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Spansion Inc. Reports Fourth Quarter 2012 Results

SUNNYVALE, Calif., Jan. 29, 2013 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a leading innovator of Flash memory solutions, today announced operating results for its fourth fiscal quarter ended December 30, 2012.

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

On a U.S. GAAP basis, Spansion reported fourth quarter net sales of $224.0 million, gross margin of 32.1%, operating income of $15.0 million and net income of $6.9 million.

On a non‑GAAP basis, net sales totaled $224.0 million, adjusted gross margin was 36.1%, adjusted operating income was $32.0 million and adjusted net income was $21.8 million.

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

Fourth Quarter 2012 Financial Highlights:

  • Revenue of $224.0 million
  • Non-GAAP adjusted gross margin of 36.1%
  • Non-GAAP adjusted operating income of $32.0 million or 14.3% of revenue
  • Adjusted EBITDA of $46.0 million
  • Cash, cash equivalents and short term investments of $313.9 million
  • Non-GAAP Diluted EPS $0.34

Fourth Quarter 2012 Business Highlights:  

  • Continued market leadership and focused execution
  • Began to recognize incremental revenue from Embedded SLC NAND
  • Introduced industry's first 8Gb 45nm Parallel NOR product

"As a result of continued execution on our strategic objectives, we delivered another profitable quarter amid challenging market conditions," said John Kispert, president and CEO of Spansion. "For the full fiscal year, we made substantial progress in new product introductions with NAND and the Acoustic Coprocessor (ACP), as well as expanded into new markets with the growth of connected and intelligent devices in a range of industrial applications such as smart displays, security surveillance and home energy systems."

Kispert continued," With our strong product positioning, design win momentum and innovation in our embedded markets, we remain encouraged about future growth. Assuming business confidence improves, we expect to resume revenue growth throughout 2013, following a seasonally soft first quarter."

Quarterly Conference Call and Accompanying Slide Presentation
Spansion will host a conference call Tuesday, January 29, 2013 at 1:30 pm PDT / 4:30 pm EDT to discuss its fourth quarter 2012 results. A live webcast of the conference call, together with a slide presentation that includes supplemental financial information and reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, may be accessed through the investor relations section of Spansion's website at http://investor.spansion.com/.

Dial-in: 1- 800-573-4752 (toll free) or 1- 617-224-4324 (international); passcode: 51780179

An audio replay will be available two hours after the call and may be accessed via dial-in at 1-888-286-8010 (US), 1-617-801-6888 (International), with the passcode 13827671 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/.

Fourth Quarter 2012 Results



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


Q4 2012

Q3 2012

Q4 2011

Net Sales

$224.0

$239.7

$220.0

Gross Margin

32.1%

32.7%

1.0%

Operating Income (Loss)

$15.0

$14.0

$(63.9)

Operating Margin

6.7%

5.8%

(29.0%)

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

$6.9

$5.1

$(74.4)

Diluted Net Income (loss) Per Share

$0.11

$0.08

$(1.25)






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


Q4 2012

Q3 2012

Q4 2011

Inventory reserves relating to restructuring

Adjusted Q4 2011 excluding inventory reserves

      Net Sales

$224.0

$239.7

$220.0

-

$220.0

Adjusted Gross Profit

$80.8

$87.0

$19.9

$33.4

$53.3

Adjusted Gross Margin

36.1%

36.3%

9.0%

-

24.2%

Adjusted Operating Income (Loss)

$32.0

$31.5

$(30.1)

$33.4

$3.3

Adjusted Net Income (Loss)

$21.8

$22.6

$(40.7)

$33.4

$(7.3)

Adjusted EBITDA

$46.0

$46.8

$(8.6)

$33.4

$24.8

Adjusted diluted EPS

$0.34

$0.36

$(0.68)

-

$(0.12)












Business Outlook
For the first quarter of 2013, Spansion estimates U.S. GAAP net sales in the range of $180 million to $205 million and GAAP net loss per share of ($0.33) to ($0.22).

