2014

Spansion Inc. Reports First Quarter 2013 Results Spansion to Acquire Microcontroller and Analog Business from Fujitsu

SUNNYVALE, Calif., April 30, 2013 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its first quarter ended March 31, 2013.

(Logo:  http://photos.prnewswire.com/prnh/20060118/SFW077LOGO)

On a U.S. GAAP basis, Spansion reported first quarter net sales of $189.6 million, gross margin of 24.2%, operating loss of $5.4 million and net loss of $14.4 million.

On a non‑GAAP basis, net sales totaled $189.6 million, gross margin was 28.6%, operating income was $10.5 million and net income was $1.5 million.

For a reconciliation of GAAP to non - GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures" below.

First Quarter 2013 Financial Highlights:

  • Revenue of $189.6 million
  • Non-GAAP gross margin of 28.6%
  • Non-GAAP operating income of $10.5 million or 5.6% of revenue
  • Adjusted EBITDA of $23.1 million
  • Non-GAAP Diluted EPS $0.03
  • Cash, cash equivalents and short term investments of $309.1 million

First Quarter 2013 Business Highlights:

  • Continued market leadership and focused execution
  • Announced 32nm NOR technology development
  • Introduced 40nm embedded Charge Trap (eCT) technology- optimized for high performance, low power and ease of integration with advanced logic process in system-on-chip (SoC) products
  • Recognized $11 million revenue from Embedded SLC NAND
  • Strong design win momentum for NAND and first 8Gb 45nm Parallel NOR product

"We continue to execute our strategy and drive new product innovation and customer momentum with our NOR and NAND Flash memory products across embedded markets," said John Kispert, president and CEO of Spansion. "As expected, the first quarter was seasonally soft.  We are encouraged by design win progress, especially with our newer products as they continue to meet the growing Flash memory requirements across automotive, consumer, communications, gaming and industrial applications."

Kispert continued, "We are making solid progress on our embedded system-on-chip solutions strategy and today announced a definitive agreement to acquire Fujitsu's Microcontroller and Analog businesses. This acquisition, which extends our core competency in Flash Memory, will accelerate new product development in system solutions.  The combination of two highly complementary organizations, technologies and products will address customers' needs for discrete Flash memory, microcontrollers and analog products, as well integrated solutions for embedded designs.  With the expanded product portfolio, talent and IP, we will improve the user experience and shape the future of electronics in embedded markets."  

Quarterly Conference Call and Accompanying Slide Presentations

Spansion will host a conference call Tuesday, April 30, 2013 at 5:00 am PDT / 8:00 am EDT to discuss its first quarter 2013 results and the acquisition of Fujitsu's microcontroller and analog business, which Spansion announced today by separate press release. http://news.spansion.com/2013-04-29-Spansion-to-Acquire-Microcontroller-and-Analog-Business-from-Fujitsu. A live webcast of the conference call, with accompanying slide presentations, may be accessed through the investor relations section of Spansion's website at http://investor.spansion.com/.

Dial-in: 1-866-271-5140 (toll free), 1-617-213-8893 (International), Passcode: 35257573

An audio replay will be available within two hours of the call through May 7, 2013 and may be accessed via dial-in at 1-888-286-8010 (US), 1-617-801-6888 (International), with the Passcode 69966114 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/.

First Quarter 2013 Results

U.S. GAAP Results, in $millions except per share data and percentages


Q1 2013

Q4 2012

Q1 2012

Net Sales

$189.6

$224.0

$218.8

Gross Margin

24.2%

32.1%

27.1%

Operating Income (Loss)

($5.4)

$15.0

($4.0)

Operating Margin

(2.9%)

6.7%

(1.8%)

Net Income (Loss) attributable to Spansion Inc. common stockholders

($14.4)

$6.9

($13.1)

Diluted Net Income (Loss) Per Share

($0.25)

$0.11

($0.22)

 

