SUNNYVALE, Calif., Oct. 31, 2013 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a global leader in embedded systems solutions, today announced operating results for its third quarter ended September 29, 2013.
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On a U.S. GAAP basis, Spansion reported third quarter net sales of $273.4 million, gross margin of 20.5%, operating loss of $43.0 million and net loss of $36.9 million. The GAAP operating loss includes $36.0 million of acquisition related costs and purchase accounting inventory markup.
On a non‑GAAP basis, net sales totaled $274.9 million, gross margin was 35.4%, operating income was $25.2 million and net income was $16.6 million.
For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures" below.
Third Quarter 2013 Financial Highlights:
- Non-GAAP Revenue of $274.9 million
- Non-GAAP gross margin of 35.4%
- Non-GAAP operating income of $25.2 million or 9.2% of revenue
- Adjusted EBITDA of $38.0 million
- Non-GAAP Diluted EPS $0.27
- Cash, cash equivalents and short term investments of $228.4 million
Note: Percentages may not calculate precisely due to rounding.
Third Quarter 2013 Business Highlights:
- Continued embedded market leadership and focused execution
- Completed the acquisition of the Microcontroller and Analog/Mixed Signal business from Fujitsu
- Strong design win momentum across all embedded segments
- Progress with IP licensing and royalty revenue
"The third quarter played out as expected. Our financial results were in line with our expectations, and we closed the acquisition of the Microcontroller and Analog/Mixed Signal business from Fujitsu in a timely and efficient manner," said John Kispert, CEO of Spansion. "Design win momentum continues to grow across all of our embedded markets. Looking forward, we will continue to focus on execution, customer service and innovation across our microcontrollers, Flash memory and analog/mixed signal product portfolio to enable differentiation in the automotive, industrial, communications and consumer segments."
Quarterly Conference Call and Accompanying Slide Presentations
Spansion will host a conference call Thursday, October 31, 2013, at 1:30 PM PT/ 4:30 PM ET to discuss its third quarter 2013 results. 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: 1-866-318-8615 (toll free), 1-617-399-5134 (International), Passcode: 30735889
An audio replay will be available within two hours of the call through November 7, 2013 and may be accessed via dial-in at 1-888-286-8010 (US), 1-617-801-6888 (International), with the Passcode 92952187 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/.
Third Quarter 2013 Results
U.S. GAAP Results, in $millions except per share data and percentages |
|||
Q3 2013 |
Q2 2013 |
Q3 2012 |
|
Net Sales |
$273.4 |
$195.1 |
$239.7 |
Gross Margin |
20.5% |
29.4% |
32.7% |
Operating Income (Loss) |
($43.0) |
($0.6) |
$14.0 |
Operating Margin |
(15.7%) |
(0.3%) |
5.8% |
Net Income (Loss) |
($36.9) |
($3.2) |
$5.1 |
Diluted Net Income (Loss) Per Share |
($0.63) |
($0.06) |
$0.08 |
Non-GAAP Results, in $millions except per share data and percentages |
|||
Q3 2013 |
Q2 2013 |
Q3 2012 |
|
Net Sales |
$274.9 |
$195.1 |
$239.7 |
Gross Margin |
35.4% |
33.6% |
36.3% |
Operating Income |
$25.2 |
$18.4 |
$31.5 |
Operating Margin |
9.2% |
9.5% |
13.1% |
Net Income |
$16.6 |
$15.7 |
$22.6 |
Diluted Net Income Per Share |
$0.27 |
$0.26 |
$0.36 |
Note: Percentages may not calculate precisely due to rounding. |
Business Outlook
For the fourth quarter of 2013, Spansion estimates U.S. GAAP net sales in the range of $305 million to $335 million and GAAP diluted net income per share of ($0.37) to ($0.33). Non-GAAP gross margin is expected to be in the range of 30.5% to 32.5%, and non-GAAP diluted EPS is expected to be in the range of $0.17 to $0.23. These estimates exclude amortization of intangibles of approximately $10 million, and stock compensation expense of approximately $1 million in COGS and $7 million in Net Income. These estimates also exclude charges related to the acquisition of the Fujitsu Microcontroller and Analog business including (i) $10 million to $12 million in inventory markup related to fair value accounting, (ii) $2 million to $3 million in integration related cost, and (iii) up to $1 million in financing cost, and one time items consisting of $1 million to $2 million in charges related to business alignment.
