Company Posts Third Consecutive Quarterly Increase in Net Sales
SUNNYVALE, Calif., Oct. 15 /PRNewswire-FirstCall/ -- Spansion Inc., the
world's largest pure-play provider of Flash memory solutions, today
announced results for the third quarter ended September 28, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20060118/SFW077LOGO)
Net sales for the third quarter of 2008 were $631 million, up 3 percent
compared to the prior quarter, and up 3 percent compared to the third
quarter of 2007, driven by significant segment share gains in the wireless
segment and continued strong performance by the company's Consumer, Set Top
Box and Industrial Division (CSID.)
During the third quarter 2008, gross margin was approximately 14
percent. The sequential decline in gross margin was primarily due to a
larger than expected drop in ASP per bit at 10 percent quarter on quarter.
As a result, Spansion elected to exit its least profitable business, the
90nm content delivery business, monetized the inventory and wrote down
related assets, resulting in an approximate $13 million impact to gross
profit. Operating loss for the third quarter 2008 was approximately $86
million.
In the third quarter Spansion achieved internal qualifications of
multiple MirrorBit NOR devices for wireless applications. Due to the delay
of certain SP1 customer qualifications and softness in the Japan handset
market, the third quarter revenue from SP1 was lower than expected.
Additional qualifications are expected in the fourth quarter including
server and CSID products, positioning SP1 to begin to ramp significant NOR
revenue in the fourth quarter and for Spansion to take full advantage of
SP1 in 2009.
"Our sales growth for the third quarter in this business environment
was a great achievement," said Bertrand Cambou, president and CEO of
Spansion Inc. "I am pleased with the segment share gains in wireless driven
by strength in North America, Korea and Europe. During the third quarter,
Spansion had solid improvements in manufacturing efficiency, reduced
inventory, and made significant progress in finalizing customer
qualifications at SP1. In light of current market conditions, we are taking
very aggressive action to considerably reduce our cost structure and
enhance our cash position."
Restructuring
Spansion is focusing on its own core competencies and is establishing
strategic alliances with industry leading partners in final manufacturing.
As part of this effort, Spansion has signed a non-binding Memorandum of
Understanding with Advanced Semiconductor Engineering Incorporated (ASE),
the world's largest provider of independent semiconductor manufacturing
services in assembly and test, to establish a joint venture that will
include the Spansion Suzhou, China final manufacturing facility. Upon the
completion of this transaction the joint venture is expected to allow
management to reduce capital expenditures and increase asset utilization
through greater economies of scale. ASE and Spansion plan to complete a
definitive agreement in the fourth quarter 2008. The Suzhou facility is
Spansion's flagship final manufacturing factory, with approximately 1100
employees.
As a result of the cost cutting programs initiated in the second
quarter 2008, Spansion drove down sequential operating expenses by $6
million in the third quarter 2008. During the third quarter, Spansion
intensified its cost-cutting activities, with a broad-based set of actions
including: salary reductions; cutting capital spending; freezing headcount;
cutting research and development projects and reducing administrative
expenses.
Division Highlights
In the third quarter 2008, Spansion's Consumer, Set-top Box and
Industrial Division (CSID) continued its strong performance, following
substantial growth and segment share gains in the second quarter 2008. CSID
reported net sales of $305 million for the third quarter 2008, slightly
down from the second quarter 2008 and up compared to third quarter 2007.
CSID had another strong quarter in a segment where Spansion commands clear
segment leadership with noticeable strength in Europe and North America
driven by growth in high density MirrorBit Flash memory sales.
The company's Wireless Solutions Division (WSD) reported net sales
increased 8% sequentially to $320 million for the third quarter of 2008,
and were up compared to the third quarter 2007. Robust third quarter sales
in North America, Korea, China and Europe more than offset an industry
slowdown in the Japan handset market. WSD experienced significant segment
share gains and successfully increased price in select segments. During the
quarter, WSD increased total units shipped by approximately 10 million
driven by growth in the mid-range handset segment.