Non-GAAP Results, in $millions except  per share data and percentages


Q1 2013

Q4 2012

Q1 2012

 Net Sales

$189.6

$224.0

$218.8

Gross Margin

28.6%

36.1%

30.7%

Operating Income

$10.5

$32.0

$13.6

Operating Margin

5.6%

14.3%

6.2%

Net Income (Loss) attributable to Spansion Inc. common stockholders

$1.5

$21.8

$4.4

Diluted Net Income Per Share

$0.03

$0.34

$0.07

Business Outlook

For the second quarter of 2013, Spansion estimates U.S. GAAP net sales in the range of $200 million to $220 million and GAAP diluted net income per share of ($0.10) to ($0.03). Non-GAAP gross margin is expected to be in the range of 34% to 36%, and non-GAAP diluted EPS is expected to be in the range of $0.16 and $0.23. These estimates exclude amortization of intangibles of approximately $7 million, stock compensation expense of approximately $1 million in COGS and $8 million in Net Income, and charges related to the acquisition of the Fujitsu businesses of approximately $1 million.

About Spansion

Spansion (NYSE: CODE) is a global leader in Flash memory-based embedded systems solutions. Spansion is at the heart of electronics systems, connecting, controlling, storing, and powering everything from automotive electronics and industrial systems to the highly interactive and immersive consumer devices that are enriching people's daily lives. For more information, visit http://www.spansion.com.

Spansion®, the Spansion logo, MirrorBit®, MirrorBit® Eclipse™ and combinations thereof, are trademarks and registered trademarks of Spansion LLC in the United States and other countries. Other names used are for informational purposes only and may be trademarks of their respective owners.

Cautionary Statement

This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements. The risks and uncertainties include statements related to the acquisition of the Fujitsu Microcontroller and Analog business including regarding the timing and the ability to close the transaction, the possibility that anticipated benefits, growth prospects and synergies expected from the acquisition may not be fully realized or may take longer to realize than expected; the accretive nature of the transaction, including incremental margin, EBITDA and EPS estimates for future periods; estimations and variations in market growth and demand for the acquired products and technologies; delays, disruptions, costs and challenges associated with integrating the new business into the company's existing business, including changing relationships with partners, customers, employees or suppliers; the amount of costs incurred in connection with the supporting and integrating the new business and supporting new customers and partners; ongoing personnel and logistical challenges of managing the new combined organization; our ability to retain and motivate key employees from Fujitsu; and general economic and business conditions.   Other risks and uncertainties include: the success of Spansion's plan to focus primarily on the embedded solutions market; the ability to improve our gross margins and to continue to implement successfully our cost reduction efforts; the ability to maintain a competitive cost and expense structure; the ability to maintain a strong product portfolio; the ability to control operating expenses, particularly our sales, general and administrative costs; the ability to retain and expand our customer base in focus markets, and retain and grow our share of business within our customer base; the ability to penetrate further the embedded solutions market with our high density products and expand the number of customers in emerging markets; and the ability to successfully develop and transition to the latest technologies. In addition, the instability of the global economy and tight credit markets could continue to adversely impact  our business in several respects, including adversely impacting credit quality and insolvency risk of the company and its customers and business partners, including suppliers and distributors; bookings; and reductions and deferrals of demand for our products. We urge investors to review in detail the risks and uncertainties discussed in the company's Securities and Exchange Commission filings, including but not limited to our Annual Report on Form 10-K for the fiscal year ended December 30, 2012. Unless otherwise required by applicable laws, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

 


Three Months

Ended

March 31, 2013

Three Months

Ended

December 30, 2012

Three Months

Ended

March 25, 2012

Net sales

$189,572

$223,987

$218,758

Cost of sales

143,717

152,047

159,560

Gross Profit

45,855

71,940

59,198





Research and development

22,777

24,771

26,041

Sales, general and administrative

28,483

32,121

32,640

Restructuring  charges

-

-

4,518

Operating  income (loss)

(5,405)

15,048

(4,001)

Interest & other income

962

2,472

1,505

Interest expense

(7,604)

(7,224)

(7,681)





Income (loss) before income taxes

(12,047)

10,296

(10,177)

Provision for income taxes

(2,388)

(3,428)

(3,445)

Net income (loss)

