LSI Reports Third Quarter 2012 Results
14% year-over-year revenue growth, with strong operating cash flows
MILPITAS, Calif., Oct. 24, 2012 /PRNewswire/ -- LSI Corporation (NYSE: LSI) today reported results for its third quarter ended September 30, 2012.
(Logo: http://photos.prnewswire.com/prnh/20120222/SF57952LOGO)
Third Quarter 2012 Highlights
- Third quarter 2012 revenues from continuing operations* of $624 million, up 14% year-over-year
- Third quarter 2012 GAAP** income from continuing operations of $0.07 per diluted share
- Third quarter 2012 non-GAAP*** income from continuing operations of $0.17 per diluted share
- Third quarter 2012 operating cash flows of $112 million
Fourth Quarter 2012 Business Outlook
- Projected revenues from continuing operations* of $570 million to $610 million
- GAAP** 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 $0.11 to $0.17 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, gain/loss on sale/write-down of investments and, in the case of non-GAAP net income, gain from the sale of the external storage systems business. It also excludes the income tax effect associated with the above-mentioned items. |
"In the third quarter we delivered strong year-over-year growth in an environment with considerable macroeconomic uncertainty and with softness in several key markets. We are managing the elements within our control, and are pleased with the significant improvement in margin and earnings over last year," said Abhi Talwalkar, LSI's president and CEO. "Looking forward, our design win performance is ahead of expectations and we are benefiting from the rapid adoption of LSI's exciting new flash-based products and the penetration of LSI products into large web and cloud datacenters."
Third quarter 2012 revenues from continuing operations were $624 million, in line with guidance, compared to $547 million generated from continuing operations in the third quarter of 2011, and compared to $660 million generated from continuing operations in the second quarter of 2012.
Third quarter 2012 GAAP** income from continuing operations was $40 million or $0.07 per diluted share, compared to third quarter 2011 GAAP income from continuing operations of $29 million or $0.05 per diluted share. Second quarter 2012 GAAP income from continuing operations was $59 million or $0.10 per diluted share. Third quarter 2012 GAAP income from continuing operations included a net charge of $59 million from special items, consisting primarily of approximately $28 million of stock-based compensation expense, $30 million of amortization of acquisition-related items, $4 million of net restructuring and other items, and $3 million of gain on the sale of investments.
Third quarter 2012 non-GAAP*** income from continuing operations was $99 million or $0.17 per diluted share, compared to third quarter 2011 non-GAAP income from continuing operations of $83 million or $0.14 per diluted share. Second quarter 2012 non-GAAP income from continuing operations was $121 million or $0.21 per diluted share.
Cash and short-term investments totaled approximately $643 million at quarter end. The company completed third-quarter purchases of approximately 7 million shares of its common stock for approximately $50 million. On a cumulative basis, LSI has repurchased a total of 102 million shares and utilized approximately $725 million of the $750 million stock repurchase program the board authorized last year. In addition, in August the board authorized a new $500 million stock repurchase program.
"LSI continued to demonstrate solid cash generation with cash flow from operations in the quarter exceeding $110 million," said Bryon Look, LSI's CFO and chief administrative officer. "Together with a debt-free balance sheet and exciting long-term growth opportunities, we are well-positioned to deliver strong operating profits while also continuing to return capital to shareholders."
| LSI 4Q2012 Business Outlook for Continuing Operations |
|||
| GAAP** |
Special Items |
Non-GAAP*** |
|
| Revenue |
$570 million to $610 million |
$570 million to $610 million |
|
| Gross Margin |
47% – 51% |
$20 million to $30 million |
52% – 54% |
| Operating Expenses |
$258 million to $278 million |
$35 million to $45 million |
$223 million to $233 million |
| Net Other Income |
$3 million |
$3 million |
|
| Tax |
Approximately $9 million |
Approximately $9 million |
|
| (Loss)/Income from Continuing Operations Per Share |
($0.02) to $0.07 |
($0.10) to ($0.13) |
$0.11 to $0.17 |
| Diluted Share Count |
570 million |
570 million |
|
Capital spending is projected to be around $27 million in the fourth quarter and approximately $130 million in total for 2012.
Depreciation and software amortization is projected to be around $15 million in the fourth quarter and approximately $60 million in total for 2012.
