SUNNYVALE, Calif., Dec. 31 /PRNewswire-FirstCall/ -- Spansion Inc. today announced operating results for its quarter and nine months ended September 27, 2009. Spansion reported third quarter of 2009 net sales of $327.6 million, which reflects the company's refined focus and decision to concentrate primarily on embedded and targeted wireless applications. The company generated net income on a U.S. GAAP basis of $1.5 million, or diluted net income per share of $0.01. Operating income for the quarter was $20.0 million and U.S. GAAP gross and operating margins were 28.3% and 6.1%, respectively.

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 U.S. GAAP Results (in millions, except margin and per share amounts) Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 --------------------------------------------------- Net sales $327.6 $376.3 $399.6 $468.0 $630.9 Gross margin 28.3% 25.5% 4.2% (43.1%) 13.7% Operating income (loss) $20.0 $10.1 $(156.1) $(2,007.3) $(85.7) Operating margin 6.1% 2.7% (39.1%) (429.0%) (13.6%) Net income (loss) $1.5 $(7.3) $(512.6) $(2,076.9) $(135.3) Diluted net income (loss) per share $0.01 $(0.04) $(3.18) $(12.90) $(0.84)

The reduction in net sales and substantial improvements in operating and net income are a direct result of the company's strategy to exit unprofitable markets and restructure the company to support its refined focus.

Non-GAAP net income for the third quarter of 2009 excluding restructuring, reorganization, and other special charges and credits was $17.6 million, or non-GAAP net income per share of $0.10. Reconciliation between U.S. GAAP operating results and non-GAAP operating results is provided following the financial statements in this release.

 Non GAAP Results (in millions, except per share amounts) Q3 2009 Q2 2009 Q1 2009 Q4 2008 Q3 2008 ----------------------------------------------------- Net income (loss) $17.6 $16.8 $(156.2) $(433.0) $(116.8) Diluted net income (loss) per share $0.10 $0.10 $(0.97) $(2.69) $(0.73)

As a result of a focus on cost reductions, efficiencies and improved asset management, the company continued to generate positive cash flows from operations and ended the third quarter of fiscal 2009 with $263.6 million in cash as compared to $220.5 million and $95.3 million at the end of the second and first quarters of fiscal 2009, respectively.

"Spansion is executing well against its plan," said Randy Furr, Spansion's CFO. "Net income has improved by approximately $135 million year over year for its fiscal third quarter on approximately half the net sales. By focusing on our core businesses and exiting unprofitable applications, we have shown that our strategy is working to deliver stronger financial results."

Restructuring

With a sustainable business model designed for profitability and generating positive free cash flow, the company is focused on servicing its core embedded customers as well as target wireless applications. The company has completed a number of restructuring activities to realign its business to support a refined target market of Flash memory applications. The company now maintains a more flexible manufacturing network that balances internal and external capacity to fulfill customer demand. Spansion's Fab 25 in Austin, Texas, is the company's main wafer fabrication facility, with supplemental foundry support provided by Spansion Japan, Fujitsu and Semiconductor Manufacturing International Corporation (SMIC). For final manufacturing (assembly, test, mark and pack), Spansion maintains two internal facilities with a number of additional external resources.

"Our restructuring efforts are paying off as highlighted in our improved third quarter performance," said John Kispert, Spansion president and CEO. "Over the past nine months we have taken a number of difficult actions relative to restructuring. I am proud to say that we now have those efforts behind us and can focus on the future. We expect to emerge from Chapter 11 in the first quarter of 2010 with a healthier capital structure and a broad product portfolio, positioned to compete in our target markets."

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

For the nine months ended September 27, 2009, the company has recognized approximately $381.6 million as reorganization items in the Condensed Consolidated Statement of Operations included as part of this press release. Reorganization items consist primarily of provisions for expected allowed claims and certain charges related to allowed claims. The U.S. Bankruptcy Court will ultimately determine liability amounts that will be allowed for claims. As claims are resolved, or where better information becomes available and is evaluated, the company will make adjustments to the liabilities recorded on its quarterly or annual financial statements as appropriate. Any such adjustments could be material to the company's financial position or results of operations in any given period.

