, inventory step-up expense, non-cash economic interest expense associated with the convertible debt, non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017 and related tax adjustments, as these non-GAAP charges do not reflect the cash operating results of the business or the ongoing results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies.
(a)
Share-based compensation expense.
(b)
Amortization of acquisition-related intangible assets, primarily developed technology, customer relationships, and trademarks and trade names related to the acquisitions of Pliant Technology, Inc., FlashSoft Corporation, Schooner Information Technology, Inc., SMART Storage Systems and Fusion-io, Inc.
(c)
Inventory step-up expense related to the acquisition of Fusion-io, Inc.
(d)
Impairment of acquisition-related intangible assets and in-process research and development related to the acquisitions of Schooner Information Technology, Inc. and Pliant Technology, Inc.
(e)
Incremental interest expense related to the non-cash economic interest expense associated with the 1% Convertible Senior Notes due 2013, 1.5% Convertible Senior Notes due 2017 and 0.5% Convertible Senior Notes due 2020, and the non-cash change in fair value of the liability component of the convertible debt due to the conversion of a portion of the 1.5% Convertible Senior Notes due 2017.
(f)
Income taxes associated with certain non-GAAP to GAAP adjustments and the effects of one-time income tax adjustments recorded in a specific quarter for GAAP purposes are reflected on a forecast basis in our non-GAAP tax rate but not in our forecasted GAAP tax rate.
(g)
Non-GAAP diluted shares include the impact of offsetting shares from the call options related to the 1.5% Convertible Senior Notes due 2017 and 0.5% Convertible Senior Notes due 2020, and the impact of share-based compensation.






SanDisk Corporation
Preliminary Condensed Consolidated Balance Sheets
(in thousands, unaudited)
 
December 28, 2014
 
December 29, 2013
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
809,003

 
$
986,246

Short-term marketable securities
1,455,509

 
1,919,611

Accounts receivable, net
842,476

 
682,809

Inventory
698,011

 
756,975

Deferred taxes
180,134

 
138,192

Other current assets
214,992

 
166,885

Total current assets
4,200,125

 
4,650,718

Long-term marketable securities
2,758,475

 
3,179,471

Property and equipment, net
724,357

 
655,794

Notes receivable and investments in Flash Ventures
962,817

 
1,134,620

Deferred taxes
161,827

 
134,669

Goodwill
831,328

 
318,111

Intangible assets, net
542,351

 
247,904

Other non-current assets
108,677

 
167,430

Total assets
$
10,289,957

 
$
10,488,717

 
 
 
 
LIABILITIES, CONVERTIBLE SHORT-TERM DEBT CONVERSION OBLIGATION AND EQUITY
Current liabilities:
 
 
 
Accounts payable trade
$
404,237

 
$
282,582

Accounts payable to related parties
136,051

 
146,964

Convertible short-term debt (1)
869,645

 

Other current accrued liabilities
506,293

 
509,732

Deferred income on shipments to distributors and retailers and deferred revenue
274,657

 
291,302

Total current liabilities
2,190,883

 
1,230,580

Convertible long-term debt
1,199,696

 
1,985,363

Non-current liabilities
245,554

 
307,083

Total liabilities
3,636,133

 
3,523,026

 
 
 
 
Convertible short-term debt conversion obligation (1)
127,143

 

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock
5,236,982

 
5,040,242

Retained earnings
1,499,149

 
2,004,089

Accumulated other comprehensive loss
(208,072
)
 
(76,459
)
Total stockholders’ equity
6,528,059

 
6,967,872

Non-controlling interests
(1,378
)
 
(2,181
)
Total equity
6,526,681

 
6,965,691

Total liabilities, convertible short-term debt conversion obligation and equity
$
10,289,957

 
$
10,488,717

 
 
(1) 
The 1.5% Convertible Senior Notes due 2017 are convertible through March 31, 2015 as a result of the Company’s common stock price exceeding the trigger price set forth in the indenture. Accordingly, the carrying value of the notes is reported as short-term debt as of December 28, 2014 and will remain so while the notes are convertible. The Convertible short-term debt conversion obligation represents the difference between the carrying value of the convertible debt and the principal amount due in cash upon conversion.