LSI Conference Call Information
LSI will hold a conference call today at 2 p.m. PDT to discuss third quarter 2012 financial results and the fourth 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 repurchase our common stock at prices we believe to be advantageous; 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, mobile networks and client computing. 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, the LSI & Design logo and the Storage.Networking.Accelerated. tagline 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) |
||||||||
| September 30, |
July 1, |
December 31, |
||||||
| Assets |
2012 |
2012 |
2011 |
|||||
| Current assets: |
||||||||
| Cash and short-term investments |
$ 643.0 |
$ 601.1 |
$ 935.5 |
|||||
| Accounts receivable, net |
256.5 |
296.8 |
246.5 |
|||||
| Inventories |
209.1 |
204.0 |
180.0 |
|||||
| Prepaid expenses and other current assets |
64.6 |
63.4 |
60.7 |
|||||
| Total current assets |
1,173.2 |
1,165.3 |
1,422.7 |
|||||
| Property and equipment, net |
250.2 |
235.7 |
180.6 |
|||||
| Goodwill and identified intangible assets, net |
771.9 |
802.0 |
506.2 |
|||||
| Other assets |
108.1 |
107.6 |
122.6 |
|||||
| Total assets |
$ 2,303.4 |
$ 2,310.6 |
$ 2,232.1 |
|||||
| Liabilities and Stockholders' Equity |
||||||||
| Current liabilities |
$ 476.8 |
$ 468.4 |
$ 460.9 |
|||||
| Pension, tax and other liabilities |
628.6 |
678.8 |
712.2 |
|||||
| Total liabilities |
1,105.4 |
1,147.2 |
1,173.1 |
|||||
| Stockholders' equity: |
||||||||
| Common stock and additional paid-in capital |
5,579.6 |
5,594.5 |
5,629.2 |
|||||
| Accumulated deficit |
(3,863.4) |
(3,903.1) |
(4,037.0) |
|||||
| Accumulated other comprehensive loss |
(518.2) |
(528.0) |
(533.2) |
|||||
| Total stockholders' equity |
1,198.0 |
1,163.4 |
1,059.0 |
|||||
| Total liabilities and stockholders' equity |
$ 2,303.4 |
$ 2,310.6 |
$ 2,232.1 |
|||||
| LSI CORPORATION |
|||||||||
| Consolidated Statements of Operations (GAAP) |
|||||||||
| (In thousands, except per share amounts) |
|||||||||
| (Unaudited) |
|||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30, |
July 1, |
October 2, |
September 30, |
October 2, |
|||||
| 2012 |
2012 |
2011 |
2012 |
2011 |
|||||
| Revenues |
$ 623,962 |
$ 659,573 |
$ 546,910 |
$ 1,905,959 |
$ 1,520,818 |
||||
| Cost of revenues |
287,390 |
303,334 |
261,399 |
886,876 |
727,550 |
||||
| Amortization of acquisition-related intangibles |
21,348 |
21,348 |
20,206 |
64,086 |
62,305 |
||||
| Purchase accounting effect on inventory |
- |
- |
- |
14,458 |
- |
||||
| Stock-based compensation expense |
2,573 |
3,003 |
1,460 |
9,088 |
5,324 |
||||
| Total cost of revenues |
311,311 |
327,685 |
283,065 |
974,508 |
795,179 |
||||
| Gross profit |
312,651 |
331,888 |
263,845 |
931,451 |
725,639 |
||||
| Research and development |
156,318 |
163,591 |
137,937 |
477,472 |
413,281 |
||||
| Stock-based compensation expense |
11,170 |
11,973 |
5,410 |
35,451 |
18,286 |
||||
| Total research and development |
167,488 |
175,564 |
143,347 |
512,923 |
431,567 |
||||
| Selling, general and administrative |
69,722 |
69,905 |
64,672 |
206,046 |
178,115 |
||||
| Amortization of acquisition-related intangibles |
8,667 |
8,667 |
8,319 |
26,001 |
24,957 |
||||
| Stock-based compensation expense |
13,643 |
10,342 |
4,883 |
38,999 |
15,462 |
||||
| Total selling, general and administrative |
92,032 |
88,914 |
77,874 |
271,046 |
218,534 |
||||
| Restructuring of operations and other items, net |
4,221 |
6,491 |
10,784 |
26,174 |
2,686 |
||||
| Income from operations |
48,910 |
60,919 |
31,840 |
121,308 |
72,852 |
||||
| Interest income and other, net |
5,855 |
9,594 |
7,610 |
30,105 |
18,348 |
||||
| Income from continuing operations before income taxes |
54,765 |
70,513 |
39,450 |