Additional Highlights
-- Spansion led NOR Flash memory segment share for the eleventh
consecutive quarter with nearly 40 percent share and ranked the third
largest supplier in the overall Flash memory market according to market
research firm, iSuppli.
-- The company unveiled plans for the industry's first charge-trapping
NAND flash memory, the MirrorBit ORNAND2 product family featuring the
highest performance in the NAND segment.
As part of this strategy, Spansion established an alliance with SMIC to
produce Spansion Flash memory products at a fabrication facility in Wuhan,
China, owned by Wuhan Xinxin Semiconductor Manufacturing.
-- Spansion was awarded most innovative Flash memory technology for
Spansion(R) EcoRAM(TM) product during the 2008 Flash Memory Summit.
Spansion is currently working closely with key end-customers globally to
alpha-test Spansion EcoRAM memory-based systems.
Spansion's outlook for the fourth quarter of 2008 is based on current
expectations and subject to various factors including those set forth in
the Cautionary Statement below.
Bertrand Cambou, president and CEO of Spansion Inc. commented on the
outlook for the fourth quarter, "While we remain optimistic about
Spansion's long-term opportunity, our expectations for the fourth quarter
are tempered due to the uncertain economic environment."
Fourth Quarter of 2008 Outlook
-- Spansion expects net sales for the fourth quarter of 2008 to decline
slightly compared to the prior quarter;
-- Gross margin for the fourth quarter of 2008 is expected to be flat
to up compared to the prior quarter;
-- SG&A and R&D expenses are expected to be down approximately $10
million in aggregate compared to the prior quarter;
-- Capital expenditures for the fourth quarter of 2008 are expected to
be approximately $40 million reducing the full year 2008 capital
expenditure outlook to approximately $435 million, down from the previous
outlook of less than $500 million. Spansion expects capital spending to
remain at a maintenance level at approximately $40 million per quarter
between now and mid-2009; and
-- Free cash flow is expected to be positive during the fourth quarter
of 2008. (Note: free cash flow positive, an alternative non-GAAP measure of
liquidity, is defined as net cash provided by operating activities minus
capital expenditures.)
Investor Conference Call
Spansion will host a conference call today, October 15, 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.
Cautionary Statement
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 under the caption "Fourth Quarter of 2008
Outlook" with respect to Spansion's expectations for net sales, gross
margins, SG&A and R&D expenses in its fourth quarter of 2008, Spansion's
expectations for capital expenditures in the fourth quarter and on a
quarterly basis through mid-2009, and Spansion's expectations to be free
cash flow positive in the fourth quarter; statements with respect to
realizing NOR revenue from SP1 in the fourth quarter and 2009 and
finalizing customer qualifications at SP1; Spansion's expectations with
respect to its ability to significantly reduce costs and enhance its cash
position as a result of potential strategic alliances and Spansion's other
cost reduction efforts, Spansion's expectations regarding entering into
definitive agreements with ASE in the fourth quarter and the anticipated
benefits from such potential transaction, and Spansion's expectations
regarding potential benefits from working closely with key end- customers
with respect to Spansion EcoRam memory-based systems. 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 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 adverse
financial market conditions may impeded access to or increase the cost of
financing operations and investments; that Spansion may not be effective in
expense reduction efforts; that OEMs will increasingly choose NAND-based
Flash memory products over the company's MirrorBit architecture-based Flash
memory products for their applications; that the company 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
unavailable 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 may
fail to successfully develop next generation products; 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; that the company may experience manufacturing constraints or
fail to achieve manufacturing efficiencies; the company may experience
manufacturing disruptions of suppliers interrupt supply or increase prices
for raw materials; that Spansion may not realize the expected value of
Saifun's NROM technology; the merger with Saifun may not result in benefits
that Spansion anticipates as a result of integration or other challenges;
intellectual property claims or litigation could cause the company to incur
substantial costs or pay substantial damages or prohibit sales of its
products; risks related to the negotiation, entry into and closing of the
definitive agreements with ASE and Spansion's ability to realize the
expected benefits from such transaction; and risks associated with general
economic conditions. 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 30, 2007 and the company's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2008.
