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Spansion Inc. Reports Fourth Quarter 2009 Results | Cypress Semiconductor

Spansion Inc. Reports Fourth Quarter 2009 Results

Last Updated: January 15, 2010

Company Posts Second Consecutive Profitable Quarter

SUNNYVALE, Calif., Jan 15, 2010 -- Spansion Inc. today announced operating results for its fourth quarter and fiscal year ended December 27, 2009. Spansion reported fourth quarter of 2009 net sales of $307.1 million and its second consecutive profitable quarter with net income on a U.S. GAAP basis of $4.3 million, or diluted net income per share of $0.02. Operating income for the quarter was $20.7 million and U.S. GAAP gross and operating margins were 33.1% and 6.7%, respectively.

    U.S. GAAP Comparison
                            Q4 2009           Q3 2009         Q4 2008
    Net sales           $307.1 million    $327.6 million    $468.0 million

    Net income (loss)   $4.3 million      $1.5 million     ($2,076.9 million)
    Diluted net income
     (loss) per share   $0.02             $0.01            ($12.90)
    Operating income
     (loss)             $20.7 million     $20.0 million    ($2,007.3 million)
    Gross margin         33.1%             28.3%           (43.1%)
    Operating margin     6.7%              6.1%            (429.0%)



"Spansion's core markets showed strength this quarter and helped the company easily surpass our expectations for revenue in 2009," said John Kispert, Spansion president and CEO. "With our restructuring and reorganization activities largely behind us, we look forward to continued strong results in 2010."

Non-GAAP net income for the fourth quarter of 2009, excluding restructuring, reorganization, and other special charges and credits, was $29.8 million, or net income per share of $0.17. Reconciliation between U.S. GAAP operating results and non-GAAP operating results is provided following the financial statements in this release.

    Non-GAAP Comparison
    -------------------
                          Q4 2009          Q3 2009         Q4 2008
                          -------          -------         -------

    Net income (loss)    $29.8 million    $17.6 million    ($433.0 million)
    -----------------    -------------    -------------     --------------
    Diluted net income
     (loss) per share    $0.17            $0.10            ($2.69)
    ------------------   -----            -----             ------




The company increased its cash position by over $61 million and ended the fourth quarter of 2009 with $324.9 million in cash, compared to $263.6 million at the end of the third quarter of fiscal 2009 and $116.4 million at the end of the fourth quarter of 2008.

"The continued margin improvement on lower net sales is a result of Spansion's strategy to focus on embedded and targeted wireless applications," said Randy Furr, Spansion CFO. "The company's sound financial management, including operational expense control and working capital management, helped increase the cash position over $225 million since first quarter 2009, resulting in approximately $325 million of cash and equivalents at year-end."

Restructuring

Spansion's second amended disclosure statement and its plan of reorganization were approved by the U.S. Bankruptcy Court on December 22, 2009. A confirmation hearing for the plan of reorganization is scheduled for February 11, 2010.

Prior to the filing of our Annual Report on Form 10-K for the fiscal year ended December 27, 2009, the company may settle, in connection with the company's Chapter 11 bankruptcy proceedings, pre-petition claims of creditors. Consequently, the company may be required, in accordance with U.S. GAAP, to record adjustments related to any such settlement of pre-petition claims. These adjustments may change reorganization items and net income presented in the statement of operations, and liabilities subject to compromise presented in the balance sheet. As a result, there could be a material change to the statement of operations and balance sheet reported in this release.

