Spansion Inc. Reports Third Quarter 2012 Results PR Newswire SUNNYVALE, Calif., Oct. 25, 2012 SUNNYVALE, Calif., Oct. 25, 2012 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its third fiscal quarter ended September 30, 2012. (Logo: http://photos.prnewswire.com/prnh/20060118/SFW077LOGO) On a U.S. GAAP basis, Spansion reported third quarter net sales of $239.7 million, gross margin of 32.7%, operating income of $14.0 million, net income of $5.1 million, and earnings per share of $0.08. On a non‑GAAP basis, net sales totaled $239.7 million, gross margin was 36.3%, operating income was $31.5 million, net income was $22.6 million, and diluted EPS was $0.36. For reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Adjusted Financial Measures" on page 9. Third Quarter 2012 Financial Highlights: oRevenue of $239.7 million oNon-GAAP adjusted gross margin of 36.3% oNon-GAAP adjusted operating income of $31.5 million or 13.1% of revenue oAdjusted EBITDA of $46.8 million oNon-GAAP EPS of $0.36 per share oCash, cash equivalents and short term investments of $328 million Third Quarter 2012 Business Highlights: oContinued market leadership and focused execution oLeading embedded NOR market with comprehensive product portfolio oExpanded product portfolio with new serial and NAND products oOver 520 new design wins across all segments with an increase in wins for newer products "As a result of operational execution and customer adoption of new differentiated products in embedded markets, we delivered another profitable quarter with growing cash flow generation," said John Kispert, president and CEO of Spansion. "Our leadership in the embedded market continues as our Flash memory solutions play a critical role in the next generation of electronics. We plan to continue to introduce new products based on our leading technology." Quarterly Conference Call and Accompanying Slide Presentation Spansion will host a conference call Thursday, October 25, 2012 at 1:30 pm PT / 4:30 pm ET to discuss its third 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- 866-730-5763 (toll free) or 1- 857-350-1587 (international); passcode: 42870545 An audio replay will be available two hours after the call and may be accessed via dial-in at 1-888-286-8010 (US) or 1-617-801-6888 (International) with the passcode 83396508 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/. Third Quarter 2012 Results U.S. GAAP results, in $millions except per share data and percentages Q3 2012 Q2 2012 Q3 2011 Net Sales $239.7 $233.4 $258.2 Gross Margin 32.7% 31.7% 28.5% Operating Income $14.0 $37.8 $23.2 Operating Margin 5.8% 16.2% 9.0% Net income attributable to Spansion Inc. common $5.1 $26.0 $7.3 stockholders Diluted Net Income Per Share $0.08 $0.43 $0.12 Non-GAAP Results, in $millions except percentages Q3 2012 Q2 2012 Q3 2011 Adjusted Net Sales $239.7 $233.4 $258.2 Adjusted Gross Profit $87.0 $83.0 $93.4 Adjusted Gross Margin 36.3% 35.5% 36.2% Adjusted Operating Income $31.5 $25.0 $46.7 Adjusted Net Income $22.6 $13.7 $30.3 Adjusted EBITDA $46.8 $43.4 $69.3 Adjusted diluted EPS $0.36 $0.22 $0.48 Business Outlook For the fourth quarter of 2012, Spansion estimates U.S. GAAP net sales in the range of $220 million to $245 million and GAAP net income per share of $0.08 to $0.13. The following charges are included in the guidance above: ($ in millions) Net COGS Income Favorable/(Unfavorable) Intangible Amortization (7) (7) Stock Based Compensation (1)-(2) (8)-(9) Total (8)-(9) (15)-(16) Excluding the above items, fourth quarter 2012 non-GAAP gross margin is expected to be in the range of 35.5% to 37.5%, and non-GAAP EPS is expected to be in the range of $0.33 and $0.37. 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. 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™ 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. 