About Spansion
Spansion (NYSE: CODE) is a global leader in embedded systems solutions. Spansion's Flash memory, microcontrollers, analog and mixed-signal products drive the development of faster, intelligent, secure and energy efficient electronics. 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 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 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 the Company's plan to focus primarily on the embedded solutions market; the ability to improve our gross margins and to continue to successfully implement our cost reduction efforts; the ability to grow revenue; 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 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2013 and June 30, 2013. 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 September 29, 2013 |
Three Months Ended June 30, 2013 |
Three Months Ended September 30, 2012 |
|
Net sales |
$273,378 |
$195,070 |
$239,747 |
Cost of sales |
217,210 |
137,714 |
161,281 |
Gross Profit |
56,168 |
57,356 |
78,466 |
Research and development |
38,341 |
23,548 |
27,407 |
Sales, general and administrative |
54,544 |
34,414 |
35,228 |
Restructuring charges |
6,264 |
- |
1,862 |
Operating income (loss) |
(42,981) |
(606) |
13,969 |
Interest and other income (expense) |
3,579 |
3,118 |
1,267 |
Interest expense |
(7,351) |
(7,378) |
(7,339) |
Gain on acquisition of the Microcontroller and Analog business |
8,205 |
- |
- |
Income (loss) before income taxes |
(38,548) |
(4,866) |
7,897 |
Provision (benefit) for income taxes |
(1,644) |
(1,635) |
2,757 |
Net income (loss) |
(36,904) |
(3,231) |
5,140 |
Net income (loss) per common share |
|||
Basic |
$(0.63) |
$(0.06) |
$0.09 |
Diluted |
$(0.63) |
$(0.06) |
$0.08 |
Shares used in per share calculation |
|||
Basic |
58,785 |
58,646 |
60,139 |
Diluted |
58,785 |
58,646 |
60,820 |
Spansion Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except par value and shares) |
||||||||||
Assets |
September 29, 2013 |
June 30, 2013 |
December 30, 2012 |
|||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$193,025 |
$205,535 |
$262,177 |
|||||||
Short-term investments |
35,367 |
99,751 |
51,720 |
|||||||
Accounts receivable, net |
155,206 |
112,865 |
106,864 |
|||||||
Inventories |
257,600 |
197,082 |
182,192 |
|||||||
Deferred income taxes |
3,811 |
8,644 |
8,699 |
|||||||
Prepaid expenses and other current assets |
64,914 |
36,609 |
28,531 |
|||||||
Total current assets |
709,923 |
660,486 |
640,183 |
|||||||
Property, plant and equipment, net |
186,211 |
174,369 |
176,728 |
|||||||
Intangible assets |
177,207 |
134,528 |
149,153 |
|||||||
Goodwill |
166,584 |
166,558 |
166,931 |
|||||||
Other assets |
66,961 |
33,627 |
39,171 |
|||||||
Total assets |
$1,306,886 |
$1,169,568 |
$1,172,166 |
|||||||
Liabilities and Equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable |
99,454 |
83,607 |
85,542 |
|||||||
Accrued compensation and benefits |
65,606 |
18,597 |
26,080 |
|||||||
Other accrued liabilities |
97,896 |
32,989 |
29,913 |
|||||||
Income taxes payable |
1,673 |
2,066 |
2,618 |
|||||||
Deferred income |
27,099 |
15,140 |
9,135 |
|||||||
Current portion of long-term debt |
5,380 |
4,887 |
5,382 |
|||||||
Total current liabilities |
297,108 |
157,286 |
158,670 |
|||||||
Deferred income taxes |
4,408 |
9,234 |
9,393 |
|||||||
Long-term debt, less current portion |
413,789 |
409,602 |
410,913 |
|||||||
