LSI Reports First Quarter 2011 Results

News provided by

LSI Corporation

Apr 27, 2011, 04:01 ET

MILPITAS, Calif., April 27, 2011 /PRNewswire/ -- LSI Corporation (NYSE: LSI) today reported results for its first quarter ended April 3, 2011.

On March 9, 2011, LSI entered into a definitive agreement to sell its external storage systems business to NetApp, Inc. The transaction is expected to be completed in May, 2011, and the financial results of this business have been classified as discontinued operations in the company's financial statements. The company's guidance for the first quarter included expected financial results for the external storage systems business, therefore financial measures including and excluding this business have been provided in this news release.

First Quarter 2011 News Release Summary

  • First quarter 2011 revenues from continuing operations of $473 million
  • First quarter 2011 GAAP* income from continuing operations of 3 cents per diluted share
  • First quarter 2011 non-GAAP** income from continuing operations of 10 cents per diluted share
  • First quarter operating cash flows of $108 million

Second Quarter 2011 Business Outlook

  • Projected revenues from continuing operations of $465 million to $495 million
  • GAAP* (loss)/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 $0.07 to $0.13 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, and gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above mentioned items.

First quarter 2011 revenues from continuing operations were $473 million, essentially flat year over year compared to $473 million generated from continuing operations in the first quarter of 2010, and compared to $471 million generated from continuing operations in the fourth quarter of 2010.

Including results from discontinued operations, first quarter 2011 revenues would have been $629 million, a 1% decrease year over year compared to $637 million reported in the first quarter of 2010, and compared to $664 million reported in the fourth quarter of 2010.

First quarter 2011 GAAP* income from continuing operations was $19 million or 3 cents per diluted share, compared to first quarter 2010 GAAP income from continuing operations of $14 million or 2 cents per diluted share. First quarter 2011 GAAP results compare to fourth quarter 2010 GAAP income from continuing operations of $5 million or 1 cent per diluted share. First quarter 2011 GAAP income from continuing operations included a net charge of $47 million from special items, consisting primarily of $30 million of amortization of acquisition-related items, $14 million of stock-based compensation expense, and $3 million of net restructuring and other items.

First quarter 2011 GAAP net income was $10 million or 2 cents per diluted share, compared to first quarter 2010 GAAP net income of $23 million or 3 cents per diluted share. First quarter 2011 GAAP net income compares to fourth quarter 2010 GAAP net loss of $13 million or 2 cents per share.

First quarter 2011 non-GAAP** income from continuing operations was $65 million or 10 cents per diluted share, compared to first quarter 2010 non-GAAP income from continuing operations of $78 million or 12 cents per diluted share. Fourth quarter 2010 non-GAAP income from continuing operations was $53 million or 8 cents per diluted share.

First quarter 2011 non-GAAP net income was $82 million or 13 cents per diluted share, compared to first quarter 2010 non-GAAP net income of $92 million or 14 cents per diluted share. Fourth quarter 2010 non-GAAP net income was $90 million or 14 cents per diluted share.

Cash and short-term investments totaled approximately $682 million at quarter end. The company completed first-quarter purchases of approximately 15 million shares of its common stock for approximately $97 million.

"Our first quarter revenues were strong, bolstered by market share gains with key hard disk drive system-on-chip customers that partially offset normal seasonal patterns," said Abhi Talwalkar, LSI president and chief executive officer. "I'm also pleased with our execution in the quarter, which contributed to both solid gross margin performance and effective operating expense control. We're now well positioned to achieve our current business model and to establish a new, richer business model as we transition to becoming a leading, pure-play provider of semiconductors that enable growing storage and networking applications."

Bryon Look, LSI CFO and chief administrative officer, said, "First-quarter operating cash flows of $108 million were healthy while our balance sheet remained strong and debt free. Our net cash position increased to $682 million after purchasing nearly 15 million shares of our common stock during the quarter."

