LSI Reports Third Quarter 2012 Results 14% year-over-year revenue growth, with strong operating cash flows

MILPITAS, Calif., Oct. 24, 2012 /PRNewswire/ -- LSI Corporation (NYSE: LSI) today reported results for its third quarter ended September 30, 2012.

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Third Quarter 2012 Highlights

  • Third quarter 2012 revenues from continuing operations* of $624 million, up 14% year-over-year
  • Third quarter 2012 GAAP** income from continuing operations of $0.07 per diluted share
  • Third quarter 2012 non-GAAP*** income from continuing operations of $0.17 per diluted share
  • Third quarter 2012 operating cash flows of $112 million

 Fourth Quarter 2012 Business Outlook

  • Projected revenues from continuing operations* of $570 million to $610 million
  • GAAP** income from continuing operations in the range of ($0.02) to $0.07 per share
  • Non-GAAP*** income from continuing operations in the range of $0.11 to $0.17 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.

"In the third quarter we delivered strong year-over-year growth in an environment with considerable macroeconomic uncertainty and with softness in several key markets. We are managing the elements within our control, and are pleased with the significant improvement in margin and earnings over last year," said Abhi Talwalkar, LSI's president and CEO. "Looking forward, our design win performance is ahead of expectations and we are benefiting from the rapid adoption of LSI's exciting new flash-based products and the penetration of LSI products into large web and cloud datacenters."

Third quarter 2012 revenues from continuing operations were $624 million, in line with guidance, compared to $547 million generated from continuing operations in the third quarter of 2011, and compared to $660 million generated from continuing operations in the second quarter of 2012.

Third quarter 2012 GAAP** income from continuing operations was $40 million or $0.07 per diluted share, compared to third quarter 2011 GAAP income from continuing operations of $29 million or $0.05 per diluted share. Second quarter 2012 GAAP income from continuing operations was $59 million or $0.10 per diluted share. Third quarter 2012 GAAP income from continuing operations included a net charge of $59 million from special items, consisting primarily of approximately $28 million of stock-based compensation expense, $30 million of amortization of acquisition-related items, $4 million of net restructuring and other items, and $3 million of gain on the sale of investments.

Third quarter 2012 non-GAAP*** income from continuing operations was $99 million or $0.17 per diluted share, compared to third quarter 2011 non-GAAP income from continuing operations of $83 million or $0.14 per diluted share. Second quarter 2012 non-GAAP income from continuing operations was $121 million or $0.21 per diluted share.

Cash and short-term investments totaled approximately $643 million at quarter end. The company completed third-quarter purchases of approximately 7 million shares of its common stock for approximately $50 million. On a cumulative basis, LSI has repurchased a total of 102 million shares and utilized approximately $725 million of the $750 million stock repurchase program the board authorized last year. In addition, in August the board authorized a new $500 million stock repurchase program.

"LSI continued to demonstrate solid cash generation with cash flow from operations in the quarter exceeding $110 million," said Bryon Look, LSI's CFO and chief administrative officer. "Together with a debt-free balance sheet and exciting long-term growth opportunities, we are well-positioned to deliver strong operating profits while also continuing to return capital to shareholders."

LSI 4Q2012 Business Outlook for Continuing Operations






GAAP**

Special Items

Non-GAAP***

Revenue

$570 million to $610 million


$570 million to $610 million

Gross Margin

47% – 51%

$20 million to $30 million

52% – 54%

Operating Expenses

$258 million to $278 million

$35 million to $45 million

$223 million to $233 million

Net Other Income

$3 million


$3 million

Tax

Approximately $9 million


Approximately $9 million

(Loss)/Income from Continuing Operations Per Share

($0.02) to $0.07

($0.10) to ($0.13)

$0.11 to $0.17

Diluted Share Count

570 million


570 million

Capital spending is projected to be around $27 million in the fourth quarter and approximately $130 million in total for 2012.

Depreciation and software amortization is projected to be around $15 million in the fourth quarter and approximately $60 million in total for 2012.

