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Spansion Inc. Reports Third Quarter 2010 Resul | Cypress Semiconductor

Spansion Inc. Reports Third Quarter 2010 Resul

Last Updated: October 26, 2010

SUNNYVALE, Calif., Oct 26, 2010 --

Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its third fiscal quarter ended September 26, 2010. 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 $307.6 million, operating loss of $55.4 million, and net loss of $64.9 million. On a non-GAAP basis, adjusted net sales were $319.7 million, adjusted operating income was $48.2 million, and adjusted net income was $38.7 million.

 

"Spansion delivered another strong quarter, with record Non-GAAP earnings, new customer design wins and strong performance out of our manufacturing facilities," said John Kispert, president and CEO of Spansion. "These results demonstrate the company's ability to execute and our continued focus on meeting customer design requirements of the embedded market."

   

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

 
 

Q3 2010

Q2 2010

Q3 2009

 

Net sales

$307.6

$255.7

$327.6

 

Gross margin

10.0%

22.9%

28.3%

 

Operating income (loss)

($55.4)

($3.0)

$20.0

 

Operating margin

(18.0%)

(1.2%)

6.1%

 

Net income/(loss)

($64.9)

$341.8

$1.5

 

Diluted net income per share (Predecessor)

N/A

$2.21

$0.01

 

Diluted net (loss) per share (Successor)

($1.09)

($0.31)

N/A

 
   
       
   

Non-GAAP results, in $millions except per share data and percentages

 
 

Q3 2010

Q2 2010

Q3 2009

 

Adjusted net sales

$319.7

$292.7

$327.6

 

Adjusted operating income

$48.2

$40.3

$29.8

 

Adjusted net income

$38.7

$27.4

$20.6

 

Adjusted EBITDA

$76.2

$67.5

$63.7

 
   
       

Spansion's cash position continued to strengthen and improved to $330 million at the end of the third quarter, compared to $254 million at the end of second quarter 2010. On a GAAP basis Spansion generated $58.7 million of cash flow from operations in the third quarter of 2010. The cash flow from operations includes approximately $13 million of bankruptcy related payments in the quarter.

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 fourth quarter of 2010, Spansion estimates U.S. GAAP net sales in the range of $315 million to $330 million, non-GAAP adjusted net sales in the range of $320 million to $340 million, GAAP net loss per diluted share of ($0.49) to ($0.08), and non-GAAP adjusted net income per diluted share of $0.53 to $0.77.

Quarterly Conference Call

Spansion will host a conference call to discuss third quarter 2010 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: 1-866-543-6403 (US), 1-617-213-8896 (International), Passcode: 68484998

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 37158275 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), 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; 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.

   

Company News:

Investor Relations Web site:

 

http://www.spansion.com/news

http://investor.spansion.com/financials.cfm

 
   
   

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share amounts)

 
 

Three Months Ended
June 27, 2010

 
 

Successor

Successor

Predecessor

Predecessor

 
 

Three Months
Ended
Sept. 26, 2010

Period from May
11, 2010 to June
27, 2010

Period from March
29, 2010 to May
10, 2010

Three Months
Ended
Sept. 27, 2009

 

Net sales

$ 307,594

$ 129,370

$ 126,282

$ 327,578

 

Cost of sales

276,838

111,413

85,697

234,952

 

Gross profit

30,756

17,957

40,585

92,626

 
           

Research and development

26,246

13,420

12,115

28,281

 

Sales, general and administrative

59,948

18,259

20,497

36,820

 

Restructuring (credits) / charges

-

-

(2,785)

7,492

 
           

Operating income (loss)

(55,438)

(13,722)

10,758

20,033

 

Interest & other income (expense), net

1,378

364

(3,190)

532

 

Interest expense

(9,124)

(4,877)

(11,237)

(9,199)

 
           

Income (loss) before reorganization
items and income taxes

(63,184)

(18,235)

(3,669)

11,366

 

Reorganization items

-

-

364,876

(9,348)

 
           

Income (loss) before income taxes

(63,184)

(18,235)

361,207

2,018

 

Provision (benefit) for income taxes

1,670

(21)

1,235

518

 

Net income (loss)

$ (64,854)

$ (18,214)

$ 359,972

$ 1,500

 
           

Net income (loss) per common share

         

Basic

$ (1.09)

$ (0.31)

$ 2.22

$ 0.01

 

Diluted

$ (1.09)

$ (0.31)

$ 2.21

$ 0.01

 

Shares used in per share calculation

         

Basic

59,271

59,271

162,513

162,090

 

Diluted

59,271

59,271

162,518

173,925

 
   
         

Spansion Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands)

 
       

Successor

Predecessor

 
       