LSI Second Quarter 2011 Business Outlook

For Continuing Operations

GAAP*

Special Items

Non-GAAP**

Revenue

$465 million to $495 million

$465 million to $495 million

Gross Margin

45.5% – 50.0%

$20 million to $30 million

52.0% – 54.0%

Operating Expenses

$205 million to $225 million

$15 million to $25 million

$190 million to $200 million

Net Other (Loss)/Income

$5 million

$5 million

Tax

Approximately $7 million

Approximately $7 million

(Loss)/Income From Continuing Operations Per Share

($0.02) to $0.07

($0.06) to ($0.09)

$0.07 to $0.13

Diluted Share Count

610 million

610 million

Capital spending is projected to be around $20 million in the second quarter and approximately $55 million in total for 2011.

Depreciation and software amortization is projected to be around $17 million in the second quarter and approximately $75 million in total for 2011.

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 2011 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: a delay in the closing of the sale of our external storage systems business to NetApp; our ability to eliminate costs related to our external storage systems business; our ability to repurchase our common stock at prices we believe to be advantageous; the impact of the recent earthquake, tsunami and nuclear power plant events in Japan; 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 3,

December 31,

April 4,

Assets


2011

2010

2010









Current assets:





   Cash and short-term investments

$    682.3

$            676.6

$ 1,015.5

   Accounts receivable, net

286.1

326.6

298.6

   Inventories

155.0

186.8

185.8

   Prepaid expenses and other current assets

68.4

73.3

107.2

   Assets held for sale

236.3

0.5

17.2









       Total current assets

1,428.1

1,263.8

1,624.3









Property and equipment, net

188.0

223.2

215.4

Goodwill and identified intangible assets, net

592.0

749.8

887.7

Other assets

146.8

188.1

223.1









       Total assets

$ 2,354.9

$         2,424.9

$ 2,950.5


















Liabilities and Stockholders' Equity














Current liabilities:





   Current portion of long-term debt

$          -

$                  -

$    350.0

   Other current liabilities

484.3

484.6

509.4









       Total current liabilities

484.3

484.6

859.4









Pension, tax and other liabilities

611.0

622.8

618.9









       Total liabilities

1,095.3

1,107.4

1,478.3









Stockholders' equity:





   Common stock and additional paid-in capital

5,932.3

6,004.3

6,141.6

   Accumulated deficit

(4,358.3)

(4,368.5)

(4,386.0)

   Accumulated other comprehensive loss

(314.4)

(318.3)

(283.4)









       Total stockholders' equity

1,259.6

1,317.5

1,472.2









       Total liabilities and stockholders' equity

$ 2,354.9

$         2,424.9

$ 2,950.5

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)



Three Months Ended

April 3,

December 31,

April 4,

2011

2010

2010






Revenues

$ 473,264

$        470,657

$ 472,672






   Cost of revenues

225,459

217,059

227,627

   Amortization of acquisition-related intangibles

21,818

28,914

28,835

   Stock-based compensation expense

1,813

1,821

1,416

      Total cost of revenues

249,090

247,794

257,878






Gross profit

224,174

222,863

214,794






   Research and development

136,124

136,087

132,842

   Stock-based compensation expense

6,223

4,654

6,020

      Total research and development

142,347

140,741

138,862






   Selling, general and administrative

54,917

55,231

55,730

   Amortization of acquisition-related intangibles

8,319

8,949

8,948

   Stock-based compensation expense

5,631

5,226

5,687

      Total selling, general and administrative

68,867

69,406

70,365






   Restructuring of operations and other items, net

2,806

(1,043)

1,620






Operating income

10,154

13,759

3,947






   Interest expense

-

-

(3,894)

   Interest income and other, net

4,288

7,701

(8,807)






Income/(loss) before income taxes

14,442

21,460

(8,754)

(Benefit)/provision for income taxes

(4,104)

16,905

(23,102)






Income from continuing operations

18,546

4,555

14,348






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

(8,392)

(17,956)

8,172






Net income/(loss)

$   10,154

$         (13,401)

$   22,520






Basic income/(loss) per share:




   Income from continuing operations

$       0.03

$              0.01

$       0.02

  (Loss)/income from discontinued operations

$      (0.01)

$             (0.03)

$       0.01

   Net Income

$       0.02

$             (0.02)

$       0.03






Diluted income/(loss) per share:




   Income from continuing operations

$       0.03

$              0.01

$       0.02

  (Loss)/income from discontinued operations

$      (0.01)

$             (0.03)

$       0.01

   Net Income

$       0.02

$             (0.02)

$       0.03






Shares used in computing per share amounts:




   Basic

615,450

616,809

656,528






   Diluted

629,733

616,809

664,315






A reconciliation of certain GAAP measures to non-GAAP measures is included below.











