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SANDISK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
2005 2004 2003
Fiscal Years Ended
(In thousands)
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 386,384 $ 266,616 $ 168,859
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,538) 9,326 2,152
(Gain) loss on investment in foundries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,480 12,927 (3,746)
(Recovery) loss on unauthorized sales of UMC shares . . . . . . . . . . . . . . . . . . . . . — (6,193) 18,339
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,774 38,862 22,952
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272) 4,581 1,400
FlashVision wafer cost adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,263) (1,282) (1,613)
Other non-cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,833 3,764 3,143
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134,207) (14,880) (104,550)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135,162) (79,526) (28,301)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29,559) (246) 7,697
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,589) 1,927 (4,116)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,234 (6,298) 51,296
Accounts payable and other current liabilities, related parties . . . . . . . . . . . . . . . . 24,657 (3,149) 29,104
Accrued payroll and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,827 13,472 16,543
Income taxes receivable/payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,240 (11,950) 27,720
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,964 8,959 9,196
Deferred income on shipments to distributors and retailers and deferred revenue . . . 57,166 (15,489) 57,682
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,114) 6,209 (1,225)
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,471 (38,986) 103,673
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,855 227,630 272,532
Cash flows from investing activities:
Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (803,967) (1,147,142) (622,580)
Proceeds from sale of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722,986 810,111 327,457
Proceeds from sale of investments in foundries . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 21,627
Notes receivable from Matrix Semiconductor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,000) — —
Acquisition of property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (134,477) (125,842) (54,623)
Acquisition of technology license . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,500) — (1,500)
Consideration paid in a business combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,061) —
Notes receivable from FlashVision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,249) (33,564) —
Investment in FlashVision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Investment in Flash Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,790) (23,129) —
Investment in foundries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,500) (704) (11,001)
Proceeds from other sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 6,333 4,880
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (299,497) (522,998) (335,740)
Cash flows from financing activities:
Issuance of common stock in public offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 521,608
Issuance of common stock under employee programs . . . . . . . . . . . . . . . . . . . . . . . 115,398 24,648 55,294
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,398 24,648 576,902
Effect of changes in foreign currency exchange rates on cash . . . . . . . . . . . . . . . . 1,507 36 —
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . 298,263 (270,684) 513,694
Cash and cash equivalents at beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . 463,795 734,479 220,785
Cash and cash equivalents at end of the year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 762,058 $ 463,795 $ 734,479
Supplemental disclosure of cash flow information:
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(164,345) $ (159,436) $ (44,244)
Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (17) $ (6,750) $ (6,750)
Non-cash financing and investing activities:
Conversion of subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 150,000 $ —
Issuance of shares in a business combination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 4,935 $ —
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Annual Report