Spansion Japan

On March 3, 2009, Spansion Japan Limited commenced corporate reorganization proceedings under the Japanese Corporate Reorganization Law (Kaisha Kosei Ho) in the Tokyo District Court. As a result, and in accordance with U.S. GAAP, the financial results of Spansion Japan Limited are not included in the consolidated financial results of Spansion Inc. after March 3, 2009. On January 8, 2010, the company announced that it reached verbal agreements in principle with its former subsidiary, Spansion Japan, to acquire Spansion Japan's distribution business and to obtain foundry services, including wafer and sort services, from Spansion Japan. Additional details can be read in Spansion's 8-K filing on January 11, 2010, which can be accessed 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 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 (Pink Sheets: SPSNQ) 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, selling and licensing 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: manage costs; achieve adequate liquidity; complete the chapter 11 reorganization process; execute on its new strategic focus; reach a sustainable business model; survive as a stand-alone entity; reach operational efficiency; and reach and sustain profitability. The risks and uncertainties related to the chapter 11 cases include: the company's ability to finalize, execute and obtain necessary court approvals for the definitive agreements with Spansion Japan regarding the sale of the distribution business and foundry services; depend on Spansion Japan for wafer production and distribution of products in Japan, due to actions taken by either (i) Spansion Japan (at the direction of the Spansion Japan trustee or pursuant to orders of the Japanese court in the Spansion Japan corporate reorganization proceeding or otherwise) or (ii) the company or Spansion LLC (pursuant to the orders of the U.S. Bankruptcy Court or otherwise); the company's ability to transfer wafer production capacity to another location or to a third-party foundry, or to find alternative methods of distributing and selling its products in the event that Spansion Japan is not successful or has difficulties in reorganizing; any other 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.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
    (In thousands, except per share amounts)

                                                   Quarter Ended
    ------------------------------------------------------------------------
                                           Dec. 27     Sep. 27      Dec. 28
                                             2009        2009         2008
    ------------------------------------------------------------------------

    Net sales                              $307,146    $327,578     $467,951
    Cost of sales                           205,504     234,952      669,691
    ------------------------------------------------------------------------

    Gross margin                            101,642      92,626     (201,740)

    Research and development                 25,533      28,281       96,339
    Sales, general and
     administrative                          41,661      36,820       56,756
    Acquisition related in-
     process research and
     development                                  -           -            -
    Restructuring charges                     1,206       7,492         (138)
    Asset impairment charges                 12,538           -    1,652,622
    ------------------------------------------------------------------------

    Operating income (loss)                  20,704      20,033   (2,007,319)
    Interest and other income
     (expense), net                           1,110         532       12,371
    Interest expense                         (8,099)     (9,199)     (26,287)
    Gain on deconsolidation of
     subsidiary                                   -           -            -
    ------------------------------------------------------------------------

    Income (loss) before
     reorganization items and
     income taxes                            13,715      11,366   (2,021,235)
    Reorganization items                     (9,736)     (9,348)           -
    ------------------------------------------------------------------------

    Income (loss) before income
     taxes                                    3,979       2,018   (2,021,235)
    Benefit (provision) for
     income taxes                               350        (518)     (55,670)
    ------------------------------------------------------------------------

    Net income (loss)                        $4,329      $1,500  $(2,076,905)
    ------------------------------------------------------------------------

    Net income (loss) per
     common share

    Basic                                     $0.03       $0.01      $(12.90)
    Diluted                                   $0.02       $0.01      $(12.90)


    Shares used in per share
     calculation

    - Basic                                 162,239     162,090      161,000
    - Diluted                               174,139     173,925      161,000



                                                Year Ended
    ------------------------------------------------------------
                                          Dec. 27       Dec. 28
                                            2009         2008*
    ------------------------------------------------------------

    Net sales                            $1,410,653   $2,281,803
    Cost of sales                         1,103,757    2,193,345
    ------------------------------------------------------------

    Gross margin                            306,896       88,458

    Research and development                136,449      431,808
    Sales, general and administrative       216,298      253,878
    Acquisition related in-process
     research and development                     -       10,800
    Restructuring charges                    46,852       11,161
    Asset impairment charges                 12,538    1,652,622
    ------------------------------------------------------------

