LSI Reports Third Quarter 2011 Results

Revenues up 9% quarter over quarter, 21% year over year

Oct 26, 2011, 16:14 ET from LSI Corporation

MILPITAS, Calif., Oct. 26, 2011 /PRNewswire/ -- LSI Corporation (NYSE: LSI) today reported results for its third quarter ended October 2, 2011.

On May 6, 2011, LSI completed the sale of its external storage systems business to NetApp. 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."

Third Quarter 2011 News Release Summary

  • Third quarter 2011 revenues from continuing operations of $547 million
  • Third quarter 2011 GAAP* income from continuing operations of 5 cents per diluted share
  • Third quarter 2011 non-GAAP** income from continuing operations of 14 cents per diluted share
  • Third quarter operating cash flows of $45 million

Fourth Quarter 2011 Business Outlook

Note: The business outlook reflects supply chain impacts and uncertainties due to recent flooding in Thailand.  

  • Projected revenues from continuing operations of $500 million to $550 million
  • GAAP* (loss)/income from continuing operations in the range of ($0.04) to $0.08 per share
  • Non-GAAP** income from continuing operations in the range of $0.06 to $0.14 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. It also excludes, in the case of non-GAAP net income, gain from the sale of the external storage systems business.

"Despite macro uncertainties, LSI delivered a strong quarter and is positioned to outgrow the markets we serve in both the near and longer term, based on our share gains and new product cycles across our businesses," said Abhi Talwalkar, LSI president and CEO. "Further extending LSI's growth opportunities, the acquisition of SandForce, announced earlier today, will move us into a leadership position in the rapidly growing market for flash-based solutions."

Third quarter 2011 revenues from continuing operations were $547 million, in line with guidance, compared to $453 million generated from continuing operations in the third quarter of 2010, and compared to $501 million generated from continuing operations in the second quarter of 2011.

Third quarter 2011 GAAP* income from continuing operations was $32 million or 5 cents per diluted share, compared to third quarter 2010 GAAP income from continuing operations of $13 million or 2 cents per diluted share. Second quarter 2011 GAAP income from continuing operations was $28 million or 5 cents per diluted share. Third quarter 2011 GAAP income from continuing operations included a net charge of $51 million from special items, consisting primarily of approximately $29 million of amortization of acquisition-related items, $12 million of stock-based compensation expense and $11 million of net restructuring and other items.

Third quarter 2011 GAAP net income was $29 million or 5 cents per diluted share, compared to third quarter 2010 GAAP net income of $23 million or 4 cents per diluted share. Second quarter 2011 GAAP net income was $294 million or 48 cents per diluted share. Second quarter 2011 GAAP net income included a gain of $260 million or 43 cents per diluted share related to the sale of the external storage systems business.  

Third quarter 2011 non-GAAP** income from continuing operations was $83 million or 14 cents per diluted share, compared to third quarter 2010 non-GAAP income from continuing operations of $63 million or 10 cents per diluted share. Second quarter 2011 non-GAAP income from continuing operations was $60 million or 10 cents per diluted share.

Third quarter 2011 non-GAAP net income was $83 million or 14 cents per diluted share, compared to third quarter 2010 non-GAAP net income of $79 million or 13 cents per diluted share. Second quarter 2011 non-GAAP net income was $79 million or 13 cents per diluted share.

Cash and short-term investments totaled approximately $879 million at quarter end. The company completed third-quarter purchases of approximately 11 million shares of its common stock for approximately $75 million. On a year-to-date basis, the company has purchased approximately 68 million shares of its common stock for approximately $472 million under its $750 million share repurchase program.

Bryon Look, LSI CFO and chief administrative officer, said, "Execution this quarter remained strong with revenues growing 9 percent sequentially. Year over year, our revenues increased 21 percent and non-GAAP operating income was up 38 percent. Looking forward, we have included the expected business impacts associated with Thailand supply chain disruptions in our Q4 guidance."  

LSI 4Q2011 Business Outlook for Continuing Operations

GAAP*

Special Items

Non-GAAP**

Revenue

$500 million to $550 million

$500 million to $550 million

Gross Margin

45% – 49%

$15 million to $25 million

50% – 52%

Operating Expenses

$218 million to $238 million

$20 million to $30 million

$198 million to $208 million

Net Other Income

$5 million

$5 million

Tax

Approximately $13 million

Approximately $13 million

(Loss)/Income From Continuing Operations Per Share

($0.04) to $0.08

($0.06) to ($0.10)

$0.06 to $0.14

Diluted Share Count

580 million

580 million

Capital spending is projected to be around $12 million in the fourth quarter and approximately $44 million in total for 2011.

