SPANSION INC. 
By SUNNYVALE, Calif., Jan. 26, 2012 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its fourth fiscal quarter ended December 25, 2011.
(Logo: http://photos.prnewswire.com/prnh/20060118/SFW077LOGO)
On a U.S. GAAP basis, Spansion reported fourth quarter net sales of $220 million, operating loss of $63.9 million, net loss of $74.4 million, and gross margin of 1%.
On a non-GAAP basis, adjusted net sales totaled $220 million, and excluding $33.4 million in non-cash charges for inventory reserves related to restructuring, adjusted gross margin was 24.2%, adjusted operating income was $3.3 million and adjusted net loss was $7.3 million.
For reconciliation of non-GAAP to GAAP results, see accompanying table "Reconciliation of Non-GAAP to Non-GAAP Adjusted Results" on page 2.
Fourth Quarter 2011 Financial Highlights:
-- Revenue of $220 million
-- Non-GAAP adjusted gross margin of 24.2%
-- Non-GAAP adjusted operating income of $3.3 million or 1.5% of revenue
-- Adjusted EBITDA of $25 million
-- Cash, cash equivalents and short term investments of $263 million
Fourth Quarter 2011 Business Highlights:
-- Industry's first 4 Gb Parallel NOR in production
-- Industry's fastest Serial NOR in production at 128Mb and 256Mb densities
-- 45nm NOR qualification underway
-- 450 new design wins in Q4 2011
"We delivered a solid fourth quarter amid challenging market conditions," said John Kispert, president and CEO. "We continue to execute against our objectives, strengthen customer relationships and accelerate design win momentum. 2011 was a year of transition and intense product development. Spansion is now well-positioned for growth in the future in areas such as automotive, industrial, communications and gaming as the widespread usage of connected, feature-rich embedded devices is on the rise and requires Flash memory as a critical component."
Quarterly Conference Call and Accompanying Slide Presentation
Spansion will host a conference call Thursday, January 26, 2012 at 1:30 pm PDT / 4:30 pm EDT to discuss its fourth quarter 2011 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, can be accessed through the investor relations section of Spansion's website at http://investor.spansion.com/.
Dial-in: 1-866-783-2138 (US), 1-857-350-1597 (International), Passcode: 56071471
An audio replay will be available within two hours of the call and may be accessed via dial-in at 1-888-286-8010 (US), 1-617-801-6888 (International), with the Passcode 45968394 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/.
Fourth Quarter 2011 Results
U.S. GAAP results, in $millions except per share data and
percentages
---------------------------------------------------------
Q4 2011 Q3 2011 Q4 2010
------- ------- -------
Net sales $220.0 $258.2 $327.7
--------- ------ ------ ------
Gross margin 1.0% 28.5% 20.9%
------------ --- ---- ----
Operating income (loss) ($63.9) $23.2 ($1.4)
----------------------- ------ ----- -----
Operating margin (29.0%) 9.0% (0.4%)
---------------- ------- --- ------
Net income(loss)
attributable to Spansion
Inc. common ($74.4) $7.3 ($13.6)
stockholders ------ ---- ------
------------
Diluted net income (loss)
per share ($1.25) $0.12 ($0.22)
------------------------- ------ ----- ------
Reconciliation of Non-GAAP to Non-GAAP Adjusted Results,
in $millions except percentages
Q4 2011 Inventory Q4 2011 Q3 2011 Q4 2010
(non-GAAP
(non-GAAP) reserves excl. ------- -------
inventory
---------- related to reserves)
restructuring ----------
-------------
Adjusted
net
sales $220.0 - $220.0 $258.2 $330.3
-------- ------ --- ------ ------ ------
Gross
Profit $19.9 $33.4 $53.3 $93.4 $122.6
------ ----- ----- ----- ----- ------
Adjusted
Gross
Margin 9.0% - 24.2% 36.2% 37.1%
-------- --- --- ---- ---- ----
Adjusted
operating
income ($30.1) $33.4 $3.3 $46.7 $64.0
--------- ------ ----- ---- ----- -----
Adjusted
net
income/
(loss) ($40.7) $33.4 ($7.3) $30.3 $51.8
-------- ------ ----- ----- ----- -----
Adjusted
EBITDA ($8.6) $33.4 $24.8 $69.3 $88.4
-------- ----- ----- ----- ----- -----
Business Outlook
For the first quarter of 2012, Spansion estimates U.S. GAAP net sales in the range of $210 million to $230 million and GAAP net income per share of ($0.34) to ($0.21).