Other long-term liabilities |
34,688 |
27,263 |
31,416 |
|||||||
Total liabilities |
749,993 |
603,385 |
610,392 |
|||||||
Stockholders' equity |
||||||||||
Class A Common stock, $0.001 par value, 150,000,000 shares authorized, shares issued and outstanding (58,828,662 shares as of September 29, 2013; 58,698,273 shares as of June 30, 2013 and 57,267,409 shares as of December 30, 2012) |
59 |
59 |
58 |
|||||||
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 |
739,646 |
708,645 |
690,891 |
|||||||
Accumulated deficit |
(182,261) |
(145,357) |
(127,691) |
|||||||
Accumulated other comprehensive income (loss) |
(551) |
2,836 |
(1,484) |
|||||||
Total stockholders' equity |
556,893 |
566,183 |
561,774 |
|||||||
Total liabilities and stockholders' equity |
$1,306,886 |
$1,169,568 |
$1,172,166 |
|||||||
Spansion Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) |
||||||
Three Months Ended September 29, 2013 |
Three Months Ended June 30, 2013 |
Three Months Ended September 30, 2012 |
||||
Cash Flows from Operating Activities: |
||||||
Net Income (Loss) |
$(36,904) |
$(3,231) |
$5,140 |
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||
Depreciation and amortization |
23,361 |
19,359 |
22,611 |
|||
Provision (benefit) for deferred income taxes |
(3,738) |
34 |
(87) |
|||
Net gain on sale and disposal of property, plant and equipment |
(2,126) |
(365) |
(1,117) |
|||
Gain on acquisition of Microcontroller and Analog business |
(8,205) |
- |
- |
|||
Partial repurchase of 7.875% Senior Notes related costs |
2,280 |
- |
- |
|||
Gain on recovery from impaired investment |
(9,592) |
- |
- |
|||
Compensation recognized under employee stock plans |
7,028 |
7,672 |
8,761 |
|||
Changes in operating assets and liabilities |
77,707 |
(15,483) |
27,009 |
|||
Net cash provided by operating activities |
49,811 |
7,986 |
62,317 |
|||
Cash Flows from Investing Activities: |
||||||
Proceeds from sale of property, plant and equipment |
2,272 |
322 |
1,714 |
|||
Purchase of property, plant and equipment |
(14,525) |
(11,829) |
(12,166) |
|||
Purchase of marketable securities |
(9,431) |
(67,080) |
(28,686) |
|||
Proceeds from maturities of marketable securities |
73,815 |
14,727 |
44,336 |
|||
Proceeds from recovery of impaired investment |
9,592 |
- |
- |
|||
Acquisition, net of cash acquired |
(148,144) |
- |
- |
|||
Net cash provided by (used for) investing activities |
(86,421) |
(63,860) |
5,198 |
|||
Cash Flows from Financing Activities: |
||||||
Proceeds from issuance of common stock due to options exercised |
844 |
839 |
27 |
|||
Proceeds from issuance of Senior Exchangeable Notes |
150,000 |
- |
- |
|||
Costs on issuance of Senior Exchangeable Notes |
(4,506) |
|||||
Payment on debt and capital lease obligations |
- |
(560) |
(15,560) |
|||
Refinancing costs on Revolver |
(84) |
(84) |
||||
Purchase of capped call for the Senior Exchangeable Notes |
(15,375) |
- |
- |
|||
Partial repurchase of 7.875% Senior Notes including costs |
(106,779) |
- |
- |
|||
Acquisition of noncontrolling interest |
- |
- |
(720) |
|||
Cash settlement on hedging activities |
- |
- |
(268) |
|||
Net cash provided by (used for) financing activities |
24,100 |
195 |
(16,521) |
|||
Effect of exchange rate on cash and cash equivalents |
- |
(518) |
339 |
|||
Net increase (decrease) in cash and cash equivalents |
(12,510) |
(56,197) |
51,333 |
|||
Cash and cash equivalents at the beginning of period |
