LSI Reports Fourth Quarter and Full Year 2012 Results

23% revenue growth year-over-year

Jan 23, 2013, 16:01 ET from LSI Corporation

SAN JOSE, Calif., Jan. 23, 2013 /PRNewswire/ -- LSI Corporation (NASDAQ: LSI) today reported results for its fourth quarter and full year ended December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120222/SF57952LOGO)

Fourth Quarter and Full Year 2012 Highlights

  • Fourth quarter 2012 revenues from continuing operations* of $600 million, up 15% year-over-year
  • Fourth quarter 2012 GAAP** income from continuing operations of $0.05 per diluted share
  • Fourth quarter 2012 non-GAAP*** income from continuing operations of $0.18 per diluted share
  • Fourth quarter 2012 operating cash flows of $95 million
  • Full year 2012 revenues of $2.51 billion, up 23% year over year

First Quarter 2013 Business Outlook

  • Projected revenues from continuing operations* of $535 million to $575 million
  • GAAP** income from continuing operations in the range of ($0.03) to $0.06 per share
  • Non-GAAP*** income from continuing operations in the range of $0.09 to $0.15 per share

*

On May 6, 2011, LSI completed the sale of its external storage systems business. The financial results of the external storage systems business have been classified as discontinued operations in LSI's financial statements. Our ongoing business is referred to as "continuing operations."

**

Generally Accepted Accounting Principles.

***

Excludes stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, gain on remeasurement of a pre-acquisition equity interest to fair value, gain/loss on sale/write-down of investments and, in the case of non-GAAP net income, gain from the sale of the external storage systems business. It also excludes the income tax effect associated with the above-mentioned items.

"2012 was a year of exciting progress for LSI as we delivered 23% revenue growth, strong expansion in operating margin and earnings per share from continuing operations, and record design wins. We introduced several important new products, and customers are increasingly looking to new LSI solutions for mega datacenters, mobile networks and flash," said Abhi Talwalkar, LSI's president and CEO. "LSI's intelligent silicon offers proven solutions as businesses turn to the cloud and look for new ways to accelerate their ability to quickly analyze, store, share and protect data. While there is uncertainty in the macro environment and softness in some end markets, we are centered in dynamic new growth cycles that are expected to drive long-term growth in our flash, server and networking businesses."

Fourth quarter 2012 revenues from continuing operations were $600 million, in line with guidance, compared to $523 million generated from continuing operations in the fourth quarter of 2011, and compared to $624 million generated from continuing operations in the third quarter of 2012.

Fourth quarter 2012 GAAP** income from continuing operations was $29 million or $0.05 per diluted share, compared to fourth quarter 2011 GAAP income from continuing operations of $11 million or $0.02 per diluted share. Third quarter 2012 GAAP income from continuing operations was $40 million or $0.07 per diluted share. Fourth quarter 2012 GAAP income from continuing operations included a net charge of $72 million from special items, consisting primarily of approximately $30 million of amortization of acquisition-related items, $25 million of stock-based compensation expense, $16 million of net restructuring and other items, and $1 million income tax effect.

Fourth quarter 2012 non-GAAP*** income from continuing operations was $101 million or $0.18 per diluted share, compared to fourth quarter 2011 non-GAAP income from continuing operations of $73 million or $0.13 per diluted share. Third quarter 2012 non-GAAP income from continuing operations was $99 million or $0.17 per diluted share.

Cash and short-term investments totaled approximately $676 million at quarter end. The company completed fourth-quarter purchases of approximately 7 million shares of its common stock for approximately $46 million. In 2012 the company purchased approximately 36 million shares of its common stock for approximately $273 million.

LSI recorded full-year 2012 revenues from continuing operations of $2.51 billion, a 23% increase compared to $2.04 billion in 2011.

"We delivered solid profitability and results in 2012, making good progress on our gross margin targets and generating strong cash flows," said Bryon Look, LSI's CFO. "With a strong balance sheet, zero debt and $479 million remaining on our share buyback authorization, we are in a good position to continue to return capital to our shareholders."

