TechWeb

LSI Reports Fourth Quarter and Full-Year 2010 Results

Jan 26, 2011 (03:01 PM EST)
URL: http://www.techweb.com/show-press-release/X826768/lsi-reports-fourth-quarter-and-full-year-2010-results.html

MILPITAS, Calif., Jan. 26, 2011 /PRNewswire-FirstCall/ --LSI Corporation (NYSE: LSI) today reported results for its fourth quarter and full year ended December 31, 2010.

Fourth Quarter and Full-Year 2010 News Release Summary

  • Fourth quarter 2010 revenues of $664 million
  • Fourth quarter 2010 GAAP* net loss of 2 cents per share
  • Fourth quarter 2010 non-GAAP** net income of 14 cents per diluted share
  • Fourth quarter operating cash flows of $112 million
  • Full-year 2010 revenues of $2.6 billion

First Quarter 2011 Business Outlook

  • Projected revenues of $605 million to $635 million
  • GAAP* net (loss)/income in the range of ($0.03) to $0.07 per share
  • Non-GAAP** net income in the range of $0.07 to $0.13 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.



Fourth quarter 2010 revenues were $664 million, a 4% increase year over year compared to $638 million reported in the fourth quarter of 2009, and compared to $629 million reported in the third quarter of 2010.

Fourth quarter 2010 GAAP* net loss was $13 million or 2 cents per share, compared to fourth quarter 2009 GAAP net income of $65 million or 10 cents per diluted share. Fourth quarter 2010 GAAP results compare to third quarter 2010 GAAP net income of $23 million or 4 cents per diluted share. Fourth quarter 2010 GAAP net income included a net charge of $103 million from special items, consisting primarily of $48 million of net restructuring and other items, $40 million of amortization of acquisition-related items, and $15 million of stock-based compensation expense.

Fourth quarter 2010 non-GAAP** net income was $90 million or 14 cents per diluted share, compared to fourth quarter 2009 non-GAAP net income of $124 million or 18 cents per diluted share. Third quarter 2010 non-GAAP net income was $79 million or 13 cents per diluted share.

Cash and short-term investments totaled approximately $677 million at quarter end. The company completed fourth-quarter purchases of approximately 6 million shares of its common stock for approximately $32 million. In 2010, the company purchased approximately 51 million shares of its common stock for approximately $250 million, completing its repurchase program announced in March, 2010.

"We delivered solid quarterly revenue growth with revenues near the high end of our guidance range, reflecting seasonal strength in our storage systems and storage semiconductor businesses," said Abhi Talwalkar, LSI president and chief executive officer. "For the full year, our revenues grew substantially, driven by increased enterprise spending for IT infrastructure products that rely on our technology. As economic conditions continue to improve in 2011, we expect to benefit from higher enterprise spending levels and new product ramps with our tier one customers."

LSI recorded full-year 2010 revenues of $2.57 billion, a 16% increase compared to $2.22 billion in 2009. The company reported 2010 GAAP net income of $40 million or 6 cents per diluted share. Full-year 2010 GAAP results compare to full-year 2009 GAAP net loss of $48 million or 7 cents per share. Full-year 2010 GAAP net income included a net charge of $293 million from special items, consisting primarily of $161 million in the amortization of acquisition-related items, $66 million of stock-based compensation expense, $59 million of restructuring costs, and $7 million of net loss on the sale and write-down of investments.

Non-GAAP net income for 2010 was $333 million or 52 cents per diluted share, compared to 2009 non-GAAP net income of $232 million or 35 cents per diluted share.

Bryon Look, LSI CFO and chief administrative officer, said, "We delivered another quarter of solid operating performance, with operating cash flows growing 36% sequentially to $112 million. For the full year, our operating cash flows were $367 million, up 80% year over year. Our balance sheet further strengthened as we ended the year with $677 million of net cash while remaining debt free. On a full-year basis, our profitability also improved significantly as we continued to focus on making progress toward our business model targets."

LSI First Quarter 2011 Business Outlook


GAAP*

Special Items

Non-GAAP**

Revenue

$605 million to $635 million


$605 million to $635 million

Gross Margin

41.5% – 45.5%

$20 million to $30 million

46.5% – 48.5%

Operating Expenses

$245 million to $265 million

$20 million to $30 million

$225 million to $235 million

Net Other (Loss)/Income

$3 million


$3 million

Tax

Approximately $7 million


Approximately $7 million

Net (Loss)/Income Per Share

($0.03) to $0.07

($0.06) to ($0.10)

$0.07 to $0.13

Diluted Share Count

625 million


625 million

Capital spending is projected to be around $15 million in the first quarter and approximately $60 million in total for 2011.


Depreciation and software amortization is projected to be around $26 million in the first quarter and approximately $105 million in total for 2011.