The following charges are included in the guidance above:

($ in millions)

Favorable/(Unfavorable)

COGS

Net Income

Intangible Amortization

(7)

(7)

Stock Based Compensation

(1)

(9)

Total

(8)

(16)

Excluding the above items, first quarter 2013 gross margin is expected to be 26.5% to 28.5%, and EPS is expected to be between ($0.05) and $0.06.

Use of Non-GAAP Financial Information
The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for or superior to, the company's financial results presented in accordance with U.S. GAAP. The non-GAAP financial measures presented by the company may be different than non-GAAP financial measures presented by other companies.

The non-GAAP and supplemental information is 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 costs and expenses that the company believes are not indicative of its core operating results. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. A reconciliation of each non-GAAP financial measure to the most direct, comparable GAAP financial measure is included below.

About Spansion
Spansion's (NYSE: CODE) technology is at the heart of electronics systems, powering everything from the internet of today to the smart grid of tomorrow, positively impacting people's daily lives at work and play. Spansion's broad Flash memory product portfolio, smart innovation and industry leading service and support are enabling customers to achieve greater efficiency and success in their target markets. 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 release 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 the company's ability to: execute its business strategy; drive new design wins; reduce operating expenses; strengthen customer relations; accelerate the adoption of new products and obtain the anticipated cost savings.  Additional risks related to the company's emergence from bankruptcy include: any negative impact on the company's business, results of operations, financial position or cash management arrangements; and the negative impact on relationships with employees, customers, suppliers, contract manufacturers and other stakeholders. In addition, the instability of the global economy and tight credit markets could continue to adversely impact the company's business in several respects, including adversely impacting: the credit quality and insolvency risk of the company and its customers and business partners, including suppliers and distributors; bookings; and demand for Spansion products. The company urges investors to review in detail the risks and uncertainties discussed in the company's Securities and Exchange Commission filings, including but not limited to the company's most recent Annual Report on Form 10-K for fiscal 2011 and Quarterly Reports on Form 10-Q. Unless otherwise required by applicable laws, the company undertakes 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

Dec 30, 2012

Three Months

Ended

Sep 30, 2012

Three Months

Ended

Dec 25, 2011

Net sales

$223,987

$239,747

$220,015

Cost of sales

152,047

161,281

217,810

Gross Profit

71,940

78,466

2,205





Research and development

24,771

27,407

24,525

Sales, general and administrative

32,121

35,228

29,273

Restructuring  charges

-

1,862

12,295

Operating  income (loss)

15,048

13,969

(63,888)

Interest & other income

2,472

1,267

2,721

Interest expense

(7,224)

(7,339)

(7,687)





Income (loss) before income taxes

10,296

7,897

(68,854)

Provision for income taxes

(3,428)

(2,757)

( 5,649)

Net income (loss)

$6,868

$5,140

$(74,503)

     Less: Net loss attributable to non-controlling  interest

-

-

(134)

Net income (loss) attributable to Spansion Inc.

$6,868

$5,140

$(74,369)





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




           Basic

$0.11

$0.09

$(1.25)

           Diluted

$0.11

$0.08

$(1.25)

Shares used in per share calculation




           Basic

60,144

60,139

59,574

           Diluted

61,487

60,820

59,574

 

 

 

Spansion Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)





Assets

Dec 30, 2012

Sep 30, 2012

Dec 25, 2011

Current assets:





Cash and cash equivalents

$262,177

$279,460

$194,850


Short-term investments

51,720

48,606

67,855


Accounts receivable, net

106,864

117,446

110,343


Inventories

182,192

172,503

174,089


Deferred income taxes

8,699

9,782

6,275


Prepaid expenses and  other current assets

28,531

36,700

29,494




Total current assets

640,183

664,497

582,906








Property, plant and equipment, net

176,728

175,456

209,227

Intangible assets

149,153

156,802

177,721

Goodwill


166,931

167,216

167,219

Other assets


39,171

41,643

54,072

                              Total assets

$1,172,166

$1,205,614

$1,191,145








Liabilities and  Equity




Current liabilities:





Accounts payable

85,542

78,902

79,560


Accrued compensation and benefits

26,080

33,878

30,676


Other accrued liabilities

29,913

46,738

52,598


Deferred income

9,135

15,065

18,223


Current portion of long-term debt and

obligations under capital leases

5,382

11,468

4,222


Income taxes payable

2,618

4,810

1,702


Deferred income taxes, short-term

-

-

360




Total current liabilities

158,670

190,861

187,341








Deferred income taxes

9,393

9,314

6,135

Long-term debt, less current portion

410,913

405,832

445,177

Other long-term liabilities

31,416

31,436

29,951





Total liabilities

610,392

637,443

668,604








Class A Common stock, $0.001 par value, 150,000,000 shares authorized, 57,267,409 shares issued and outstanding

58

61

60

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

-

-

-

Additional paid in capital

690,891

704,922

675,309

Accumulated deficit

(127,691)

(134,559)

(152,578)

Accumulated other comprehensive loss

(1,484)

(2,253)

(1,628)


                          Total Spansion Inc. stockholders' equity

561,774

568,171

521,163

Non-controlling interest

-

-

1,378



                Total equity

561,774

568,171

522,541








Total liabilities and stockholders' equity

$1,172,166

$1,205,614

$1,191,145









 

 

 

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)








Three Months Ended

Dec 30, 2012

Three Months Ended

Sep 30, 2012

Three Months Ended

Dec 25, 2011

Cash Flows from Operating Activities:




Net income (loss)

$6,868

$5,140

$(74,503)

Adjustments to reconcile net income (loss) to net cash

provided by (used for) operating activities:





Depreciation and amortization

21,041

22,611

27,906


Provision (benefit) for deferred income taxes

4,063

(87)

7,249


Net gain on sale and disposal of property,

plant and equipment

(760)

(1,117)

(438)


Asset impairment charges

-

-

11,945


Compensation recognized under employee  stock plans

10,187

8,761

4,977


Changes in operating  assets and liabilities 

(16,197)

27,010

11,607

Net cash provided by (used for) operating activities

25,202

62,318

(11,257)






Cash Flows from Investing Activities:





Proceeds from sale of property, plant and equipment

1,278

1,713

840


Purchase of property, plant and equipment

(11,533)

(12,166)

(26,835)


Purchase of marketable securities

(16,199)

(28,686)

(20,305)


Proceeds from maturities of marketable securities

13,086

44,336

17,714

Net cash provided by (used for) investing activities

(13,368)

5,197

(28,586)



Cash Flows from Financing Activities:




Proceeds from issuance of common stock

due to options exercised

230

27

-

   Refinancing costs on Term loan and Revolver

(2,597)

-

-

   Payments on debt and capital lease obligations

-

(15,560)

(696)

   Acquisition of non-controlling interest

-

(720)

-

   Cash settlement on hedging activities

(274)

(268)

(268)

   Purchase of bankruptcy claims

(24,450)

-

-

Net cash used for financing activities

(27,091)

(16,521)

(964)



Effect of exchange rate changes

on cash and cash equivalents

(2,026)

339

137

Net increase (decrease) in cash and cash equivalents

(17,283)

51,333

(40,670)

Cash and cash equivalents at the beginning of period

279,460

228,127

235,520

Cash and cash equivalents at end of period

$262,177

$279,460

$194,850







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 adjusted gross profit, adjusted operating income, adjusted 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 presented by the company may be different than non-GAAP financial measures presented by other companies.

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 costs and expenses that the company believes are not indicative of its core operating results. The presentation of these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.

Spansion has provided a reconciliation of the non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures:

  • Non-GAAP adjusted gross profit differs from GAAP gross profit in that it excludes the impact of non-recurring items, amortization of intangibles, asset impairment charges, stock compensation expense and inventory reserves related to restructuring.
  • Non-GAAP adjusted operating income differs from GAAP operating income in that it excludes the impact of non-recurring items, amortization of intangibles, litigation credit related to Samsung, one-time restructuring charges, asset impairment charges, stock compensation expense and inventory reserves related to restructuring.
  • Non-GAAP adjusted net income (loss) differs from GAAP net income in that it excludes the impact of non-recurring items, amortization of intangibles, litigation credit related to Samsung, one-time restructuring charges, asset impairment charges, stock compensation expense, net income attributable to non-controlling interest, Tessera claim reserve reversal, refinancing costs for Term Loan and Revolver and inventory reserves related to restructuring.
  • Adjusted EBITDA is a non-GAAP financial measure, and it is EBITDA adjusted for the impact of  one-time restructuring charges, asset impairment charges, litigation credit related to Samsung, stock-based compensation and inventory reserves related to restructuring.

