Exhibit 99.1
Spansion Inc. Reports Third Quarter 2012 Results
Sunnyvale, California, October 25, 2012 -- Spansion Inc. (NYSE: CODE), a leading provider of Flash memory solutions, today announced operating results for its third fiscal quarter ended September 30, 2012.
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:
● | Revenue of $239.7 million |
● | Non-GAAP adjusted gross margin of 36.3% |
● | Non-GAAP adjusted operating income of $31.5 million or 13.1% of revenue |
● | Adjusted EBITDA of $46.8 million |
● | Non-GAAP EPS of $0.36 per share |
● | Cash, cash equivalents and short term investments of $328 million |
Third Quarter 2012 Business Highlights:
● | Continued market leadership and focused execution |
● | Leading embedded NOR market with comprehensive product portfolio |
● | Expanded product portfolio with new serial and NAND products |
● | Over 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 athttp://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 athttp://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 stockholders | $5.1 | $26.0 | $7.3 | |
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) Favorable/(Unfavorable) | COGS | Net Income |
Intangible Amortization | (7) | (7) |
Stock Based Compensation | (1)-(2) | (8)-(9) |
Total | (8)-(9) | (15)-(16) |
Excluding the above items, fourth quarter 2012 non-GAAPgross 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, visithttp://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.
Press Contact: | Investor Relations: |
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Michele Landry | Melanie Friedman |
Spansion Inc. | The Blueshirt Group |
+1.408.616.3817 | +1.415.217.4964 |
michele.landry@spansion.com | melanie@blueshirtgroup.com |
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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 | ||||||||||
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 and building | - | (28,434 | ) | - | ||||||||
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, 2012 | July 1, 2012 | Sep 25, 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 assets | 36,700 | 31,137 | 42,016 | |||||||||
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 obligations under capital leases | 11,468 | 12,045 | 4,292 | |||||||||
Income taxes payable | 4,810 | 3,966 | 3,783 | |||||||||
Deferred income taxes, short-term | - | - | 4,407 | |||||||||
Total current liabilities | 190,861 | 178,797 | 214,742 | |||||||||
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 shares issued and outstanding | 61 | 60 | 60 | |||||||||
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. stockholders' equity | 568,171 | 555,038 | 590,454 | |||||||||
Non-controlling interest | - | - | 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 Ended Sep 30, 2012 | Three Months Ended July 1, 2012 | Three Months Ended 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 income taxes | (87 | ) | 1,786 | 154 | ||||||||
Net gain on sale of KualaLumpur land and building | - | (28,434 | ) | - | ||||||||
Net gain on sale and disposal of property, plant and equipment | (1,117 | ) | (4,046 | ) | (1,533 | ) | ||||||
Compensation recognized under employee stock plans | 8,761 | 8,968 | 4,624 | |||||||||
Changes in operating assets and liabilities | 27,010 | (23,460 | ) | (16,795 | ) | |||||||
Net cash provided by operating activities | 62,318 | 6,948 | 23,090 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Proceeds from sale of property, plant and equipment | 1,713 | 38,416 | 2,899 | |||||||||
Purchase of property, plant and equipment | (12,166 | ) | (9,358 | ) | (10,828 | ) | ||||||
Purchase of marketable securities | (28,686 | ) | (17,065 | ) | (46,707 | ) | ||||||
Proceeds from maturities of marketable securities | 44,336 | 16,649 | 3,236 | |||||||||
Other | - | - | 581 | |||||||||
Net cash provided by (used for) investing activities | 5,197 | 28,642 | (50,819 | ) | ||||||||
Cash Flows from Financing Activities: | ||||||||||||
Proceeds from issuance of common stockdue to options exercised | 27 | 62 | 1,008 | |||||||||
Payments on debt and capital lease obligations | (15,560 | ) | (1,198 | ) | (822 | ) | ||||||
Acquisition of noncontrolling interest | (720 | ) | (3,304 | ) | - | |||||||
Cash settlement on hedging activities | (268 | ) | (263 | ) | (268 | ) | ||||||
Purchase of bankruptcy claims | - | - | (30,000 | ) | ||||||||
Net cash used for financing activities | (16,521 | ) | (4,703 | ) | (30,082 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 339 | 215 | 1,020 | |||||||||
Net increase / (decrease) in cash and cash equivalents | 51,333 | 31,102 | (56,791 | ) | ||||||||
Cash and cash equivalents at the beginning of period | 228,127 | 197,025 | 292,311 | |||||||||
Cash and cash equivalents at end of period | $ | 279,460 | $ | 228,127 | $ | 235,520 | ||||||
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:
● | Adjusted 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. |
● | Adjusted 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. |
● | Adjusted 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:
● | Reflect 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; |
● | Provide 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; |
● | Provide 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 building | - | (28.4 | ) | - | ||||||||
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 Incomes
($ 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 building | - | (28.4 | ) | - | ||||||||
Add: Stock compensation expense | 8.8 | 9.0 | 4.6 | |||||||||
Less:Amortization of intangibles relating to non-controlling interest | - | - | (0.1 | ) | ||||||||
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 building | - | (28.4 | ) | - | ||||||||
Add: Fresh start adjustments | - | - | 12.6 | |||||||||
Add: Stock compensation expense | 8.8 | 9.0 | 4.6 | |||||||||
Add: Net income attributable to non-controlling interest | - | - | 0.5 | |||||||||
Adjusted EBITDA | $ | 46.8 | $ | 43.4 | $ | 69.3 | ||||||
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