Spansion Reports Fourth Quarter and Fiscal Year 2007 Results | Cypress Semiconductor
Spansion Reports Fourth Quarter and Fiscal Year 2007 Results
SUNNYVALE, Calif., Jan 22, 2008 -- Spansion Inc., the world's largest pure-play provider of Flash memory solutions, today announced results for the fourth quarter and fiscal year ended December 30, 2007. For the fourth quarter of 2007, the company reported net sales of $653 million, an increase of 7 percent compared to net sales of $611 million in the third quarter of 2007.
For the fourth quarter of 2007 gross margin rose to 20 percent compared to 18 percent in the third quarter of 2007 and sequential operating loss decreased by $13 million, or 22%, to $46 million. Net loss for the fourth quarter of 2007 was $50 million, or $0.37 per share, compared to a net loss of $72 million, or $0.53 per share, in the previous quarter.
"The fourth quarter reflected significant operational improvement as gross margin improved. The overall pricing environment was encouraging and the book-to-bill ratio was strong at 1.3," said Bertrand Cambou, president and CEO, Spansion Inc. "The strategic investment plan for our 300mm, SP1 facility is on track and we expect to begin recognizing revenue in the first quarter as we are already qualified at leading customers."
In the company's Wireless Solutions Division (WSD), net sales for the fourth quarter of 2007 rose slightly to $322 million, up from $317 million in net sales in the previous quarter. Worldwide unit shipments were up in the fourth quarter and blended ASPs were flat sequentially. The book-to-bill ratio for WSD was particularly strong due to gains at the top 5 handset OEMs.
The company's Consumer, Set Top Box and Industrial Division (CSID) achieved record net sales of $324 million for the fourth quarter of 2007, compared to $294 million in net sales in the third quarter of 2007, reflecting continued segment share gains. Growth was the result of strong sales of the company's high density MirrorBit(R) solutions across multiple geographies. Blended ASPs for CSID in the fourth quarter of 2007 rose 9% sequentially and unit shipments reached a record, up 3% sequentially.
For the fiscal year ended December 30, 2007, the company outperformed the overall NOR industry as net sales declined only 3% to $2.5 billion from $2.6 billion in the same time period last year. For fiscal year 2007, Spansion preliminarily estimates that its NOR industry segment share increased from 31 percent to approximately 33 percent, driven by strong adoption of the company's MirrorBit technology as MirrorBit revenue for fiscal year 2007 rose 41 percent to $1.8 billion compared to $1.3 billion in fiscal year 2006.
Net loss for fiscal year 2007 was $263 million, or $1.95 per share, compared to a net loss of $148 million, or $1.15 per share, for fiscal year 2006. Net loss for fiscal year 2007 includes approximately $152 million in operating costs related to the strategic investment in SP1, the company's new 300mm, 65nm, wafer fabrication facility.
Additional Highlights -- Spansion announced an agreement to acquire its long time partner Saifun Semiconductor Ltd. The acquisition will consolidate all MirrorBit and NROM IP into one company and immediately enable Spansion to enter the technology licensing business. -- The company unveiled its next generation MirrorBit ORNAND architecture MirrorBit ORNAND2(TM), which will use a SONOS-like memory cell connected in a NAND memory array at 45-nanometers. Initial shipments are scheduled to begin in early 2009. -- Spansion announced an agreement with Virident Inc. to develop and market a new generation of memory solutions designed to dramatically reduce power consumption and provide excellent system performance in Internet data centers. These solutions will be based on Spansion's revolutionary MirrorBit Eclipse(TM) architecture. -- The company received the Best Supplier award from Lenovo Mobile Communication Technology Ltd. for 2007 for the fourth consecutive year. Spansion was the only NOR Flash memory supplier selected and the award reflects the commitment and success of Spansion in the China handset market.
Spansion's outlook for the first quarter of 2008 and fiscal year 2008 is based on current expectations and subject to various factors including those set forth in the Cautionary Statement below.
-- Spansion expects net sales for the first quarter of 2008 to be in the range of $580 million and $640 million, consistent with seasonal trends. The company anticipates that its first quarter 2008 CSID net sales will decline sequentially. However, the company's WSD net sales are expected to increase sequentially driven by gains at top tier handset customers. -- For the first quarter of 2008, the company expects gross margin to decline due primarily to non-cash depreciation charges related to the full conversion of its SP1 facility to production. -- For fiscal year 2008, capital expenditures will be approximately half the amount of 2007. -- Spansion expects fiscal year 2008 net sales to increase compared to fiscal year 2007 and anticipates that its financial performance will improve compared to fiscal year 2007.
Investor Conference Call
Spansion will host a conference call today, January 22, 2008, 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 http://www.spansion.com. In addition, we are providing a slide presentation regarding our quarterly results and other financial information, which will be posted to the company's web site immediately prior to the conference call. The slide presentation will be available for viewing in the Investor Relations section of the company's web site at http://www.spansion.com although we reserve the right to discontinue that availability at any time. A replay of the call will be made available on the company's investor relations web site at http://www.spansion.com following the call.
