Spansion Reports Fourth Quarter and Fiscal Year 2006 Results | Cypress Semiconductor
Spansion Reports Fourth Quarter and Fiscal Year 2006 Results
SUNNYVALE, Calif., Jan 29, 2007 -- Spansion Inc. (Nasdaq: SPSN), the world's largest pure-play provider of Flash memory solutions, today announced fourth quarter and fiscal year 2006 results. For the quarter ended December 31, 2006, the company reported net sales of $687 million, an increase of 16 percent over net sales of $592 million for the fourth quarter of 2005 and the fifth straight quarter of year-over-year quarterly revenue growth.
MirrorBit(R) sales reached $435 million, or 63% of net sales, in the fourth quarter of 2006 compared to $180 million, or 30% of net sales, in the fourth quarter of 2005. Gross margin rose to 19 percent compared to 16 percent in the year ago period and the company significantly reduced its net loss for the fourth quarter of 2006 to $25 million, or $0.19 per share, compared with a net loss of $48 million, or $0.63 per share, in the fourth quarter of 2005.
In the fourth quarter of 2006, net sales and gross margin were lower than expected primarily due to reduced demand for mid-range wireless handsets that incorporate custom high density Spansion(R) NOR-based Flash memory. The reduced demand for these higher density MirrorBit NOR products resulted in an overall lower margin product mix in the wireless segment. However, the company has demand for these custom products in the first quarter of 2007.
During the fourth quarter, Spansion successfully ramped its 90nm MirrorBit ORNAND solutions for the high-end multimedia wireless segment, including shipments of over $60 million to wireless OEMs in Japan where the most advanced high-end wireless handsets in the world are designed and produced. With the acceptance of 90nm MirrorBit ORNAND, the sampling of 65nm MirrorBit ORNAND, and its deployment into new regions such as Korea, Spansion is now well positioned to serve the high-end, higher margin wireless segment.
"2006 was a pivotal year in properly structuring Spansion for future growth," said Bertrand Cambou, president and CEO, Spansion Inc. "We gained considerable market share, completed a number of strategic transactions and significantly improved the company's financials, including strong cash management. The momentum from 2006 positions us well for strong performance in 2007."
For the fiscal year ended December 31, 2006, the company increased net sales by 29% to $2.6 billion, compared with net sales of $2.0 billion for the prior fiscal year, driven by MirrorBit sales which rose to $1.3 billion in 2006 compared to $462 million in 2005. As a result of the strong revenue growth, the company estimates that its NOR segment market share increased to approximately 30 percent in 2006, up approximately 4 percentage points from 2005.
Operating loss for fiscal year 2006 was $91 million, a reduction of $194 million or a 68 percent improvement, when compared to an operating loss of $285 million in fiscal year 2005. Net loss for the 2006 fiscal year also declined significantly to $148 million, or $1.15 per share, compared with a net loss of $304 million, or $4.15 per share, for the year ended December 25, 2005. Results for the fiscal year 2006 include $17 million in pre-tax stock-based compensation charges that are not included in fiscal 2005 results.
During 2006 Spansion delivered on its strategy to structure the company for future growth with a successful convertible bond offering and continued focus on capital efficiency. In addition, the company received its first wafers from its foundry relationship with TSMC and entered into an agreement to sell its older JV1 and JV2 manufacturing facilities in Aizu-Wakamatsu, Japan, in order to accelerate its leading edge technology development. With the necessary financing now in place and strong forecasted demand, Spansion plans to be the first major NOR Flash memory company to be in volume production on 300mm wafers, with 65nm production planned in late 2007 and 45nm production scheduled for mid-2008.
Spansion's outlook for the first quarter of 2007 and fiscal year of 2007 is based on current expectations. The following statements are forward looking, and actual results could differ materially depending on market conditions and other factors, including those set forth in the Cautionary Statement below.
-- Spansion expects revenue and financial performance in the first quarter
of 2007 to be flat sequentially with an opportunity to be slightly up
by leveraging a richer mix of higher margin products.
-- For the fiscal year 2007, the company expects net sales growth of
10 percent to 15 percent over fiscal year 2006, higher than what the
company believes the NOR industry will grow in 2007.
-- Capital expenditures for 2007 are forecasted to be approximately $1.0
billion as the company plans to accelerate the ramp of its new 300mm,
45nm SP1 fabrication facility in Japan.
Investor Conference Call
Spansion will host a conference call today, January 29, 2007, at 1:30 p.m. PT/ 4:30 p.m. ET to discuss the quarterly results. A live audio-only web cast of the call will be made available in the Investor Relations section of the company's web site at www.spansion.com . A replay of the call will be made available for seven days following the call by dialing (888) 203-1112 using the passcode 4341667 and will also be accessible on the company's investor relations web site at www.spansion.com .
