Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Spansion Inc. | code20140506_8k.htm |
Exhibit 99.1
Spansion Inc. Reports First Quarter 2014 Results
Sunnyvale, California, May 6, 2014 -- Spansion Inc. (NYSE: CODE), a global leader in embedded systems solutions, today announced operating results for its first quarter ended March 30, 2014.
On a U.S. GAAP basis, Spansion reported first quarter net sales of $311.8 million, gross margin of 28.8%, operating loss of $9.4 million and net loss of $22.5 million or $0.38 per share .
On a non-GAAP basis, gross margin was 33.0%, operating income was $19.0 million and net income was $11.6 million.
For a reconciliation of GAAP to non-GAAP results, see accompanying tables “Reconciliation of U.S. GAAP to Non-GAAP Financial Measures.”
First Quarter 2014 Financial Highlights:
|
● |
Revenue of $311.8 million, a 64% year-over-year increase |
|
● |
Non-GAAP gross margin of 33.0% |
|
● |
Non-GAAP operating income of $19.0 million or 6.1% of revenue |
|
● |
Adjusted EBITDA of $32.2 million |
|
● |
Non-GAAP Diluted EPS $0.18 |
|
● |
Cash, cash equivalents and short term investments of $289.4 million |
Note: Percentages may not calculate precisely due to rounding.
First Quarter 2014 Business Highlights:
|
● |
Continued embedded market leadership |
|
● |
Record design win momentum |
|
● |
Significant progress with integration of Microcontroller and Analog Business Groups |
|
● |
Introduced world’s fastest NOR flash memory |
“Spansion continues to execute against our plan, with increased revenue of 64 percent year-on-year and record design wins across all segments in the first quarter of 2014. Our results demonstrate increased demand for the microcontroller and analog products we acquired last year, as customers have chosen Spansion technology to build many of their future products,” said John Kispert, CEO of Spansion. "Looking ahead, we see continued demand increasing for our stand-alone Flash memory, microcontrollers and analog products, as well as growing interest in system-on-chip solutions that integrate our Flash memory directly into microcontrollers. We are well positioned to address requirements for connected and intelligent devices with advanced user interfaces, which are needed to improve the user experience for the Internet of Things."
Quarterly Conference Call and Accompanying Slide Presentations
Spansion will host a conference call Tuesday, May 6, 2014, at 1:30 PM PT/ 4:30 PM ET to discuss its first quarter 2014 results. A live webcast of the conference call, with accompanying slide presentations, may be accessed through the investor relations section of Spansion’s website at http://investor.spansion.com/.
Dial-in: 1-866-515-2913 (toll free), 1-617-399-5127 (International), Passcode: 86921279
An audio replay will be available within two hours of the call through May 13, 2014 and may be accessed via dial-in at 1-888-286-8010 (US), 1-617-801-6888 (International), with the Passcode 19857546 or by webcast on the investor relations section of Spansion's website at http://investor.spansion.com/.
First Quarter 2014 Results
U.S. GAAP Results, in $millions except per share data and percentages
|
Q1 2014 |
Q4 2013 |
Q1 2013 | |
|
Net Sales |
$311.8 |
$313.7 |
$189.6 |
|
Gross Margin |
28.8% |
29.7% |
24.2% |
|
Operating Loss |
($9.4) |
($9.4) |
($5.4) |
|
Operating Margin |
(3.0%) |
(3.0%) |
(2.9%) |
|
Net Loss |
($22.5) |
($23.7) |
($14.4) |
|
Diluted Net Loss Per Share |
($0.38) |
($0.40) |
($0.25) |
Non-GAAP Results, in $millions except per share data and percentages
|
Q1 2014 |
Q4 2013 |
Q1 2013 | |
|
Net Sales |
$311.8 |
$313.7 |
$189.6 |
|
Gross Margin |
33.0% |
34.1% |
28.6% |
|
Operating Income |
$19.0 |
$25.5 |
$10.5 |
|
Operating Margin |
6.1% |
8.1% |
5.6% |
|
Net Income |
$11.6 |
$12.6 |
$1.5 |
|
Diluted Net Income Per Share |
$0.18 |
$0.20 |
$0.03 |
Note: Percentages may not calculate precisely due to rounding.