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: the expectation to recognize revenue from the company's SP1 facility in the first quarter of 2008; the presumption that the merger with Saifun Semiconductors Ltd. will close, and the belief that such closing will consolidate all MirrorBit and NROM IP technologies into one company and enable Spansion to immediately enter the technology licensing business; the expectation that the company will begin shipments of its MirrorBit ORNAND2 products in early 2009; the belief that net sales for the first quarter of 2008 will be in the range of $580 million and $640 million; the expectation that first quarter 2008 CSID net sales will decline sequentially, that WSD net sales will increase sequentially, and that gross margin will be impacted by approximately $25 million in the first quarter of 2008; the plans that capital expenditures for fiscal year 2008 will be approximately half the amount of 2007; and the expectation that fiscal year 2008 net sales will increase compared to fiscal year 2007, and that the company's financial performance will improve in fiscal year 2008 compared to fiscal year 2007. 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 average selling prices may decline; loss of key intellectual property arrangements creates a greatly increased risk of patent or other intellectual property infringement claims; the high cyclicality of the Flash memory market which has experienced severe downturns; that Spansion may not be effective in expense reduction efforts; the merger with Saifun may not result in benefits that we anticipate or that any delay or failure to complete the merger may result in harm; that OEMs will increasingly choose NAND-based Flash memory products over NOR, MirrorBit ORNAND and MirrorBit ORNAND2 architecture-based Flash memory products for their applications; that Spansion has a significant amount of debt, and such debt could subject us to restrictive covenants; that the company may not achieve facilities and capacity implementation schedules as a result of factors such as insufficient cash flows and inadequate external financing; that the company may lose a key customer, or experience a reduction of demand from a key customer; that the company will not successfully develop, introduce and commercialize new products and technologies or to accelerate our product development cycle; that competitors may introduce new memory or other technologies that may make our Flash memory products uncompetitive or obsolete; that the company will fail to develop, or there will be a lack of customer acceptance of, MirrorBit ORNAND and MirrorBit ORNAND2 architecture-based Flash memory products; that the company may experience manufacturing constraints or fail to achieve manufacturing efficiencies; customers' ability to change booked orders may lead to excess inventory; that the company's investments in research and development may not lead to timely improvements in technology; and intellectual property claims or litigation could cause the company to incur substantial costs or pay substantial damages or prohibit sales of its products. 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2007. The company assumes no obligation to update any forward-looking statements or information included in this press release.
Spansion (Nasdaq: SPSN) is a leading Flash memory solutions provider, dedicated to enabling, storing and protecting digital content in wireless, automotive, networking and consumer electronics applications. Spansion, previously a joint venture of AMD and Fujitsu, is the largest company in the world dedicated exclusively to designing, developing, manufacturing, marketing and selling Flash memory solutions. For more information, visit http://www.spansion.com.
Spansion(R), the Spansion logo, MirrorBit(R), MirrorBit(R) Eclipse(TM), ORNAND(TM), ORNAND2(TM), HD-SIM(TM) and combinations thereof, are trademarks of Spansion LLC in the U.S. and other countries. Other names used are for informational purposes only and may be trademarks of their respective owners.
Spansion Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Quarter Ended Year Ended Dec. 30, Sep. 30, Dec. 31, Dec. 30, Dec. 31, 2007 2007 2006 2007 2006* (Unaudited)(Unaudited)(Unaudited)(Unaudited) Net sales $652,801 $611,069 $687,274 $2,500,813 $2,579,274 Cost of sales 523,783 500,741 557,793 2,065,143 2,066,642 Gross profit 129,018 110,328 129,481 435,670 512,632 Other expenses: Research and development 112,893 111,231 78,739 436,785 341,692 Sales, general and administrative 62,290 58,226 66,442 239,317 261,696 Operating loss (46,165) (59,129) (15,700) (240,432) (90,756) Interest and other income (expense), net 5,157 6,835 7,940 36,030 28,992 Interest expense (15,487) (23,628) (20,698) (84,238) (88,214) Loss before income taxes (56,495) (75,922) (28,458) (288,640) (149,978) Benefit for income taxes (6,981) (4,320) (3,445) (25,144) (2,215) Net loss $(49,514) $(71,602) $(25,013) $(263,496) $(147,763) Net loss per common share Basic and diluted $(0.37) $(0.53) $(0.19) $(1.95) $(1.15) Shares used in per share calculation - Basic and diluted 135,283 135,049 130,489 134,924 128,965 *Derived from the December 31, 2006 audited financial statements of Spansion Inc. Spansion Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Dec. 30, Sep. 30, Dec. 31, 2007 2007 2006* Assets (Unaudited) (Unaudited) Current assets: Cash, cash equivalents and marketable securities $415,742 $529,096 $885,769 Accounts receivable, net 379,962 345,890 395,903 Inventories 583,869 531,938 455,840 Deferred income taxes 26,607 32,424 1,395 Prepaid expenses and other current assets 46,452 62,866 36,163 Total current assets 1,452,632 1,502,214 1,775,070 Property, plant and equipment, net 2,271,964 2,234,153 1,735,694 Deferred income taxes 29,957 26,156 13,556 Other assets 61,092 45,292 25,397 Total Assets $3,815,645 $3,807,815 $3,549,717 Liabilities and Stockholders' Equity Current liabilities: Note payable to banks under revolving loans $- $- $33,608 Accounts payable and accrued liabilities 643,764 620,113 493,242 Accrued compensation and benefits 60,778 61,692 51,598 Income taxes payable 13,818 23,368 4,333 Deferred income on shipments to distributors 39,957 33,862 32,496 Current portion of long-term debt and capital lease obligations 101,797 85,189 74,766 Total current liabilities 860,114 824,224 690,043 Deferred income taxes 186 67 188 Long-term debt and capital lease obligations 1,299,536 1,286,782 1,009,673 Other long-term liabilities 23,361 32,020 4,053 Stockholders' equity 1,632,448 1,664,722 1,845,760 Total liabilities and stockholders' equity $3,815,645 $3,807,815 $3,549,717 *Derived from the December 31, 2006 audited financial statements of Spansion Inc.