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Spansion Inc. Reports First Quarter 2010 Results | Cypress Semiconductor

Spansion Inc. Reports First Quarter 2010 Results

Last Updated: April 28, 2010

Four Consecutive Quarters of Operating Income

SUNNYVALE, Calif., April 28, 2010 --Spansion Inc. today announced operating results for its first quarter of fiscal 2010. Spansion reported first quarter of 2010 net sales of $277.3 million, which reflects the company's refined focus and decision to concentrate primarily on embedded and targeted wireless applications. The company generated net income on a U.S. GAAP basis of $3.7 million, or diluted net income per share of $0.02. U.S. GAAP operating income for the quarter was $17.6 million and gross and operating margins were 31.8% and 6.4%, respectively.

    U.S. GAAP Comparison

                       Q1 2010           Q4 2009          Q1 2009
    Net sales            $277.3 million   $307.1 million   $399.6 million
                                                           ($512.6
    Net income (loss)      $3.7 million     $4.3 million   million)
    Diluted net income
     (loss) per share             $0.02            $0.02           ($3.18)
    Operating income                                       ($156.1
     (loss)               $17.6 million    $20.7 million   million)
    Gross margin                   31.8%            33.1%             4.2%
    ------------                   ----             ----              ---
    Operating margin                6.4%             6.7%          (39.0%)
    ----------------                ---              ---          -------



"Our strategy to focus on embedded and targeted wireless applications has delivered four consecutive quarters of operating income," said John Kispert, Spansion president and CEO. "Spansion has executed well during the Chapter 11 restructuring process. With our plan of reorganization now confirmed, Spansion has cleared the way for emergence from Chapter 11."

Non-GAAP net income for the first quarter of 2010, excluding restructuring, reorganization, financing related, and other special charges and credits, was $14.5 million, or net income per share of $0.08. Reconciliation between U.S. GAAP operating results and non-GAAP operating results is provided following the financial statements in this release.

    Non-GAAP Comparison

                       Q1 2010          Q4 2009         Q1 2009
                                                         ($156.3
    Net income (loss)     $14.5 million   $29.8 million  million)
    -----------------  -------------    -------------   --------
    Diluted net income
     (loss) per share             $0.08           $0.17         ($0.97)
    ------------------            -----           -----         ------



Spansion plans to provide earnings guidance for the second quarter of 2010 in early June.

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 the 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.

About Spansion

Spansion is a leading Flash memory solutions provider dedicated to enabling, storing and protecting digital content in automotive, consumer electronics, networking and wireless applications. Spansion is focused exclusively on designing, developing, manufacturing, marketing, and selling and Flash memory solutions. For more information, visit http://www.spansion.com.

Spansion(R), the Spansion logo, MirrorBit(R), MirrorBit(R) Eclipse(TM), ORNAND(TM), EcoRAM(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 complete the chapter 11 reorganization process in the near future and execute on its new strategic focus on certain markets. The risks and uncertainties related to the chapter 11 cases include: any actions or orders taken by the U.S. Bankruptcy Court that may impact the company's operations; any negative impacts on the company's business, results of operations, financial position or cash management arrangements; the inability to freely deploy cash resources throughout the company's various geographical locations as all or part of the total worldwide cash may not be available in either the United States or for working capital as a result of limitations inherent in the chapter 11 cases in the United States or Spansion Japan's corporate reorganization proceeding or as a result of various restrictions in certain geographies; the negative impact on relationships with employees, customers, suppliers and contract manufacturers and other stakeholders; the failure of the company to obtain the U.S. Bankruptcy Court orders substantially on the terms applied for; the failure of the company to obtain the requisite approvals of affected creditors or the courts for the proposed plan or reorganization, or to successfully implement such a plan or obtain sufficient exit financing, if required, within the time granted by the U.S. Bankruptcy Court, leading to the likely liquidation of the company's assets; and that following the approval of the proposed plan of reorganization, the company's outstanding common stock will be cancelled. 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 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 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 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.
    Debtor-in-Possession
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
    (In thousands, except per share amounts)



