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LSI Reports Second Quarter 2007 Results
First Full Quarter of Combined Operations with Agere Systems Completed
Second Quarter News Release Summary
- Second quarter 2007 revenues of $670 million
- Second quarter 2007 GAAP* net loss of 50 cents per diluted share
- Second quarter 2007 non-GAAP** net loss of 2 cents per diluted share
- Cash and short-term investments of $1.2 billion
Third Quarter 2007 Business Outlook
- Projected revenues of $675 million to $705 million
- GAAP* net loss range of 9 - 15 cents per diluted share
- Non-GAAP** net income in the range of 2 - 5 cents per diluted share
* Generally Accepted Accounting Principles.
** Excludes stock-based compensation, amortization of acquisition-related
intangibles, restructuring of operations and other items, net, purchase
accounting effect on inventory, loss on write-down of equity securities and
acquired in-process research and development. It also excludes the income
tax effect associated with the above mentioned items.
SIGNIFICANT PROGRESS ON MERGER INTEGRATION ACHIEVED
MILPITAS, Calif., July 25 /PRNewswire-FirstCall/ -- LSI Corporation
( LSI) today reported second quarter 2007 revenues of $670 million,
compared to $490 million in the second quarter of 2006 and $465 million in
the first quarter of 2007. LSI second quarter financial results reflect the
integration of the former Agere Systems. The company's merger transaction
with Agere closed on April 2, 2007.
Second quarter 2007 GAAP* net loss was $378 million or 50 cents per
diluted share, compared to second quarter 2006 GAAP net income of $54
million or 13 cents per diluted share. Second quarter 2007 GAAP results
compare to first quarter 2007 GAAP net income of $30 million or 7 cents per
diluted share. Second quarter 2007 GAAP net loss included $22.8 million of
stock-based compensation expense, and a net charge of $340.9 million from
other special items, principally related to the company's merger with
Agere.
Second quarter 2007 non-GAAP** net loss was $14.2 million or 2 cents
per diluted share, compared to second quarter 2006 non-GAAP net income of
$57 million or 14 cents per diluted share. First quarter 2007 non-GAAP net
income was $44 million or 11 cents per diluted share.
Cash and short-term investments totaled approximately $1.2 billion at
quarter end. LSI also announced today that it has completed its $500
million share repurchase program.
"During our first full quarter of combined operations with Agere, we
took significant steps to accelerate our merger integration, and signed a
definitive agreement to sell our consumer products business to Magnum
Semiconductor," said Abhi Talwalkar, LSI president and chief executive
officer. "Today, we're also announcing a global transition to third-party
assembly and test contract manufacturing to leverage greater cost
efficiencies and provide scalable capacity. As part of this transition, we
have agreed to sell our Thailand assembly and test operations to STATS
ChipPAC Ltd. for approximately $100 million."
"Customers are responding positively to the new LSI and our business
remains fundamentally strong," added Talwalkar. "We are winning significant
new designs with industry-leading customers as a result of the combination
of LSI and Agere, and I am confident that we are well positioned to achieve
our long-term objectives. We expect revenue to grow sequentially in the
second half of 2007, consistent with typical seasonal patterns."
Bryon Look, LSI chief financial officer, said, "We are continuing to
drive strategic focus and accelerate operational efficiencies. The steps
taken during the second quarter and the manufacturing decisions announced
today are significant components of positioning the company for profitable
growth."
LSI Third Quarter 2007 Business Outlook
GAAP* Special Items Non-GAAP**
Revenue $675 million to $675 million to
$705 million $705 million
Gross Margin 30 - 34% $70 to $80 million 42 - 44%
Operating Expenses $285 million to $30 to $40 million $255 million to
$305 million $265 million
Net Other Income $0 million $0 million
Tax Approximately Approximately 20%
$5 million
Net (Loss)/Income
Per Share ($0.15) to ($0.09) ($0.14) to ($0.17) $0.02 to $0.05
Diluted Share
Count 725 million 730 million
Capital spending is projected to be around $20 million in the third
quarter and approximately $80 million in total for 2007.
Third quarter depreciation and software amortization is expected to be
approximately $25 million.
LSI Conference Call Information
LSI will hold a conference call today at 2 pm PDT to discuss second
quarter financial results and the third quarter 2007 business outlook. The
number is 1-877-675-5901 within the U.S. and 1-210-839-8500 for all other
locations. 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 or may be accessed by calling
1-866-357-1423 within the U.S. and 1-203-369-0115 for all other locations.