LSI 1Q2013 Business Outlook for Continuing Operations

GAAP**

Special Items

Non-GAAP***

Revenue

$535 million to $575 million

$535 million to $575 million

Gross Margin

48% to 52%

$18 million to $28 million

53% to 55%

Operating Expenses

$257 million to $277 million

$32 million to $42 million

$225 million to $235 million

Net Other Income

$4 million

$4 million

Tax

Approximately $8 million

Approximately $8 million

(Loss)/Income from Continuing Operations Per Share

($0.03) to $0.06

($0.09) to ($0.12)

$0.09 to $0.15

Diluted Share Count

570 million

570 million

Capital spending is projected to be around $25 million in the first quarter and approximately $80 million in total for 2013.

Depreciation and software amortization is projected to be around $15 million in the first quarter and approximately $60 million in total for 2013.

LSI Conference Call Information LSI will hold a conference call today at 2 p.m. PST to discuss fourth quarter and full year 2012 financial results and the first quarter 2013 business outlook. Internet users can access the conference call at http://www.lsi.com/webcast. Subsequent to the conference call, a replay will be available at the same web address.

Forward-Looking Statements: This news release contains forward-looking statements that are based on the current opinions and estimates of management. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause LSI's actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: our ability to successfully integrate and manage the SandForce business and retain its key employees; our ability to achieve anticipated synergies and to develop integrated new products following our acquisition of SandForce; our ability to repurchase our common stock at prices we believe to be advantageous; our reliance on major customers and suppliers; our ability to keep up with rapid technological change; our ability to compete successfully in competitive markets; fluctuations in the timing and volumes of customer demand; the unavailability of appropriate levels of manufacturing capacity; and general industry and macro-economic conditions. For additional information, see the documents filed by LSI with the Securities and Exchange Commission, and specifically the risk factors set forth in the company's most recent reports on Form 10-K and 10-Q. LSI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

About LSI LSI Corporation (NASDAQ: LSI) designs semiconductors and software that accelerate storage and networking in datacenters, mobile networks and client computing. Our technology is the intelligence critical to enhanced application performance, and is applied in solutions created in collaboration with our partners. More information is available at www.lsi.com.

LSI, the LSI & Design logo and the Storage.Networking.Accelerated. tagline are trademarks or registered trademarks of LSI Corporation. All other brand or product names may be trademarks or registered trademarks of their respective companies.

LSI CORPORATION

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

December 31,

September 30,

December 31,

Assets

2012

2012

2011

Current assets:

    Cash and short-term investments

$           676.0

$             643.0

$           935.5

    Accounts receivable, net

264.1

256.5

246.5

    Inventories

206.3

209.1

180.0

    Prepaid expenses and other current assets

87.2

64.6

60.7

        Total current assets

1,233.6

1,173.2

1,422.7

Property and equipment, net

269.7

250.2

180.6

Goodwill and identified intangible assets, net

741.1

771.9

506.2

Other assets

113.2

108.1

122.6

        Total assets

$        2,357.6

$          2,303.4

$        2,232.1

Liabilities and Stockholders' Equity

Current liabilities

$           506.9

$             476.8

$           460.9

Pension, tax and other liabilities

684.6

628.6

712.2

        Total liabilities

1,191.5

1,105.4

1,173.1

Stockholders' equity:

    Common stock and additional paid-in capital

5,578.7

5,579.6

5,629.2

    Accumulated deficit

(3,834.3)

(3,863.4)

(4,037.0)

    Accumulated other comprehensive loss

(578.3)

(518.2)

(533.2)

        Total stockholders' equity

1,166.1

1,198.0

1,059.0

        Total liabilities and stockholders' equity

$        2,357.6

$          2,303.4

$        2,232.1

    