                                           Quarter   Quarter
                                                                Ended Ended
                                         March 28,   March 29,
                                               2010        2009
                                               ----        ----

    Net sales                              $277,337    $399,628
    Cost of sales                           189,120     383,035
    -------------                           -------     -------

    Gross margin                             88,217      16,593

    Research and development               22,953      44,746
    Sales, general and administrative      47,608     104,029
    Restructuring charges                      13      23,942


    Operating income (loss)                17,643    (156,124)
    Interest and other income (expense),
     net                                      286         480
    Interest expense                      (19,336)    (24,466)
    Gain on deconsolidation of
     subsidiary                                 -      30,100


    Loss before reorganization items and
     income taxes                          (1,407)   (150,010)
    Reorganization items                    5,464    (362,457)


    Income (loss) before income taxes       4,057    (512,467)
    Provision for income taxes               (405)       (168)



    Net income (loss)                      $3,652   $(512,635)



    Net income (loss) per common share

    Basic                                   $0.02      $(3.18)
    Diluted                                 $0.02      $(3.18)



    Shares used in per share calculation

       -  Basic                           162,403     161,283
       -  Diluted                         174,471     161,283





    Spansion Inc.
    Debtor-in-Possession
    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (In thousands)



                                                                    December
                                                   March 28,            27,
                                                      2010             2009
                                                      ----             ----
    Assets

    Current assets:
      Cash and cash equivalents                   $321,156         $324,903
      Auction rate securities                       75,155          100,335
      Accounts receivable                          125,885          129,174
      Accounts receivable from related party       361,983          366,602
      Allowance for doubtful accounts              (60,833)         (56,408)
      -------------------------------              -------          -------
          Accounts receivable, net                 427,035          439,368
      Inventories                                  145,531          141,723
      Deferred income taxes                         12,197           13,332
      Restricted cash                              531,516                -
      Prepaid expenses and  other current
       assets                                       25,139           49,533
      -----------------------------------           ------           ------
          Total current assets                   1,537,729        1,069,194

    Property, plant and equipment, net             297,473          322,710
    Other assets                                    40,784           46,073


    Total assets                                $1,875,986       $1,437,977
    ============                                ==========       ==========


    Liabilities and Stockholders' Deficit

    Current liabilities:
      Short term note                              $36,604          $64,149
      Senior secured term loan                     450,000                -
      Accounts payable and accrued
       liabilities                                 149,470          146,223
      Accounts payable to related party            198,069          221,211
      Rights offering deposits                      75,783                -
      Accrued compensation and benefits             24,882           21,630
      Deferred income                               54,779           62,958
      ---------------                               ------           ------
          Total current liabilities                989,587          516,171

    Deferred income taxes                           12,270           13,405
    Other long-term liabilities                      9,523            9,825

    Liabilities subject to compromise            1,717,352        1,756,269

    Stockholders' deficit                         (852,746)        (857,693)


    Total liabilities and stockholders'
     deficit                                    $1,875,986       $1,437,977
    ===================================         ==========       ==========


    Spansion Inc.
    Debtor-in-Possession
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
    (In thousands)


                                                      Quarter     Quarter
                                                       Ended       Ended
                                                    March 28,   March 29,
                                                          2010        2009
                                                          ----        ----
    Cash Flows from Operating Activities:
    Net income (loss)                                   $3,652   $(512,635)
    Adjustments to reconcile net loss to net cash
     provided by operating activities:
      Depreciation and amortization                     27,780      59,660
      Asset impairment charges                             629           -
      Provision for doubtful accounts                    5,591      17,708
      Net loss on sale and disposal of property,
       plant and equipment                               1,112      (1,902)
      Compensation recognized under employee stock
       plans                                             1,295       5,430
      Gain on deconsolidation of subsidiary                  -     (30,100)
      Gain on sale of Suzhou plant                      (3,676)          -
      Gain from approved settlement of rejected
       capital leases and various licenses             (22,517)          -
      Amortization of financing cost and debt
       premium and discount                                897       1,540