Spansion Japan

Spansion Japan Limited, a subsidiary of Spansion Inc., commenced corporate reorganization proceedings in Japan on March 3, 2009. As a result, and in accordance with U.S. GAAP, the financial results of Spansion Japan Limited are no longer included in the consolidated financial results of Spansion Inc. post March 3, 2009. Spansion Japan has supplied, and continues to supply, silicon wafers to Spansion LLC. Historically, the prices for the wafers sold by Spansion Japan to Spansion LLC were governed by a pre-bankruptcy foundry agreement. The prices the company pays to Spansion Japan for the wafers and related services are a material component of the company's "cost of goods sold." The company believes that the prices under the foundry agreement were significantly greater than fair value and thus the Company attempted to renegotiate these pricing terms with Spansion Japan. These efforts were unsuccessful and in October 2009, the company filed a motion with the U.S. Bankruptcy Court to reject the foundry agreement. An order rejecting the foundry agreement was issued by the U.S. Bankruptcy Court on November 19, 2009.

As a result of the rejection of the foundry agreement, there is no valid contract that establishes pricing for the wafers the company has received from Spansion Japan from February 9, 2009 (which is 20 days prior to the company's chapter 11 filing) through October 27, 2009, which is referred to in this press release as the "dispute period." The results of operations for the third quarter and nine months ended September 27, 2009 presented in this press release are based on the company's estimates of value for the goods and services provided by Spansion Japan during the dispute period. The U.S. Bankruptcy Court is scheduled to hear evidence to establish the value of wafers purchased during the dispute period from Spansion Japan on January 8, 2010. If the U.S. Bankruptcy Court finds that the value of wafers purchased during the dispute period from Spansion Japan is different than the company's estimates, it will have an impact on the results of operations and that impact could be material. Moreover, the result of that ruling could also have a material impact on the financial condition of the company.

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, company's financial results presented in accordance with United States 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, 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 United States 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®, the Spansion logo, MirrorBit®, MirrorBit® 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 creditor protection proceedings include: the company's ability to 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 or if the company discontinues its business relationship with Spansion Japan; 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 proceedings 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 adequacy of the company's cash on hand to fund its ongoing operations; 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. Debtor-in-Possession CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Quarter Ended YTD YTD ------------------------------------------------------------------------- September June March September September 27 28 29 27 28 2009 2009 2009 2009 2008(*) Net sales $327,578 $376,301 $399,628 $1,103,507 $1,813,852 Cost of sales 234,952 280,266 383,035 898,253 1,523,654 ------------------------------------------------------------------------- Gross profit 92,626 96,035 16,593 205,254 290,198 Research and development 28,281 37,889 44,746 110,916 346,269 Sales, general and administrative 36,820 33,788 104,029 174,637 197,122 Restructuring charges 7,492 14,212 23,942 45,646 11,299 ------------------------------------------------------------------------- Operating income (loss) before reorganization items 20,033 10,146 (156,124) (125,945) (264,492) Other than temporary impairment on marketable securities - - - - (14,518) Gain on deconsolidation of subsidiary - - 30,100 30,100 - Interest and other income (expense), net 532 1,916 480 2,928 7,347 Interest expense (9,199) (9,212) (24,466) (42,877) (79,249) ------------------------------------------------------------------------- Income (loss) before reorganization items and income taxes 11,366 2,850 (150,010) (135,794) (350,912) Reorganization items (9,348) (9,842) (362,457) (381,647) - ------------------------------------------------------------------------- Income (loss) before income taxes 2,018 (6,992) (512,467) (517,441) (350,912) Provision for income taxes (518) (261) (168) (947) (7,195) ------------------------------------------------------------------------- Net income (loss) $1,500 $(7,253)$(512,635) $(518,388) $(358,107) ------------------------------------------------------------------------- Net income (loss) per common share Basic $0.01 $(0.04) $(3.18) $(3.21) $(2.34) Diluted $0.01 $(0.04) $(3.18) $(3.21) $(2.34) ------------------------------------------------------------------------- Shares used in per share calculation Basic 162,090 161,778 161,283 161,717 153,216 Diluted 173,925 161,778 161,283 161,717 153,216 ------------------------------------------------------------------------- * Prior quarters' numbers have been recast to give effect to the retroactive application of FSP APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", now Accounting Standards Codification (ASC) 470-20.