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2012

2012

2011

2012

2011

Revenues

$             600,128

$               623,962

$             523,140

$          2,506,087

$          2,043,958

    Cost of revenues

275,538

287,390

264,364

1,162,414

991,914

    Amortization of acquisition-related intangibles

21,318

21,348

20,354

85,404

82,659

    Purchase accounting effect on inventory

-

-

-

14,458

-

    Stock-based compensation expense

2,858

2,573

1,597

11,946

6,921

       Total cost of revenues

299,714

311,311

286,315

1,274,222

1,081,494

Gross profit 

300,414

312,651

236,825

1,231,865

962,464

    Research and development

165,758

156,318

139,061

643,230

552,342

    Stock-based compensation expense

11,613

11,170

5,360

47,064

23,646

       Total research and development

177,371

167,488

144,421

690,294

575,988

    Selling, general and administrative

64,919

69,722

63,705

270,965

241,820

    Amortization of acquisition-related intangibles

8,667

8,667

8,319

34,668

33,276

    Stock-based compensation expense

10,291

13,643

4,881

49,290

20,343

       Total selling, general and administrative

83,877

92,032

76,905

354,923

295,439

    Restructuring of operations and other items, net

16,480

4,221

21,033

42,654

23,719

Income/(loss) from operations

22,686

48,910

(5,534)

143,994

67,318

    Interest income and other, net

7,606

5,855

8,124

37,711

26,472

Income from continuing operations before income taxes 

30,292

54,765

2,590

181,705

93,790

Provision for/(benefit from) income taxes 

1,202

15,100

(8,818)

(20,960)

3,778

Income from continuing operations

29,090

39,665

11,408

202,665

90,012

(Loss)/income from discontinued operations, net of taxes 

-

-

(13,194)

-

241,479

Net income/(loss)

$               29,090

$                 39,665

$               (1,786)

$             202,665

$             331,491

Basic income/(loss) per share:

    Income from continuing operations 

$                   0.05

$                     0.07

$                   0.02

$                   0.36

$                   0.15

    (Loss)/income from discontinued operations 

$                       -

$                         -

$                 (0.02)

$                       -

$                   0.42

    Net income/(loss)

$                   0.05

$                     0.07

$                   0.00

$                   0.36

$                   0.57

Diluted income/(loss) per share:

    Income from continuing operations 

$                   0.05

$                     0.07

$                   0.02

$                   0.35

$                   0.15

    (Loss)/income from discontinued operations 

$                       -

$                         -

$                 (0.02)

$                       -

$                   0.40

    Net income/(loss)

$                   0.05

$                     0.07

$                   0.00

$                   0.35

$                   0.55

Shares used in computing per share amounts:

    Basic

552,761

555,197

563,721

559,459

585,704

    Diluted

568,611

572,022

573,018

580,548

600,893

Reconciliations of certain GAAP measures to non-GAAP measures are included below.

Three Months Ended

Year Ended

December 31,

2012

September 30,

2012

December 31,

2011

December 31,

2012

December 31,

2011

Reconciliation of GAAP net income to non-GAAP net income:

GAAP income from continuing operations

$               29,090

$                 39,665

$               11,408

$             202,665

$               90,012

Special items:

a)   Stock-based compensation expense - cost of revenues

2,858

2,573

1,597

11,946

6,921

b)   Stock-based compensation expense - R&D

11,613

11,170

5,360

47,064

23,646

c)   Stock-based compensation expense - SG&A

10,291

13,643

4,881

49,290

20,343

d)   Amortization of acquisition-related intangibles - cost of revenues  

21,318

21,348

20,354

85,404

82,659

e)   Amortization of acquisition-related intangibles - SG&A

8,667

8,667

8,319

34,668

33,276

f)   Purchase accounting effect on inventory

-

-

-

14,458

-

g)   Restructuring of operations and other items, net

16,480

4,221

21,033

42,654

23,719

h)  Gain on sale of investments

-

(2,550)

-

(2,550)

-

i)   Gain on re-measurement of a pre-acquisition equity interest to fair value

-

-

-

(5,765)

-

j)   Income tax effect

833

-

-

(42,365)

-

     Total special items from continuing operations

72,060

59,072

61,544

234,804

190,564

Non-GAAP income from continuing operations

$             101,150

$                 98,737

$               72,952

$             437,469

$             280,576

Non-GAAP income from continuing operations per share: 

    Basic

$                   0.18

$                     0.18

$                   0.13

$                   0.78

$                   0.48

    Diluted 

$                   0.18

$                     0.17

$                   0.13

$                   0.75

$                   0.47

GAAP net income/(loss)

$               29,090

$                 39,665

$               (1,786)