The company has also scheduled an analyst meeting for July 31, 2007 in
New York City. For more information, please visit
http://www.lsi.com/investors.
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: the challenges and costs of
integrating and restructuring our operations and achieving anticipated
synergies following our recent acquisition of Agere Systems; a delay in the
closing of the sale of our Consumer business to Magnum Semiconductor; our
ability to successfully and timely transition our assembly and test
operations to third parties; fluctuations in the timing and volumes of
customer demand; our reliance on major customers and suppliers; our ability
to compete successfully in competitive markets; our ability to keep up with
rapid technological change; the unavailability of appropriate levels of
manufacturing capacity; and general industry and market conditions. For
additional information, see the documents filed by LSI with the SEC, 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 ( LSI) is a leading provider of innovative
silicon, systems and software technologies that enable products which
seamlessly bring people, information and digital content together. The
company offers a broad portfolio of capabilities and services including
custom and standard product ICs, adapters, systems and software that are
trusted by the world's best known brands to power leading solutions in the
Storage, Networking and Mobility markets. More information is available at
http://www.lsi.com.
LSI CORPORATION
Consolidated Condensed Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
July 1, April 1, July 2, July 1, July 2,
2007 2007 2006 2007 2006
Revenues $669,939 $465,415 $489,635 $1,135,354 $965,519
Cost of revenues 395,607 263,670 277,970 659,277 547,840
Purchase accounting
effect on inventory 47,904 - - 47,904 -
Amortization of
acquisition
related intangibles 71,310 5,285 10,801 76,595 22,017
Stock-based
compensation
expense 3,148 1,944 2,458 5,092 3,983
Total cost of
revenues 517,969 270,899 291,229 788,868 573,840
Gross profit 151,970 194,516 198,406 346,486 391,679
Research and
development 192,955 99,130 95,719 292,085 193,471
Stock-based
compensation
expense 8,978 4,717 4,643 13,695 9,165
Total research
and development 201,933 103,847 100,362 305,780 202,636
Selling, general
and administrative 97,440 57,087 58,439 154,527 121,533
Amortization of
acquisition
related intangibles 6,676 - - 6,676 -
Stock-based
compensation
expense 10,687 4,523 6,197 15,210 11,981
Total selling,
general and
administrative 114,803 61,610 64,636 176,413 133,514
Restructuring of
operations and
other items, net 25,920 (8,080) (21,648) 17,840 (15,998)
Acquired in-
process research
and development 176,400 6,500 - 182,900 -
(Loss)/income from
operations (367,086) 30,639 55,056 (336,447) 71,527
Interest expense (9,049) (3,890) (6,428) (12,939) (12,758)
Interest income and
other, net 10,790 10,531 10,319 21,321 19,846
(Loss)/income before
income taxes (365,345) 37,280 58,947 (328,065) 78,615
Provision/(benefit)
for income taxes 12,500 7,456 5,100 19,956 11,600
Net (loss)/income $(377,845) $29,824 $53,847 $(348,021) $67,015
(Loss)/income per
share:
Basic $(0.50) $0.07 $0.14 $(0.60) $0.17
Diluted $(0.50) $0.07 $0.13 $(0.60) $0.17
Shares used in
computing per share
amounts:
Basic 751,114 404,230 397,790 577,672 396,312
Diluted 751,114 409,808 405,613 577,672 404,213
A reconciliation between net (loss)/income on a GAAP basis to a non-GAAP
net (loss)/income are included below.
Reconciliation of
GAAP to Non-GAAP Three Months Ended Six Months Ended
net income: July 1, April 1, July 2, July 1, July 2,
2007 2007 2006 2007 2006
GAAP net (loss)/income $(377,845) $29,824 $53,847 $(348,021) $67,015
Special items:
a) Stock-based
compensation expense
- Cost of revenues 3,148 1,944 2,458 5,092 3,983
b) Stock-based
compensation expense
- R&D 8,978 4,717 4,643 13,695 9,165
c) Stock-based
compensation expense
- SG&A 10,687 4,523 6,197 15,210 11,981
d) Amortization of
acquisition related
intangibles -
Cost of revenues 71,310 5,285 10,801 76,595 22,017
e) Amortization of
acquisition related
intangibles - SG&A 6,676 - - 6,676 -
f) Purchase accounting
effect on inventory 47,904 - - 47,904 -
g) Restructuring of
operations and
other items, net 25,920 (8,080)(21,648) 17,840 (15,998)
h) Acquired in-process
research and
development 176,400 6,500 - 182,900 -
i) Loss/(gain) on
sale/write-down
of certain equity
securities 2,396 - - 2,396 (1,429)
j) Income tax effect 10,264 (369) 453 9,895 (317)
Total special items 363,683 14,520 2,904 378,203 29,402
Non-GAAP net
(loss)/income $(14,162) $44,344 $56,751 $30,182 $96,417
Non-GAAP income per share:
Basic $(0.02) $0.11 $0.14 $0.05 $0.24
Diluted* $(0.02) $0.11 $0.14 $0.05 $0.24
Shares used in
computing Non-GAAP
per share amounts:
Basic 751,114 404,230 397,790 577,672 396,312
Diluted 751,114 409,808 431,693 587,248 404,213
* In computing non-GAAP diluted earnings per share for the three month
period ended July 2, 2006, net income was increased by $3,500 for
interest, net of taxes, on the $350 million convertible notes considered
dilutive common stock equivalents.