 Spansion Inc. Debtor-in-Possession CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) September 27 June 28 March 29 Dec. 28 2009 2009 2009 2008* ---------------------------------------------- Assets Current assets: Cash and cash equivalents $263,554 $220,468 $95,327 $116,387 Auction rate securities 104,138 - - - Accounts receivable 118,754 124,886 155,085 139,888 Accounts receivable from related party 310,045 258,989 180,801 117,575 Allowance for doubtful accounts (55,052) (55,012) (54,283) (8,106) Inventories 137,197 134,577 181,291 379,157 Deferred income taxes 3,213 3,213 3,213 3,213 Prepaid expenses and other current assets 66,201 26,248 34,732 35,225 ------------------------------------------------------------------------- Total current assets 948,050 713,369 596,166 783,339 Property, plant and equipment, net 343,140 396,780 440,600 795,030 Auction rate securities - 110,839 104,848 94,014 Other assets 62,398 86,368 94,900 101,489 ------------------------------------------------------------------------- Total Assets $1,353,588 $1,307,356 $1,236,514 $1,773,872 ========================================================================== Liabilities and Stockholders' Deficit Current liabilities: Note payable to banks under revolving loans $ - $ - $ - $105,687 Short term note (UBS loan) 68,410 79,591 79,197 - Accounts payable and accrued liabilities 120,103 93,170 67,185 554,787 Accounts payable and accrued liabilities to related party 146,440 66,121 21,926 79,684 Accrued compensation and benefits 16,814 21,266 7,534 60,412 Income taxes payable 464 303 2,519 3,972 Deferred income 69,111 69,271 43,524 35,285 Current portion of long-term debt and obligations under capital leases - - - 1,126,849 ------------------------------------------------------------------------- Total current liabilities 421,342 329,722 221,885 1,966,676 Deferred income taxes 3,280 3,275 3,267 3,267 Long-term debt, less current portion - - - 210,246 Other long-term liabilities 27,015 36,953 47,280 44,330 Liabilities subject to compromise 1,765,933 1,805,761 1,827,146 - Total liabilities 2,217,570 2,175,711 2,099,578 2,224,519 Stockholders' deficit (863,982) (868,355) (863,064) (450,647) ------------------------------------------------------------------------- Total liabilities and stockholders' deficit $1,353,588 $1,307,356 $1,236,514 $1,773,872 ========================================================================= * Derived from the December 28, 2008 audited financial statements of Spansion Inc. Prior quarters' numbers have been recast to give effect to the retroactive application of FSP APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", now Accounting Standards Codification (ASC) 470-20.