Depreciation and software amortization is projected to be around $16 million in the fourth quarter and approximately $72 million in total for 2011.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss third quarter financial results and the fourth 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: our ability to obtain all necessary regulatory approvals for the acquisition, the successful consummation of the acquisition; 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 to NetApp; our ability to repurchase our common stock at prices we believe to be advantageous; the impact of the recent flooding 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. The company applies its technology in solutions created in collaboration with our partners. 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)

October 2,

July 3,

December 31,

Assets

2011

2011

2010

Current assets:

   Cash and short-term investments

$      878.9

$    906.5

$            676.6

   Accounts receivable, net

248.4

234.1

326.6

   Inventories

210.4

193.8

186.8

   Prepaid expenses, assets held for sale

     and other current assets

91.4

92.4

73.8

       Total current assets

1,429.1

1,426.8

1,263.8

Property and equipment, net

176.7

178.5

223.2

Goodwill and identified intangible assets, net

534.8

563.4

749.8

Other assets

132.5

147.2

188.1

       Total assets

$   2,273.1

$ 2,315.9

$         2,424.9

Liabilities and Stockholders' Equity

Current liabilities

$      464.4

$    447.7

$            484.6

Pension, tax and other liabilities

533.7

567.5

622.8

       Total liabilities

998.1

1,015.2

1,107.4

Stockholders' equity:

   Common stock and additional paid-in capital

5,629.6

5,678.4

6,004.3

   Accumulated deficit

(4,035.2)

(4,064.5)

(4,368.5)

   Accumulated other comprehensive loss

(319.4)

(313.2)

(318.3)

       Total stockholders' equity

1,275.0

1,300.7

1,317.5

       Total liabilities and stockholders' equity

$   2,273.1

$ 2,315.9

$         2,424.9

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

October 2,

July 3,

October 3,

October 2,

October 3,

2011

2011

2010

2011

2010

Revenues

$  546,910

$ 500,644

$  452,878

$ 1,520,818

$ 1,398,997

   Cost of revenues

261,399

240,692

204,001

727,550

649,487

   Amortization of acquisition-related intangibles

20,206

20,281

28,835

62,305

86,505

   Stock-based compensation expense

1,460

2,051

1,822

5,324

5,223

      Total cost of revenues

283,065

263,024

234,658

795,179

741,215

Gross profit

263,845

237,620

218,220

725,639

657,782

   Research and development

137,937

139,220

134,470

413,281

403,433

   Stock-based compensation expense

5,410

6,653

6,047

18,286

18,817

      Total research and development

143,347

145,873

140,517

431,567

422,250

   Selling, general and administrative

64,672

58,526

54,122

178,115

164,615

   Amortization of acquisition-related intangibles

8,319

8,319

8,948

24,957

26,844

   Stock-based compensation expense

4,883

4,948

6,135

15,462

18,261

      Total selling, general and administrative

77,874

71,793

69,205

218,534

209,720

   Restructuring of operations and other items, net

10,784

(10,904)

3,538

2,686

10,244

Income from operations

31,840

30,858

4,960

72,852

15,568

   Interest expense

-

-

-

-

(5,601)

   Interest income and other, net

7,610

6,450

10,315

18,348

6,147

Income from continuing operation before income taxes

39,450

37,308

15,275

91,200

16,114

Provision for/(benefit from) income taxes

7,800

8,900

2,456

12,596

(13,735)

Income from continuing operations

31,650

28,408

12,819

78,604

29,849

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

(2,311)

265,376

10,602

254,673

23,524

Net income

$    29,339

$ 293,784

$    23,421

$    333,277

$      53,373

Basic income per share:

   Income from continuing operations

$        0.05

$       0.05

$        0.02

$          0.13

$          0.04

   (Loss)/income from discontinued operations

$      (0.00)

$       0.44

$        0.02

$          0.43

$          0.04

   Net income

$        0.05

$       0.49

$        0.04

$          0.56

$          0.08

Diluted income per share:

   Income from continuing operations

$        0.05

$       0.05

$        0.02

$          0.13

$          0.04

   (Loss)/income from discontinued operations

$      (0.00)

$       0.43

$        0.02

$          0.42

$          0.04

   Net income

$        0.05

$       0.48

$        0.04

$          0.55

$          0.08

Shares used in computing per share amounts:

   Basic

567,790

594,957

629,852

592,898

646,167

   Diluted

581,483

611,093

633,731

608,743

653,685

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

Three Months Ended

Nine Months Ended

October 2,

July 3,

October 3,

October 2,

October 3,

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

2011

2011

2010

2011

2010

GAAP income from continuing operations

$    31,650

$   28,408

$    12,819

$      78,604

$      29,849

Special items:

a)   Stock-based compensation expense - cost of revenues

1,460

2,051

1,822

5,324

5,223

b)   Stock-based compensation expense - R&D

5,410

6,653

6,047

18,286

18,817

c)   Stock-based compensation expense - SG&A

4,883

4,948

6,135

15,462

18,261

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

20,206

20,281

-

28,835

62,305

86,505

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

8,319

8,319

8,948

24,957

26,844

f)   Restructuring of operations and other items, net

10,784

(10,904)

3,538

2,686

10,244

g)   (Gain) on sale/write-down of investments, net

-

-

(4,821)

-

6,779

      Total special items from continuing operations

51,062

31,348

50,504

129,020

172,673

Non-GAAP income from continuing operations

$    82,712

$   59,756

$    63,323

$    207,624

$    202,522

Non-GAAP income from continuing operations per share:

   Basic

$        0.15

$       0.10

$        0.10

$          0.35

$          0.31

   Diluted

$        0.14

$       0.10

$        0.10

$          0.34

$          0.31

GAAP net income

$    29,339

$ 293,784

$    23,421

$    333,277

$      53,373

Special items:

a)   Total special items from continuing operations

51,062

31,348

50,504

129,020

172,673

b)   Stock-based compensation expense - discontinued operations

(385)

(526)

2,954

(592)

9,583

c)   Amortization of acquisition-related intangibles - discontinued operations

-

-

2,453

886

7,359

d)   Restructuring of operations - discontinued operations

3,040

14,079

155

40,930

136

e)   Gain on sale of business

-

(260,066)

-

(260,066)

-

Non-GAAP net income

$    83,056

$   78,619

$    79,487

$    243,455

$    243,124

Non-GAAP net income per share:

   Basic

$        0.15

$       0.13

$        0.13

$          0.41

$          0.38

   Diluted

$        0.14

$       0.13

$        0.13

$          0.40

$          0.37

Shares used in computing non-GAAP per share amounts:

   Basic

567,790

594,957

629,852

592,898

646,167

   Diluted

581,483

611,093

633,731

608,743

653,685

Reconciliation of GAAP income from operations to non-GAAP income from operations:

Income from operations - GAAP

$    31,840

$   30,858

$      4,960

$      72,852

$      15,568

Special items:

a)   Stock-based compensation expense

11,753

13,652

14,004

39,072

42,301

b)   Amortization of acquisition-related intangibles

28,525

28,600

37,783

87,262

113,349

c)   Restructuring of operations and other items, net

10,784

(10,904)

3,538

2,686

10,244

Income from operations - Non-GAAP

$    82,902

$   62,206

$    60,285

$    201,872

$    181,462

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

October 2,

July 3,

October 3,

October 2,

October 3,

2011

2011

2010

2011

2010

Operating activities:

Net income

$    29,339

$ 293,784

$    23,421

$  333,277

$    53,373

Adjustments:

   Depreciation and amortization *

43,533

46,303

67,450

145,843

200,718

   Stock-based compensation expense

11,368

13,126

16,958

38,480

51,884

   Non-cash restructuring of operations and other items, net

9,571

10,140

-

30,535

(41)

   (Gain) on sale/write-down of investments, net

-

-

(4,821)

-

6,779

   Gain on sale of business

-

(260,066)

-

(260,066)

-

  (Gain)/loss on sale of property and equipment

(35)

(269)

(115)

(543)

153

   Unrealized foreign exchange (gain)/loss

(2,381)

1,202

5,384

200

6,374

   Deferred taxes

822

(19,723)

(149)

(18,944)

34

   Changes in assets and liabilities:

       Accounts receivable, net

(14,262)

52,006

(6,793)

78,215

25,094

       Inventories

(17,063)

(30,489)

(28,538)

(60,203)

(50,785)

       Prepaid expenses, assets held for sale and other assets

735

(9,925)

7,555

(10,256)

13,898

       Accounts payable

(10,990)

(14,983)

(9,131)

(1,700)

(23,541)

       Accrued and other liabilities

(5,601)

(42,812)

10,919

(83,479)

(28,405)

Net cash provided by operating activities

45,036

38,294

82,140

191,359

255,535

Investing activities:

   Purchases of debt securities available-for-sale

(14,552)

(8,601)

(23,029)

(38,683)

(24,218)

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

8,543

10,487

14,684

31,988

36,209

   Purchases of other investments

-

(4,000)

-

(4,000)

(316)

   Proceeds from sales of other investments

-

-

9,795

-

9,795

   Purchases of property and equipment

(9,643)

(15,656)

(18,889)

(46,841)

(67,262)

   Proceeds from sale of property and equipment

43

586

360

939

559

   Proceeds from sale of business, net of transaction costs

-

475,150

-

475,150

-

Net cash (used in)/provided by investing activities

(15,609)

457,966

(17,079)

418,553

(45,233)

Financing activities:

  Redemption of convertible subordinated notes

-

-

-

-

(349,999)

  Issuance of common stock

15,129

33,612

469

66,060

22,057

  Purchase of common stock under repurchase programs

(74,995)

(300,001)

(137,011)

(471,787)

(217,743)

Net cash used in financing activities

(59,866)

(266,389)

(136,542)

(405,727)

(545,685)

Effect of exchange rate changes on cash and cash equivalents

147

(957)

(915)

(821)

(3,927)

Net change in cash and cash equivalents

(30,292)

228,914

(72,396)

203,364

(339,310)

Cash and cash equivalents at beginning of period

755,442

526,528

511,377

521,786

778,291

Cash and cash equivalents at end of period

$  725,150

$ 755,442

$  438,981

$  725,150

$  438,981

* Depreciation of fixed assets and amortization of intangible assets, software, and premiums on short-term investments.

SOURCE LSI Corporation



RELATED LINKS

http://www.lsi.com