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.
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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.