LSI Reports First Quarter 2010 Results

Company swings quarterly net income by more than $100 million year-over-year

News provided by

LSI Corporation

Apr 28, 2010, 04:01 ET

MILPITAS, Calif., April 28 /PRNewswire-FirstCall/ -- LSI Corporation (NYSE: LSI) today reported results for its first quarter ended April 4, 2010.

First Quarter 2010 News Release Summary

  • First quarter 2010 revenues of $637 million
  • First quarter 2010 GAAP* net income of 3 cents per diluted share
  • First quarter 2010 non-GAAP** net income of 14 cents per diluted share
  • First quarter operating cash flows of $106 million

Second Quarter 2010 Business Outlook

  • Projected revenues of $635 million to $665 million
  • GAAP* net (loss)/income in the range of ($0.03) to $0.06 cents per share
  • Non-GAAP** net income in the range of $0.08 to $0.14 cents per share

*

Generally Accepted Accounting Principles.

**

Excludes goodwill and other intangible asset impairment, stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, write-down of debt and equity securities and gain on repurchase of convertible subordinated notes. It also excludes the income tax effect associated with the above mentioned items.



First quarter 2010 revenues were $637 million, a 32% increase year-over-year compared to $482 million reported in the first quarter of 2009, and essentially flat sequentially compared to $638 million reported in the fourth quarter of 2009.

First quarter 2010 GAAP* net income was $23 million or 3 cents per diluted share, compared to first quarter 2009 GAAP net loss of $104 million or 16 cents per share. First quarter GAAP results included a net tax benefit of $19 million primarily related to the expiration of statutes of limitations. First quarter 2010 GAAP results compare to fourth quarter 2009 GAAP net income of $65 million or 10 cents per diluted share. First quarter 2010 GAAP net income included a net charge of $70 million from special items, consisting primarily of $40 million of amortization of acquisition-related items, $16 million of stock-based compensation expense, $12 million of loss on write-down of equity securities, and $2 million of net restructuring and other items.

First quarter 2010 non-GAAP** net income was $92 million or 14 cents per diluted share, compared to first quarter 2009 non-GAAP net loss of $18 million or 3 cents per share. First quarter non-GAAP results also included the aforementioned net tax benefit of $19 million. Fourth quarter 2009 non-GAAP net income was $124 million or 18 cents per diluted share.

Cash and short-term investments totaled approximately $1.0 billion at quarter end. LSI also announced today that it has completed the purchase of approximately 4 million shares of its common stock for approximately $26 million under its $250 million share repurchase program.

"Our strong first quarter results reflect an improving end demand environment as well as increasing operating leverage from the steps we have taken to transform our business over the past few years," said Abhi Talwalkar, LSI president and chief executive officer. "Revenues were at the high end of our updated guidance range and well above typical seasonal patterns, further underscoring our confidence in our ability to grow faster than the markets we serve."

Bryon Look, LSI CFO and chief administrative officer, said, "First quarter revenues improved significantly on a year-over-year basis and were sequentially flat to the fourth quarter of 2009, offsetting the effects of normal seasonality. We delivered strong earnings performance relative to our upwardly revised guidance and generated solid operating cash flows of $106 million. Semiconductor revenues grew 9% sequentially, while our storage systems business achieved record first-quarter revenues."

LSI Second Quarter 2010 Business Outlook



GAAP*

Special Items

Non-GAAP**

Revenue

$635 million to
$665 million


$635 million to
$665 million

Gross Margin

40% – 44%

$30 million to
$40 million

46.7% – 48.7%

Operating Expenses

$248 million to
$268 million

$20 million to
$30 million

$228 million to
$238 million

Net Other (Loss)/Income

$1 million


$1 million

Tax

Approximately
$9 million


Approximately
$9 million

Net (Loss)/Income Per Share


($0.03) to $0.06


($0.08) to ($0.11)


$0.08 to $0.14

Diluted Share Count


664 million


664 million




Capital spending is projected to be around $15 million in the second quarter and approximately $55 million in total for 2010.

Depreciation and software amortization is projected to be around $26 million in the second quarter and approximately $100 million in total for 2010.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss first quarter financial results and the second quarter 2010 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 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 market 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) 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 and Networking markets. More information is available at www.lsi.com.