Business Outlook
For the second quarter of 2014, Spansion estimates net sales in the range of $315 million to $340 million and GAAP diluted net loss per share of ($0.16) to ($0.09). Non-GAAP gross margin is expected to be in the range of 32% to 35%, and non-GAAP diluted EPS is expected to be in the range of $0.21 to $0.27. These estimates exclude amortization of intangibles of approximately $9 million, accretion of non-cash interest associated with convertible notes of $1 million to $2 million, and stock compensation expense of approximately $1 million in COGS and $7 million in Net Income. These estimates also exclude charges related to defensive litigation of $1 million to $2 million, and one time items related to the recently acquired Fujitsu Microcontroller and Analog business including (i) $2 million to $3 million in inventory markup related to fair value accounting, and (ii) $2 million to $3 million in integration related costs.
About Spansion
Spansion (NYSE: CODE) is a global leader in embedded systems solutions. Spansion’s flash memory, microcontrollers, analog and mixed-signal products drive the development of faster, intelligent, secure and energy efficient electronics. Spansion is at the heart of electronics systems, connecting, controlling, storing and powering everything from automotive electronics and industrial systems to the highly interactive and immersive consumer devices that are enriching people's daily lives. For more information, visit http://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 press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 and include statements relating to future events or our future financial performance. These forward looking statements include statements regarding our estimated net sales, net loss per share, non-GAAP gross margin and non-GAAP earnings per share, expectations of growing demand for and interest in our products, and the estimated amounts of certain expense items that are adjusted in the presentation of non-GAAP results, for the second quarter of 2014 . Forward-looking statements are subject to risks and uncertainties, and actual events or results may differ materially. Factors that could cause our actual results to differ materially include, but are not limited to, those discussed under “Part I, Item 1A. Risk Factors” in our 2013 Annual Report on Form 10-K, filed with the SEC on February 25, 2014. These risks include our ability to: accurately forecast customer demand for our products; manage risks associated with our investment in new business strategies and acquisitions, such as our acquisition of the MCA business from Fujitsu; maintain our distribution relationships and channels in the future; manage risks associated with our global customer base and support structure; maintain and manage relations with third party manufacturers; maintain manufacturing efficiency; and protect our intellectual property and defend against infringement or other intellectual property claims. We undertake no obligation to revise or update any forward-looking statements to reflect any events or circumstances that arise after the date of this report, or to conform such statements to actual results or changes in our expectations.
|
Press Contact:
Michele Landry Spansion Inc. +1.408.616.3817 Michele.landry@spansion.com |
Investor Relations:
Rahul Mathur Spansion Inc. +1.408.616.6682 Rahul.mathur@spansion.com |
Spansion Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
|
Three Months Ended March 30, 2014 |
Three Months Ended December 29, 2013 |
Three Months |
||||||||||
|
Net sales |
$ | 311,750 | $ | 313,670 | $ | 189,572 | ||||||