151,413 |
91,200 |
||||
| Provision for/(benefit from) income taxes |
15,100 |
11,800 |
7,800 |
(22,162) |
12,596 |
||||
| Income from continuing operations |
39,665 |
58,713 |
31,650 |
173,575 |
78,604 |
||||
| (Loss)/income from discontinued operations, net of taxes |
- |
- |
(2,311) |
- |
254,673 |
||||
| Net income |
$ 39,665 |
$ 58,713 |
$ 29,339 |
$ 173,575 |
$ 333,277 |
||||
| Basic income per share: |
|||||||||
| Income from continuing operations |
$ 0.07 |
$ 0.10 |
$ 0.05 |
$ 0.31 |
$ 0.13 |
||||
| (Loss)/income from discontinued operations |
$ - |
$ - |
$ (0.00) |
$ - |
$ 0.43 |
||||
| Net income |
$ 0.07 |
$ 0.10 |
$ 0.05 |
$ 0.31 |
$ 0.56 |
||||
| Diluted income per share: |
|||||||||
| Income from continuing operations |
$ 0.07 |
$ 0.10 |
$ 0.05 |
$ 0.30 |
$ 0.13 |
||||
| (Loss)/income from discontinued operations |
$ - |
$ - |
$ (0.00) |
$ - |
$ 0.42 |
||||
| Net income |
$ 0.07 |
$ 0.10 |
$ 0.05 |
$ 0.30 |
$ 0.55 |
||||
| Shares used in computing per share amounts: |
|||||||||
| Basic |
555,197 |
563,686 |
567,790 |
561,708 |
592,898 |
||||
| Diluted |
572,022 |
581,344 |
581,483 |
582,296 |
608,743 |
||||
| Reconciliations of certain GAAP measures to non-GAAP measures are included below. |
|||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30, |
July 1, |
October 2, |
September 30, |
October 2, |
|||||
| Reconciliation of GAAP net income to non-GAAP net income: |
2012 |
2012 |
2011 |
2012 |
2011 |
||||
| GAAP income from continuing operations |
$ 39,665 |
$ 58,713 |
$ 31,650 |
$ 173,575 |
$ 78,604 |
||||
| Special items: |
|||||||||
| a) Stock-based compensation expense - cost of revenues |
2,573 |
3,003 |
1,460 |
9,088 |
5,324 |
||||
| b) Stock-based compensation expense - R&D |
11,170 |
11,973 |
5,410 |
35,451 |
18,286 |
||||
| c) Stock-based compensation expense - SG&A |
13,643 |
10,342 |
4,883 |
38,999 |
15,462 |
||||
| d) Amortization of acquisition-related intangibles - cost of revenues |
21,348 |
21,348 |
- |
20,206 |
64,086 |
62,305 |
|||
| e) Amortization of acquisition-related intangibles - SG&A |
8,667 |
8,667 |
8,319 |
26,001 |
24,957 |
||||
| f) Purchase accounting effect on inventory |
- |
- |
- |
14,458 |
- |
||||
| g) Restructuring of operations and other items, net |
4,221 |
6,491 |
10,784 |
26,174 |
2,686 |
||||
| h) Gain on sale of investments |
(2,550) |
- |
- |
(2,550) |
- |
||||
| i) Gain on re-measurement of a pre-acquisition equity interest to fair value |
- |
- |
- |
(5,765) |
- |
||||
| j) Income tax effect |
- |
- |
- |
(43,198) |
- |
||||
| Total special items from continuing operations |
59,072 |
61,824 |
51,062 |
162,744 |
129,020 |
||||
| Non-GAAP income from continuing operations |
$ 98,737 |
$ 120,537 |
$ 82,712 |
$ 336,319 |
$ 207,624 |
||||
| Non-GAAP income from continuing operations per share: |
|||||||||
| Basic |
$ 0.18 |
$ 0.21 |
$ 0.15 |
$ 0.60 |
$ 0.35 |
||||
| Diluted |
$ 0.17 |
$ 0.21 |
$ 0.14 |
$ 0.58 |
$ 0.34 |
||||
| GAAP net income |
$ 39,665 |
$ 58,713 |
$ 29,339 |
$ 173,575 |
$ 333,277 |
||||
| Special items: |
|||||||||
| a) Total special items from continuing operations |
59,072 |
61,824 |
51,062 |
162,744 |
129,020 |
||||
| b) Stock-based compensation expense - discontinued operations |
- |
- |
(385) |
- |
(592) |
||||
| c) Amortization of acquisition-related intangibles - discontinued operations |
- |
- |
- |
- |
886 |
||||
| d) Restructuring of operations - discontinued operations |
- |
- |
3,040 |
- |
40,930 |
||||
| e) Gain on sale of business |
- |
- |
- |
- |
(260,066) |
||||
| Non-GAAP net income |
$ 98,737 |
$ 120,537 |
$ 83,056 |
$ 336,319 |
$ 243,455 |
||||
| Non-GAAP net income per share: |
|||||||||
| Basic |
$ 0.18 |
$ 0.21 |
$ 0.15 |
$ 0.60 |
$ 0.41 |
||||
| Diluted |
$ 0.17 |
$ 0.21 |
$ 0.14 |
$ 0.58 |