This release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding demand for certain custom products in the first quarter of 2007, positioning for strong performance in 2007 and future growth, plans for volume production on 300mm wafers at 65 nm in late 2007 and 45 nm in mid-2008, expectation that revenue and financial performance in the first quarter of 2007 to be flat with an opportunity to be slightly up, expectation of net sales growth of 10 percent to 15 percent in fiscal year 2007, and plans for capital expenditures for 2007 to be approximately $1.0 billion. Investors are cautioned that the forward-looking statements in this release involve risks and uncertainties that could cause actual results to differ materially from the company's current expectations. Risks that the company considers to be the important factors that could cause actual results to differ materially from those set forth in the forward-looking statements include the possibility that demand for the company's Flash memory products will be lower than currently expected; that the company will lose rights to key intellectual property arrangements and be subject to intellectual property infringement claims; that customer acceptance of MirrorBit technology will not continue to increase; that OEMs will increasingly choose NAND-based Flash memory products over NOR- and MirrorBit ORNAND-based Flash memory products for their applications; that competitors may introduce new memory or other technologies that may make our Flash memory products uncompetitive or obsolete; that there will be a lack of customer acceptance of MirrorBit ORNAND- or MirrorBit Quad- based Flash memory products; that the company will lose a significant customer; that the company will be adversely affected by its substantial indebtedness; that the company will not be able to raise sufficient capital to enable it to establish leading-edge capacity to meet product demand and maintain market share; that the company may not achieve facilities and capacity implementation schedules; that the company will not be able to reduce expenses; that the company will not successfully develop, introduce and commercialize new products and technologies or to accelerate our product development cycle; that the company will not be able to meet customer demand during cyclical industry or economic downturns; that our reliance on third-party manufacturers may harm us; that industry overcapacity may affect our prices and our manufacturing capacity; that average selling prices may decline; and that the company's operations in foreign countries may be subject to economic and geopolitical risks. The company urges investors to review in detail the risks and uncertainties in the company's Securities and Exchange Commission filings, including but not limited to the company's Quarterly Report on Form 10-Q for the quarter ended October 1, 2006 and the company's Registration Statement on Form S-1/A dated November 3, 2006. The company assumes no obligation to update any forward-looking statements or information included in this press release.
Spansion is the world's largest pure-play provider of Flash memory solutions, dedicated to enabling, storing and protecting digital content in the wireless, automotive, networking and consumer electronics applications. Spansion, previously a joint venture of Advanced Micro Devices, Inc. and Fujitsu Limited, is the largest company in the world dedicated exclusively to developing, designing, and manufacturing Flash memory products and systems. For more information, visit www.spansion.com .
NOTE: Spansion(R), the Spansion Logo(R), MirrorBit(R), ORNAND(TM), HD-SIM(TM) and combinations thereof, are trademarks of Spansion LLC. Spansion, the Spansion Logo and MirrorBit are registered in the US and other countries. Other names used are for informational purposes only and may be trademarks of their respective owners.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Quarter Ended Year Ended
Dec. 31, Oct. 01, Dec. 25, Dec. 31, Dec. 25,
2006 2006 2005 2006 2005 *
(Unaudited) (Unaudited) (Unaudited)
Net sales $687,274 $674,718 $591,596 $2,579,274 $2,002,805
Cost of sales 557,793 532,563 497,459 2,066,642 1,809,929
Gross profit 129,481 142,155 94,137 512,632 192,876
development 81,123 90,259 75,749 347,740 295,849
and administrative 64,058 61,866 55,127 255,648 181,910
Operating loss (15,700) (9,970) (36,739) (90,756) (284,883)
(expense), net 7,940 3,888 677 28,992 3,173
Interest expense (20,698) (13,020) (11,458) (88,214) (45,032)
income taxes (28,458) (19,102) (47,520) (149,978) (326,742)
for income taxes (3,445) 3,013 8 (2,215) (22,626)
Net loss $(25,013) $(22,115) $(47,528) $(147,763) $(304,116)
Net loss per
Income (loss) before
Basic and diluted $(0.19) $(0.17) $(0.63) $(1.15) $(4.15)
Shares used in per
diluted 130,489 128,800 75,604 128,965 73,311
* Derived from the December 25, 2005 audited financial statements of
CONDENSED CONSOLIDATED BALANCE SHEETS
Dec. 31, Oct. 1, Dec. 25,
2006 2006 2005*
Assets (Unaudited) (Unaudited)
Cash, cash equivalents
and marketable securities $885,769 $378,187 $725,816
Accounts receivable, net 395,903 413,427 418,642
Inventories 455,840 466,885 460,143
Deferred income taxes 1,395 2,466 34,452
Prepaid expenses and
other current assets 36,163 44,308 33,789
Total current assets 1,775,070 1,305,273 1,672,842
Property, plant and
equipment, net 1,735,694 1,630,073 1,587,763
Deferred income taxes 13,556 9,479 7,128
Other assets 25,397 31,883 34,232
Total Assets $3,549,717 $2,976,708 $3,301,965
Note payable to banks
under revolving loans $-- $-- $43,020
Accounts payable and
accrued liabilities 493,242 450,834 460,892
and benefits 51,598 49,363 51,534
Income taxes payable 4,333 1,683 13,058
Deferred income on shipments
to distributors 32,496 35,759 31,901
Current portion of long-term
debt and capital lease
obligations 108,374 89,888 190,535
Total current liabilities 690,043 627,527 790,940
Deferred income taxes 188 1,265 29,498
Long-term debt and capital
lease obligations 1,009,673 514,641 526,058
Other long-term liabilities 4,053 22,900 33,492
Stockholders' equity 1,845,760 1,810,375 1,921,977
Total liabilities and
stockholders' equity $3,549,717 $2,976,708 $3,301,965
* Derived from the December 25, 2005 audited financial statements of