SanDisk Corporation
Preliminary Condensed Consolidated Statements of Cash Flows
(in thousands, unaudited)
 
Three months ended
 
Twelve months ended
 
December 28, 2014
 
December 29, 2013
 
December 28, 2014
 
December 29, 2013
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income
$
201,891

 
$
337,780

 
$
1,007,446

 
$
1,042,657

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
Deferred taxes
(14,699
)
 
(52,727
)
 
(7,915
)
 
527

Depreciation
66,620

 
60,472

 
254,271

 
226,334

Amortization
93,244

 
65,775

 
324,231

 
237,731

Provision for doubtful accounts
180

 
1,669

 
857

 
2,167

Share‑based compensation expense
40,639

 
27,431

 
155,313

 
99,756

Excess tax benefit from share-based plans
(6,143
)
 
(7,299
)
 
(44,919
)
 
(27,198
)
Impairment and other
6,270

 
(697
)
 
6,790

 
75,561

Other non-operating
293

 
(1,566
)
 
636

 
(792
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable, net
27,391

 
624

 
(118,606
)
 
(51,125
)
Inventory
83,886

 
19,214

 
136,442

 
23,310

Other assets
27,357

 
170,806

 
37,738

 
147,713

Accounts payable trade
(24,738
)
 
(65,817
)
 
37,380

 
16,377

Accounts payable to related parties
1,234

 
(16,867
)
 
(10,913
)
 
(67,842
)
Other liabilities
(15,612
)
 
78,017

 
(80,303
)
 
138,496

Total adjustments
285,922

 
279,035

 
691,002

 
821,015

Net cash provided by operating activities
487,813

 
616,815

 
1,698,448

 
1,863,672

Cash flows from investing activities:
 
 
 
 
 
 
 
Purchases of short and long-term marketable securities
(730,244
)
 
(2,421,041
)
 
(4,106,494
)
 
(4,925,520
)
Proceeds from sales of short and long-term marketable securities
493,294

 
576,178

 
4,114,712

 
3,701,528

Proceeds from maturities of short and long-term marketable securities
208,992

 
117,300

 
772,882

 
751,900

Acquisition of property and equipment, net
(67,145
)
 
(42,700
)
 
(232,786
)
 
(213,415
)
Investment in Flash Ventures

 
(12,342
)
 
(24,296
)
 
(12,342
)
Notes receivable issuances to Flash Ventures
(49,789
)
 
(37,099
)
 
(181,481
)
 
(37,099
)
Notes receivable proceeds from Flash Ventures
104,654

 
51,377

 
231,409

 
124,765

Purchased technology and other assets
(20,248
)
 
884

 
(24,837
)
 
(8,377
)
Acquisitions, net of cash acquired

 

 
(1,063,798
)
 
(304,320
)
Net cash used in investing activities
(60,486
)
 
(1,767,443
)
 
(514,689
)
 
(922,880
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Proceeds from issuance of convertible senior notes, net of issuance costs

 
1,483,125

 

 
1,483,125

Purchase of convertible bond hedge

 
(331,650
)
 

 
(331,650
)
Proceeds from sale of warrants

 
217,800

 

 
217,800

Repayment of debt financing
(3,212
)
 

 
(3,212
)
 
(928,061
)
Distribution to non-controlling interests

 

 

 
(87
)
Proceeds from employee stock programs
22,442

 
59,992

 
181,486

 
266,044

Excess tax benefit from share-based plans
6,143

 
7,299

 
44,919

 
27,198

Dividends paid
(65,122
)
 
(50,553
)
 
(234,565
)
 
(101,191
)
Share repurchases (1)
(503,406
)
 
(150,000
)
 
(1,341,476
)
 
(1,589,539
)
Net cash provided by (used in) financing activities
(543,155
)
 
1,236,013

 
(1,352,848
)
 
(956,361
)
Effect of changes in foreign currency exchange rates on cash
(6,004
)
 
(1,904
)
 
(8,154
)
 
6,345

Net increase (decrease) in cash and cash equivalents
(121,832
)
 
83,481

 
(177,243
)
 
(9,224
)
Cash and cash equivalents at beginning of period
930,835

 
902,765

 
986,246

 
995,470

Cash and cash equivalents at end of period
$
809,003

 
$
986,246

 
$
809,003

 
$
986,246

 
 
(1) 
Share repurchases include cash used to repurchase common stock and cash used to settle employee tax withholding obligations due upon the vesting of restricted stock units.


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