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Spansion Inc. Reports First Quarter 2011 Results | Cypress Semiconductor

Spansion Inc. Reports First Quarter 2011 Results

Last Updated: April 28, 2011

SUNNYVALE, Calif., April 28, 2011 --

Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its first fiscal quarter ended March 27, 2011. Due to the unique impacts of fresh start accounting, Spansion is providing both GAAP and non-GAAP results. On a U.S. GAAP basis, Spansion reported net sales of $292.9 million, operating loss of $0.7 million, and net loss of $14.1 million. On a non-GAAP basis, adjusted net sales were $294.4 million, adjusted operating income was $38.5 million, and adjusted net income was $25.1 million.

 

"Spansion delivered a solid quarter and we see continued design win momentum," said John Kispert, president and CEO of Spansion. "These results demonstrate our ability to execute and the value and confidence our customers have in our products and service."

   

U.S. GAAP results, in $millions except per share data and percentages

 
 

Q1 2011

Q4 2010

Q1 2010

 

Net sales

$292.9

$327.7

$277.3

 

Gross margin

23.5%

20.9%

31.8%

 

Operating income (loss)

$(0.7)

$(1.4)

$17.6

 

Operating margin

(0.0%)

(0.0%)

6.3%

 

Net income/(loss)

($14.1)

($13.6)

$3.7

 

Diluted net income per share (Predecessor)

N/A

N/A

0.02

 

Diluted net (loss) per share (Successor)

$(0.23)

$(0.22)

N/A

 
   
       
   

Non-GAAP results, in $millions

 
 

Q1 2011

Q4 2010

Q1 2010

 

Adjusted net sales

$294.4

$330.3

$277.3

 

Adjusted operating income

$38.5

$60.5

$30.5

 

Adjusted net income

$25.1

$48.3

$24.2

 

Adjusted EBITDA

$66.6

$88.4

$58.0

 
   
         

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. References to "Successor" refer to Spansion and its consolidated subsidiaries after May 10, 2010, after giving effect to the cancellation of old common stock issued prior to May 10, 2010, the issuance of new common stock and settlement of existing debt and other adjustments in accordance with the reorganization plan, and the application of fresh start accounting. References to "Predecessor" refer to Spansion and its consolidated subsidiaries prior to May 10, 2010.

Business Outlook

For the second quarter of 2011, Spansion estimates U.S. GAAP net sales and non-GAAP adjusted net sales in the range of $300 million to $325 million, GAAP net income per diluted share of $0.21 to $0.28, and non-GAAP adjusted net income per diluted share of $0.47 to $0.57.

Quarterly Conference Call

Spansion will host a conference call to discuss first quarter 2011 results at 1:30 pm PDT / 4:30 pm EDT today. 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: 1-866-831-6247 (US), 1-617-213-8856 (International), Passcode: 14844882

An audio replay will be available within two hours of the call and may be accessed via dial-in at 1-888-286-8010, international 1-617-801-6888 with the Passcode of 49058165 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/

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.

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(R), the Spansion logo, MirrorBit(R), MirrorBit(R) 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: manage costs; achieve adequate liquidity; execute its new strategic focus; reach a sustainable business model; survive as a stand-alone entity; reach operational efficiency; and reach and sustain profitability. Additional risks related to the company's recent emergence from bankruptcy include: any negative impacts on the company's business, results of operations, financial position or cash management arrangements; the negative impact on relationships with employees, customers, suppliers and contract manufacturers and other stakeholders; and the failure of the company to successfully implement the plan of reorganization. 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 fiscal 2009 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.

Press Contact:

Investor Relations:

 

Michele Landry

Shubham Maheshwari

 

Spansion Inc.

Spansion Inc.

 

+1.408.616.3817

+1.408.616.3677

 

michele.landry@spansion.com

shubham.maheshwari@spansion.com

 
     

Company News:

Investor Relations Web site:

 

http://www.spansion.com/news

http://investor.spansion.com/

 
   

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

 
       
 

Successor

Successor

Predecessor

 
 

Three Months Ended
March 27, 2011

Three Months Ended
Dec. 26, 2010

Three Months Ended
March 28, 2010

 

Net sales

$ 292,937

$ 327,723

$ 223,128

 

Net sales to related parties

-

-

54,209

 

Total net sales

$ 292,937

$ 327,723

$ 277,337

 

Cost of sales

224,165

259,130

189,120

 

Gross Profit

68,772

68,593

88,217

 
         

Research and development

29,829

25,748

22,953

 

Sales, general and administrative

39,683

44,271

47,608

 

Restructuring (credits) / charges

-

-

13

 
         

Operating income (loss)
before reorganization items

(740)

(1,426)

17,643

 

Interest & other income
(expense), net

747

(1,567)

286

 

Interest expense

(9,058)

(10,179)

(19,336)

 
         

Loss before reorganization
items and income taxes

(9,051)

(13,172)

(1,407)

 

Reorganization items

-

-

5,464

 
         

Loss before income taxes

(9,051)

(13,172)

4,057

 

Provision for income taxes

(5,097)

(454)

(405)

 

Net income (loss)

