SanDisk Announces Third Quarter 2009 Financial Results

http://www.businesswire.com/news/home/20091020006675/en

Delivers Strong Growth in Revenue & Profits, $220 Million in Free Cash Flow
MILPITAS, Calif.--(Business Wire)--
SanDisk Corporation (NASDAQ:SNDK), the global leader in flash memory cards,
today announced results for the third quarter ended September 27, 2009. Total
third quarter revenue of $935 million increased 14% on a year-over-year basis
and increased 28% on a sequential basis. Net income, in accordance with U.S.
Generally Accepted Accounting Principles (GAAP), was $231 million, or $0.99 per
diluted share, compared to GAAP net loss of ($166) million or ($0.74) per share
in the third quarter of 2008 and GAAP net income of $53 million, or $0.23 per
diluted share in the second quarter of 2009.

On a non-GAAP basis, which excludes the impact of acquisition-related charges,
share-based compensation expense, and non-cash economic interest expense
associated with the cash-settled convertible note, third-quarter net income was
$176 million, or $0.75 per diluted share, compared to a net loss of ($132)
million or ($0.59) per share in the third quarter of 2008 and net income of $83
million or $0.36 per diluted share in the second quarter of 2009. For
reconciliation of non-GAAP to GAAP results, see accompanying financial tables
and footnotes.

"Our outstanding Q3 results reflect major gains in our OEM business with strong
orders continuing into Q4. Product gross margin improved dramatically, driven by
favorable pricing and strong product cost reductions. We are encouraged by
improved industry fundamentals and our increasingly diversified global markets,
which bode well for further growth in Q4 and in 2010," said Eli Harari, Chairman
and CEO, SanDisk.

THIRD QUARTER 2009 METRICS & HIGHLIGHTS

* Free cash flow generated was $220 million.
* Total cash and equivalents, short and long-term investments at the end of the
third quarter were $2.58 billion compared to $2.64 billion at the end of the
third quarter of 2008 and $2.34 billion at the end of the second quarter of
2009.
* Total revenue was $935 million, up 14% year-over-year and up 28%
sequentially.

* Product revenue was $814 million, up 18% year-over-year and up 33%
sequentially.
* License and royalty revenue was $121 million, down 8% year-over-year and up 1%
sequentially.

* GAAP product gross profit was $315 million, or 39% of product revenue,
compared to GAAP product gross loss of ($138) million, or (20%) of product
revenue, in the third quarter of 2008 and GAAP product gross profit of $129
million, or 21% of product revenue, in the second quarter of 2009. Third quarter
product gross profit included a $139 million benefit primarily from the sale of
previously reserved inventory.
* Non-GAAP product gross profit was $320 million, or 39% of product revenue,
compared to non-GAAP product gross loss of ($121) million, or (17%) of product
revenue, in the third quarter of 2008 and non-GAAP product profit of $134
million, or 22% of product revenue, in the second quarter of 2009. Third quarter
product gross profit included a $139 million benefit primarily from the sale of
previously reserved inventory.
* GAAP operating profit was $240 million, or 26% of total revenue, compared to
GAAP operating loss of ($250) million, or (30%) of total revenue, in the third
quarter of 2008 and GAAP operating profit of $68 million, or 9% of total
revenue, in the second quarter of 2009.
* Non-GAAP operating profit was $263 million, or 28% of total revenue, compared
to non-GAAP operating loss of ($205) million, or (25%) of total revenue, in the
third quarter of 2008 and non-GAAP operating profit of $94 million, or 13% of
total revenue, in the second quarter of 2009.
* Total units sold increased 31% year-over-year and increased 45% sequentially.
* Gigabytes sold increased 107% year-over-year and increased 37% sequentially.
* Average price per gigabyte sold declined 43% year-over-year and declined 3%
sequentially.
* Average retail card capacity was 4.22 gigabytes, an increase of 46% on a
year-over-year basis and a decrease of 1% sequentially.

OTHER RECENT KEY ANNOUNCEMENTS

* SanDisk began shipping the industry`s first 8 gigabyte (GB)1 and 16GB SDHC™
and 8GB Memory Stick PRO Duo™ cards using four bits per cell memory technology.
* SanDisk began shipping the industry`s fastest SanDisk Extreme Pro™ Compact
Flash memory card with read and write speeds up to 90 megabytes per second2 and
with capacities ranging from 16GB to 64GB.
* SanDisk launched the Sansa Clip+ MP3 player that features a microSD™ memory
card slot. The Sansa Clip+ MP3 player is fully compatible with SanDisk
slotRadio™ and slotMusic™ cards, as well as any microSD™ card pre-loaded with
music.