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. LSI and the LSI & Design logo are trademarks or registered trademarks of LSI Corporation.
  3. 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)












April 4,


December 31,


April 5,

Assets


2010


2009


2009








Current assets:







   Cash and short-term investments


$ 1,015.5


$    962.1


$ 1,073.8

   Accounts receivable, net


298.6


339.0


273.3

   Inventories


185.8


169.3


201.2

   Prepaid expenses and other current assets


124.4


115.1


136.7








       Total current assets


1,624.3


1,585.5


1,685.0








Property and equipment, net


215.4


219.0


226.6

Goodwill and identified intangible assets, net


887.7


927.9


1,022.9

Other assets


223.1


235.5


243.5








       Total assets


$ 2,950.5


$ 2,967.9


$ 3,178.0















Liabilities and Stockholders' Equity














Current liabilities:







   Current portion of long-term debt


$    350.0


$    350.0


$    244.6

   Other current liabilities


509.4


504.4


490.0








       Total current liabilities


859.4


854.4


734.6








Long-term debt, net of current portion


-


-


350.0

Pension, tax and other liabilities


618.9


652.4


750.8








       Total liabilities


1,478.3


1,506.8


1,835.4








Stockholders' equity:







   Common stock and additional paid-in capital


6,141.6


6,149.2


6,088.4

   Accumulated deficit


(4,386.0)


(4,408.5)


(4,464.3)

   Accumulated other comprehensive loss


(283.4)


(279.6)


(281.5)








       Total stockholders' equity


1,472.2


1,461.1


1,342.6








       Total liabilities and stockholders' equity


$ 2,950.5


$ 2,967.9


$ 3,178.0



LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)




Three Months Ended


April 4,


December 31,


April 5,


2010


2009


2009







Revenues

$ 637,182


$ 637,796


$  482,279







   Cost of revenues

332,937


335,792


276,584

   Purchase accounting effect on inventory

-


56


-

   Amortization of acquisition-related intangibles

31,288


33,448


33,610

   Stock-based compensation expense

1,712


1,650


2,013

      Total cost of revenues

365,937


370,946


312,207







Gross profit

271,245


266,850


170,072







   Research and development

158,974


146,526


147,422

   Stock-based compensation expense

7,898


6,536


7,862

      Total research and development

166,872


153,062


155,284







   Selling, general and administrative

70,563


63,239


66,519

   Amortization of acquisition-related intangibles

8,948


9,123


9,123

   Stock-based compensation expense

6,821


5,993


8,115

      Total selling, general and administrative

86,332


78,355


83,757







   Restructuring of operations and other items, net

1,620


2,286


25,205







Income/(loss) from operations

16,421


33,147


(94,174)







   Interest expense

(3,894)


(3,932)


(7,236)

   Interest income and other, net

(8,807)


4,530


5,863







Income/(loss) before income taxes

3,720


33,745


(95,547)

(Benefit)/provision for income taxes

(18,800)


(31,081)


8,000







Net income/(loss)

$   22,520


$   64,826


$ (103,547)







Net income/(loss) per share:






   Basic

$       0.03


$       0.10


$       (0.16)







   Diluted

$       0.03


$       0.10


$       (0.16)







Shares used in computing per share amounts:






   Basic

656,528


654,560


648,459







   Diluted

664,315


663,237


648,459







A reconciliation of net income/(loss) on the GAAP basis to non-GAAP net income/(loss) is included below.










Three Months Ended

Reconciliation of GAAP net income/(loss) to

April 4,


December 31,


April 5,

   non-GAAP net income/(loss):

2010


2009


2009







GAAP net income/(loss)

$   22,520


$   64,826


$ (103,547)







Special items:






a)   Stock-based compensation expense - cost of revenues

1,712


1,650


2,013

b)   Stock-based compensation expense - R&D

7,898


6,536


7,862

c)   Stock-based compensation expense - SG&A

6,821


5,993


8,115

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

31,288


33,448


33,610

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

8,948


9,123


9,123

f)   Purchase accounting effect on inventory

-


56


-

g)   Restructuring of operations and other items, net

1,620


2,286


25,205

h)   Write-down of equity securities

11,600


-


-







      Total special items

69,887


59,092


85,928







Non-GAAP net income/(loss)

$   92,407


$ 123,918


$   (17,619)







Non-GAAP net income/(loss) per share:






   Basic

$       0.14


$       0.19


$       (0.03)







   Diluted *

$       0.14


$       0.18


$       (0.03)







Shares used in computing non-GAAP per share amounts:






   Basic

656,528


654,560


648,459







   Diluted

690,395


689,317


648,459







* In computing non-GAAP diluted earnings per share for three months ended April 4, 2010 and December 31, 2009, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock.