|
Cost of sales |
221,918 | 220,422 | 143,717 | |||||||||
|
Gross Profit |
89,832 | 93,248 | 45,855 | |||||||||
|
Research and development |
43,562 | 42,102 | 22,777 | |||||||||
|
Sales, general and administrative |
55,631 | 60,824 | 28,483 | |||||||||
|
Restructuring charges (credits) |
- | (247 | ) | - | ||||||||
|
Operating loss |
(9,361 | ) | (9,431 | ) | (5,405 | ) | ||||||
|
Interest and other income (expense) |
(4,600 | ) | (3,252 | ) | 962 | |||||||
|
Interest expense |
(6,087 | ) | (7,459 | ) | (7,604 | ) | ||||||
|
Loss on acquisition of the Microcontroller and Analog business |
- | (255 | ) | - | ||||||||
|
Loss before income taxes |
(20,048 | ) | (20,397 | ) | (12,047 | ) | ||||||
|
Provision for income taxes |
(2,447 | ) | (3,301 | ) | (2,388 | ) | ||||||
|
Net loss |
$ | (22,495 | ) | $ | (23,698 | ) | $ | (14,435 | ) | |||
|
Net loss per common share |
||||||||||||
|
Basic |
$ | (0.38 | ) | $ | (0.40 | ) | $ | (0.25 | ) | |||
|
Diluted |
$ | (0.38 | ) | $ | (0.40 | ) | $ | (0.25 | ) | |||
|
Shares used in per share calculation |
||||||||||||
|
Basic |
59,771 | 58,878 | 58,086 | |||||||||
|
Diluted |
59,771 | 58,878 | 58,086 | |||||||||
Spansion Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands except par value and shares)
|
Assets |
March 30, 2014 |
December 29, 2013 |
March 31, 2013 |
|||||||||
|
Current assets: |
||||||||||||
|
Cash and cash equivalents |
$ | 262,473 | $ | 286,069 | $ | 261,732 | ||||||
|
Short-term investments |
26,922 | 25,428 | 47,398 | |||||||||
|
Accounts receivable, net |
176,714 | 177,838 | 106,602 | |||||||||
|
Inventories |
256,891 | 254,154 | 179,648 | |||||||||
|
Deferred income taxes |
4,638 | 4,592 | 8,663 | |||||||||
|
Prepaid expenses and other current assets |
49,347 | 52,756 | 39,045 | |||||||||
|
Total current assets |
776,985 | 800,837 | 643,088 | |||||||||
|
Property, plant and equipment, net |
184,648 | 185,505 | 170,823 | |||||||||
|
Intangible assets |
158,950 | 167,949 | 141,670 | |||||||||
|
Goodwill |
166,473 | 166,422 | 166,688 | |||||||||
|
Other assets |
50,980 | 60,208 | 32,105 | |||||||||
|
Total assets |
$ | 1,338,036 | $ | 1,380,921 | $ | 1,154,374 | ||||||
|
Liabilities and Equity |
||||||||||||
|
Current liabilities: |
||||||||||||
|
Accounts payable |
128,524 | 126,680 | 70,794 | |||||||||
|
Accrued compensation and benefits |
62,735 | 57,876 | 19,993 | |||||||||
|
Accrued liabilities and other |
146,059 | 86,352 | 33,658 | |||||||||
|
Income taxes payable |
3,846 | 4,651 | 2,919 | |||||||||
|
Deferred income |
27,035 | 30,247 | 10,996 | |||||||||
|
Current portion of long-term debt |
2,394 | 97,320 | 11,626 | |||||||||
|
Total current liabilities |
370,593 | 403,126 | 149,986 | |||||||||
|
Deferred income taxes |
3,704 | 3,675 | 9,289 | |||||||||
|
Long-term debt, less current portion |
406,013 | 404,612 | 403,352 | |||||||||
|
Other long-term liabilities |
31,976 | 32,048 | 31,429 | |||||||||
|
Total liabilities |
812,286 | 843,461 | 594,056 | |||||||||
|
Stockholders’ equity |
||||||||||||
|
Class A Common stock, $0.001 par value, 150,000,000 shares authorized, 60,358,585 shares issued and outstanding (58,882,949 shares as of December 29, 2013, and 58,086,437 shares as of March 31, 2013) |
61 | 59 | 59 | |||||||||
|
Class B common stock, $0.001 par value, 1 share authorized, 0 share issued and outstanding as of March 30, 2014 and 1 share issued and outstanding as of December 29, 2013 and March 31, 2013) |
- | - | - | |||||||||
|
Preferred Stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding |
- | - | - | |||||||||
|
Additional paid-in capital |