CONFERENCE CALL

SanDisk`s third quarter 2009 conference call is scheduled for 2:00 P.M., Pacific
Time, Tuesday, October 20, 2009, with SanDisk CEO Eli Harari joining the call
from SanDisk`s Shanghai facility. The conference call will be webcast and can be
accessed live, and throughout the quarter, at SanDisk's website at
http://www.sandisk.com/IR. To participate in the call via telephone, the dial-in
number is 913-312-0702 and the dial-in password is 8643791. 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 our website prior to the conference
call.

SCHEDULED INTERVIEWS

SanDisk Corporation President and Chief Operating Officer, Sanjay Mehrotra, is
scheduled to appear on CNBC`s "Closing Bell with Maria Bartiromo," on October
20, 2009, at approximately 1:10 P.M., Pacific Time.

SanDisk Corporation Executive Vice-President, Administration and Chief Financial
Officer, Judy Bruner, is scheduled to appear on Bloomberg Television on October
21, 2009, at approximately 6:35 A.M., Pacific Time.

A complete reconciliation between GAAP and non-GAAP information referred to in
this release is provided in the attached tables.

FORWARD LOOKING STATEMENTS

This news release contains certain forward-looking statements, including
statements about our business prospects and outlook, our expectations for the
fourth fiscal quarter of 2009, and fiscal 2010, and our expectations regarding
our business, including our OEM business, 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, or no, growth in market demand for our products or a
slower adoption rate for our products in markets that we are targeting including
through new channels,
* reduced demand or consumer confidence due to the continuing global economic
downturn,
* over-supply in the markets that we serve,
* declines in average selling prices,
* 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,
* slower than expected expansion of our global sales channels,
* fluctuations in operating results, unexpected yield variances and delays
related to our conversion to smaller geometries of NAND flash technology,
* increased memory component and other costs as a result of currency exchange
rate fluctuations to the U.S. dollar, particularly with respect to the Japanese
yen,
* business interruption due to earthquakes, hurricanes or other natural
disasters, particularly in areas in the Pacific Rim and Japan where we
manufacture and assemble products,
* adverse results in litigation or regulatory actions affecting us, and
* 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 Annual Report on Form 10-K/A for the fiscal
year ended December 28, 2008 and Quarterly Report on Form 10-Q for the second
quarter ended June 28, 2009.

Future results may differ materially from those previously reported. We do not
intend to update the information contained in this release.

ABOUT SANDISK

SanDisk Corporation, the inventor and world`s largest supplier of flash storage
cards, is a global leader in flash memory - from research, manufacturing and
product design to consumer branding and retail distribution. SanDisk`s product
portfolio includes flash memory cards for mobile phones, digital cameras and
camcorders, digital audio/video players, USB flash drives for consumers and the
enterprise, embedded memory for mobile devices, and solid state drives for
computers. SanDisk (www.sandisk.com/corporate) is a Silicon Valley-based S&P 500
company with more than half its sales outside the United States.

SanDisk, the SanDisk logo, Sansa, CompactFlash and SanDisk Extreme are
trademarks of SanDisk Corporation, registered in the United States and other
countries. slotRadio is a trademark of SanDisk Corporation.slotMusic is a
trademark of SLOTmedia Group LLC.SDHC and microSD are trademarks of SD-3C LLC.
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 holder(s).

1 1 GB = 1 billion bytes.

2 Based on internal testing; performance may vary depending upon host device.

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

Three months ended Nine months ended
September 27, 2009 September 28, 2008(1) September 27, 2009 September 28, 2008(1)
Revenues:
Product $ 813,811 $ 689,556 $ 2,012,342 $ 2,101,115
License and royalty 121,360 131,941 312,873 386,360
Total revenues 935,171 821,497 2,325,215 2,487,475

Cost of product revenues 495,769 812,832 1,631,691 2,039,994
Amortization of acquisition-related intangible assets 3,132 14,582 9,396 43,746
Total cost of product revenues 498,901 827,414 1,641,087 2,083,740