Three Months Ended

Reconciliation of GAAP to non-GAAP shares used in the calculation of diluted per share amounts:

April 4,


December 31,


April 5,

2010


2009


2009







Diluted shares used in per-share computation  - GAAP

664,315


663,237


648,459

Effect of $350 million convertible notes considered dilutive

26,080


26,080


-

Diluted shares used in per-share computation - non-GAAP

690,395


689,317


648,459



LSI CORPORATION

Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)








Three Months Ended


April 4,


December 31,


April 5,


2010


2009


2009

Operating activities:






Net income/(loss)

$   22,520


$   64,826


$ (103,547)

Adjustments:






   Depreciation and amortization *

67,017


69,244


65,079

   Stock-based compensation expense

16,431


14,179


17,990

   Non-cash restructuring of operations and other items, net

(10)


-


(1)

   Write-down of equity securities

11,600


-


-

   Loss on sale of property and equipment

3


75


100

   Unrealized foreign exchange (gain)/loss

(2,215)


986


(12,384)

   Deferred taxes

98


3,316


73

   Changes in assets and liabilities:






       Accounts receivable, net

40,396


(31,769)


30,690

       Inventories

(16,441)


(13,814)


19,340

       Prepaid expenses and other assets

(8,095)


20,197


32,443

       Accounts payable

(8,547)


15,001


(63,535)

       Accrued and other liabilities

(16,979)


(65,490)


3,905

Net cash provided by/(used in) operating activities

105,778


76,751


(9,847)







Investing activities:






   Purchases of debt securities available-for-sale

-


-


(10)

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

11,254


12,932


35,882

   Purchases of equity securities

-


(4,625)


(5,000)

   Purchases of property, equipment and software

(27,276)


(21,266)


(25,463)

   Proceeds from sale of property and equipment

22


24


7

Net cash (used in)/provided by investing activities

(16,000)


(12,935)


5,416







Financing activities:






  Issuance of common stock

3,635


8,707


1

  Purchase of common stock under repurchase programs

(26,208)


-


-

Net cash (used in)/provided by financing activities

(22,573)


8,707


1







Effect of exchange rate changes on cash and cash equivalents

(2,117)


383


(2,366)







Increase/(decrease) in cash and cash equivalents

65,088


72,906


(6,796)







Cash and cash equivalents at beginning of period

778,291


705,385


829,301







Cash and cash equivalents at end of period

$ 843,379


$ 778,291


$  822,505













* Depreciation of fixed assets and amortization of intangible assets, software, capitalized intellectual property, premiums on short-term investments, debt issuance costs, and accrued debt premium.



LSI CORPORATION

Selected Financial Information (GAAP)

(In millions)

(Unaudited)


















Three Months Ended




April 4,


December 31,


April 5,




2010


2009


2009










Semiconductor revenues


$ 416.5


$ 380.8


$ 325.0


Storage Systems revenues


$ 220.7


$ 257.0


$ 157.3


Total revenues


$ 637.2


$ 637.8


$ 482.3


Percentage change in revenues-qtr./qtr. ( a )


-0.1%


10.3%


-20.9%


Percentage change in revenues-yr./yr. ( b )


32.1%


4.6%


-27.0%










Days sales outstanding


42


48


51


Days of inventory


46


41


58


Current ratio


1.9


1.9


2.3


Quick ratio


1.5


1.5


1.8










Gross margin as a percentage of revenues


42.6%


41.8%


35.3%


R&D as a percentage of revenues


26.2%


24.0%


32.2%


SG&A as a percentage of revenues


13.5%


12.3%


17.4%










Employees  ( c )


5,451


5,397


5,310


Revenues per employee (in thousands) ( d )


$ 467.6


$ 472.7


$ 363.3










Selected Cash Flow Information:








Purchases of property and equipment ( e )


$   15.2


$   14.1


$   10.2


Depreciation and amortization ( f )


$   26.3


$   26.2


$   22.5

































( a )

Represents a sequential quarterly change in revenues.

( b )

Represents a change 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.  



SOURCE LSI Corporation