Three Months Ended

April 3,

December 31,

April 4,

Reconciliation of GAAP net income/(loss) to  non-GAAP net income:

2011

2010

2010






GAAP income from continuing operations

$   18,546

$            4,555

$   14,348






Special items:




a)   Stock-based compensation expense - cost of revenues

1,813

1,821

1,416

b)   Stock-based compensation expense - R&D

6,223

4,654

6,020

c)   Stock-based compensation expense - SG&A

5,631

5,226

5,687

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

21,818

28,914

-

28,835

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

8,319

8,949

8,948

f)   Restructuring of operations and other items, net

2,806

(1,043)

1,620

g)   Write-down of investments

-

-

11,600

      Total special items from continuing operations

46,610

48,521

64,126






Non-GAAP income from continuing operations

$   65,156

$          53,076

$   78,474






Non-GAAP income from continuing operations per share






   Basic

$       0.11

$              0.09

$       0.12






   Diluted

$       0.10

$              0.08

$       0.12






GAAP net income/(loss)

$   10,154

$         (13,401)

$   22,520






Special items:




a)   Total special items from continuing operations

46,610

48,521

64,126

b)   Stock-based compensation expense - discontinued operations

319

2,856

3,308

c)   Amortization of acquisition-related intangibles - discontinued operations

886

2,453

2,453

d)   Restructuring of operations - discontinued operations

23,811

49,548

-






Non-GAAP net income

$   81,780

$          89,977

$   92,407






Non-GAAP net income per share:




   Basic

$       0.13

$              0.15

$       0.14






   Diluted

$       0.13

$              0.14

$       0.14






Shares used in computing non-GAAP per share amounts:




   Basic

615,450

616,809

656,528






   Diluted

629,733

626,079

690,395

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)







Three Months Ended

April 3,

December 31,

April 4,

2011

2010

2010

Operating activities:




Net income/(loss)

$   10,154

$         (13,401)

$   22,520

Adjustments:




   Depreciation and amortization *

56,007

65,954

67,017

   Stock-based compensation expense

13,986

14,557

16,431

   Non-cash restructuring of operations and other items, net

10,824

45,681

(10)

   Write-down of investments

-

-

11,600

  (Gain)/loss on sale of property and equipment

(239)

(142)

3

   Unrealized foreign exchange loss/(gain)

1,379

(2,063)

(2,215)

   Deferred taxes

(43)

3,478

98

   Changes in assets and liabilities:




       Accounts receivable, net

40,471

(12,737)

40,396

       Inventories

(12,651)

33,348

(16,441)

       Prepaid expenses, assets held for sale and other assets

(1,066)

506

(8,095)

       Accounts payable

24,273

(11,672)

(8,547)

       Accrued and other liabilities

(35,066)

(11,869)

(16,979)

Net cash provided by operating activities

108,029

111,640

105,778






Investing activities:




   Purchases of debt securities available-for-sale

(15,530)

(20,425)

-

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

12,958

20,320

11,254

   Purchases of property, equipment and software

(21,542)

(25,080)

(27,276)

   Proceeds from sale of property and equipment

310

281

22

   Proceeds from a repayment on a note receivable

-

10,000

-

Net cash used in investing activities

(23,804)

(14,904)

(16,000)






Financing activities:




  Issuance of common stock

17,319

18,826

3,635

  Purchase of common stock under repurchase programs

(96,791)

(32,199)

(26,208)

Net cash used in financing activities

(79,472)

(13,373)

(22,573)






Effect of exchange rate changes on cash and cash equivalents

(11)

(558)

(2,117)






Net change in cash and cash equivalents

4,742

82,805

65,088






Cash and cash equivalents at beginning of period

521,786

438,981

778,291






Cash and cash equivalents at end of period

$ 526,528

$        521,786

$ 843,379












* Depreciation of fixed assets and amortization of intangible assets, software, capitalized intellectual property, premiums on short-term


investments, and debt issuance costs.






SOURCE LSI Corporation