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 Sep 30, 2012 July 1, 2012 Sep 25, 2011 Net sales $239,747 $233,440 $ 258,163 Cost of sales 161,281 159,529 184,486 Gross Profit 78,466 73,911 73,677 Research and development 27,407 29,631 21,721 Sales, general and administrative 35,228 35,617 28,728 Net gain on sale of Kuala Lumpur land - (28,434) - and building Restructuring charges (credits) 1,862 (729) - Operating income 13,969 37,826 23,228 Interest & other income (loss) 1,267 (556) 775 Interest expense (7,339) (7,903) (7,629) Income before income taxes 7,897 29,367 16,374 Provision for income taxes (2,757) (3,370) (8,560) Net income 5,140 25,997 $ 7,814 Less: Net income attributable to non-controlling interest - - 472 Net income attributable to Spansion Inc. $5,140 $25,997 $7,342 Net income per common share attributable to Spansion Inc. common stockholders Basic $0.09 $0.43 $ 0.12 Diluted $0.08 $0.43 $ 0.12 Shares used in per share calculation Basic 60,139 59,975 61,530 Diluted 60,820 60,475 62,607 Spansion Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands) Assets Sep 30, July 1, Sep 25, 2012 2012 2011 Current assets: Cash and cash equivalents $279,460 $228,127 $ 235,520 Short-term investments 48,606 64,257 65,263 Accounts receivable, net 117,446 135,068 105,576 Inventories 172,503 159,875 210,722 Deferred income taxes 9,782 5,482 3,988 Prepaid expenses and other current 36,700 31,137 42,016 assets Total current assets 664,497 623,946 663,085 Property, plant and equipment, net 175,456 179,420 217,348 Intangible assets 156,802 163,449 184,370 Goodwill 167,216 167,143 167,280 Other assets 41,643 51,628 49,996 Total assets $1,205,614 $1,185,586 $1,282,079 Liabilities and Equity Current liabilities: Accounts payable 78,902 68,252 104,754 Accrued compensation and benefits 33,878 28,948 23,776 Other accrued liabilities 46,738 41,483 59,137 Deferred income 15,065 24,103 14,593 Current portion of long-term debt and 11,468 12,045 4,292 obligations under capital leases Income taxes payable 4,810 3,966 3,783 - Deferred income taxes, short-term - 4,407 Total current 190,861 178,797 214,742 liabilities Deferred income taxes 9,314 5,022 1,320 Long-term debt, less current portion 405,832 420,618 445,667 Other long-term liabilities 31,436 26,111 28,385 Total liabilities 637,443 630,548 690,114 Class A Common stock, $0.001 par value, 150,000,000 shares authorized, 60,190,374 61 60 60 shares issued and outstanding Class B common stock, $0.001 par value, 1 share authorized, 1 share issued and - - - outstanding Additional paid in capital 704,922 696,134 670,332 Accumulated deficit (134,559) (139,699) (78,209) Accumulated other comprehensive loss (2,253) (1,457) (1,729) Total Spansion Inc. 568,171 555,038 590,454 stockholders' equity Non-controllinginterest - - 1,511 Total equity 568,171 555,038 591,965 Total liabilities and stockholders' equity $1,205,614 $1,185,586 $1,282,079 Spansion Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Three Months Three Months Three Months Ended Ended Ended Sep 30, 2012 July 1, 2012 Sep 25, 2011 Cash Flows from Operating Activities: Net Income $5,140 $25,997 $7,814 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 22,611 26,137 28,826 Provision (benefit) for deferred (87) 1,786 154 income taxes Net gain on sale of Kuala Lumpur - (28,434) - land and building Net gain on sale and disposal of property, (1,117) (4,046) (1,533) plant and equipment Compensation recognized under 8,761 8,968 4,624 employee stock plans Changes in operating assets and 27,010 (23,460) (16,795) liabilities Net cash provided by operating 62,318 6,948 23,090 activities Cash Flows from Investing Activities: Proceeds from sale of property, 1,713 38,416 2,899 plant and equipment Purchase of property, plant and (12,166) (9,358) (10,828) equipment Purchase of marketable securities (28,686) (17,065) (46,707) Proceeds from maturities of 44,336 16,649 3,236 marketable securities Other - - 581 Net cash provided by (used for) 5,197 28,642 (50,819) investing activities Cash Flows from Financing Activities: Proceeds from issuance of common stock 27 62 1,008 due to options exercised Payments on debt and capital lease (15,560) (1,198) (822) obligations Acquisition of noncontrolling (720) (3,304) - interest Cash settlement on hedging (268) (263) (268) activities Purchase of bankruptcy claims - - (30,000) Net cash used for financing activities (16,521) (4,703) (30,082) Effect of exchange rate changes 339 215 1,020 on cash and cash equivalents Net increase / (decrease) in cash and 51,333 31,102 (56,791) cash equivalents Cash and cash equivalents at the 228,127 197,025 292,311 beginning of period Cash and cash equivalents at end of $279,460 $228,127 $ 235,520 period 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 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: oAdjusted operating income differs from GAAP operating income in that it excludes the impact of non-recurring items, amortization of intangibles, fresh start accounting related adjustments, one-time restructuring charges or credits and stock compensation expense. oAdjusted net income differs from GAAP net income in that it excludes the impact of non-recurring items, amortization of intangibles, fresh start accounting related adjustments, one-time restructuring charges or credits, stock compensation expense and is adjusted for the associated tax impact of all these changes. oAdjusted EBITDA is a non-GAAP financial measure, and it is EBITDA adjusted for the impact of IP amortization and stock-based compensation. Management believes these non-GAAP financial measures: oReflect 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; oProvide 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; oProvide 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 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 Adjusted Financial Measures Operating Income to Non-GAAP Adjusted Operating Income ($ in millions) Q3 2012 Q2 2012 Q3 2011 GAAP operating income $14.0 $37.8 $23.2 Add: Amortization of intangibles 6.8 7.3 6.3 Add: Fresh start adjustments - - 12.6 Add: Restructuring charges (credits) 1.9 (0.7) - Less: Net gain on sale of Kuala Lumpur land and - (28.4) - building Add: Stock compensation expense 8.8 9.0 4.6 Non-GAAP Operating Income $31.5 $25.0 $46.7 Net Income to Non-GAAP Adjusted Net Income ($ in millions) Q3 2012 Q2 2012 Q3 2011 GAAP net income $5.1 $26.0 $7.3 Add: Amortization of intangibles 6.8 7.3 6.3 Add: Fresh start adjustments - - 12.6 Add: Restructuring charges (credits) 1.9 (0.7) - Less: Net gain on sale of Kuala Lumpur land and - (28.4) - building Add: Stock compensation expense 8.8 9.0 4.6 Less:Amortization of intangibles relating to - - (0.1) non-controlling interest Add: Tax adjustments - 0.5 (0.4) Non-GAAP Net Income $22.6 $13.7 $30.3 Net Income to Adjusted EBITDA ($ in millions) Q3 2012 Q2 2012 Q3 2011 GAAP net income $5.1 $26.0 $7.3 Add: Interest and other expense (income) 6.1 8.5 6.9 Add: Taxes 2.8 3.4 8.6 Add: Depreciation and amortization 22.1 25.6 28.8 Add: Restructuring charges (credits) 1.9 (0.7) - Less: Net gain on sale of Kuala Lumpur land and - (28.4) - building Add: Fresh start adjustments - - 12.6 Add: Stock compensation expense 8.8 9.0 4.6 Add: Net income attributable to non-controlling - - 0.5 interest Adjusted EBITDA $46.8 $43.4 $69.3 SOURCE Spansion Inc. Website: http://www.spansion.com Contact: Press, Michele Landry, Spansion Inc., +1-408-616-3817, firstname.lastname@example.org; or Investor Relations, Melanie Friedman, The Blueshirt Group, +1-415-217-4964, email@example.com
Spansion Inc. Reports Third Quarter 2012 Results
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