Spansion Inc. Reports Fourth Quarter 2014 Results

SUNNYVALE, Calif., Jan. 22, 2015 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a global leader in embedded systems solutions, today announced operating results for its fourth quarter ended December 28, 2014.

On December 1, 2014, Cypress Semiconductor Corporation and Spansion entered into a definitive agreement to merge in an all-stock, tax-free transaction.  Under the terms of the agreement, Spansion shareholders will receive 2.457 shares of Cypress common stock for each share of Spansion common stock they own. The shareholders of each company are expected to own approximately 50 percent of the post-merger company. 

In anticipation of this transaction, which is expected to close in the first half of 2015, subject to customary closing conditions, including termination of the applicable waiting period in Japan and approval by Spansion and Cypress stockholders, Spansion will not conduct a fourth quarter earnings call and is not providing profit estimates for the first quarter of 2015.  However, Spansion is providing the business outlook for net sales for the first quarter of 2015.

On a U.S. GAAP basis, Spansion reported fourth quarter net sales of $309.5 million, gross margin of 31.9%, operating loss of $3.0 million, net loss of $9.7 million and diluted net loss of $0.16 per share.

On a non-GAAP basis, gross margin was 35.8%, operating income was $26.6 million,  net income was $20.8 million, and diluted net income per share was $0.30.

For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."

Fourth Quarter 2014 Financial Highlights:

• Revenue of $309.5 million
• Non-GAAP gross margin of 35.8%
• Non-GAAP operating income of $26.6 million or 8.6% of revenue
• Adjusted EBITDA of $41.8 million or 13.5% of revenue
• Non-GAAP Diluted EPS of $0.30 per share
• Cash, cash equivalents and short term investments of $300.7 million

Note: Percentages may not calculate precisely due to rounding.

Fourth Quarter 2014 Business Highlights:

• Maintained embedded market leadership
• Record design win momentum
• Strong momentum and demand for newer products
  (NAND, HyperFlash™ memory, MCUs and analog)
• Expanded licensing revenue with ISSI as licensee of HyperBus™ interface and HyperFlash memory
• Continued strength in automotive and industrial
• Launched new products including high-density automotive flash products, intelligent single chip LED IC, low-power wearable development platform, e.MMC memory

"We executed well in the fourth quarter, continuing our rapid pace of new product introductions and achieving record design wins, which increased approximately 30% over the fourth quarter a year ago," said John Kispert, CEO of Spansion. "Additionally, we had a transformational 2014,  growing our technologies, products, financial and brand position as an innovator in embedded systems solutions for automotive, industrial, IoT, consumer and communications. We expect our product and design win momentum to continue this year."

Fourth quarter net sales were comprised of $163 million from flash memory, $133 million from the microcontroller and analog mixed-signal businesses, and $13 million from licensing.  From an end market and regional perspective, revenue distribution was generally in line with expectations.  The fourth quarter showed continued growth in NAND, with record revenue of $48 million, and internal fab equipment utilization rate remained flat at roughly 70%.

Fourth Quarter 2014 Results

Business Outlook

For the first quarter of 2015, Spansion estimates net sales in the range of $270 million to $310 million.  The company expects momentum in NAND and strength in the transportation and industrial markets to be offset by typical first quarter seasonality and changes in foreign exchange rates in Japan.

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®, HyperBus, HyperFlash, HyperRAM and combinations thereof, are trademarks or 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" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our estimated net sales, expectations regarding demand for and interest in our products, and expectations regarding the timing and benefits of the proposed merger with Cypress Semiconductor Corporation.  Forward-looking statements are subject to risks and uncertainties, and actual events or results may differ materially from those projected in such statements.  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, as amended by the Form 10-K/A filed July 8, 2014.  These risks include uncertainty that may be associated with our recently announced entry into an agreement and plan of merger with Cypress Semiconductor Corporation, and our ability to: accurately forecast customer demand for our products; manage risks associated with our investment in new business strategies and acquisitions; 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 release, or to conform such statements to actual results or changes in our expectations.

No Offer or Solicitation

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval with respect to the proposed merger or otherwise. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Additional Information and Where to Find It

In connection with the proposed merger, Cypress has filed a registration statement on Form S-4, which includes a preliminary joint proxy statement/prospectus and other documents concerning the proposed merger with the SEC. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE JOINT PRELIMINARY PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED (WHEN THEY BECOME AVAILABLE) WITH THE SEC CAREFULLY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT CYPRESS, SPANSION, AND THE PROPOSED MERGER. Investors and security holders will be able to obtain free copies of the registration statement and the joint proxy statement/prospectus and any other documents filed by Cypress and Spansion with the SEC at the SEC's website at www.sec.gov. They may also be obtained for free by contacting Cypress Investor Relations at http://investors.cypress.com/contactus.cfm or by telephone at (408) 943-2656 or by contacting Spansion Investor Relations at [email protected] or by telephone at (408) 962-2500. The contents of the websites referenced above are not deemed to be incorporated by reference into the registration statement or the joint proxy statement/prospectus.

Participants in the Solicitation

Each of Spansion and Cypress and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from their respective stockholders with respect to the transactions contemplated by the merger agreement. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Cypress or Spansion security holders in connection with the proposed merger is or will be set forth in the registration statement and the joint proxy statement/prospectus when filed with the SEC. Information regarding Spansion's executive officers and directors is included in Spansion's Proxy Statement for its 2014 Annual Meeting of Stockholders, filed with the SEC on April 18, 2014, and its Current Report on Form 8-K, filed with the SEC on August 19, 2014, and information regarding Cypress' executive officers and directors is included in Cypress' Proxy Statement for its 2014 Annual Meeting of Stockholders, filed with the SEC on March 28, 2014 and its Current Report on Form 8-K, filed with the SEC on April 2, 2014. Copies of the foregoing documents may be obtained as provided above. Certain executive officers and directors of Cypress and Spansion have interests in the transaction that may differ from the interests of Cypress and Spansion stockholders generally. These interests are described in the preliminary joint proxy statement/prospectus when it becomes available.

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 December 28, 2014, the presentation of non-GAAP financial information included adjustments such as intangibles amortization, equity compensation expense, inventory markup amortization, Cypress merger costs, defensive litigation reserve, financing arrangements related costs, gain on recovery from impaired investments, reversal of expense accruals related to foundry 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 $7.1 million in Q4 2014 and $8.1 million in Q3 2014.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

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SOURCE Spansion Inc.

Related Links

http://www.spansion.com