Gross profit (loss) 436,270 (5,917 ) 684,128 403,735

Operating expenses:
Research and development 94,925 104,560 273,080 328,137
Sales and marketing 55,750 87,859 144,037 245,653
General and administrative 45,350 47,091 122,311 158,579
Amortization of acquisition-related intangible assets 292 4,766 875 13,794
Restructuring and other - - 765 4,085
Total operating expenses 196,317 244,276 541,068 750,248

Operating income (loss) 239,953 (250,193 ) 143,060 (346,513 )

Other income (expense) (2,538 ) (12,901 ) (16,515 ) 9,307

Income (loss) before income taxes 237,415 (263,094 ) 126,545 (337,206 )

Provision for (benefit from) income taxes 6,122 (97,195 ) 50,740 (108,513 )
Net income (loss) $ 231,293 $ (165,899 ) $ 75,805 $ (228,693 )

Net income (loss) per share:
Basic $ 1.02 $ (0.74 ) $ 0.33 $ (1.02 )
Diluted $ 0.99 $ (0.74 ) $ 0.33 $ (1.02 )

Shares used in computing net income (loss) per share:
Basic 227,771 225,682 227,092 225,030
Diluted 232,724 225,682 230,936 225,030

(1) As adjusted for the retrospective adoption of new accounting requirements, effective on December 29, 2008, relating to non-cash economic interest expense associated with the Company's cash-settled convertible debt.

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

Three months ended Nine months ended
September 27, 2009 September 28, 2008(2) September 27, 2009 September 28, 2008(2)

SUMMARY RECONCILIATION OF NET INCOME (LOSS)
GAAP NET INCOME (LOSS) $ 231,293 $ (165,899 ) $ 75,805 $ (228,693 )
Share-based compensation (a) 19,374 25,551 58,058 73,885
Amortization of acquisition-related intangible assets (b) 3,424 19,348 10,271 57,540
Convertible debt interest (c) 13,410 12,451 39,495 36,667
Income tax adjustments (d) (91,990 ) (23,539 ) (33,633 ) (46,042 )
NON-GAAP NET INCOME (LOSS) $ 175,511 $ (132,088 ) $ 149,996 $ (106,643 )

GAAP COST OF PRODUCT REVENUES $ 498,901 $ 827,414 $ 1,641,087 $ 2,083,740
Share-based compensation (a) (2,347 ) (2,648 ) (7,167 ) (8,286 )
Amortization of acquisition-related intangible assets (b) (3,132 ) (14,582 ) (9,396 ) (43,746 )
NON-GAAP COST OF PRODUCT REVENUES $ 493,422 $ 810,184 $ 1,624,524 $ 2,031,708

GAAP GROSS PROFIT (LOSS) $ 436,270 $ (5,917 ) $ 684,128 $ 403,735
Share-based compensation (a) 2,347 2,648 7,167 8,286
Amortization of acquisition-related intangible assets (b) 3,132 14,582 9,396 43,746
NON-GAAP GROSS PROFIT $ 441,749 $ 11,313 $ 700,691 $ 455,767

GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 94,925 $ 104,560 $ 273,080 $ 328,137
Share-based compensation (a) (7,137 ) (10,543 ) (22,341 ) (28,693 )
NON-GAAP RESEARCH AND DEVELOPMENT EXPENSES $ 87,788 $ 94,017 $ 250,739 $ 299,444

GAAP SALES AND MARKETING EXPENSES $ 55,750 $ 87,859 $ 144,037 $ 245,653
Share-based compensation (a) (3,918 ) (5,546 ) (11,153 ) (15,480 )
NON-GAAP SALES AND MARKETING EXPENSES $ 51,832 $ 82,313 $ 132,884 $ 230,173

GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 45,350 $ 47,091 $ 122,311 $ 158,579
Share-based compensation (a) (5,972 ) (6,814 ) (17,397 ) (21,426 )
NON-GAAP GENERAL AND ADMINISTRATIVE EXPENSES $ 39,378 $ 40,277 $ 104,914 $ 137,153

GAAP TOTAL OPERATING EXPENSES $ 196,317 $ 244,276 $ 541,068 $ 750,248
Share-based compensation (a) (17,027 ) (22,903 ) (50,891 ) (65,599 )
Amortization of acquisition-related intangible assets (b) (292 ) (4,766 ) (875 ) (13,794 )
NON-GAAP TOTAL OPERATING EXPENSES $ 178,998 $ 216,607 $ 489,302 $ 670,855