 Spansion Inc. Debtor-in-Possession CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Quarter Ended YTD September June March September 27 28 29 27 2009 2009 2009 2009 --------------------------------------- Cash Flows from Operating Activities: Net income (loss) $1,500 $(7,253)$(512,635)$(518,388) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, amortization, and in-process research and development write-off 33,312 45,776 61,200 140,288 Provision (benefit) for deferred income taxes 4 8 - 12 Provision for doubtful accounts 39 730 17,708 18,477 Net (gain) loss on sale and disposal of property, plant, and equipment 530 - (1,902) (1,372) Compensation recognized under employee stock plans 2,875 2,138 5,430 10,443 Gain on deconsolidation of subsidiary - - (30,100) (30,100) Gain on sale of Suzhou entity (784) - - (784) Loss from write-off of rejected capital leases and various licenses (3,090) - - (23,138) Changes in operating assets and liabilities, net of effects of deconsolidation of subsidiary: (Increase) in trade accounts receivable and other receivables (78,845) (47,989) (54,018) (180,852) (Increase) decrease in inventories (4,117) 46,714 142,499 185,096 (Increase) decrease in prepaid expenses and other current assets 5,849 8,484 (25,191) (9,923) (Increase) decrease in other assets (1,488) 2,426 (8,936) (6,675) Increase (decrease) in accounts payable, accrued liabilities and accrued compensation 118,376 55,767 383,219 581,332 Increase (decrease) in income taxes payable 167 (2,217) (277) (2,327) Increase (decrease) in deferred income (12,972) 25,746 3,226 16,000 --------------------------------------- Net cash (used) provided by operating activities 67,536 130,330 (19,777) 178,089 --------------------------------------- Cash Flows from Investing Activities: Proceeds from sale of property, plant and equipment 785 15 45 845 Purchases of property, plant and equipment (10,446) (1,280) (3,921) (15,647) Loan made to an investee - - (5,263) (5,263) Proceeds from redemption of ARS 10,375 - - 10,375 Cash decrease due to deconsolidation of subsidiary - - (52,092) (52,092) Cash decreases due to the sale of Suzhou entity (10,431) - - (10,431) --------------------------------------- Net cash used by investing activities (9,717) (1,265) (61,231) (72,213) --------------------------------------- Cash Flows from Financing Activities: Proceeds from borrowings, net of issuance costs - - 117,758 117,758 Payments on debt and capital lease obligations (14,733) (3,924) (54,715) (73,372) --------------------------------------- Net cash (used) provided by financing activities (14,733) (3,924) 63,043 44,386 --------------------------------------- Effect of exchange rate changes on cash and cash equivalents - - (3,095) (3,095) --------------------------------------- Net (decrease) increase in cash and cash equivalents 43,086 125,141 (21,060) 147,167 Cash and cash equivalents at the beginning of period 220,468 95,327 116,387 116,387 --------------------------------------- Cash and cash equivalents at end of period $263,554 $220,468 $95,327 $263,554 =======================================

 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 ------------------------------------------------------- September June March December September 27 28 29 28 28 2009 2009 2009 2008 2008 GAAP Net income (loss) $1,500 $(7,253) $(512,635) $(2,076,905) $(135,347) Acquisition- related charges 79 79 79 84,030 2,676 Restructuring charges 7,492 14,212 23,942 (138) 1,377 Reorganization charges 9,348 9,842 362,457 - - Impairment charges 1,571,269 - Gain on deconsolidation of subsidiary - - (30,100) - - Gain on divestiture (784) - - - - Impairment of Marketable securities - - - (11,248) 14,518 Income tax effect of non-GAAP adjustments - - - - - Non-GAAP Net income (loss) $17,635 $16,880 $(156,257) $(432,992) $(116,776) Non-GAAP net income (loss) per diluted share $0.10 $0.10 $(0.97) $(2.69) $(0.73) Shares used in diluted shares calculation 173,925 174,367 161,283 161,000 160,687

 Spansion Inc. Debtor-in-Possession SELECT ITEMS IN THE FINANCIALS (Unaudited) (In thousands) Quarter Ended YTD YTD ------------------------------------------------------- September June March September September 27 28 29 27 28 2009 2009 2009 2009 2008 Interest expense (income) $8,667 $7,296 $23,986 $39,949 $71,902 Taxes 518 261 168 947 7,195 Depreciation in cost of sales, R&D and SG&A 31,032 37,292 58,042 126,365 464,068 Depreciation in restructuring charges 2,328 2,857 - 5,184 - Impairment charges - 5,596 211 5,808 - Amortization 79 79 79 237 5,739

SOURCE Spansion Inc.

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Spansion Inc. Reports Third Quarter 2009 Results

Spansion Inc. Reports Third Quarter 2009 Results