LSI Reports Third Quarter 2011 Results
Revenues up 9% quarter over quarter, 21% year over year
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:
- 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.
- 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) | ||||||
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
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