(14,435)

$6,868

(13,622)

     Less: Net loss attributable to non-controlling  interest

-

-

(503)

Net income (loss) attributable to Spansion Inc. common stockholders

$(14,435)

$6,868

$(13,119)





Net income (loss) per common share attributable to Spansion Inc. common stockholders




           Basic

$(0.25)

$0.11

$(0.22)

           Diluted

$(0.25)

$0.11

$(0.22)

Shares used in per share calculation




           Basic

58,086

60,144

59,676

           Diluted

58,086

61,487

59,676

 

Spansion Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands except par value and shares)

 


Assets

March 31, 2013

December 30, 2012

March 25, 2012


Current assets:






Cash and cash equivalents

$261,732

$262,177

$197,025



Short-term investments

47,398

51,720

63,842



Accounts receivable, net

106,602

106,864

112,988



Inventories

179,648

182,192

159,689



Deferred income taxes

8,663

8,699

5,176



Prepaid expenses and  other current assets

39,045

28,531

35,110




           Total current assets


643,088

640,183

573,830










Property, plant and equipment, net

170,823

176,728

182,900


Intangible assets

141,670

149,153

170,507


Goodwill


166,688

166,931

167,053


Other assets


32,105

39,171

61,021


                    Total assets

$1,154,374

$1,172,166

$1,155,311










Liabilities and  Equity





Current liabilities:






Accounts payable

70,794

85,542

62,387



Accrued compensation and benefits

19,993

26,080

30,448



Other accrued liabilities

33,658

29,913

55,253



Income taxes payable

2,919

2,618

2,779



Deferred income taxes, short-term

-

-

370



Deferred income

10,996

9,135

17,532



Current portion of long-term debt

11,626

5,382

12,951




        Total current liabilities


149,986

158,670

181,720










Deferred income taxes

9,289

9,393

5,032


Long-term debt, less current portion

403,352

410,913

423,056


Other long-term liabilities

31,429

31,416

29,047



         Total liabilities


594,056

610,392

638,855


Class A Common stock, $0.001 par value, 150,000,000 shares authorized, 58,086,437 shares issued and outstanding (57,267,409 shares as of December 30, 2012)

59

58

60


Class B common stock, $0.001 par value, 1 share authorized, 1 share issued and outstanding

-

-

-


Preferred Stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding

-

-

-


Additional paid-in capital

700,134

690,891

683,025


Accumulated deficit

(142,126)

(127,691)

(165,696)


Accumulated other comprehensive income (loss)

2,251

(1,484)

(1,807)



        Total Spansion Inc. stockholders' equity

560,318

561,774

515,582


Non-controlling interest

-

-

874



        Total equity

560,318

561,774

516,456


                  Total liabilities and stockholders' equity

$1,154,374

$1,172,166

$1,155,311











 

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 



Three Months Ended

March 31, 2013

Three Months Ended

December 30, 2012

Three Months Ended

March 25, 2012


Cash Flows from Operating Activities:





Net Income (Loss)

$(14,435)

$6,868

$(13,622)


Adjustments to reconcile net income (loss) to net cash
provided by operating activities:





   Depreciation and amortization

19,910

21,041

25,642


   Gain on liquidation of auction rate securities

(1,200)

-

(1,059)


   Provision (benefit) for deferred income taxes

(25)

4,063

126


   Net gain on sale and disposal of property,
   plant and equipment

(592)

(760)

(163)


   Asset impairment charges

-

-

2,070


   Compensation recognized under employee  stock plans

8,624

10,187

6,447


   Changes in operating  assets and liabilities 

(5,287)

(16,197)

(4,508)


Net cash provided by operating activities

6,995

25,202

14,933








Cash Flows from Investing Activities:





   Proceeds from sale of property, plant and equipment

612

1,278

4,227


   Purchase of property, plant and equipment

(12,883)

(11,533)

(9,229)


   Proceeds from liquidation of auction rate securities

1,530

-

1,059


   Purchase of marketable securities

(24,024)

(16,199)

(34,383)