761,212 | 747,393 | 700,134 | |||||||||
|
Accumulated deficit |
(228,454 | ) | (205,959 | ) | (142,126 | ) | ||||||
|
Accumulated other comprehensive income (loss) |
(7,069 | ) | (4,033 | ) | 2,251 | |||||||
|
Total stockholders’ equity |
525,750 | 537,460 | 560,318 | |||||||||
|
Total liabilities and stockholders’ equity |
$ | 1,338,036 | $ | 1,380,921 | $ | 1,154,374 | ||||||
Spansion Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
|
Three Months |
Three Months |
Three Months Ended March 31, 2013 |
||||||||||
|
Cash Flows from Operating Activities: |
||||||||||||
|
Net Loss |
$ | (22,495 | ) | $ | (23,698 | ) | $ | (14,435 | ) | |||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||
|
Depreciation and amortization |
26,306 | 26,162 | 20,379 | |||||||||
|
Benefit from deferred income taxes |
(47 | ) | (1,257 | ) | (25 | ) | ||||||
|
Net loss (gain) on sale and disposal of property, plant and equipment |
(34 | ) | 2 | (592 | ) | |||||||
|
Loss on acquisition of Microcontroller and Analog business |
- | 255 | - | |||||||||
|
Gain on recovery from impaired investments |
(449 | ) | (444 | ) | (1,200 | ) | ||||||
|
Loss on repurchase of 7.875% Senior Notes |
1,137 | - | - | |||||||||
|
Compensation recognized under employee stock plans |
8,481 | 7,363 | 8,624 | |||||||||
|
Changes in operating assets and liabilities |
6,480 | 12,477 | (5,237 | ) | ||||||||
|
Net cash provided by operating activities |
19,379 | 20,860 | 7,514 | |||||||||
|
Cash Flows from Investing Activities: |
||||||||||||
|
Proceeds from sale of property, plant and equipment |
96 | - | 612 | |||||||||
|
Purchase of property, plant and equipment |
(10,316 | ) | (13,242 | ) | (12,883 | ) | ||||||
|
Purchase of marketable securities |
(9,876 | ) | (20,014 | ) | (24,024 | ) | ||||||
|
Proceeds from sale and maturities of marketable securities |
8,382 | 29,952 | 28,346 | |||||||||
|
Proceeds from recovery of impaired investments |
449 | 444 | 1,530 | |||||||||
|
Acquisition, net of cash acquired |
- | (1,808 | ) | - | ||||||||
|
Net cash used for investing activities |
(11,265 | ) | (4,668 | ) | (6,419 | ) | ||||||
|
Cash Flows from Financing Activities: |
||||||||||||
|
Proceeds from issuance of common stock due to options exercised |
5,341 | 390 | 620 | |||||||||
|
Payments on financing arrangements |
- | (5,053 | ) | (2,064 | ) | |||||||
|
Repurchase of 7.875% Senior Notes including costs |
(96,319 | ) | - | - | ||||||||
|
Refinancing costs on Term loan and Revolver |
- | (134 | ) | (114 | ) | |||||||
|
Additional borrowings on term loan, net of discount |
- | 82,117 | - | |||||||||
|
Cash settlement on hedging activities |
- | - | (268 | ) | ||||||||
|
Net proceeds from sale of Sunnyvale property |
58,908 | - | - | |||||||||
|
Net cash provided by (used for) financing activities |
(32,070 | ) | 77,320 | (1,826 | ) | |||||||
|
Effect of exchange rate on cash and cash equivalents |
360 | (468 | ) | 286 | ||||||||
|
Net increase (decrease) in cash and cash equivalents |
(23,596 | ) | 93,044 | (445 | ) | |||||||
|
Cash and cash equivalents at the beginning of period |
286,069 | 193,025 | 262,177 | |||||||||
|
Cash and cash equivalents at end of period |
$ | 262,473 | $ | 286,069 | $ | 261,732 | ||||||
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 gross profit, operating income, 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 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 expenses that the company believes are not indicative of its core operating results. For more information on non-GAAP financial measures, please see the reconciliations of such measures in the tables of this release.