    Operating income (loss)                (105,241)  (2,271,811)
    Interest and other income
     (expense), net                           4,038        5,200
    Interest expense                        (50,976)    (105,536)
    Gain on deconsolidation of
     subsidiary                              30,100            -
    ------------------------------------------------------------

    Income (loss) before reorganization
     items and income taxes                (122,079)  (2,372,147)
    Reorganization items                   (391,383)           -
    ------------------------------------------------------------

    Income (loss) before income taxes      (513,462)  (2,372,147)
    Benefit (provision) for income taxes       (597)     (62,865)
    ------------------------------------------------------------

    Net income (loss)                     $(514,059) $(2,435,012)
    ------------------------------------------------------------

    Net income (loss) per common share

    Basic                                    $(3.18)     $(15.69)
    Diluted                                  $(3.18)     $(15.69)
    ------------------------------------------------------------

    Shares used in per share
     calculation

    -  Basic                                161,847     155,162
    -  Diluted                              161,847     155,162


    * The Statement of Operations for the year ended December 28, 2008 is
    derived from the December 30, 2008 audited financial statements of
    Spansion Inc. and has been adjusted to reflect the change in accounting
    for the Company's Exchangeable Senior Subordinated Debentures.


    Spansion Inc.
    CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
    (In thousands)

                                         Dec. 27             Dec. 28
                                           2009                2008*
                                           ----                ----
    Assets

    Current assets:
            Cash and cash
             equivalents                $324,903            $116,387
            Auction rate
             securities                  100,335                   -
            Accounts receivable          129,174             139,888
            Accounts receivable
             from related party          366,602             117,575
            Allowance for
             doubtful accounts           (56,408)             (8,106)
            Inventories                  141,723             379,157
            Deferred income
             taxes                        13,332               3,213
            Prepaid expenses and
             other current
             assets                       49,533              35,225
    ----------------------------------------------------------------
                 Total current
                 assets                1,069,194             783,339

    Property, plant and
     equipment, net                      322,710             795,030
    Auction rate securities                    -              94,014
    Other assets                          46,073             101,489
    ----------------------------------------------------------------
    Total Assets                      $1,437,977          $1,773,872
    ================================================================

    Liabilities and Stockholders' Deficit

    Current liabilities:
            Note payable to
             banks under
             revolving loans                  $-            $105,687
            Short term note               64,149                   -
            Accounts payable and
             accrued liabilities         146,140             554,787
            Accounts payable and
             accrued liabilities
             to related party            221,211              79,684
            Accrued compensation
             and benefits                 21,630              60,412
            Income taxes payable              83               3,972
            Deferred income               62,958              35,285
            Current portion of
             long-term debt                    -           1,126,849
    ----------------------------------------------------------------
                 Total current
                  liabilities            516,171           1,966,676

    Deferred income taxes                 13,405               3,267
    Long-term debt, less
     current portion                           -             210,246
    Other long-term
     liabilities                           9,825              44,330

    Liabilities subject to
     compromise                        1,756,269                   -

    Stockholders' deficit               (857,693)           (450,647)

    ----------------------------------------------------------------
    Total liabilities and
     stockholders' deficit            $1,437,977          $1,773,872
    ================================================================
    * The Balance Sheet as of December 28, 2008 has been adjusted to
      reflect the change in accounting for the Company's Exchangeable
      Senior Subordinated Debentures.








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

                                                  Quarter Ended        YTD
                                                   December 27     December 27
                                                       2009            2009
                                                       ----            ----
    Cash Flows from Operating Activities:
    Net income (loss)                                 $4,329       $(514,059)
    Adjustments to reconcile net loss to net cash
     provided by operating activities:
      Depreciation, amortization, and in-
       process research and development
       write-off                                      29,620         169,908
      Asset impairment charges                        14,045          14,045
      Provision for deferred income taxes                  6              18
      Provision for doubtful accounts                    578          19,055
      Net loss on sale and disposal of
       property, plant, and equipment                  1,448              76
      Compensation recognized under employee
       stock plans                                     1,976          12,419
      Gain on deconsolidation of subsidiary                -         (30,100)
      Gain on sale of Suzhou plant                    (3,885)         (4,669)
      Loss from write-off of rejected
       capital leases and various licenses                 -           3,090