   Proceeds from maturities of marketable securities

28,346

13,086

38,396


Net cash provided by (used for) investing activities

(6,419)

(13,368)

70


 

Cash Flows from Financing Activities:





Proceeds from issuance of common stock
due to options exercised

620

230

1,269


   Refinancing costs on Term Loan and Revolver

(114)

(2,597)

-


   Payments on debt and capital lease obligations

(1,545)

-

(13,632)


   Cash settlement on hedging activities

(268)

(274)

(268)


   Purchase of bankruptcy claims

-

(24,450)

-


Net cash used for financing activities

(1,307)

(27,091)

(12,631)


Effect of exchange rate on cash and cash equivalents

286

(2,026)

(197)


Net increase (decrease) in cash and cash equivalents

(445)

(17,283)

2,175


Cash and cash equivalents at the beginning of period

262,177

279,460

194,850


Cash and cash equivalents at end of period

$261,732

$262,177

$197,025


 

Use of Non-GAAP Financial Information

To provide investors and others with additional information regarding Spansion's operating results, we have disclosed in this press release certain non-GAAP financial measures, including gross profit, operating income, net income, and adjusted EBITDA. These non-GAAP financial measures are a supplement to, and not a substitute for or superior to, the company's results presented in accordance with U.S. GAAP.

The non-GAAP financial measures are provided to enhance the user's overall understanding of the company's operating performance. Specifically, the company believes the non-GAAP information provides useful measures to investors regarding the company's financial performance by excluding certain expenses that the company believes are not indicative of its core operating results. For more information on non-GAAP financial measures, please see the reconciliations of such measures in the tables of this release.

Management believes these non-GAAP financial measures reflect Spansion's ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in Spansion's business, as they exclude expenses that are not reflective of ongoing operating results and provide useful information to investors and others in understanding and evaluating Spansion's operating results and future prospects in the same manner as management.  During the quarter ended March 31, 2013 the presentation of non-GAAP financial information included the addition of interest expense, taxes, depreciation and amortization to the net income. Further adjustments due to acquisition related expense and stock compensation expense attempt to exclude items that are either non-cash or non-recurring in nature.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

Gross Profit to Non-GAAP Gross Profit





($ in millions)

Q1 2013

Q4 2012

Q1 2012


GAAP gross profit

$45.9

$71.9

$59.2


Add: Intangibles amortization

6.8

6.8

6.7


Add: Stock compensation expense

1.4

2.1

1.3


Non-GAAP Gross Profit

$54.1

$80.8

$67.2


 

Operating Income (Loss) to Non-GAAP Operating Income



($ in millions)

Q1 2013

Q4 2012

Q1 2012


GAAP operating income (loss)

$(5.4)

$15.0

$(4.0)


Add: Intangibles amortization

6.8

6.8

6.7


Add: Restructuring charges

-

-

4.5


Add: Stock compensation expense

8.6

10.2

6.4


Add: Acquisition related expense

0.5

-

-


Non-GAAP Operating Income

$10.5

$32.0

$13.6


 

Net Income (Loss) to Non-GAAP Net Income and Adjusted EBITDA

($ in millions)

Q1 2013

Q4 2012

Q1 2012

GAAP net income (loss)

$(14.4)

$6.9

$(13.1)

Add: Intangibles amortization

6.8

6.8

6.7

Add: Restructuring charges

-

-

4.5

Add: Stock compensation expense

8.6

10.2

6.4

Less: Net Income attributable to non-controlling interest

-

-

(0.1)

Add: Acquisition related expenses

0.5

-

-

Less: Tessera claim reserve reversal

-

(4.0)

-

Add: Refinancing costs for Term Loan

-

1.9

-

Non-GAAP Net Income

$1.5

$21.8

$4.4

Add: Interest and other expense (income) excluding Tessera claim reserve reversal and refinancing costs for term loan already considered above

6.6

6.9

6.2

Add: Taxes

2.4

3.4

3.4

Add: Depreciation

12.6

13.9

18.4

Adjusted EBITDA

$23.1

$46.0

$32.4










SOURCE Spansion Inc.



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