$ (14,148)

$ (13,626)

$ 3,652

 
         

Net income (loss)
per common share

       

Basic

$ (0.23)

$ (0.22)

$ 0.02

 

Diluted

$ (0.23)

$ (0.22)

$ 0.02

 

Shares used in
per share calculation

       

Basic

62,140

62,332

162,403

 

Diluted

62,140

62,332

174,471

 
   
         

Spansion Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)

 
       

Successor

Predecessor

 

Assets

March 27, 2011

Dec. 26, 2010

March 28, 2010

 

Current assets:

       
 

Cash and cash equivalents

$ 283,435

$ 329,294

$ 321,156

 
 

Short term investment

24,979

24,979

75,155

 
 

Accounts receivable, net

158,096

165,975

120,278

 
 

Accounts receivable from related party

-

-

306,757

 
 

Inventories

178,428

168,937

145,531

 
 

Deferred income taxes

7,257

6,321

12,197

 
 

Restricted cash

4,233

4,233

531,516

 
 

Prepaid expenses and other current assets

53,022

45,977

25,139

 
     

Total current assets

709,450

745,716

1,537,729

 
               

Property, plant and equipment, net

245,743

259,940

297,473

 

Intangible assets

192,722

197,733

-

 

Goodwill

 

159,861

153,338

-

 

Other assets

 

36,926

42,578

40,784

 

Total assets

$1,344,702

$ 1,399,305

$1,875,986

 
               

Liabilities and Stockholders' Equity (Deficit )

       

Current liabilities:

       
 

Short term note

$ -

$ -

$ 36,604

 
 

Senior secured term loan

-

-

450,000

 
 

Accounts payable

97,498

119,288

46,575

 
 

Accounts payable to related parties

-

-

198,069

 
 

Accrued compensation and benefits

32,467

39,978

24,882

 
 

Other accrued liabilities

97,544

109,444

102,895

 
 

Income taxes payable

4,158

1,107

-

 
 

Rights offering deposits

-

-

75,783

 
 

Deferred income

27,184

22,198

54,779

 
 

Deferred income to related party

-

40

-

 
 

Current portion of long-term debt and
obligations under capital leases

25,221

13,689

-

 
     

Total current liabilities

284,072

305,744

989,587

 
               

Deferred income taxes

4,728

3,877

12,270

 

Long-term debt, less current portion

427,549

441,220

-

 

Other long-term liabilities

26,492

24,179

9,523

 

Liabilities subject to compromise

-

-

1,717,352

 
     

Total liabilities

742,841

775,020

2,728,732

 
               

Old Class A Common stock, $0.001 par value, 714,999,998 shares authorized, 162,489,608 shares issued and outstanding

-

-

162

 

New Class A Common stock, $0.001 par value, 150,000,000 shares authorized, 62,390,784 shares issued and outstanding

63

62

-

-

 

New Class B common stock, $0.001 par value, 1 share authorized, 1 share issued and outstanding

-

-

-

 

Additional paid in capital

714,259

721,712

2,485,615

 

Retained deficit

(110,839)

(96,692)

(3,338,718)

 

Accumulated other comprehensive income

(1,622)

(797)

195

 
     

Total stockholders' equity (deficit)

601,861

624,285

(852,746)

 
               

Total liabilities and stockholders' equity (deficit)

$1,344,702

$ 1,399,305

$ 1,875,986

 
   
               

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 
   

Successor

Predecessor

 
   

Three Months
Ended March
27, 2011

Three Months
Ended December
26, 2010

Three Months
Ended March
28, 2010

 

Cash Flows from Operating Activities:

       

Net income (loss)

$ (14,148)

$ (13,626)

$ 3,652

 

Adjustments to reconcile net loss to net cash
provided by operating activities:

       
 

Depreciation and amortization

52,083

54,616

28,677

 
 

Net provision for doubtful accounts

3

71

5,591

 
 

Provision (benefit) for deferred income taxes

(1,457)

20,129

-

 
 

Net loss (gain) on sale and disposal of property,
plant and equipment

(648)

59

1,112

 
 

Asset impairment charges

2,683

-

629

 
 

Compensation recognized under employee stock plans

4,548

3,516

1,295

 
 

Gain from approved settlement of rejected
capital leases and various licenses

-

-

(22,517)

 
 

Gain on sale of Suzhou plant

-

-

(3,676)

 
 

Amortization of inventory fresh start markup

6,787

22,507

-

 
 

Mark to market on hedging derivatives

-

1,329

-

 
 

Changes in assets and liabilities

(78,761)

(77,476)

(13,276)

 

Net cash provided (used) by operating activities

(28,910)

11,125

1,487

 
           

Cash Flows from Investing Activities:

       
 

Proceeds from sale of property, plant and equipment

2,139

4,818

4,917

 
 

Purchases of property, plant and equipment

(6,053)

(27,215)

(8,493)

 
 

Proceeds from redemption of auction rate securities

-

-

27,325

 
 

Purchases of treasury bills

-

(24,979)

-

 
 

Proceeds from maturity of treasury bills

-

29,989

-

 
 

Increase in restricted cash

-

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