LSI Conference Call Information
LSI will hold a conference call today at 2 p.m. PDT to discuss third quarter 2012 financial results and the fourth quarter 2012 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 (NYSE: 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)
































September 30,


July 1,


December 31,

Assets




2012


2012


2011










Current assets:








    Cash and short-term investments


$             643.0


$    601.1


$           935.5

    Accounts receivable, net


256.5


296.8


246.5

    Inventories



209.1


204.0


180.0

    Prepaid expenses and other current assets


64.6


63.4


60.7










        Total current assets



1,173.2


1,165.3


1,422.7










Property and equipment, net


250.2


235.7


180.6

Goodwill and identified intangible assets, net


771.9


802.0


506.2

Other assets



108.1


107.6


122.6










        Total assets



$          2,303.4


$ 2,310.6


$        2,232.1



















Liabilities and Stockholders' Equity
















Current liabilities



$             476.8


$    468.4


$           460.9










Pension, tax and other liabilities


628.6


678.8


712.2










        Total liabilities



1,105.4


1,147.2


1,173.1










Stockholders' equity:








    Common stock and additional paid-in capital


5,579.6


5,594.5


5,629.2

    Accumulated deficit



(3,863.4)


(3,903.1)


(4,037.0)

    Accumulated other comprehensive loss


(518.2)


(528.0)


(533.2)










        Total stockholders' equity


1,198.0


1,163.4


1,059.0










        Total liabilities and stockholders' equity


$          2,303.4


$ 2,310.6


$        2,232.1

 

 

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)












Three Months Ended


Nine Months Ended


September 30,


July 1,


October 2,


September 30,


October 2,


2012


2012


2011


2012


2011











Revenues

$               623,962


$      659,573


$      546,910


$            1,905,959


$       1,520,818











    Cost of revenues

287,390


303,334


261,399


886,876


727,550

    Amortization of acquisition-related intangibles

21,348


21,348


20,206


64,086


62,305

    Purchase accounting effect on inventory

-


-


-


14,458


-

    Stock-based compensation expense

2,573


3,003


1,460


9,088


5,324

       Total cost of revenues

311,311


327,685


283,065


974,508


795,179











Gross profit 

312,651


331,888


263,845


931,451


725,639











    Research and development

156,318


163,591


137,937


477,472


413,281

    Stock-based compensation expense

11,170


11,973


5,410


35,451


18,286

       Total research and development

167,488


175,564


143,347


512,923


431,567











    Selling, general and administrative

69,722


69,905


64,672


206,046


178,115

    Amortization of acquisition-related intangibles

8,667


8,667


8,319


26,001


24,957

    Stock-based compensation expense

13,643


10,342


4,883


38,999


15,462

       Total selling, general and administrative

92,032


88,914


77,874


271,046


218,534











    Restructuring of operations and other items, net

4,221


6,491


10,784


26,174


2,686











Income from operations

48,910


60,919


31,840


121,308


72,852











    Interest income and other, net

5,855


9,594


7,610


30,105


18,348











Income from continuing operations before income taxes 

54,765


70,513


39,450


151,413


91,200

Provision for/(benefit from) income taxes 

15,100


11,800


7,800


(22,162)


12,596











Income from continuing operations

39,665


58,713


31,650


173,575


78,604











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

-


-


(2,311)


-


254,673











Net income

$                 39,665


$        58,713


$        29,339


$               173,575


$          333,277











Basic income per share:










    Income from continuing operations 

$                     0.07


$            0.10


$            0.05


$                     0.31


$                0.13

    (Loss)/income from discontinued operations 

$                            -


$                   -


$           (0.00)


$                            -


$                0.43

    Net income

$                     0.07


$            0.10


$             0.05


$                     0.31


$                0.56











Diluted income per share:










    Income from continuing operations 

$                     0.07


$            0.10


$            0.05


$                     0.30


$                0.13

    (Loss)/income from discontinued operations 

$                            -


$                   -


$           (0.00)


$                            -


$                0.42

    Net income

$                     0.07


$            0.10


$             0.05


$                     0.30


$                0.55











Shares used in computing per share amounts:










    Basic

555,197


563,686


567,790


561,708


592,898











    Diluted

572,022


581,344


581,483


582,296


608,743











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












Three Months Ended


Nine Months Ended


September 30,


July 1,


October 2,


September 30,


October 2,

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

2012


2012


2011


2012


2011











GAAP income from continuing operations

$                 39,665


$        58,713


$        31,650


$               173,575


$            78,604











Special items:










a)   Stock-based compensation expense - cost of revenues

2,573


3,003


1,460


9,088


5,324

b)   Stock-based compensation expense - R&D

11,170


11,973


5,410


35,451


18,286

c)   Stock-based compensation expense - SG&A

13,643


10,342


4,883


38,999


15,462

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

21,348


21,348

-

20,206


64,086


62,305

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

8,667


8,667


8,319


26,001


24,957

f)   Purchase accounting effect on inventory

-


-


-


14,458


-

g)   Restructuring of operations and other items, net

4,221


6,491


10,784


26,174


2,686

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

-


-


-


(43,198)