    Changes in operating assets and liabilities, net of
     effects of deconsolidation of subsidiary:
      Increase in accounts receivable and
       other receivables                             (66,724)       (247,576)
      (Increase) decrease in inventories              (4,527)        180,569
      (Increase) decrease in prepaid
       expenses and other current assets                 660         (10,448)
      (Increase) decrease in other assets              2,833          (5,165)
      Increase in accounts payable, accrued
       liabilities and accrued compensation           72,069         629,431
      Decrease in income taxes payable                  (381)         (2,708)
      Increase in deferred income                      6,663          22,663
                                                       -----          ------
    Net cash provided by operating
     activities                                       58,710         236,549
                                                      ------         -------

    Cash Flows from Investing Activities:
    Proceeds from sale of property, plant
     and equipment                                     3,507           4,352
    Purchases of property, plant and
     equipment                                       (14,066)        (29,713)
    Loan made to an investee                               -          (5,263)
    Cash proceeds from PTI due to sale of
     Suzhou plant                                     15,539          15,539
    Proceeds from redemption of ARS                    4,150          14,775
    Cash decrease due to deconsolidation
     of subsidiary                                         -         (52,092)
    Cash decreases due to the sale of
     Suzhou plant                                          -         (10,431)
                                                         ---         -------
    Net cash provided (used)  by investing
     activities                                        9,130         (62,833)
                                                       -----         -------

    Cash Flows from Financing Activities:
    Proceeds from borrowings, net of
     issuance costs                                        -         117,758
    Payments on debt and capital lease
     obligations                                      (6,491)        (79,863)
                                                      ------         -------
    Net cash (used) provided by financing
     activities                                       (6,491)         37,895
                                                      ------          ------

    Effect of exchange rate changes on
     cash and cash equivalents                             -          (3,095)
                                                         ---          ------
    Net increase in cash and cash
     equivalents                                      61,349         208,516
    Cash and cash equivalents at the
     beginning of period                             263,554         116,387
                                                     -------         -------
    Cash and cash equivalents at end of
     period                                         $324,903        $324,903
                                                    ========        ========





    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 Ended
                            --------------------------------------------------
                                December 27      September 27      December 28
                                   2009              2009              2008

    GAAP net income
     (loss)                        $4,329            $1,500       $(2,076,905)

    Acquisition-related
     charges                           79                79             2,676
    Restructuring
     charges                        5,091             7,492              (138)

    Reorganization
     charges                        9,736             9,348                 -

    Impairment charges             14,431                 -         1,652,622

    Gain on divestiture            (3,885)             (784)                -

    Impairment of
     marketable
     securities                         -                 -           (11,248)

    Non-GAAP net income
     (loss)                       $29,781           $17,635         $(432,993)

    Non-GAAP net income
     (loss) per diluted
     share                          $0.17             $0.10            $(2.69)
    Shares used in
     diluted shares
     calculation                  174,139           173,925           161,000



    Spansion Inc.
    Debtor-in-Possession
    SELECT ITEMS IN THE FINANCIALS (UNAUDITED)
    (In thousands)

                                            Quarter Ended
                            -----------------------------------------------
                                December 27      September 27      December 28
                                  2009              2009              2008
    Interest expense
     (income)                      $6,988            $8,667           $13,916

    Benefit (provision)
     for income taxes                (350)              518            55,670
    Depreciation in cost
     of sales, R&D and
     SG&A                          27,853            31,032           160,901
    Depreciation in
     restructuring
     charges                        1,689             2,328                 -
    Impairment charges             14,431                 -         1,652,622

    Amortization                       79                79             2,676

http://www.spansion.com

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