September 26, 2010

December 27, 2009

 

Assets

       

Current assets:

     
 

Cash and cash equivalents

$ 329,680

$ 324,903

 
 

Auction rate securities

-

100,335

 
 

Accounts receivable

147,839

129,174

 
 

Accounts receivable from related parties

-

366,602

 
 

Allowance for doubtful accounts

(254)

(56,408)

 
 

Inventories

180,827

141,723

 
 

Deferred income taxes

3,298

13,332

 
 

Prepaid expenses and other current assets

45,097

49,533

 
     

Total current assets

706,487

1,069,194

 
             

Property, plant and equipment, net

288,643

322,710

 

Intangible assets

202,083

-

 

Goodwill

 

163,359

-

 

Other assets

 

42,906

46,073

 

Total assets

$ 1,403,478

$ 1,437,977

 
             

Liabilities and Stockholders' Deficit

     

Current liabilities:

     
 

Short term note

$ -

$ 64,149

 
 

Accounts payable

104,029

33,463

 
 

Accrued liabilities

147,041

112,676

 
 

Accounts payable to related parties

-

221,211

 
 

Accrued compensation and benefits

36,655

21,630

 
 

Deferred income

21,779

62,958

 
 

Current portion of long-term debt

13,419

-

 
 

Income taxes payable

18,562

83

 
     

Total current liabilities

341,485

516,171

 
             

Deferred income taxes

13,488

13,405

 

Long-term debt, less current portion

444,870

-

 

Other long-term liabilities

11,105

9,825

 

Liabilities subject to compromise

-

1,756,269

 
     

Total liabilities

810,948

2,295,670

 
             

Additional paid in capital

678,809

2,484,482

 

Retained deficit

(83,068)

(3,342,370)

 

Accumulated other comprehensive income

(3,211)

195

 

Stockholders' (deficit)/earnings

592,530

(857,693)

 
             

Total liabilities and stockholders' deficit

$ 1,403,478

$ 1,437,977

 
   
           

Spansion Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 
   

Successor

Successor

Predecessor

 
   

Three Months
Ended September
26, 2010

Period from
May 11, 2010
to June 27, 2010

Period from
March 29, 2010
to May 10, 2010

 

Cash Flows from Operating Activities:

       

Net income (loss)

$ (64,854)

$ (18,214)

$ 359,972

 

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

       
 

Depreciation and amortization

56,445

26,146

14,482

 
 

Gain on discharge of pre-petition obligations

-

-

(434,046)

 
 

Provision for deferred income taxes

(4,634)

(3)

7,000

 
 

Provision for doubtful accounts

(50)

310

1,640

 
 

(Gain) on sale and disposal of property, plant and equipment

(1,276)

(266)

(3,219)

 
 

Compensation recognized under employee stock plans

2,865

1,944

5,757

 
 

Impairment on investments in Densbit and Virident

-

-

3,011

 
 

Gain on sale of Suzhou plant

(2,359)

(1,342)

(1,548)

 
 

Gain from approved settlement of
rejected capital leases and various licenses

-

-

-

 
 

Write-off financing cost for old debts

-

-

13,020

 
 

Amortization of inventory fresh-start markup

49,069

18,597

-

 
           

Changes in operating assets and liabilities,
net of effects of deconsolidation of subsidiary:

       
 

Decrease (increase) in accounts receivable

5,274

(14,077)

(3,752)

 
 

(Increase) decrease in inventories

14,641

27,770

(3,434)

 
 

Decrease (increase) in prepaid expenses and other current assets

(2,233)

(6,271)

(9,935)

 
 

Decrease (increase) in other assets

910

177

342

 
 

(Decrease) increase in accounts payable,
accrued liabilities and accrued compensation and benefits

(8,819)

(29,733)

45,643

 
 

(Decrease) increase in deferred income

13,735

(6,468)

4,939

 

Net cash provided (used) by operating activities

58,714

(1,431)

(128)

 
           

Cash Flows from Investing Activities:

       

Proceeds from sale of property, plant and equipment

11,438

4,278

4,703

 

Purchases of property, plant and equipment

(17,522)

(4,561)

(5,553)

 

Proceeds from redemption of auction rate securities

27,950

16,750

35,100

 

Decrease (increase) in restricted cash

-

-

531,516

 

Purchase of distribution business

-

(13,125)

-

 

Net cash provided (used) by investing activities

21,866

3,342

565,766

 
           

Cash Flows from Financing Activities:

       

Payments on debt and capital lease obligations

(3,241)

(2,715)

(661,157)

 

Proceeds from Rights Offering, net of expenses

-

-

29,092

 

Net cash (used) provided by financing activities

(3,241)

(2,715)

(632,065)

 
         

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