205,535 |
261,732 |
228,127 |
|||
Cash and cash equivalents at end of period |
$193,025 |
$205,535 |
$279,460 |
|||
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 September 29, 2013 the presentation of non-GAAP financial information included the addition of interest expense, taxes, depreciation, amortization and stock compensation expense to the net income. Further adjustments due to revenues lost due on Microcontroller and Analog business, acquisition related expense, gain on acquisition, inventory mark-up amortization, financing costs, restructuring charges and others attempt to exclude items that are either non-cash or non-recurring in nature.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
Net Sales to Non-GAAP Net Sales |
|||||
($ in millions) |
Q3 2013 |
Q2 2013 |
Q3 2012 |
||
GAAP Net Sales |
$273.4 |
$195.1 |
$239.7 |
||
Add: Revenue lost on Microcontroller and Analog business due to purchase accounting |
1.5 |
- |
- |
||
Non-GAAP Net Sales |
$274.9 |
$195.1 |
$239.7 |
||
Gross Profit to Non-GAAP Gross Profit |
||||||||
($ in millions) |
Q3 2013 |
Q2 2013 |
Q3 2012 |
|||||
GAAP gross profit |
$56.2 |
$57.4 |
$78.5 |
|||||
Add: Intangibles amortization |
9.5 |
6.8 |
6.8 |
|||||
Add: Inventory mark-up amortization |
27.1 |
- |
- |
|||||
Add: Stock compensation expense |
1.4 |
1.3 |
1.7 |
|||||
Add: Revenue lost on Microcontroller and Analog business due to purchase accounting |
1.5 |
- |
- |
|||||
Add: Acquisition related costs |
0.2 |
- |
- |
|||||
Add: Restructuring and others |
1.4 |
- |
- |
|||||
Non-GAAP Gross Profit |
$97.3 |
$65.5 |
$87.0 |
|||||
Operating Income (Loss) to Non-GAAP Operating Income |
||||||||
($ in millions) |
Q3 2013 |
Q2 2013 |
Q3 2012 |
|||||
GAAP operating income (loss) |
$(43.0) |
$(0.6) |
$14.0 |
|||||
Add: Intangibles amortization |
9.5 |
6.8 |
6.8 |
|||||
Add: Inventory mark-up amortization |
27.1 |
- |
- |
|||||
Add: Stock compensation expense |
7.0 |
7.7 |
8.8 |
|||||
Add: Revenue lost on Microcontroller and Analog business due to purchase accounting |
1.5 |
- |
- |
|||||
Add: Acquisition costs |
7.4 |
4.5 |
- |
|||||
Add: Litigation reserve |
8.0 |
- |
- |
|||||
Add: Restructuring and others |
7.7 |
- |
1.9 |
|||||
Non-GAAP Operating Income |
$25.2 |
$18.4 |
$31.5 |
|||||
Net Income (Loss) to Non-GAAP Net Income and Adjusted EBITDA |
||||||||
($ in millions) |
Q3 2013 |
Q2 2013 |
Q3 2012 |
|||||
GAAP net income (loss) |
$(36.9) |
$(3.2) |
$5.1 |
|||||
Add: Intangibles amortization |
9.5 |
6.8 |
6.8 |
|||||
Add: Inventory mark-up amortization |
27.1 |
- |
- |
|||||
Add: Stock compensation expense |
7.0 |
7.7 |
8.8 |
|||||
Add: Restructuring and others |
7.7 |
- |
1.9 |
|||||
Add: One-time financing costs |
8.0 |
- |
- |
|||||
Add: Litigation reserve |
8.0 |
- |
- |
|||||
Add: Revenue lost on Microcontroller and Analog business due to purchase accounting |
1.5 |
- |
- |
|||||
Add: Acquisition costs, net of gain on acquisition |
(5.8) |
4.5 |
- |
|||||
Less: Gain on recovery from impaired investment |
(9.6) |
- |
- |
|||||
Non-GAAP Net Income |
$16.6 |
$15.7 |
$22.6 |
|||||
Add: Interest and other expense (income) |
6.5 |
4.3 |
6.1 |
|||||
Add: Taxes |
2.1 |
(1.6) |
2.8 |
|||||
Add: Depreciation |
12.8 |
12.2 |
15.3 |
|||||
Adjusted EBITDA |
$38.0 |
$30.6 |
$46.8 |
|||||
Note: Totals may not add precisely due to rounding. |
||||||||
SOURCE Spansion Inc.
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