First-quarter net loss was $6.4 million, or $0.24 per share, compared with net income of $565,000, or $0.02 per share, for the same quarter a year earlier. First-quarter 2009 results include a restructuring expense of $459,000, and a non-cash impairment charge of $5.4 million related to restructuring and cost saving measures announced in March of this year. The results for the first quarter also include non-cash, stock-based compensation expense of $342,000, and an income tax benefit of $506,000. Without these items, first-quarter net loss would have been $744,000, or $0.03 per share. Product gross margin for the first quarter of 2009 was 46%, compared to 53% for the first quarter of 2008, reflecting the impact of fixed overhead relative to lower production volume and a less favorable product mix.
First-Quarter Product Highlights:
“Inventory reductions within our sales channels made for an increasingly challenging first quarter,” said Bill Staunton, Ramtron’s chief executive officer. “Compared with last year, reduced order rates for our lower-end serial memories overshadowed increases in our integrated, custom, and high density F-RAM products. By target market, order declines were sharp in automotive and office equipment while other printer related sales grew and shipments into metering applications showed areas of strength. As revenue trends grew weaker during the quarter, we took steps to adjust 2009 operating expenses to prepare for the potential for lower than projected annual revenue.
“Having reduced costs and expenses by more than $5.0 million on an annualized basis, we expect to return to GAAP profitability in the third quarter,” Staunton continued. “We have started to see indications of a stabilization of orders from distributors and believe that orders will pick up in the second half of the year as distributors and customers replenish inventories. As a result, we still expect to remain profitable in 2009 before restructuring, impairment, and stock-based compensation expenses, as well as income tax benefit.
“Our return to GAAP profitability in the third quarter is modeled on research and development, sales and marketing, and general administrative expenses of approximately 48% to 49% as a percentage of annual revenue, and a conservative annual revenue estimate of $48 million,” Staunton added.
Product Defect Update
Negotiations are ongoing between Ramtron, its insurance carrier and one of Ramtron’s customers regarding the previously announced request for payment for losses resulting from in-field failures of one of Ramtron’s semiconductor memory products. These parties have recently concluded a nonbinding two-day mediation without reaching an agreement. Ramtron does not have a basis for any change in the previously recorded loss contingency estimate at this time.
Ramtron to Transition Product Manufacturing to US Foundry Locations
Ramtron also announced today that, over the next two years, it will transition the manufacturing of products that are currently being built at Fujitsu’s chip foundry located in Iwate, Japan to its foundry at Texas Instruments in Dallas, Texas and to its newest foundry at IBM Corporation in Essex Junction, Vermont. The transition will allow Ramtron to enhance its competitive market position and design and develop a wider array of products that leverage Ramtron’s F-RAM technology advantage. Ramtron has established a transition plan with Fujitsu that is designed to meet customer delivery requirements and ensure an orderly transition of products to the new facilities.
“Making this change in our manufacturing model allows us to significantly expand the addressable market for our industry-leading F-RAM products while improving our ability to penetrate markets served by incumbent technologies,” Staunton commented. “With the greater product development flexibility afforded by our U.S.-based manufacturing sources, we are moving forward with our strategic initiatives to build new devices that will feature faster device speeds and lower operating voltages, among other enhancements.
“After implementing the cost reduction actions last month, we
re-evaluated the amount of debt we would need to support the capital and
development costs of the foundry agreement with IBM and concluded that
an $11.0 million term loan facility was not necessary,” concluded
Staunton. “However, we are working with Silicon Valley Bank to increase
the borrowing base under our revolving line, and to extend the maturity
to March of 2012. At this level of debt we will have the financial
flexibility to execute all of our growth plans while staying comfortably
within our debt to capital parameters.”