TechWeb

LSI Reports Second Quarter 2010 Results

Jul 28, 2010 (04:07 PM EDT)
URL: http://www.techweb.com/show-press-release/X811570/lsi-reports-second-quarter-2010-results.html

MILPITAS, Calif., July 28 /PRNewswire-FirstCall/ -- LSI Corporation (NYSE: LSI) today reported results for its second quarter ended July 4, 2010.

Second Quarter 2010 News Release Summary

  • Second quarter 2010 revenues of $639 million
  • Second quarter 2010 GAAP* net income of 1 cent per diluted share
  • Second quarter 2010 non-GAAP** net income of 11 cents per diluted share
  • Second quarter operating cash flows of $68 million

Third Quarter 2010 Business Outlook

  • Projected revenues of $625 million to $655 million
  • GAAP* net (loss)/income in the range of ($0.03) to $0.06 cents per share
  • Non-GAAP** net income in the range of $0.08 to $0.14 cents 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, write-down of debt and equity securities and gain on repurchase of convertible subordinated notes. It also excludes the income tax effect associated with the above mentioned items.



Second quarter 2010 revenues were $639 million, a 23% increase year-over-year compared to $521 million reported in the second quarter of 2009, and compares to $637 million reported in the first quarter of 2010.

Second quarter 2010 GAAP* net income was $7 million or 1 cent per diluted share, compared to second quarter 2009 GAAP net loss of $61 million or 9 cents per share. Second quarter 2010 GAAP results compare to first quarter 2010 GAAP net income of $23 million or 3 cents per diluted share. First quarter GAAP results included a net tax benefit of $19 million. Second quarter 2010 GAAP net income included a net charge of $64 million from special items, consisting primarily of $40 million of amortization of acquisition-related items, $18 million of stock-based compensation expense, and $5 million of net restructuring and other items.

Second quarter 2010 non-GAAP** net income was $71 million or 11 cents per diluted share, compared to second quarter 2009 non-GAAP net income of $7 million or 1 cent per diluted share. First quarter 2010 non-GAAP net income was $92 million or 14 cents per diluted share. First quarter non-GAAP results also included the aforementioned net tax benefit of $19 million.

Cash and short-term investments totaled approximately $670 million at quarter end. During the quarter, LSI repaid $350 million of outstanding convertible notes, becoming debt free. The company also completed second-quarter purchases of approximately 10 million shares of its common stock for approximately $55 million under its $250 million share repurchase program.

"Despite some isolated customer inventory adjustments late in the quarter that modestly affected our sequential revenue growth, tight operating expense control and higher gross margins enabled us to deliver a solid bottom-line performance," said Abhi Talwalkar, LSI president and chief executive officer. "While improving end market demand for enterprise IT products continues to bode well for us, our outlook for the third quarter is one of tempered optimism as macro-economic conditions appear to be somewhat fluid at the present time."

Bryon Look, LSI CFO and chief administrative officer, said, "We delivered sound financial results in the second quarter. First-half operating cash flows nearly tripled from the year-ago period while net cash improved by 28% on the same basis. We also repaid all our remaining debt and continued to purchase shares of the company's common stock through our previously announced share repurchase program."

LSI Third Quarter 2010 Business Outlook


GAAP*

Special Items

Non-GAAP**

Revenue

$625 million to
$655 million


$625 million to
$655 million

Gross Margin

40% – 44%

$30 million to
$40 million

46.5% – 48.5%

Operating Expenses

$243 million to
$263 million

$20 million to
$30 million

$223 million to
$233 million

Net Other (Loss)/Income

$3 million


$3 million

Tax

Approximately
$8 million


Approximately
$8 million

Net (Loss)/Income Per Share


($0.03) to $0.06


($0.08) to ($0.11)


$0.08 to $0.14

Diluted Share Count


655 million


655 million




Capital spending is projected to be around $15 million in the third quarter and approximately $55 million in total for 2010.

Depreciation and software amortization is projected to be around $26 million in the third quarter and approximately $104 million in total for 2010.

LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PDT to discuss second quarter financial results and the third quarter 2010 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 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)












July 4,


April 4,


December 31,

Assets


2010


2010


2009








Current assets:







   Cash and short-term investments


$    669.8


$ 1,015.5


$   962.1

   Accounts receivable, net


307.1


298.6


339.0

   Inventories


191.6


185.8


169.3

   Prepaid expenses and other current assets


110.5


124.4


115.1








       Total current assets


1,279.0


1,624.3


1,585.5








Property and equipment, net


212.8


215.4


219.0

Goodwill and identified intangible assets, net


847.5


887.7


927.9

Other assets


224.8


223.1


235.5








       Total assets


$ 2,564.1


$ 2,950.5


$2,967.9















Liabilities and Stockholders' Equity














Current liabilities:







   Current portion of long-term debt


$          -


$    350.0


$   350.0

   Other current liabilities


489.6


509.4


504.4








       Total current liabilities


489.6


859.4


854.4








Pension, tax and other liabilities


609.8


618.9


652.4








       Total liabilities


1,099.4


1,478.3


1,506.8








Stockholders' equity:







   Common stock and additional paid-in capital


6,123.8


6,141.6


6,149.2

   Accumulated deficit


(4,378.5)


(4,386.0)


(4,408.5)

   Accumulated other comprehensive loss


(280.6)


(283.4)


(279.6)








       Total stockholders' equity


1,464.7


1,472.2


1,461.1








       Total liabilities and stockholders' equity


$ 2,564.1


$ 2,950.5


$2,967.9



LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per-share amounts)

(Unaudited)






Three Months Ended


Six Months Ended


July 4,


April 4,


July 5,


July 4,


July 5,


2010


2010


2009


2010


2009











Revenues

$ 639,405


$ 637,182


$ 520,665


$ 1,276,587


$ 1,002,944











   Cost of revenues

330,194


332,937


301,333


663,131


577,917

   Purchase accounting effect on inventory

-


-


2,550


-


2,550

   Amortization of acquisition-related intangibles

31,288


31,288


33,867


62,576


67,477

   Stock-based compensation expense

2,292


1,712


2,022


4,004


4,035

      Total cost of revenues

363,774


365,937


339,772


729,711


651,979











Gross profit

275,631


271,245


180,893


546,876


350,965











   Research and development

162,509


158,974


141,724


321,483


289,146

   Stock-based compensation expense

8,644


7,898


7,195


16,542


15,057

      Total research and development

171,153


166,872


148,919


338,025


304,203











   Selling, general and administrative

69,304


70,563


64,819


139,867


131,338

   Amortization of acquisition-related intangibles

8,948


8,948


9,123


17,896


18,246

   Stock-based compensation expense

7,559


6,821


7,785


14,380


15,900

      Total selling, general and administrative

85,811


86,332


81,727


172,143


165,484











   Restructuring of operations and other items, net

5,067


1,620


6,010


6,687


31,215











Income/(loss) from operations

13,600


16,421


(55,763)


30,021


(149,937)











   Interest expense

(1,707)


(3,894)


(6,864)


(5,601)


(14,100)

   Interest income and other, net

4,639


(8,807)


6,344


(4,168)


12,207











Income/(loss) before income taxes

16,532


3,720


(56,283)


20,252


(151,830)

Provision/(benefit) for income taxes

9,100


(18,800)


5,200


(9,700)


13,200











Net income/(loss)

$     7,432


$   22,520


$ (61,483)


$      29,952


$  (165,030)











Net income/(loss) per share:










   Basic

$       0.01


$       0.03


$     (0.09)


$          0.05


$        (0.25)











   Diluted

$       0.01


$       0.03


$     (0.09)


$          0.05


$        (0.25)











Shares used in computing per-share amounts:










   Basic

651,778


656,528


650,300


654,192


649,360











   Diluted

661,540


664,315


650,300


663,857


649,360











A reconciliation of net income/(loss) on the GAAP basis to non-GAAP net income/(loss) is included below.




















Three Months Ended


Six Months Ended

Reconciliation of GAAP net income/(loss) to

July 4,


April 4,


July 5,


July 4,


July 5,

   non-GAAP net income/(loss):

2010


2010


2009


2010


2009











GAAP net income/(loss)

$     7,432


$   22,520


$ (61,483)


$      29,952


$  (165,030)











Special items:










a)   Stock-based compensation expense - cost of revenues

2,292


1,712


2,022


4,004


4,035

b)   Stock-based compensation expense - R&D

8,644


7,898


7,195


16,542


15,057

c)   Stock-based compensation expense - SG&A

7,559


6,821


7,785


14,380


15,900

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

31,288


31,288


33,867


62,576


67,477

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

8,948


8,948


9,123


17,896


18,246

f)   Purchase accounting effect on inventory

-


-


2,550


-


2,550

g)   Restructuring of operations and other items, net

5,067


1,620


6,010


6,687


31,215

h)   Write-down of equity securities

-


11,600


-


11,600


-











      Total special items

63,798


69,887


68,552


133,685


154,480











Non-GAAP net income/(loss)

$   71,230


$   92,407


$     7,069


$    163,637


$    (10,550)











Non-GAAP net income/(loss) per share:










   Basic

$       0.11


$       0.14


$       0.01


$          0.25


$        (0.02)











   Diluted *

$       0.11


$       0.14


$       0.01


$          0.25


$        (0.02)











Shares used in computing non-GAAP per-share amounts:










   Basic

651,778


656,528


650,300


654,192


649,360











   Diluted

661,540


690,395


652,389


663,857


649,360











* In computing non-GAAP diluted earnings per share for three months ended April 4, 2010, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock.

