LSI Conference Call Information

LSI will hold a conference call today at 2 p.m. PST to discuss fourth quarter financial results and the first 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 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)








December 31,


October 3,


December 31,

Assets

2010


2010


2009







Current assets:






   Cash and short-term investments

$            676.6


$      600.8


$            962.1

   Accounts receivable, net

326.6


313.9


339.0

   Inventories

186.8


220.1


169.3

   Prepaid expenses and other current assets

73.8


103.4


115.1







       Total current assets

1,263.8


1,238.2


1,585.5







Property and equipment, net

223.2


208.8


219.0

Goodwill and identified intangible assets, net

749.8


807.2


927.9

Other assets

188.1


221.4


235.5







       Total assets

$         2,424.9


$   2,475.6


$         2,967.9













Liabilities and Stockholders' Equity












Current liabilities:






   Current portion of long-term debt

$                  -


$            -


$            350.0

   Other current liabilities

484.6


499.3


504.4







       Total current liabilities

484.6


499.3


854.4







Pension, tax and other liabilities

622.8


599.9


652.4







       Total liabilities

1,107.4


1,099.2


1,506.8







Stockholders' equity:






   Common stock and additional paid-in capital

6,004.3


6,003.9


6,149.2

   Accumulated deficit

(4,368.5)


(4,355.1)


(4,408.5)

   Accumulated other comprehensive loss

(318.3)


(272.4)


(279.6)







       Total stockholders' equity

1,317.5


1,376.4


1,461.1







       Total liabilities and stockholders' equity

$         2,424.9


$   2,475.6


$         2,967.9



LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)






Three Months Ended


Year Ended


December 31,


October 3,


December 31,


December 31,


December 31,


2010


2010


2009


2010


2009











Revenues

$        664,476


$  628,984


$        637,796


$     2,570,047


$     2,219,159











   Cost of revenues

345,542


319,061


335,792


1,327,734


1,228,776

   Purchase accounting effect on inventory

-


-


56


-


4,498

   Amortization of acquisition-related intangibles

31,367


31,288


33,448


125,231


135,102

   Stock-based compensation expense

2,104


2,109


1,650


8,217


7,382

      Total cost of revenues

379,013


352,458


370,946


1,461,182


1,375,758











Gross profit

285,463


276,526


266,850


1,108,865


843,401











   Research and development

159,267


158,558


146,526


639,308


580,333

   Stock-based compensation expense

6,258


7,714


6,536


30,514


27,979

      Total research and development

165,525


166,272


153,062


669,822


608,312











   Selling, general and administrative

70,371


69,272


63,239


279,510


260,900

   Amortization of acquisition-related intangibles

8,949


8,948


9,123


35,793


36,492

   Stock-based compensation expense

6,195


7,135


5,993


27,710


28,622

      Total selling, general and administrative

85,515


85,355


78,355


343,013


326,014











   Restructuring of operations and other items, net

48,505


3,693


2,286


58,885


38,246











(Loss)/income from operations

(14,082)


21,206


33,147


37,145


(129,171)











   Interest expense

-


-


(3,932)


(5,601)


(21,931)

   Interest income and other, net

7,701


10,315


4,530


13,848


20,272











(Loss)/income before income taxes

(6,381)


31,521


33,745


45,392


(130,830)

Provision/(benefit) for income taxes

7,020


8,100


(31,081)


5,420


(83,111)











Net (loss)/income

$         (13,401)


$    23,421


$          64,826


$          39,972


$         (47,719)











Net (loss)/income per share:










   Basic

$             (0.02)


$        0.04


$              0.10


$              0.06


$             (0.07)











   Diluted

$             (0.02)


$        0.04


$              0.10


$              0.06


$             (0.07)











Shares used in computing per share amounts:










   Basic

616,809


629,852


654,560


638,998


651,238











   Diluted

616,809


633,731


663,237


646,324


651,238











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














Three Months Ended


Year Ended

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

December 31,

2010


October 3,

2010


December 31,

2009


December 31,

2010


December 31,

2009











GAAP net (loss)/income

$         (13,401)


$    23,421


$          64,826


$          39,972


$         (47,719)











Special items:










a)   Stock-based compensation expense - cost of revenues

2,104


2,109


1,650


8,217


7,382

b)   Stock-based compensation expense - R&D

6,258


7,714


6,536


30,514


27,979

c)   Stock-based compensation expense - SG&A

6,195


7,135


5,993


27,710


28,622

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

31,367


31,288


33,448


125,231


135,102

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

8,949


8,948


9,123


35,793


36,492

f)   Purchase accounting effect on inventory

-


-


56


-


4,498

g)   Restructuring of operations and other items, net

48,505


3,693


2,286


58,885


38,246

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

-


(4,821)


-


6,779


1,650











      Total special items

103,378


56,066


59,092


293,129


279,971











Non-GAAP net income

$          89,977


$    79,487


$        123,918


$        333,101


$        232,252











Non-GAAP net income per share:










   Basic

$              0.15


$        0.13


$              0.19


$              0.52


$              0.36











   Diluted *

$              0.14


$        0.13


$              0.18


$              0.52


$              0.35











Shares used in computing non-GAAP per share amounts:










