LSI Reports First Quarter 2012 Results

Revenue up 19% quarter-over-quarter, driven by hard disk recovery, flash storage processor demand and new product cycles

News provided by

LSI Corporation

Apr 25, 2012, 04:01 ET

MILPITAS, Calif., April 25, 2012 /PRNewswire/ -- LSI Corporation (NYSE: LSI) today reported results for its first quarter ended April 1, 2012.

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

First Quarter 2012 Highlights

  • First quarter 2012 revenues from continuing operations* of $622 million
  • First quarter 2012 GAAP** income from continuing operations of 13 cents per diluted share
  • First quarter 2012 non-GAAP*** income from continuing operations of 20 cents per diluted share
  • First quarter 2012 operating cash flows of $50 million

 Second Quarter 2012 Business Outlook

  • Projected revenues from continuing operations* of $630 million to $670 million
  • GAAP** income from continuing operations in the range of $0.03 to $0.13 per share
  • Non-GAAP*** income from continuing operations in the range of $0.15 to $0.21 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 and gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above-mentioned items. It also excludes, in the case of non-GAAP net income, gain from the sale of the external storage systems business.

"Our performance in the first quarter demonstrates the positive results of our multi-year growth strategy and our ability to outgrow the storage and networking markets we serve. The significant revenue growth was driven by better-than-expected growth in our HDD business, strength in our new SandForce flash business and contribution from various new product cycles," said Abhi Talwalkar, LSI president and CEO. "Going forward, LSI is firmly established as a central player in some of the most critical growth trends in computing, including cloud, Big Data, mobile networking and flash, with products that are bringing exciting new levels of speed and productivity to our customers." 

First quarter 2012 revenues from continuing operations were $622 million, above the high end of updated guidance, compared to $473 million generated from continuing operations in the first quarter of 2011, and compared to $523 million generated from continuing operations in the fourth quarter of 2011.

First quarter 2012 GAAP** income from continuing operations was $75 million or 13 cents per diluted share, compared to first quarter 2011 GAAP income from continuing operations of $19 million or 3 cents per diluted share. Fourth quarter 2011 GAAP income from continuing operations was $11 million or 2 cents per diluted share. First quarter 2012 GAAP income from continuing operations included a net charge of $42 million from special items, consisting primarily of approximately $31 million of stock-based compensation expense, $30 million of amortization of acquisition-related items, $15 million of net restructuring and other items, $14 million of purchase accounting effect on inventory, a $43 million favorable income tax effect and a $6 million gain on remeasurement of a pre-acquisition equity interest to fair value.

First quarter 2012 non-GAAP*** income from continuing operations was $117 million or 20 cents per diluted share, compared to first quarter 2011 non-GAAP income from continuing operations of $65 million or 10 cents per diluted share. Fourth quarter 2011 non-GAAP income from continuing operations was $73 million or 13 cents per diluted share.

Cash and short-term investments totaled approximately $623 million at quarter end. The company completed first-quarter purchases of approximately 4.6 million shares of its common stock for approximately $38 million, and on a cumulative basis, LSI has repurchased a total of 77 million shares and utilized approximately $537 million of the company's current $750 million share repurchase program.

"In the first quarter, LSI delivered double-digit revenue growth and demonstrated significant progress towards our business model and non-GAAP operating margin target," said Bryon Look, LSI CFO and chief administrative officer. "Year over year, our revenues grew 32% and non-GAAP income from operations increased 80%." 

LSI 2Q2012 Business Outlook for Continuing Operations

GAAP**

Special Items

Non-GAAP***

Revenue

$630 million to $670 million

$630 million to $670 million

Gross Margin

47% – 51%

$20 million to $30 million

52% – 54%

Operating Expenses

$255 million to $275 million

$30 million to $40 million

$225 million to $235 million

Net Other Income

$3 million

$3 million

Tax

Approximately $11 million

Approximately $11 million

(Loss)/Income from Continuing Operations Per Share

$0.03 to $0.13

($0.08) to ($0.12)

$0.15 to $0.21

Diluted Share Count

600 million

600 million

Capital spending is projected to be around $20 million in the second quarter and approximately $125 million in total for 2012.