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;
  • Provide useful information to investors and others in understanding and evaluating Spansion's operating results and future prospects in the same manner as management and in comparing financial results across accounting periods;
  • Provide an additional view of the performance of the company by adding interest expenses, taxes, depreciation and amortization to the net income. Further adjustments due to 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 Adjusted Financial Measures



Gross Profit to Non-GAAP Adjusted Gross Profit





 ($ in millions)

Q4 2012

Q3 2012

Q4 2011

GAAP gross profit

$71.9

$78.5

$2.2

Add: Intangibles amortization

6.8

6.8

6.4

Add: Asset impairment charges

-

-

10.4

Add: Stock compensation expense

2.1

1.7

0.9

Non-GAAP Gross Profit

$80.8

$87.0

$19.9

Add: Inventory reserves related to restructuring

-

-

33.4

Non-GAAP Adjusted Gross Profit excluding inventory reserves

$80.8

$87.0

$53.3

 





Operating Income (Loss) to Non-GAAP Adjusted Operating Income





 ($ in millions)

Q4 2012

Q3 2012

Q4 2011

GAAP operating income (loss)

$15.0

$14.0

$(63.9)

Add: Intangibles amortization

6.8

6.8

6.4

Less: Litigation credit related to Samsung

-

-

(1.0)

Add: Restructuring charges

-

1.9

12.3

Add:  Asset impairment charges

-

-

11.1

Add: Stock compensation expense

10.2

8.8

5.0

Non-GAAP Operating Income (Loss)

$32.0

$31.5

$(30.1)

Add: Inventory reserves related to restructuring

-

-

33.4

Non-GAAP Adjusted Operating Income excluding inventory reserves

$32.0

$31.5

$3.3

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


($ in millions)

Q4 2012

Q3 2012

Q4 2011

GAAP net income (loss)

$6.9

$5.1

$(74.4)

Add: Intangibles amortization

6.8

6.8

6.4

Less: Litigation credit related to Samsung

-

-

(1.0)

Add: Restructuring charges

-

1.9

12.3

Add: Asset impairment charges

-

-

11.1

Add: Stock compensation expense

10.2

8.8

5.0

Less: Net income attributable to non-controlling interest

-

-

(0.1)

Less: Tessera claim reserve reversal

(4.0)

-

-

Add: Refinancing costs for Term Loan and Revolver

1.9

-

-

Non-GAAP Net Income (Loss)

$21.8

$22.6

$(40.7)

Add: Inventory reserves related to restructuring

-

-

33.4

Non-GAAP Adjusted Net Income (Loss) excluding inventory reserves

$21.8

$22.6

$(7.3)

Net Income (Loss) to Adjusted EBITDA








($ in millions)

Q4 2012

Q3 2012

Q4 2011

GAAP net income (loss)

$6.9

$5.1

$(74.4)

Add: Interest and other expense (income)

4.8

6.1

5.0

Add: Taxes

3.4

2.8

5.6

Add: Depreciation and amortization

20.7

22.1

27.9

Add: Restructuring charges

-

1.9

12.3

Add: Asset impairment charges

-

-

11.1

Less: Litigation credit related to Samsung

-

-

(1.0)

Add: Stock compensation expense

10.2

8.8

5.0

Less: Net income attributable to non-controlling interest

-

-

(0.1)

Non-GAAP Adjusted EBITDA

$46.0

$46.8

$(8.6)

Add: Inventory reserves related to restructuring

-

-

33.4

Non-GAAP Adjusted EBITDA excluding inventory reserves

$46.0

$46.8

$24.8







SOURCE Spansion Inc.



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