The following charges are included in the guidance above:
($ in millions) COGS R&D SG&A Operating Tax Net Income
--------------- ---- --- ---- Income --- ----------
Favorable/(Unfavorable)
-----------------------
Intangible Amortization 7 - - 7 - 7
Stock Based
Compensation 1-2 1-2 3-4 6-7 - 6-7
Restructuring 4-8 - - 4-8 - 4-8
------------- --- --- --- --- --- ---
Total 12-17 1-2 3-4 17-22 - 17-22
----- ----- --- --- ----- --- -----
Excluding the above items, first quarter 2012 gross margin will be 29.5% to 31.5%, operating margin will be 4.5% to 7.0%, and EPS is expected to be between $0.01 and $0.07.
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.
Upon emergence from bankruptcy on May 10, 2010, Spansion adopted fresh start accounting in accordance with U.S. GAAP. The adoption of fresh start accounting resulted in Spansion becoming a new entity for financial reporting purposes, whereby the U.S. GAAP financial statements on or after May 10, 2010 are not comparable to the financial statements prior to that date. Fresh start accounting required resetting the historical net book values of Spansion's assets and liabilities to the related fair values.
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(TM) 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 2010 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.
Company News: Investor Relations Web site:
http://www.spansion.com http://investor.spansion.com
----------------------- ----------------------------
Spansion Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
Three Months Three Months Three Months
Ended Ended Ended
December 25, September 25, December 26,
2011 2011 2010
------------- -------------- -------------
Net sales $220,015 $258,163 $327,723
--------- -------- -------- --------
Cost of sales (217,810) 184,486 259,130
------------- -------- ------- -------
Gross Profit 2,205 73,677 68,593
------------ ----- ------ ------
Research and
development 24,525 21,721 25,748
------------ ------ ------ ------
Sales, general
and
administrative 29,273 28,728 44,271
--------------- ------ ------ ------
Restructuring
charges 12,295 - -
------------- ------ --- ---
Operating
income (loss) (63,888) 23,228 (1,426)
-------------- ------- ------ ------
Interest &
other income 2,721 775 (1,567)
(expense), net ----- --- ------
--------------
Interest
expense (7,687) (7,629) (10,179)
-------- ------ ------ -------
Income (loss)
before income
taxes (68,854) 16,374 (13,172)
-------------- ------- ------ -------
Provision for
income taxes 5,649 8,560 454
------------- ----- ----- ---
Net income
(loss) $(74,503) $7,814 $(13,626)
---------- -------- ------ --------
Less: Net income (loss)
attributable
to non-controlling interest
---------------------------- (134) 472 -
---- --- ---
Net income (loss)
attributable to Spansion
Inc.
-------------------------
$(74,369) $7,342 $(13,626)
-------- ------ --------
Net income (loss) per common
share
attributable to Spansion Inc.
common
stockholders
------------
Basic $(1.25) $0.12 $0.22
----- ------ ----- -----
Diluted $(1.25) $0.12 $0.22
------- ------ ----- -----
Shares used in per share
calculation
------------------------
Basic 59,574 61,530 62,314
----- ------ ------ ------
Diluted 59,574 62,607 62,314
------- ------ ------ ------
Spansion Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
December 25, September December
Assets 2011 25, 2011 26, 2010
------ ------------- ---------- ---------
Current assets:
Cash and cash
equivalents $194,850 $235,520 $329,294
Short term
investments 67,855 65,263 24,979
Accounts receivable,
net 110,343 105,576 165,975
Inventories 174,089 210,722 168,937
Deferred income taxes 6,275 3,988 6,321
Prepaid expenses and
other current assets 29,494 42,016 50,210
--------------------- ------ ------ ------
Total current assets 582,906 663,085 745,716
-------------------- ------- ------- -------
Property, plant and
equipment, net 209,227 217,348 259,940
Intangible assets 177,721 184,370 197,733
Goodwill 167,219 167,280 153,338
Other assets 54,072 49,996 42,578
Total assets $1,191,145 $1,282,079 $1,399,305
============ ========== ========== ==========
Liabilities and Stockholders'
Equity
-----------------------------
Current liabilities:
Accounts payable 79,560 104,754 119,288
Accrued compensation
and benefits 30,676 23,776 39,978
Other accrued
liabilities 52,598 59,137 109,444
Deferred income 18,223 14,593 22,238
Current portion of
long-term debt and 4,222 4,292 13,689
obligations under capital leases
Income taxes payable 1,702 3,783 1,107
Deferred income
taxes, short-term 360 4,407 -
Total current
liabilities 187,341 214,742 305,744
------------- ------- ------- -------
Deferred income taxes 6,135 1,320 3,877
Long-term debt, less
current portion 445,177 445,667 441,220
Other long-term
liabilities 29,951 28,385 24,179
Total liabilities 668,604 690,114 775,020
================= ======= ======= =======
New Class A Common
stock, $0.001 par
value, 150,000,000
shares authorized,
59,337,419 shares
issued and
outstanding 60 60 62
New Class B common stock, $0.001
par value, 1 share authorized, 1
share issued and outstanding - -
--------------------------------- --- ---
Additional paid in
capital 675,309 670,332 721,712
------------------ ------- ------- -------
Retained deficit (152,578) (78,209) (96,692)
---------------- -------- ------- -------
Accumulated other
comprehensive loss (1,628) (1,729) (797)
------------------- ------ ------ ----
Total Spansion Inc.