The company assumes no obligation to update any forward-looking statements
or information included in this press release.
About Spansion
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, selling and licensing 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
Sep. 28 Jun. 29 Sep. 30,
2008 2008 2007
(Unaudited) (Unaudited) (Unaudited)
Net sales $630,860 $612,720 $611,069
Cost of sales (*) 544,273 503,571 499,758
Gross profit 86,587 109,149 111,311
Other expenses:
Research and development 106,845 108,303 111,248
Sales, general and administrative 64,094 68,264 59,193
Restructuring charges (*) 1,377 9,922 -
Operating loss (85,729) (77,340) (59,130)
Interest and other income (expense), net 1,432 2,536 6,835
Interest expense (24,853) (27,663) (23,628)
Loss before income taxes (109,150) (102,467) (75,923)
Provision (benefit) for income taxes 9,583 (1,824) (4,320)
Net loss $(118,733) $(100,643) $(71,603)
Net loss per common share
Basic and diluted (**) $(0.74) $(0.63) $(0.53)
Shares used in per share calculation
- Basic and diluted (**) 160,687 160,196 135,049
* Restructuring charges included $1,489 and $3,123 related to cost of
sales for the quarter ended Sep 28, 2008, and Jun. 29, 2008,
respectively.
** Shares used in per share calculation is computed based on the weighted-
average number of common shares outstanding during the period. The
shares used in net loss per common share calculation for the quarters
ended Sep. 28, 2008 and Jun. 29, 2008 included 22,729 thousand of
weighted-average common shares, related to the acquisition of Saifun
Semiconductors Ltd.
Spansion Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
Sep. 28 Jun. 29 Dec. 30
2008 2008 2007*
Assets (Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $152,107 $240,442 $199,092
Marketable securities 107,382 108,479 216,650
Accounts receivable, net 393,064 371,399 379,962
Inventories 614,717 636,389 583,869
Deferred income taxes 13,976 29,133 26,607
Prepaid expenses and other current
assets 48,903 43,277 46,452
Total current assets 1,330,149 1,429,119 1,452,632
Property, plant and equipment, net 2,308,480 2,365,211 2,271,964
Deferred income taxes 43,240 40,014 29,957
Acquisition related intangible assets,
net 57,761 60,437 -
Goodwill 18,506 19,289 -
Other assets 81,771 85,619 61,092
Total Assets $3,839,907 $3,999,689 $3,815,645
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to banks under
revolving loans $130,411 $128,930 $-
Accounts payable and accrued
liabilities 685,038 694,255 643,764
Accrued compensation and benefits 76,960 78,099 60,778
Income taxes payable 608 4,809 13,818
Deferred income on shipments to
distributors 52,826 46,688 39,957
Current portion of long-term debt
and capital lease obligations 146,831 144,767 101,797
Total current liabilities 1,092,674 1,097,548 860,114
Deferred income taxes 4,260 7,023 186
Long-term debt and capital lease
obligations 1,278,246 1,312,377 1,299,536
Other long-term liabilities 22,429 28,595 23,361
Stockholders' equity 1,442,298 1,554,146 1,632,448
Total liabilities and stockholders'
equity $3,839,907 $3,999,689 $3,815,645
* Derived from the December 30, 2007 audited financial statements of
Spansion Inc.
Spansion Inc.
Selected Cash Flow Information
(In millions)
Quarter Ended
Sep. 28, Jun. 29, Sep. 30
2008 2008 2007
Depreciation & Amortization $158 $162 $130
Amortization of intangibles and
other acquisition-related costs $3 $3 $-
Purchases of property, plant
and equipment $110 $110 $195
|