    Changes in operating assets and liabilities,
     net of effects of deconsolidation of
     subsidiary:
      Decrease (increase) in accounts receivable        13,908     (54,018)
      (Increase) decrease in inventories                (3,808)    142,499
      Decrease (increase) in prepaid expenses and
       other current assets                              6,041     (25,191)
      Decrease (increase) in other assets                1,192      (8,936)
      (Decrease) increase in accounts payable,
       accrued liabilities and accrued compensation
       and benefits                                    (22,430)    382,942
      (Decrease) increase in deferred income            (8,179)      3,226
    Net cash provided (used) by operating
     activities                                          1,487     (19,777)
    -------------------------------------                -----     -------

    Cash Flows from Investing Activities:
    Proceeds from sale of property, plant and
     equipment                                           4,917          45
    Purchases of property, plant and equipment          (8,493)     (3,921)
    Loan made to an investee                                 -      (5,263)
    Cash proceeds from sale of Suzhou plant             18,687           -
    Proceeds from redemption of auction rate
     securities                                         27,325           -
    Increase in restricted cash                       (531,516)
    Cash decrease due to deconsolidation of
     subsidiary                                              -     (52,092)
    Net cash used by investing activities             (489,080)    (61,231)
    -------------------------------------             --------     -------

    Cash Flows from Financing Activities:
    Proceeds from borrowings, net of issuance
     costs                                             438,082     117,758
    Payments on debt and capital lease
     obligations                                       (30,019)    (54,715)
    Proceeds from rights offering                       75,783           -
    Net cash provided by financing activities          483,846      63,043
    -----------------------------------------          -------      ------

    Effect of exchange rate changes on cash and
     cash equivalents                                        -      (3,095)
    -------------------------------------------            ---      ------
    Net increase in cash and cash equivalents           (3,747)    (21,060)
    Cash and cash equivalents at the beginning of
     period                                            324,903     116,387
    ---------------------------------------------      -------     -------
    Cash and cash equivalents at end of period        $321,156     $95,327
    ==========================================        ========     =======


    Spansion Inc.
    Debtor-in-Possession
    CONDENSED CONSOLIDATED SUPPLEMENTAL INFORMATION (UNAUDITED)
    (In thousands, except per share amounts)

    Reconciliation of GAAP Net Income (Loss) to NON-GAAP Net Income (Loss)
    ----------------------------------------------------------------------



                                        Quarter     Quarter     Quarter
                                        Ended       Ended       Ended
                                                     December
                                        March 28,       27,     March 29,
                                              2010        2009        2009
                                              ----        ----        ----

    GAAP net income (loss)                  $3,652      $4,329   $(512,635)

    Amortization of Saifun intangible
     assets                                     79          79          79
    Restructuring charges                    3,689       5,091      23,942
    Reorganization charges (gain)           (5,464)      9,736     362,457
    Impairment charges                         629      14,431           -
    Interest expense for the senior
     secured term loan                       5,182           -           -
    Amortization of financing cost
     for the senior secured term loan        7,855           -           -
    Customer administrative claim            2,569           -           -
    Gain on deconsolidation of
     subsidiary                                  -           -     (30,100)
    Gain on the sale of Suzhou plant        (3,676)     (3,885)          -

    Non-GAAP net income (loss)             $14,515     $29,781   $(156,257)

    Non-GAAP net income (loss) per
     diluted share                           $0.08       $0.17      $(0.97)
    Shares used in diluted shares
     calculation                           174,471     174,139     161,283



    Spansion Inc.
    Debtor-in-Possession
    SELECT ITEMS IN THE FINANCIALS (UNAUDITED)
    (In thousands)
                                          Quarter     Quarter     Quarter
                                           Ended       Ended       Ended
                                                     December
                                        March 28,       27,     March 29,
                                              2010        2009        2009
                                              ----        ----        ----
    Interest expense, net                  $19,050      $6,988     $23,986
    Benefit (provision) for income
     taxes                                    (405)       (350)        168
    Depreciation in cost of sales,
     R&D and SG&A                           26,142      27,853      58,042
    Depreciation in restructuring
     charges                                 1,559       1,689           -
    Impairment charges                         629      14,431         211
    Amortization                                79          79          79



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