$ 0.40 |
||||
| Shares used in computing non-GAAP per share amounts: |
|||||||||
| Basic |
555,197 |
563,686 |
567,790 |
561,708 |
592,898 |
||||
| Diluted |
572,022 |
581,344 |
581,483 |
582,296 |
608,743 |
||||
| LSI CORPORATION |
|||||||||
| Consolidated Statements of Cash Flows |
|||||||||
| (In thousands) |
|||||||||
| (Unaudited) |
|||||||||
| Three Months Ended |
Nine Months Ended |
||||||||
| September 30, |
July 1, |
October 2, |
September 30, |
October 2, |
|||||
| 2012 |
2012 |
2011 |
2012 |
2011 |
|||||
| Operating activities: |
|||||||||
| Net income |
$ 39,665 |
$ 58,713 |
$ 29,339 |
$ 173,575 |
$ 333,277 |
||||
| Adjustments: |
|||||||||
| Depreciation and amortization |
45,671 |
45,279 |
43,533 |
136,318 |
145,843 |
||||
| Stock-based compensation expense |
27,386 |
25,318 |
11,368 |
83,538 |
38,480 |
||||
| Non-cash restructuring of operations and other items, net |
698 |
2,901 |
9,571 |
5,739 |
30,535 |
||||
| Gain on sale of investments |
(2,550) |
- |
- |
(2,550) |
- |
||||
| Gain on re-measurement of a pre-acquisition equity interest to fair value |
- |
- |
- |
(5,765) |
- |
||||
| Gain on sale of business |
- |
- |
- |
- |
(260,066) |
||||
| Loss/(gain) on sale of property and equipment |
2,644 |
(95) |
(35) |
2,574 |
(543) |
||||
| Unrealized foreign exchange loss/(gain) |
2,655 |
(4,196) |
(2,381) |
(80) |
200 |
||||
| Deferred taxes |
(72) |
28 |
822 |
(43,246) |
(18,944) |
||||
| Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combination: |
|||||||||
| Accounts receivable |
40,348 |
5,428 |
(14,262) |
931 |
78,215 |
||||
| Inventories |
(5,091) |
(3,226) |
(17,063) |
(4,864) |
(60,203) |
||||
| Prepaid expenses, assets held for sale and other assets |
1,110 |
460 |
735 |
(720) |
(10,256) |
||||
| Accounts payable |
(25,186) |
(17,598) |
(10,990) |
4,335 |
(1,700) |
||||
| Accrued and other liabilities |
(15,471) |
4,260 |
(5,601) |
(70,481) |
(83,479) |
||||
| Net cash provided by operating activities |
111,807 |
117,272 |
45,036 |
279,304 |
191,359 |
||||
| Investing activities: |
|||||||||
| Purchases of debt securities available-for-sale |
(22,087) |
(51,106) |
(14,552) |
(94,456) |
(38,683) |
||||
| Proceeds from maturities and sales of debt securities available-for-sale |
11,767 |
8,250 |
8,543 |
29,523 |
31,988 |
||||
| Purchases of other investments |
- |
- |
- |
- |
(4,000) |
||||
| Proceeds from sale of other investments |
2,550 |
- |
- |
2,550 |
- |
||||
| Purchases of property and equipment |
(25,667) |
(12,636) |
(9,643) |
(103,285) |
(46,841) |
||||
| Proceeds from sale of property and equipment |
1,374 |
231 |
43 |
1,626 |
939 |
||||
| Acquisition of business, net of cash acquired |
- |
- |
- |
(319,231) |
- |
||||
| Proceeds from sale of business, net of transaction costs |
- |
- |
- |
- |
475,150 |
||||
| Net cash (used in)/provided by investing activities |
(32,063) |
(55,261) |
(15,609) |
(483,273) |
418,553 |
||||
| Financing activities: |
|||||||||
| Issuance of common stock |
8,515 |
16,854 |
15,129 |
90,643 |
66,060 |
||||
| Purchases of common stock under repurchase program |
(50,062) |
(137,979) |
(74,995) |
(226,247) |
(471,787) |
||||
| Net cash used in financing activities |
(41,547) |
(121,125) |
(59,866) |
(135,604) |
(405,727) |
||||
| Effect of exchange rate changes on cash and cash equivalents |
166 |
598 |
147 |
269 |
(821) |
||||
| Net change in cash and cash equivalents |
38,363 |
(58,516) |
(30,292) |
(339,304) |
203,364 |
||||
| Cash and cash equivalents at beginning of period |
402,144 |
460,660 |
755,442 |
779,811 |
521,786 |
||||
| Cash and cash equivalents at end of period |
$ 440,507 |
$ 402,144 |
$ 725,150 |
$ 440,507 |
$ 725,150 |
||||
SOURCE LSI Corporation
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