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 and provide useful information to investors and others in understanding and evaluating Spansion’s operating results and future prospects in the same manner as management. During the quarter ended March 30, 2014, the presentation of non-GAAP financial information included the addition of intangible amortization, stock compensation expense, acquisition related costs, litigation reserve, financing arrangements related costs and others to net income as they are either non-cash or non-recurring in nature. The amounts in the U.S. GAAP to Non-GAAP reconciliation below for litigation reserves include the impact of actual expense incurred and adjustments to the accrual for estimated defensive litigation costs for the next 4 quarters per Company policy. Actual expense incurred for defensive litigation was $0.7 million in Q4 2013 and $3.6 million in Q1 2014.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
Gross Profit to Non-GAAP Gross Profit
|
($ in millions) |
Q1 2014 |
Q4 2013 |
Q1 2013 |
|||||||||
|
GAAP gross profit |
$ | 89.8 | $ | 93.2 | $ | 45.9 | ||||||
|
Add: Intangibles amortization |
9.2 | 8.9 | 6.8 | |||||||||
|
Add: Inventory mark-up amortization relating to Microcontroller and Analog business acquisition |
2.0 | 3.1 | - | |||||||||
|
Add: Stock compensation expense |
1.5 | 1.7 | 1.4 | |||||||||
|
Add: Acquisition related costs |
0.5 | 0.1 | - | |||||||||
|
Non-GAAP Gross Profit |
$ | 103.0 | $ | 107.0 | $ | 54.1 | ||||||
Operating Loss to Non-GAAP Operating Income
|
($ in millions) |
Q1 2014 |
Q4 2013 |
Q1 2013 |
|||||||||
|
GAAP operating loss |
$ | (9.4 | ) | $ | (9.4 | ) | $ | (5.4 | ) | |||
|
Add: Intangibles amortization |
9.2 | 8.9 | 6.8 | |||||||||
|
Add: Inventory mark-up amortization relating to Microcontroller and Analog business acquisition |
2.0 | 3.1 | - | |||||||||
|
Add: Stock compensation expense |
8.5 | 7.4 | 8.6 | |||||||||
|
Add: Acquisition related costs |
7.6 | 2.7 | 0.5 | |||||||||
|
Add: Litigation reserve |
1.1 | 13.1 | - | |||||||||
|
Add: Others |
- | (0.2 | ) | - | ||||||||
|
Non-GAAP Operating Income |
$ | 19.0 | $ | 25.5 | $ | 10.5 | ||||||
Net Loss to Non-GAAP Net Income and Adjusted EBITDA
|
($ in millions) |
Q1 2014 |
Q4 2013 |
Q1 2013 |
|||||||||
|
GAAP net loss |
$ | (22.5 | ) | $ | (23.7 | ) | $ | (14.4 | ) | |||
|
Add: Intangibles amortization |
9.2 | 8.9 | 6.8 | |||||||||
|
Add: Inventory mark-up amortization relating to Microcontroller and Analog business acquisition |
2.0 | 3.1 | - | |||||||||
|
Add: Stock compensation expense |
8.5 | 7.4 | 8.6 | |||||||||
|
Add: Financing arrangements related costs |
4.8 | 0.3 | - | |||||||||
|
Add: Accretion of interest on the senior exchangeable notes |
1.1 | 1.1 | - | |||||||||
|
Add: Litigation reserve |
1.1 | 13.1 | - | |||||||||
|
Add: Acquisition related costs |
7.8 | 3.0 | 0.5 | |||||||||
|
Add: Others |
(0.3 | ) | (0.5 | ) | - | |||||||
|
Non-GAAP Net Income |
$ | 11.6 | $ | 12.6 | $ | 1.5 | ||||||
|
Add: Interest and other expense (income) |
5.0 | 9.6 | 6.6 | |||||||||
|
Add: Taxes |
2.4 | 3.3 | 2.4 | |||||||||
|
Add: Depreciation |
13.2 | 13.3 | 12.6 | |||||||||
|
Adjusted EBITDA |
$ | 32.2 | $ | 38.8 | $ | 23.1 | ||||||
Note: Totals may not add precisely due to rounding.
8