Reconciliation of
shares used in the
calculation of
GAAP to
Non-GAAP diluted Three Months Ended Six Months Ended
net income per share: July 1, April 1, July 2, July 1, July 2,
2007 2007 2006 2007 2006
Diluted shares used
in per-share
calculation - GAAP 751,114 409,808 405,613 577,672 404,213
Dilutive options,
RSUs and ESPPs - - - 9,576 -
Effect of $350 million
convertible notes
considered dilutive - - 26,080 - -
Diluted shares used
in per-share
calculation - Non-GAAP 751,114 409,808 431,693 587,248 404,213
LSI CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
July 1, April 1, July 2,
Assets 2007 2007 2006
Current assets:
Cash and short-term investments $1,158.3 $1,016.6 $1,200.6
Accounts receivable, net 424.4 303.4 310.8
Inventories 285.0 229.1 173.8
Prepaid expenses and other current
assets 252.4 62.3 85.6
Total current assets 2,120.1 1,611.4 1,770.8
Property and equipment, net 246.1 89.2 94.1
Goodwill and other intangibles 4,231.8 997.8 949.1
Other assets 227.1 103.4 108.0
Total assets $6,825.1 $2,801.8 $2,922.0
Liabilities and Stockholders' Equity
Current liabilities:
Other current liabilities $699.4 $383.7 $482.9
Current portion of long-term debt - - 272.6
Total current liabilities 699.4 383.7 755.5
Long-term debt 719.5 350.0 350.0
Pension, tax and other liabilities 519.7 131.5 73.5
Total liabilities 1,938.6 865.2 1,179.0
Minority interest in subsidiary 0.2 0.2 0.2
Stockholders' equity:
Common stock and additional paid-in
capital 6,453.6 3,121.0 3,055.4
Accumulated deficit (1,575.9) (1,198.1) (1,322.9)
Accumulated other comprehensive
income 8.6 13.5 10.3
Total stockholders' equity 4,886.3 1,936.4 1,742.8
Total liabilities and
stockholders' equity $6,825.1 $2,801.8 $2,922.0
LSI CORPORATION
Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)
Three Months Ended Six Months Ended
July 1, April 1, July 2, July 1, July 2,
2007 2007 2006 2007 2006
Operating Activities:
Net (loss)/income $(377,845) $29,824 $53,847 $(348,021) $67,015
Adjustments:
Depreciation &
amortization * 101,599 18,576 22,831 120,175 48,166
Stock-based
compensation expense 22,813 11,184 13,298 33,997 25,129
Non-cash restructuring
and other items (29) 228 209 199 (2,749)
Acquired in-process
research and
development 176,400 6,500 - 182,900 -
Gain on sale of
intellectual
property - - (15,000) - (15,000)
Gain on sale of
Gresham manufacturing
facility and
associated
intellectual property - - (12,553) - (12,553)
Write-off of
intangible assets
acquired in a
purchase business
combination - - 3,325 - 3,325
Non-cash foreign
exchange (gain)/loss (4,277) 389 1,057 (3,888) 469
Loss/(gain) on
sale/write-down
of equity securities 2,396 - 218 2,396 (1,211)
Loss/(gain) on
sale of property
and equipment 160 (9,662) (5) (9,502) (5)
Changes in deferred
tax assets and
liabilities (5,501) 31 23 (5,470) 20
Changes in assets
and liabilities,
net of assets
acquired and
liabilities
assumed in
business combinations:
Accounts
receivable 104,715 45,450 (44,366) 150,165 12,523
Inventories 64,896 (19,654) 8,613 45,242 17,306
Prepaid expenses
and other assets 9,299 24,565 (15,381) 33,864 (5,977)
Accounts payable (94,585) (36,469) 31,751 (131,054) 8,743
Accrued and
other liabilities 29,840 (14,980) 1,575 14,860 3,801
Net cash provided by
operating activities 29,881 55,982 49,442 85,863 149,002
Investing activities:
Purchases of debt
securities
available-for-
sale (61,606) (60,630) (216,019) (122,236) (382,212)
Proceeds from
maturities and
sales of debt
securities
available-for-
sale 199,740 174,392 97,747 374,132 205,913
Purchases of