stockholders' equity 521,163 590,454 624,285
--------------------- ------- ------- -------
Non-controlling
interest 1,378 1,511 -
--------------- ----- ----- ---
Total equity 522,541 591,965 624,285
------------ ------- ------- -------
Total liabilities and
stockholders' equity $1,191,145 $1,282,079 1,399,305
===================== ========== ========== =========
Spansion Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Three Three
Months Months Three Months
Ended Ended Ended
December September
25, 25, December 26,
2011 2011 2010
Cash Flows from Operating
Activities:
Net income (loss) (74,503) $7,814 $(13,626)
Adjustments to reconcile net loss to
net cash
provided by operating activities:
Depreciation and
amortization 27,906 28,826 54,615
Provision for deferred
income taxes 5,915 154 3,424
Net loss (gain) on sale
and disposal of
property, (438) (1,533) 59
plant and equipment
Asset impairment charges 5,945 - -
Compensation recognized
under employee stock 4,977 4,624 3,515
plans
Amortization of inventory fresh
start markup - 22,507
Changes in operating
assets and liabilities,
net of 11,993 (16,795) (59,369)
effects of deconsolidation of
subsidiary:
Net cash provided (used)
by operating activities (18,205) 23,090 11,125
Cash Flows from Investing
Activities:
Proceeds from sale of
property, plant and
equipment 840 2,899 4,818
Purchases of property,
plant and equipment (19,887) (10,828) (27,216)
Purchase of marketable
securities (20,306) (46,707) (24,979)
Proceeds from redemption
of marketable securities 17,714 3,236 29,989
Other - 581 -
Net cash used by
investing activities (21,639) (50,819) (17,388)
--------------------- ------- ------- -------
Cash Flows from Financing
Activities:
Proceeds from issuance of
common stock - 1,008 124,448
due to options exercised
------------------------
Proceeds from borrowings,
net of issuance costs - - 195,587
-------------------------
Payments on debt and
capital lease
obligations (696) (822) (198,842)
--------------------
Cash settlement on
hedging activities (268) (268) -
-------------------
Purchase of bankruptcy
claims - (30,000) (85,000)
---------------------- --- ------- -------
Net cash provided (used)
by financing activities (964) (30,082) 36,193
------------------------ ---- ------- ------
Effect of exchange rate
changes 138 1,020 (327)
on cash and cash
equivalents --- ----- ----
----------------
Net decrease in cash and
cash equivalents (40,670) (56,791) 29,603
Cash and cash equivalents
at the beginning of
period 235,520 292,311 299,691
------------------------- ------- ------- -------
Cash and cash equivalents
at end of period $194,850 $235,520 $329,294
========================= ======== ======== ========
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 net sales, 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, as well as the impact of fresh start accounting. 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:
-- Adjusted net sales differs from GAAP net sales in that it includes
revenue lost from product sell-through that was physically located with
the distributors as of the date of emergence from Chapter 11
proceedings.
-- Adjusted operating income differs from GAAP operating income in that it
excludes the impact of non-recurring items, fresh start accounting
related adjustments, litigation expenses with Samsung, one-time
restructuring charges, stock compensation expense and other bankruptcy
related charges or credits.
-- Adjusted net income differs from GAAP net income in that it (i) excludes
the impact of non-recurring items, fresh start accounting related
adjustments, stock compensation expense, litigation expenses with
Samsung, one-time restructuring and reorganization charges or credits,
(ii) includes net sales lost from product sell-through that was
physically located with distributors as of the date of emergence from
Chapter 11 proceedings and ((iii) is adjusted for the associated tax
impact of all these changes.
-- Adjusted EBITDA differs from GAAP net income in that it (i) excludes
interest expenses, taxes, depreciation, amortization, net loss
attributable to non-controlling interest and stock based compensation
charges, (ii) excludes the impact of non-recurring items, fresh start
accounting related adjustments, litigation expenses with Samsung,
one-time restructuring or inventory reserves related to restructuring,
reorganization charges or credits and write-off of financing costs
completed prior to emergence from bankruptcy and (iii) includes net
sales lost from product sell-through that was physically located with
distributors as of the date of emergence from Chapter 11 proceedings.