   Basic

616,809


629,852


654,560


638,998


651,238











   Diluted

626,079


633,731


689,317


646,324


658,679











* In computing non-GAAP diluted earnings per share for three months ended December 31, 2009, 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


Year Ended

Reconciliation of GAAP to non-GAAP shares used in the calculation of diluted per share amounts:

December 31,

2010


October 3,

2010


December 31,

2009


December 31,

2010


December 31,

2009











Diluted shares used in per share computation  - GAAP

616,809


633,731


663,237


646,324


651,238

Dilutive stock awards

9,270


-


-


-


7,441

Effect of $350 million convertible notes considered dilutive

-


-


26,080


-


-

Diluted shares used in per share computation - non-GAAP

626,079


633,731


689,317


646,324


658,679



LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)












Three Months Ended


Year Ended


December 31,


October 3,


December 31,


December 31,


December 31,


2010


2010


2009


2010


2009

Operating activities:










Net (loss)/income

$         (13,401)


$    23,421


$          64,826


$          39,972


$         (47,719)

Adjustments:










   Depreciation and amortization *

65,954


67,450


69,244


266,672


268,162

   Stock-based compensation expense

14,557


16,958


14,179


66,441


63,983

   Non-cash restructuring of operations and other items, net

45,681


-


-


45,681


690

   Gain on redemption of convertible subordinated notes

-


-


-


-


(149)

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

-


(4,821)


-


6,779


1,529

  (Gain)/loss on sale of property and equipment, including assets held-for-sale

(142)


(115)


75


11


(145)

   Unrealized foreign exchange (gain)/loss

(2,063)


5,384


986


4,311


1,301

   Deferred taxes

3,478


(149)


3,316


3,512


3,063

   Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:










       Accounts receivable, net

(12,737)


(6,793)


(31,769)


12,357


(34,986)

       Inventories

33,348


(28,538)


(13,814)


(17,437)


64,592

       Prepaid expenses and other assets

506


7,555


20,197


14,404


68,469

       Accounts payable

(11,672)


(9,131)


15,001


(35,213)


8,420

       Accrued and other liabilities

(11,869)


10,919


(65,490)


(40,315)


(192,736)

Net cash provided by operating activities

111,640


82,140


76,751


367,175


204,474











Investing activities:










   Purchases of debt securities available-for-sale

(20,425)


(23,029)


-


(44,643)


(10)

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

20,320


14,684


12,932


56,529


90,572

   Purchases of other investments

-


-


(4,625)


(316)


(14,159)

   Proceeds from sales of other investments

-


9,795


-


9,795


165

   Purchases of property, equipment and software

(25,080)


(18,889)


(21,266)


(92,342)


(90,004)

   Proceeds from sale of property and equipment

281


360


24


840


2,773

   Acquisition of business and companies, net of cash acquired

-


-


-


-


(46,981)

   Decrease in non-current assets and deposits

-


-


-


-


13,501

   Proceeds from maturity of a note receivable

10,000






10,000


10,000

Net cash used in investing activities

(14,904)


(17,079)


(12,935)


(60,137)


(34,143)











Financing activities:










  Redemption of convertible subordinated notes

-


-


-


(349,999)


(244,047)

  Issuance of common stock

18,826


469


8,707


40,883


18,747

  Purchase of common stock under repurchase programs

(32,199)


(137,011)


-


(249,942)


-

Net cash (used in)/provided by financing activities

(13,373)


(136,542)


8,707


(559,058)


(225,300)











Effect of exchange rate changes on cash and cash equivalents

(558)


(915)


383


(4,485)


3,959











Net change in cash and cash equivalents

82,805


(72,396)


72,906


(256,505)


(51,010)











Cash and cash equivalents at beginning of period

438,981


511,377


705,385


778,291


829,301











Cash and cash equivalents at end of period

$        521,786


$  438,981


$        778,291


$        521,786


$        778,291











* 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



December 31,


October 3,


December 31,



2010


2010


2009








Semiconductor revenues


$            392.5


$      390.1


$            380.8

Storage Systems revenues


$            272.0


$      238.9


$            257.0

Total revenues


$            664.5


$      629.0


$            637.8

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


5.6%


-1.6%


10.3%

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


4.2%


8.7%


4.6%








Days sales outstanding


44


45


48

Days of inventory


44


56


41

Current ratio


2.6


2.5


1.9

Quick ratio


2.1


1.8


1.5








Gross margin as a percentage of revenues


43.0%


44.0%


41.8%

R&D as a percentage of revenues


24.9%


26.4%


24.0%

SG&A as a percentage of revenues


12.9%


13.6%


12.3%








Employees  ( c )


5,718


5,640


5,397

Revenues per employee (in thousands) ( d )


$            464.8


$      446.1


$            472.7








Selected Cash Flow Information:







Purchases of property and equipment ( e )


$              12.3


$        11.1


$              14.1

Depreciation and amortization ( f )


$              25.5


$        27.2


$              26.2








( 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