Spansion Issues Second Quarter and 2010 Guidance

Jun 16, 2010, 09:00 ET from Spansion Inc.

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SUNNYVALE, Calif., June 16 /PRNewswire-FirstCall/ -- Spansion Inc. (NYSE Amex: CODE), a leading provider of Flash memory solutions, today announced guidance for its second quarter ending June 27, 2010 and fiscal year 2010.  Due to the unique impacts of fresh start accounting, Spansion is providing both GAAP and non-GAAP guidance.  

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($ in millions)

Q210

FY 2010

GAAP Basis  

   Net sales

240 – 260

1,100 – 1185

   Net income

290 – 330

230 – 290

Non-GAAP Basis

   Adjusted net sales

285 – 305

1,150 – 1240

   Adjusted net income

15 – 30

65 – 110

   Adjusted EBITDA

50 – 65

260 – 300

An explanation of the non-GAAP guidance and reconciliation between (i) net sales and adjusted net sales, (ii) net income and adjusted net income, and (iii) net income and adjusted EBITDA are provided below.

Spansion will host a conference call to provide additional details on fiscal second quarter guidance and an update on the impact of fresh start accounting on future financials. The call will be held on Wednesday, June 16, 2010, at 7:00 am PDT / 10:00 am EDT with John Kispert, president and chief executive officer, and Randy Furr, chief financial officer.

Conference Call Details

Interested parties may access the call via the Internet at http://investor.spansion.com/events.cfm or via dial-in at 1-877-312-5884. Please join the conference call at least 10 minutes early to register.

An audio replay of the call will be available within two hours of the call and may be accessed at http://investor.spansion.com/events.cfm or via dial-in at 1-800-642-1687. The conference ID for the replay is 80770066.

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

Net Sales to Adjusted Net Sales

($ in millions)

Q210

FY10

GAAP net sales

240 - 260

1,100 - 1,185

Add: revenue lost due to fresh start accounting

40 - 50

50 - 55

Non-GAAP net sales

285 - 305

1,150 - 1,240

Net Income to Adjusted Net Income

($ in millions)

Q210

FY10

GAAP net income

290 - 330

230 - 290

Add: fresh start operating expense adjustments

60 - 65

190 - 195

Add: financing charge write-off to interest

11

11

Less: reorganization gain

352 - 382

362 - 382

Add: litigation expense with Samsung

5

25 - 30

Less: tax impact for adjustments

0

26 - 28

Adjusted net income

15 - 30

65 - 110

Net Income to EBITDA and Adjusted EBITDA

($ in millions)

Q210

FY10

GAAP net income

290 - 330

230 - 290

Add: interest

20

59

Less: reorganization gain

352 - 382

362 - 382

Add: taxes

3

9

Add: depreciation and amortization

41

182

EBITDA

0 - 15

115 - 155

Add: fresh start adjustments

45 - 50

105 - 110

Add: litigation expense with Samsung

5

25 - 30

Add: stock based comp charges

2

10

Adjusted EBITDA

50 - 65

260 - 300

Use of Non-GAAP Financial Information

To provide investors and others with additional information regarding Spansion's guidance, we have disclosed in this press release non-GAAP financial measures, including adjusted net sales, adjusted net income, EBITDA and adjusted EBITDA.  These non-GAAP financial measures are a supplement to, and not a substitute for or superior to, the company's guidance 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 net sales differs from GAAP net sales in that it includes revenue lost under fresh start accounting from product sell-through that was physically located with the distributors. Adjusted net income differs from net income in that it excludes the impact of non-recurring items, including fresh start adjustments, litigation expenses with Samsung, one-time reorganization gain, write-off of financing costs completed prior to emergence from bankruptcy, and associated tax impact.  Adjusted EBITDA differs from GAAP net income in that it excludes interest expenses, taxes, depreciation and amortization. It also adds back the impact due to fresh start accounting, litigation expenses with Samsung, and stock based compensation charges.    

Management believes these non-GAAP financial measures:

  • reflect Spansion's ongoing business in a manner that allows for meaningful period-to-period comparisons 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 and to those of peer companies;
  • reflect net sales for the company as inventory at the distributors, when sold-through, would not be recognized as revenue under fresh start accounting.  The Company intends to collect cash from the distributors and this adjustment is non-cash in nature.  
  • provide an 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, litigation expenses with Samsung, and stock based compensation charges attempt to exclude items that are either non-cash or non-recurring in nature.  

About Spansion

Spansion's (NYSE Amex: 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™, ORNAND™, EcoRAM™ 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 presentation 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 mix of product expected to be sold, pricing of product sold, the cost of pending litigation, the effects of fresh start accounting including the effect on revenue, gross margin, and depreciation and amortization, the financial results of future operations including revenue, gross margins, expenses, operating income, interest expense and taxes.  Additional risks and uncertainties regarding guidance include risk inherent in financial modeling for balance sheet components, cash flow, and elements of future profit and loss statements such as the levels of net sales and gross margins, research and development expenses, selling, general and administrative expenses, predicted forecasts of equity, debt, interest income, interest expense, and excess cash flow sweep under the company's debt instruments and annual usable net operating loss carryforwards. In addition, the instability of the global economy and tight credit markets could continue to adversely impact Spansion'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. Spansion 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 Annual Report on Form 10-K for the fiscal year 2009 ended December 27, 2009 and the Form 10-Q for the first quarter of 2010. 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.

SOURCE Spansion Inc.



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