$             202,665

$             331,491

Special items:

a)   Total special items from continuing operations

72,060

59,072

61,544

234,804

190,564

b)   Stock-based compensation expense - discontinued operations

-

-

-

-

(592)

c)   Amortization of acquisition-related intangibles - discontinued operations

-

-

-

-

886

d)   Restructuring of operations - discontinued operations

-

-

(67)

-

40,863

e)   Gain on sale of business

-

-

-

-

(260,066)

Non-GAAP net income

$             101,150

$                 98,737

$               59,691

$             437,469

$             303,146

Non-GAAP net income per share:

    Basic

$                   0.18

$                     0.18

$                   0.11

$                   0.78

$                   0.52

    Diluted 

$                   0.18

$                     0.17

$                   0.10

$                   0.75

$                   0.50

Shares used in computing non-GAAP per share amounts:

    Basic

552,761

555,197

563,721

559,459

585,704

    Diluted

568,611

572,022

573,018

580,548

600,893

     

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

Year Ended

December 31,

September 30,

December 31,

December 31,

December 31,

2012

2012

2011

2012

2011

Operating activities:

Net income/(loss)

$         29,090

$           39,665

$          (1,786)

$       202,665

$       331,491

Adjustments:

    Depreciation and amortization 

44,166

45,671

43,357

180,484

189,200

    Stock-based compensation expense

24,762

27,386

11,838

108,300

50,318

    Non-cash restructuring of operations and other items, net

221

698

4,747

5,960

35,282

    Gain on sale of investments/write-down of investment 

-

(2,550)

183

(2,550)

183

    Gain on re-measurement of a pre-acquisition equity interest to fair value

-

-

-

(5,765)

-

    Gain on sale of business

-

-

-

-

(260,066)

    (Gain)/loss on sale of property and equipment

(46)

2,644

78

2,528

(465)

    Unrealized foreign exchange (gain)/loss

(518)

2,655

(2,215)

(598)

(2,015)

    Deferred taxes 

(10,743)

(72)

(9,894)

(53,989)

(28,838)

    Changes in assets and liabilities, net of assets acquired and liabilities 

        assumed in business combination:

        Accounts receivable

(7,620)

40,348

1,850

(6,689)

80,065

        Inventories

2,748

(5,091)

30,399

(2,116)

(29,804)

        Prepaid expenses, assets held for sale and other assets

(13,308)

1,110

(526)

(14,028)

(10,782)

        Accounts payable

23,208

(25,186)

(2,179)

27,543

(3,879)

        Accrued and other liabilities

2,895

(15,471)

(20,436)

(67,586)

(103,915)

Net cash provided by operating activities

94,855

111,807

55,416

374,159

246,775

Investing activities:

    Purchases of debt securities available-for-sale

(37,206)

(22,087)

(12,284)

(131,662)

(50,967)

    Proceeds from maturities and sales of debt securities available-for-sale 

28,320

11,767

5,472

57,843

37,460

    Purchases of other investments

(500)

-

-

(500)

(4,000)

    Proceeds from sale of other investments

-

2,550

-

2,550

-

    Purchases of property and equipment

(27,494)

(25,667)

(14,079)

(130,779)

(60,920)

    Proceeds from sale of property and equipment

67

1,374

22,683

1,693

23,622

    Acquisition of business, net of cash acquired 

-

-

-

(319,231)

-

    Proceeds from sale of business, net of transaction costs 

-

-

-

-

475,150

    Proceeds from maturity of a note receivable 

-

-

10,000

-

10,000

Net cash (used in)/provided by investing activities

(36,813)

(32,063)

11,792

(520,086)

430,345

Financing activities:

   Issuance of common stock

20,985

8,515

14,980

111,628

81,040

   Purchases of common stock under repurchase program

(46,338)

(50,062)

(26,999)

(272,585)

(498,786)

Net cash used in financing activities

(25,353)

(41,547)

(12,019)

(160,957)

(417,746)

Effect of exchange rate changes on cash and cash equivalents

(1,668)

166

(528)

(1,399)

(1,349)

Net change in cash and cash equivalents

31,021

38,363

54,661

(308,283)

258,025

Cash and cash equivalents at beginning of period

440,507

402,144

725,150

779,811

521,786

Cash and cash equivalents at end of period

$       471,528

$         440,507

$       779,811

$       471,528

$       779,811

 

SOURCE LSI Corporation



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