GAAP OPERATING INCOME (LOSS) $ 239,953 $ (250,193 ) $ 143,060 $ (346,513 )
Cost of product revenues adjustments (a) (b) 5,479 17,230 16,563 52,032
Operating expense adjustments (a) (b) 17,319 27,669 51,766 79,393
NON-GAAP OPERATING INCOME (LOSS) $ 262,751 $ (205,294 ) $ 211,389 $ (215,088 )

GAAP OTHER INCOME (EXPENSE) $ (2,538 ) $ (12,901 ) $ Other assets (3) 1,030,885 1,094,120
Total assets $ 8,936,980 $ 6,936,831

Current liabilities $ 1,889,249 $ 1,220,992
Long-term liabilities (3)(4) 1,295,574 1,250,256
Stockholders` equity (3)(4) 5,752,157 4,465,583
Total liabilities and $ 8,936,980 $ 6,936,831
stockholders` equity

Notes:
(1) In April 2009, Gilead acquired CV Therapeutics for $1.39 billion. Gilead allocated the purchase price in accordance with guidance in the Business Combinations Topic of the FASB ASC (formerly SFAS 141R) and recorded $951.2 million in intangible assets relating to marketed products, which constituted a significant portion of the purchase price allocation.

(2) Derived from audited consolidated financial statements at that date adjusted for retrospective application of guidance per notes 3 and 4 below.

(3) On January 1, 2009, Gilead adopted guidance in the Debt Topic of the FASB ASC (formerly FSP APB 14-1) on a retrospective basis for its convertible senior notes. As of December 31, 2008, the retrospective adoption of this guidance decreased deferred tax assets and debt issuance costs included in other assets by an aggregate of $81.7 million, decreased convertible senior notes included in long-term liabilities by $201.8 million, and increased total stockholders`
equity by $120.1 million after a charge of $82.6 million to retained earnings.

(4) On January 1, 2009, Gilead adopted guidance in the Consolidation Topic of the FASB ASC (formerly SFAS 160) and reclassified its noncontrolling interest (formerly minority interest) of $193.0 million from liabilities to stockholders` equity on a retrospective basis.

GILEAD SCIENCES, INC.
PRODUCT SALES SUMMARY
(unaudited)
(in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Antiviral products:
Truvada - U.S. $ 292,918 $ 262,065 $ 859,603 $ 736,999
Truvada - Europe 292,819 257,315 859,036 716,593
Truvada - Other International 34,827 29,721 100,357 91,043
620,564 549,101 1,818,996 1,544,635
Atripla - U.S. 407,896 346,377 1,180,072 965,254
Atripla - Europe 182,222 71,028 461,836 122,727
Atripla - Other International 15,181 10,218 42,416 18,960
605,299 427,623 1,684,324 1,106,941
Viread - U.S. 74,675 63,431 212,122 184,913
Viread - Europe 67,989 66,320 199,329 193,309
Viread - Other International 27,047 26,207 77,790 81,084
169,711 155,958 489,241 459,306
Hepsera - U.S. 25,795 36,744 74,218 102,600
Hepsera - Europe 38,123 49,437 117,837 148,431
Hepsera - Other International 4,010 5,036 15,661 13,573
67,928 91,217 207,716 264,604
Emtriva - U.S. 3,865 4,001 11,211 11,945
Emtriva - Europe 1,863 2,762 6,369 7,437
Emtriva - Other International 1,001 871 3,421 4,729
6,729 7,634 21,001 24,111
Total Antiviral products - U.S. 805,149 712,618 2,337,226 2,001,711
Total Antiviral products - Europe 583,016 446,862 1,644,407 1,188,497
Total Antiviral products - Other International 82,066 72,053 239,645 209,389
1,470,231 1,231,533 4,221,278 3,399,597
AmBisome 77,064 72,884 214,645 213,680
Letairis 48,073 31,656 131,781 76,679
Ranexa 49,005 - 85,070 -
Other products 4,582 2,429 12,139 7,068
178,724 106,969 443,635 297,427
Total product sales $ 1,648,955 $ 1,338,502 $ 4,664,913 $ 3,697,024

SanDisk Corporation
Jay Iyer, 408-801-2067 (Investor)
Ryan Donovan, 408-801-2857 (Media)

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