Depreciation and software amortization is projected to be around $16 million in the second quarter and approximately $65 million in total for 2012.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss first quarter 2012 financial results and the second 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 eliminate costs related to the external storage systems business that we sold in 2011; our ability to repurchase our common stock at prices we believe to be advantageous; the impact of the 2011 floods in Thailand; 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 and mobile networks. 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 and the LSI & Design logo 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)































April 1,

December 31,

April 3,

Assets


2012

2011

2011









Current assets:






    Cash and short-term investments

$               623.1

$               935.5

$               682.3

    Accounts receivable, net

302.1

246.5

286.1

    Inventories

200.8

180.0

155.0

    Prepaid expenses, assets held for sale





      and other current assets

62.4

60.7

304.7









        Total current assets

1,188.4

1,422.7

1,428.1









Property and equipment, net

235.1

180.6

188.0

Goodwill and identified intangible assets, net

832.0

506.2

592.0

Other assets

111.6

122.6

146.8









        Total assets

$            2,367.1

$            2,232.1

$            2,354.9


















Liabilities and Stockholders' Equity














Current liabilities

$               470.3

$               460.9

$               484.3









Pension, tax and other liabilities

693.5

712.2

611.0









        Total liabilities

1,163.8

1,173.1

1,095.3









Stockholders' equity:






    Common stock and additional paid-in capital

5,691.4

5,629.2

5,932.3

    Accumulated deficit

(3,961.8)

(4,037.0)

(4,358.3)

    Accumulated other comprehensive loss

(526.3)

(533.2)

(314.4)









        Total stockholders' equity

1,203.3

1,059.0

1,259.6









        Total liabilities and stockholders' equity

$            2,367.1

$            2,232.1

$            2,354.9









LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)







Three Months Ended

April 1,

December 31,

April 3,

2012

2011

2011






Revenues

$                  622,424

$                  523,140

$                  473,264






    Cost of revenues

296,152

264,364

225,459

    Amortization of acquisition-related intangibles

21,390

20,354

21,818

    Purchase accounting effect on inventory

14,458

-

-

    Stock-based compensation expense

3,512

1,597

1,813

       Total cost of revenues

335,512

286,315

249,090






Gross profit 

286,912

236,825

224,174






    Research and development

157,563

139,061

136,124

    Stock-based compensation expense

12,308

5,360

6,223

       Total research and development

169,871

144,421

142,347






    Selling, general and administrative

66,419

63,705

54,917

    Amortization of acquisition-related intangibles

8,667

8,319

8,319

    Stock-based compensation expense

15,014

4,881

5,631

       Total selling, general and administrative

90,100

76,905

68,867






    Restructuring of operations and other items, net

15,462

21,033

2,806






Income/(loss) from operations

11,479

(5,534)

10,154






    Interest income and other, net

14,656

8,124

4,288






Income from continuing operations before income taxes 

26,135

2,590

14,442

Benefit from income taxes 

(49,062)

(8,818)

(4,104)






Income from continuing operations

75,197

11,408

18,546






Loss from discontinued operations, net of taxes 

-

(13,194)

(8,392)






Net income/(loss)

$                    75,197

$                    (1,786)

$                    10,154






Basic income/(loss) per share:




    Income from continuing operations 

$                        0.13

$                        0.02

$                        0.03

    Loss from discontinued operations 

$                              -

$                      (0.02)

$                      (0.01)

    Net income/(loss)

$                        0.13

$                        0.00

$                        0.02






Diluted income/(loss) per share:




    Income from continuing operations 

$                        0.13

$                        0.02

$                        0.03

    Loss from discontinued operations 

$                              -

$                      (0.02)

$                      (0.01)

    Net income/(loss)

$                        0.13

$                        0.00

$                        0.02






Shares used in computing per share amounts:




    Basic

566,709

563,721

615,450






    Diluted

590,556

573,018

629,733






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










Three Months Ended

April 1,

December 31,

April 3,

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

2012

2011

2011






GAAP income from continuing operations

$                    75,197

$                    11,408

$                    18,546






Special items:




a)   Stock-based compensation expense - cost of revenues

3,512

1,597

1,813

b)   Stock-based compensation expense - R&D

12,308

5,360

6,223

c)   Stock-based compensation expense - SG&A

15,014

4,881

5,631

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

21,390

20,354

21,818

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

8,667

8,319

8,319

f)   Purchase accounting effect on inventory

14,458

-

-

g)   Restructuring of operations and other items, net

15,462

21,033

2,806

h)   Gain on remeasurement of a pre-acquisition equity interest to fair value

(5,765)

