Spansion positioned for Chapter 11 emergence

SUNNYVALE, USA: Spansion Inc. today announced select financial results for its second quarter ended June 28, 2009 that demonstrate the ongoing progress the company is making in its restructuring efforts.

Spansion Japan Ltd, a subsidiary of Spansion Inc., commenced corporate reorganization proceedings in Japan on March 3, 2009. As a result, Spansion Inc. is no longer able to consolidate the financial results of Spansion Japan Limited in accordance with US GAAP. Financial information presented here represents GAAP-based information for Spansion Inc. and excludes Spansion Japan Ltd.

In the second quarter of 2009, net sales were $376 million, down slightly from the prior quarter. Net sales for the second quarter reflect continued strong support for the company's products and is reflective of its strategy to focus on the embedded solutions market. Target applications in the embedded solutions market include automotive, consumer, mobility, networking, personal computers and peripherals, and telecom.

"Spansion is executing well against its plan and these results are evidence of our strong performance. The company delivered higher than forecasted net sales, decreased operating expenses and significantly improved its cash balances, providing solid momentum for emergence from Chapter 11 in the fourth quarter," said John Kispert, Spansion president and CEO.

"As a result of a focus on cost reductions, efficiencies and asset management we increased our cash position to $220 million at the end of our second quarter, which is a great improvement from Spansion's cash-challenged position earlier this year."

The new operating model is designed to support a leaner, more competitive company that has greater operational efficiencies and is positioned to lead to positive free cash flow and profitability.

Spansion continued to focus on efficiencies and cost reductions in all three major operating expense categories: Research and Development (R&D); Sales and Marketing; and General and Administrative.

Investment in R&D continues at a rate slightly greater than 10 percent of net sales, supporting Spansion's ongoing development of industry-leading products and technologies. Total operating expenses, excluding restructuring charges, dropped more than 20% in the second quarter of 2009 compared to the first quarter of 2009.

Spansion ended the second quarter of 2009 with a cash balance of approximately $220 million, reflecting the continued strong market position with its customers, stable pricing and reduced operating expenses.

The second quarter of 2009 cash balance represents an increase of approximately $125 million compared to the first quarter of 2009 ending cash balance of $95 million. Spansion Japan Limited's cash balances are excluded from these financial results due to the deconsolidation.

"Spansion and its creditors are managing the bankruptcy process very well," said John Brincko, Spansion's lead restructuring advisor. "Over the next few months, I anticipate Spansion will file a plan of reorganization and successfully emerge from Chapter 11 bankruptcy in the fourth quarter as a strong, focused company and a formidable competitor in the Flash memory marketplace."

As a result of the commencement of corporate reorganization proceedings in Japan, Spansion Inc. and Spansion Japan must negotiate new third-party agreements, which are subject to the approval of various parties, including the creditors of each company. Therefore, it is not possible to announce full operating results and balance sheet information at this time.