Three Months Ended


Six Months Ended

Reconciliation of GAAP to non-GAAP shares used in the calculation

July 4,


April 4,


July 5,


July 4,


July 5,

   of diluted per-share amounts:

2010


2010


2009


2010


2009











Diluted shares used in per-share computation  - GAAP

661,540


664,315


650,300


663,857


649,360

Dilutive stock awards

-


-


2,089


-


-

Effect of $350 million convertible notes considered dilutive

-


26,080


-


-


-

Diluted shares used in per-share computation - non-GAAP

661,540


690,395


652,389


663,857


649,360



LSI CORPORATION

Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)












Three Months Ended


Six Months Ended


July 4,


April 4,


July 5,


July 4,


July 5,


2010


2010


2009


2010


2009

Operating activities:










Net income/(loss)

$     7,432


$   22,520


$ (61,483)


$   29,952


$ (165,030)

Adjustments:










   Depreciation and amortization *

66,251


67,017


66,239


133,268


131,318

   Stock-based compensation expense

18,495


16,431


17,002


34,926


34,992

   Gain on redemption of convertible subordinated notes

-


-


(149)


-


(149)

   Write-down of equity securities

-


11,600


-


11,600


-

   Loss on sale of property and equipment

265


3


17


268


117

   Unrealized foreign exchange loss/(gain)

3,205


(2,215)


4,268


990


(8,116)

   Deferred taxes

85


98


(84)


183


(11)

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










       assumed in business combinations:










       Accounts receivable, net

(8,509)


40,396


5,364


31,887


36,054

       Inventories

(5,806)


(16,441)


54,242


(22,247)


73,582

       Prepaid expenses and other assets

14,438


(8,095)


11,015


6,343


43,458

       Accounts payable

(5,863)


(8,547)


10,147


(14,410)


(53,388)

       Accrued and other liabilities

(22,376)


(16,989)


(37,666)


(39,365)


(33,762)

Net cash provided by operating activities

67,617


105,778


68,912


173,395


59,065











Investing activities:










   Purchases of debt securities available-for-sale

(1,189)


-


-


(1,189)


(10)

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

10,271


11,254


28,063


21,525


63,945

   Purchases of equity securities

(316)


-


-


(316)


(5,000)

   Purchases of property, equipment and software

(21,097)


(27,276)


(23,138)


(48,373)


(48,601)

   Proceeds from sale of property and equipment

177


22


105


199


112

   Acquisition of business and companies, net of cash acquired

-


-


(20,840)


-


(20,840)

   Decrease in non-current assets and deposits

-


-


13,501


-


13,501

Net cash (used in)/provided by investing activities

(12,154)


(16,000)


(2,309)


(28,154)


3,107











Financing activities:










  Redemption of convertible subordinated notes

-


-


(244,047)


-


(244,047)

  Repayment of debt obligations

(349,999)


-


-


(349,999)


-

  Issuance of common stock

17,953


3,635


6,672


21,588


6,673

  Purchase of common stock under repurchase programs

(54,524)


(26,208)


-


(80,732)


-

Net cash used in financing activities

(386,570)


(22,573)


(237,375)


(409,143)


(237,374)











Effect of exchange rate changes on cash and cash equivalents

(895)


(2,117)


3,221


(3,012)


855











Net change in cash and cash equivalents

(332,002)


65,088


(167,551)


(266,914)


(174,347)











Cash and cash equivalents at beginning of period

843,379


778,291


822,505


778,291


829,301











Cash and cash equivalents at end of period

$ 511,377


$ 843,379


$ 654,954


$ 511,377


$  654,954





















* Depreciation of fixed assets and amortization of intangible assets, software, capitalized intellectual property, premiums on short-term investments, debt issuance costs, and accrued debt premium.

















LSI CORPORATION

Selected Financial Information (GAAP)

(In millions)

(Unaudited)


















Three Months Ended




July 4,


April 4,


July 5,




2010


2010


2009










Semiconductor revenues


$ 416.7


$ 416.5


$ 343.8


Storage Systems revenues


$ 222.7


$ 220.7


$ 176.9


Total revenues


$ 639.4


$ 637.2


$ 520.7


Percentage change in revenues-qtr./qtr. ( a )


0.3%


-0.1%


8.0%


Percentage change in revenues-yr./yr. ( b )


22.8%


32.1%


-24.8%










Days sales outstanding


43


42


46


Days of inventory


47


46


42


Current ratio


2.6


1.9


1.8


Quick ratio


2.0


1.5


1.4










Gross margin as a percentage of revenues


43.1%


42.6%


34.7%


R&D as a percentage of revenues


26.8%


26.2%


28.6%


SG&A as a percentage of revenues


13.4%


13.5%


15.7%










Employees  ( c )


5,612


5,451


5,357


Revenues per employee (in thousands) ( d )


$ 455.7


$ 467.6


$ 388.8










Selected Cash Flow Information:








Purchases of property and equipment ( e )


$   13.3


$   15.2


$     7.7


Depreciation and amortization ( f )


$   25.8


$   26.3


$   23.2

































( a )

Represents a sequential quarterly change in revenues.







( b )

Represents a change in revenues in the quarter presented as
compared to the same quarter of the previous year.

( c )

Actual number of employees at the end of each period presented.






( d )

Revenues per employee is calculated by annualizing revenues
for each quarter presented and dividing it by the number of employees.

( e )

Excludes purchases of software.







( f )

Represents depreciation of fixed assets and amortization of
software.  







SOURCE LSI Corporation