convertible
notes/equity
securities (3,000) - (5,000) (3,000) (5,150)
Proceeds from sale
of equity securities - - 2,026 - 3,581
Purchases of
property, equipment
and software (20,211) (20,503) (12,679) (40,714) (28,657)
Proceeds from sale
of property and
equipment 1,274 12,511 40 13,785 40
Proceeds from sale
of intellectual
property - - 15,000 - 15,000
Proceeds from sale
of Fort Collins
facility - - 10,998 - 10,998
Proceeds from sale
of Colorado
Springs facility - - 7,029 - 7,029
Proceeds from sale
of Gresham
manufacturing
facility - - 81,426 - 81,426
Proceeds from sale
of Gresham
manufacturing
facility
associated
intellectual
property - - 5,100 - 5,100
Acquisitions of
companies, net of
cash acquired 517,712 (52,079) - 465,633 -
Adjustment to
goodwill acquired
in a prior year
for resolution of
a pre-acquisition
income tax
contingency - 2,442 - 2,442 -
Net cash provided
by/(used in)
investing activities 633,909 56,133 (14,332) 690,042 (86,932)
Financing activities:
Issuance of common
stock 16,246 5,671 20,149 21,917 32,137
Purchase of common
stock under
repurchase program (400,355) - - (400,355) -
Net cash (used
in)/provided by
financing activities (384,109) 5,671 20,149 (378,438) 32,137
Effect of exchange
rate changes on cash
and cash equivalents 268 (65) 365 203 598
Increase in cash and
cash equivalents 279,949 117,721 55,624 397,670 94,805
Cash and cash
equivalents at
beginning of period 445,521 327,800 303,830 327,800 264,649
Cash and cash
equivalents at end of
period $725,470 $445,521 $359,454 $725,470 $359,454
* Depreciation of fixed assets, amortization of intangible assets,
software, capitalized intellectual property, debt issuance costs and
deferred gains on cancelled interest rate swaps.
LSI CORPORATION
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)
Three Months Ended
July 1, April 1, July 2,
2007 2007 2006
Semiconductor revenues $484.8 $272.4 $307.4
Storage Systems revenues $185.1 $193.0 $182.2
Total revenues $669.9 $465.4 $489.6
Percentage change in revenues-
qtr./qtr. (a) 43.9% -11.1% 2.9%
Percentage change in revenues-
yr./yr. (b) 36.8% -2.2% 1.7%
Days sales outstanding 57 59 57
Days of inventory 50 76 54
Current ratio 3.0 4.2 2.3
Quick ratio 2.3 3.4 2.0
Gross margin as a percentage of revenues 22.7% 41.8% 40.5%
R&D as a percentage of revenues 30.1% 22.3% 20.5%
SG&A as a percentage of revenues 17.1% 13.2% 13.2%
Employees (c) 9,138 4,082 3,867
Revenues per employee (in thousands)(d) $293.3 $456.1 $506.5
Selected Cash Flow information
Purchases of property and
equipment (e) $8.6 $14.4 $7.6
Depreciation / amortization (f) $21.0 $11.0 $10.8
(a) Represents sequential quarter growth/(decrease) in revenues.
(b) Represents growth/(decrease) in revenues in the quarter presented as
compared to the same quarter of the previous year.
(c) Actual number of employees at the end of each period presented.
(d) Revenues per employee is calculated by annualizing revenues for each
quarter presented and dividing it by the number of employees.
(e) Excludes purchases of software.
(f) Represents depreciation of fixed assets and amortization of software.
Editor's Notes:
1. All LSI news releases (financial, acquisitions, manufacturing,
products, technology etc.) are issued exclusively by PR Newswire and
are immediately thereafter posted on the company's external website,
http://www.lsi.com.
2. The LSI logo design is a trademark of LSI Corporation.
3. All other brand or product names may be trademarks or registered
trademarks of their respective companies.
SOURCE LSI Corporation