Spansion Inc. Reports Third Quarter 2012 Results

               Spansion Inc. Reports Third Quarter 2012 Results

PR Newswire

SUNNYVALE, Calif., Oct. 25, 2012

SUNNYVALE, Calif., Oct. 25, 2012 /PRNewswire/ -- Spansion Inc. (NYSE: CODE), a
leading provider of Flash memory solutions, today announced operating results
for its third fiscal quarter ended September 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20060118/SFW077LOGO)

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:

  oRevenue of $239.7 million
  oNon-GAAP adjusted gross margin of 36.3%
  oNon-GAAP adjusted operating income of $31.5 million or 13.1% of revenue
  oAdjusted EBITDA of $46.8 million
  oNon-GAAP EPS of $0.36 per share
  oCash, cash equivalents and short term investments of $328 million

Third Quarter 2012 Business Highlights: 

  oContinued market leadership and focused execution
  oLeading embedded NOR market with comprehensive product portfolio
  oExpanded product portfolio with new serial and NAND products
  oOver 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 at http://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 at http://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 $5.1    $26.0   $7.3
stockholders
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)                  Net
                         COGS    Income
Favorable/(Unfavorable)
Intangible Amortization  (7)     (7)
Stock Based Compensation (1)-(2) (8)-(9)
Total                    (8)-(9) (15)-(16)

Excluding the above items, fourth quarter 2012 non-GAAP gross 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, 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 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.

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
                                        Ended        Ended        Ended
                                        Sep 30, 2012 July 1, 2012 Sep 25, 2011
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   -            (28,434)     -
and building
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,    July 1,    Sep 25,
                                              2012       2012       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      36,700     31,137     42,016
     assets
      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    11,468     12,045     4,292
     obligations under capital leases
     Income taxes payable                     4,810      3,966      3,783
                                              -
     Deferred income taxes, short-term                   -          4,407
                                              
      Total current           190,861    178,797    214,742
     liabilities
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     61         60         60
shares issued and outstanding
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.      568,171    555,038    590,454
     stockholders' equity
Non-controllinginterest                      -          -          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 Three Months Three Months
                                        Ended        Ended        Ended

                                        Sep 30, 2012 July 1, 2012 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    (87)         1,786        154
    income taxes
    Net gain on sale of Kuala Lumpur    -            (28,434)     -
    land and building
    Net gain on sale and disposal of
    property,                           (1,117)      (4,046)      (1,533)
    plant and equipment
    Compensation recognized under       8,761        8,968        4,624
    employee stock plans
    Changes in operating assets and    27,010       (23,460)     (16,795)
    liabilities
Net cash provided by operating          62,318       6,948        23,090
activities
Cash Flows from Investing Activities:
    Proceeds from sale of property,     1,713        38,416       2,899
    plant and equipment
    Purchase of property, plant and     (12,166)     (9,358)      (10,828)
    equipment
    Purchase of marketable securities   (28,686)     (17,065)     (46,707)
    Proceeds from maturities of         44,336       16,649       3,236
    marketable securities
    Other                               -            -            581
Net cash provided by (used for)         5,197        28,642       (50,819)
investing activities
Cash Flows from Financing Activities:
Proceeds from issuance of common stock  27           62           1,008
due to options exercised
 Payments on debt and capital lease   (15,560)     (1,198)      (822)
obligations
 Acquisition of noncontrolling        (720)        (3,304)      -
interest
 Cash settlement on hedging           (268)        (263)        (268)
activities
 Purchase of bankruptcy claims        -            -            (30,000)
Net cash used for financing activities  (16,521)     (4,703)      (30,082)
Effect of exchange rate changes         339          215          1,020
on cash and cash equivalents
Net increase / (decrease) in cash and   51,333       31,102       (56,791)
cash equivalents
Cash and cash equivalents at the        228,127      197,025      292,311
beginning of period
Cash and cash equivalents at end of     $279,460     $228,127     $ 235,520
period

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:

  oAdjusted 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.
  oAdjusted 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.
  oAdjusted 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:

  oReflect 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;
  oProvide 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;
  oProvide 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        -       (28.4)  -
building
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 Income
($ 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        -       (28.4)  -
building
Add: Stock compensation expense                        8.8     9.0     4.6
Less:Amortization of intangibles relating to           -       -       (0.1)
non-controlling interest
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        -       (28.4)  -
building
Add: Fresh start adjustments                          -       -       12.6
Add: Stock compensation expense                       8.8     9.0     4.6
Add: Net income attributable to non-controlling        -       -       0.5
interest
Adjusted EBITDA                                        $46.8   $43.4   $69.3



SOURCE Spansion Inc.

Website: http://www.spansion.com
Contact: Press, Michele Landry, Spansion Inc., +1-408-616-3817,
michele.landry@spansion.com; or Investor Relations, Melanie Friedman, The
Blueshirt Group, +1-415-217-4964, melanie@blueshirtgroup.com
 
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