-

     Total special items from continuing operations

59,072


61,824


51,062


162,744


129,020











Non-GAAP income from continuing operations

$                 98,737


$      120,537


$        82,712


$               336,319


$          207,624











Non-GAAP income from continuing operations per share: 










    Basic

$                     0.18


$            0.21


$            0.15


$                     0.60


$                0.35











    Diluted 

$                     0.17


$            0.21


$            0.14


$                     0.58


$                0.34











GAAP net income

$                 39,665


$        58,713


$        29,339


$               173,575


$          333,277











Special items:










a)   Total special items from continuing operations

59,072


61,824


51,062


162,744


129,020

b)   Stock-based compensation expense - discontinued operations

-


-


(385)


-


(592)

c)   Amortization of acquisition-related intangibles - discontinued operations

-


-


-


-


886

d)   Restructuring of operations - discontinued operations

-


-


3,040


-


40,930

e)   Gain on sale of business

-


-


-


-


(260,066)











Non-GAAP net income

$                 98,737


$      120,537


$        83,056


$               336,319


$          243,455











Non-GAAP net income per share:










    Basic

$                     0.18


$            0.21


$            0.15


$                     0.60


$                0.41











    Diluted 

$                     0.17


$            0.21


$            0.14


$                     0.58


$                0.40











Shares used in computing non-GAAP per share amounts:










    Basic

555,197


563,686


567,790


561,708


592,898











    Diluted

572,022


581,344


581,483


582,296


608,743











 

 

 

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)












Three Months Ended


Nine Months Ended


September 30,


July 1,


October 2,


September 30,


October 2,


2012


2012


2011


2012


2011

Operating activities:










Net income

$           39,665


$   58,713


$    29,339


$         173,575


$  333,277

Adjustments:










    Depreciation and amortization 

45,671


45,279


43,533


136,318


145,843

    Stock-based compensation expense

27,386


25,318


11,368


83,538


38,480

    Non-cash restructuring of operations and other items, net

698


2,901


9,571


5,739


30,535

    Gain on sale of investments

(2,550)


-


-


(2,550)


-

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

-


-


-


(5,765)


-

    Gain on sale of business

-


-


-


-


(260,066)

    Loss/(gain) on sale of property and equipment

2,644


(95)


(35)


2,574


(543)

    Unrealized foreign exchange loss/(gain)

2,655


(4,196)


(2,381)


(80)


200

    Deferred taxes 

(72)


28


822


(43,246)


(18,944)

    Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combination:










        Accounts receivable

40,348


5,428


(14,262)


931


78,215

        Inventories

(5,091)


(3,226)


(17,063)


(4,864)


(60,203)

        Prepaid expenses, assets held for sale and other assets

1,110


460


735


(720)


(10,256)

        Accounts payable

(25,186)


(17,598)


(10,990)


4,335


(1,700)

        Accrued and other liabilities

(15,471)


4,260


(5,601)


(70,481)


(83,479)

Net cash provided by operating activities

111,807


117,272


45,036


279,304


191,359











Investing activities:










    Purchases of debt securities available-for-sale

(22,087)


(51,106)


(14,552)


(94,456)


(38,683)

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

11,767


8,250


8,543


29,523


31,988

    Purchases of other investments

-


-


-


-


(4,000)

    Proceeds from sale of other investments

2,550


-


-


2,550


-

    Purchases of property and equipment

(25,667)


(12,636)


(9,643)


(103,285)


(46,841)

    Proceeds from sale of property and equipment

1,374


231


43


1,626


939

    Acquisition of business, net of cash acquired 

-


-


-


(319,231)


-

    Proceeds from sale of business, net of transaction costs 

-


-


-


-


475,150

Net cash (used in)/provided by investing activities

(32,063)


(55,261)


(15,609)


(483,273)


418,553











Financing activities:










   Issuance of common stock

8,515


16,854


15,129


90,643


66,060

   Purchases of common stock under repurchase program

(50,062)


(137,979)


(74,995)


(226,247)


(471,787)

Net cash used in financing activities

(41,547)


(121,125)


(59,866)


(135,604)


(405,727)











Effect of exchange rate changes on cash and cash equivalents

166


598


147


269


(821)











Net change in cash and cash equivalents

38,363


(58,516)


(30,292)


(339,304)


203,364











Cash and cash equivalents at beginning of period

402,144


460,660


755,442


779,811


521,786











Cash and cash equivalents at end of period

$         440,507


$ 402,144


$  725,150


$         440,507


$  725,150











SOURCE LSI Corporation



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