-

-

i)   Income tax effect

(43,198)

-

-

     Total special items from continuing operations

41,848

61,544

46,610






Non-GAAP income from continuing operations

$                  117,045

$                    72,952

$                    65,156






Non-GAAP income from continuing operations per share: 




    Basic

$                        0.21

$                        0.13

$                        0.11






    Diluted 

$                        0.20

$                        0.13

$                        0.10






GAAP net income/(loss)

$                    75,197

$                    (1,786)

$                    10,154






Special items:




a)   Total special items from continuing operations

41,848

61,544

46,610

b)   Stock-based compensation expense - discontinued operations

-

-

319

c)   Amortization of acquisition-related intangibles - discontinued operations

-

-

886

d)   Restructuring of operations - discontinued operations

-

(67)

23,811






Non-GAAP net income

$                  117,045

$                    59,691

$                    81,780






Non-GAAP net income per share:




    Basic

$                        0.21

$                        0.11

$                        0.13






    Diluted 

$                        0.20

$                        0.10

$                        0.13






Shares used in computing non-GAAP per share amounts:




    Basic

566,709

563,721

615,450






    Diluted

590,556

573,018

629,733






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









Income/(loss) from operations - GAAP

$                    11,479

$                    (5,534)

$                    10,154

Special items:




a)   Total stock-based compensation expense

30,834

11,838

13,667

b)   Total amortization of acquisition-related intangibles

30,057

28,673

30,137

c)   Purchase accounting effect on inventory

14,458

-

-

d)   Restructuring of operations and other items, net

15,462

21,033

2,806

Income from operations - Non-GAAP

$                  102,290

$                    56,010

$                    56,764






LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)







Three Months Ended

April 1,

December 31,

April 3,

2012

2011

2011

Operating activities:




Net income/(loss)

$           75,197

$            (1,786)

$           10,154

Adjustments:




    Depreciation and amortization 

45,368

43,357

56,007

    Stock-based compensation expense

30,834

11,838

13,986

    Non-cash restructuring of operations and other items, net

2,140

4,747

10,824

    (Gain) on remeasurement of a pre-acquisition equity interest to fair value/




       write-down of investments

(5,765)

183

-

    Loss/(gain) on sale of property and equipment

25

78

(239)

    Unrealized foreign exchange loss/(gain)

1,461

(2,215)

1,379

    Deferred taxes 

(43,202)

(9,894)

(43)

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




        assumed in business combination:




        Accounts receivable

(44,845)

1,850

40,471

        Inventories

3,453

30,399

(12,651)

        Prepaid expenses, assets held for sale and other assets

(2,290)

(526)

(1,066)

        Accounts payable

47,119

(2,179)

24,273

        Accrued and other liabilities

(59,270)

(20,436)

(35,066)

Net cash provided by operating activities

50,225

55,416

108,029






Investing activities:




    Purchases of debt securities available-for-sale

(21,263)

(12,284)

(15,530)

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

9,506

5,472

12,958

    Purchases of property and equipment

(64,982)

(14,079)

(21,542)

    Proceeds from sale of property and equipment

21

22,683

310

    Acquisition of SandForce, net of cash acquired 

(319,231)

-

-

    Proceeds from repayments on a note receivable 

-

10,000

-

Net cash (used in)/provided by investing activities

(395,949)

11,792

(23,804)






Financing activities:




   Issuance of common stock

65,274

14,980

17,319

   Purchase of common stock under repurchase program

(38,206)

(26,999)

(96,791)

Net cash provided by/(used in) financing activities

27,068

(12,019)

(79,472)






Effect of exchange rate changes on cash and cash equivalents

(495)

(528)

(11)






Net change in cash and cash equivalents

(319,151)

54,661

4,742






Cash and cash equivalents at beginning of period

779,811

725,150

521,786






Cash and cash equivalents at end of period

$         460,660

$          779,811

$         526,528






SOURCE LSI Corporation