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;
-- Reflect net sales for the company more accurately as inventory at the
distributors, when sold-through, would not be recognized as revenue per
fresh start accounting. The company intends to collect cash from the
distributors and this adjustment is non-cash in nature;
-- Provide additional view of the performance of the company by adding
interest expenses, taxes, depreciation and amortization to the net
income. Further adjustments due to fresh start accounting, litigation
expenses with Samsung, and stock based compensation charges attempt to
exclude items that are either non-cash or non-recurring in nature.
To enable investors to assess the company's compliance with financial covenants under its debt instruments Spansion's term loan has maintenance financial covenants that use EBITDA as part of the measures, e.g. Consolidated Leverage ratio, which is a ratio of Indebtedness to Consolidated EBITDA; and Consolidated Interest Coverage Ratio which is a ratio of Consolidated EBITDA to interest expenses.
Reconciliation of U.S. GAAP to Non-GAAP Adjusted Financial
Measures
Net Sales to Adjusted Net Sales
-------------------------------
($ in millions) Q4 2011 Q3 2011 Q4 2010
--------------- ------- ------- -------
GAAP net sales 220.0 258.2 $327.7
Add: Net sales lost due to fresh start
accounting - - 2.6
-------------------------------------- --- --- ---
Non-GAAP net sales 220.0 $258.2 $330.3
------------------ ----- ------ ------
Operating Income to Non-GAAP Adjusted Operating Income
------------------------------------------------------
($ in millions) Q4 2011 Q3 2011 Q4 2010
--------------- ------- ------- -------
GAAP operating income / (loss) (63.9) 23.2 (1.4)
Add: fresh start operating expense adjustments
Net sales lost due to fresh start
accounting - - 2.6
Depreciation - - 25.1
Amortization from intangibles 6.4 6.3 5.2
Inventory Mark-Up - 12.6 22.5
Deferred COGS - - (2.7)
Add: Litigation expense (credits)
related to Samsung (1.0) - 9.2
Add: Restructuring charges 12.3 - -
Add: Asset impairment charges 11.1 - -
Add: Stock compensation expense 5.0 4.6 3.5
Adjusted Operating Income / (loss) (30.1) 46.7 64.0
---------------------------------- ----- ---- ----
Add: Inventory reserves related to
restructuring 33.4 - -
---------------------------------- ---- --- ---
Adjusted Operating Income excluding
inventory reserves 3.3 46.7 64.0
----------------------------------- --- ---- ----
Net Income to Non-GAAP Adjusted Net Income
------------------------------------------
($ in millions) Q4 2011 Q3 2011 Q4 2010
--------------- ------- ------- -------
GAAP net income / (loss) (74.4) 7.3 (13.6)
Add: fresh start operating expense
adjustments -
Net sales lost due to fresh
start accounting - - 2.6
Depreciation - - 25.1
Amortization of intangibles 6.4 6.3 5.2
Inventory Mark-Up - 12.6 22.5
Deferred COGS - - (2.7)
Add: Litigation expense (credit)
related to Samsung (1.0) - 9.2
Add: Restructuring charges 12.3 - -
Add: Asset impairment charges 11.1 - -
Add: Stock compensation expense 5.0 4.6 3.5
Less: Net income attributable to
non-controlling interest (0.1) (0.1) -
Less: Tax impact for adjustments - (0.4) -
Adjusted net income / (loss) (40.7) 30.3 51.8
---------------------------- ----- ---- ----
Add: Inventory reserves related
to restructuring 33.4 - -
------------------------------- ---- --- ---
Adjusted net loss excluding
inventory reserves (7.3) 30.3 51.8
--------------------------- ---- ---- ----
Net Income to Adjusted EBITDA
-----------------------------
($ in millions) Q4 2011 Q3 2011 Q4 2010
--------------- ------- ------- -------
GAAP net income / (loss) (74.4) 7.3 (13.6)
Add: Interest 5.0 6.9 11.8
Add: Taxes 5.6 8.6 0.4
Add: Depreciation and amortization 27.9 28.8 54.6
Add: Restructuring charges 12.3 - -
Add: Fresh start adjustments - 12.6 22.5
Add: Asset impairment charges 11.1 - -
Add: Litigation expense (credit)
related to Samsung (1.0) - 9.2
Add: Stock based compensation
charges 5.0 4.6 3.5
Add: Net loss attributable to non-
controlling interest (0.1) 0.5 -
Adjusted EBITDA (8.6) 69.3 88.4
--------------- ---- ---- ----
Add: Inventory reserves related to
restructuring 33.4 - -
---------------------------------- ---- --- ---
Adjusted EBITDA excluding inventory
reserves 24.8 69.3 88.4
----------------------------------- ---- ---- ----
SOURCE Spansion Inc.
