Exhibit 99.1
FOR IMMEDIATE RELEASE | OCTOBER 22, 2008 | |
Investor Relations Contact: Sujal Shah 610-712-5471 sujal.shah@lsi.com | Media Relations Contact: Mitch Seigle 408-954-3225 mitch.seigle@lsi.com |
cc08-67
LSI REPORTS THIRD QUARTER 2008 RESULTS
MILPITAS, Calif., October 22, 2008 —LSI Corporation (NYSE: LSI) today reported results for its third quarter ended September 28, 2008.
Third Quarter News Release Summary
• | Third quarter 2008 revenues of $714 million | |
• | Third quarter 2008 GAAP* net income of 2 cents per share | |
• | Third quarter 2008 non-GAAP** net income of 14 cents per diluted share | |
• | Third quarter operating cash flows of $56 million | |
• | Cash and short-term investments of $1.2 billion |
Fourth Quarter 2008 Business Outlook
• | Projected revenues of $670 million to $710 million | |
• | GAAP* net (loss)/income in the range of ($0.07) to $0.03 per share | |
• | Non-GAAP** net income in the range of 8 to 14 cents per diluted share |
* | Generally Accepted Accounting Principles. | |
** | Excludes goodwill impairment, stock-based compensation, amortization of acquisition-related intangibles, restructuring of operations and other items, net, purchase accounting effect on inventory, loss on write-down of debt/equity securities and acquired in-process research and development. It also excludes the income tax effect associated with the above mentioned items. |
1
GROWTH IN STORAGE SEMICONDUCTORS DRIVES SOLID
QUARTERLY RESULTS
QUARTERLY RESULTS
Third quarter 2008 revenues were $714 million, a 2% decrease year-over-year compared to $727 million reported in the third quarter of 2007, and up 3% sequentially compared to $692 million reported in the second quarter of 2008. Adjusting for the sale of the consumer and mobility businesses, third quarter revenues increased 14% year-over-year compared to the third quarter of 2007.
Third quarter 2008 GAAP* net income was $11 million or 2 cents per diluted share, compared to third quarter 2007 GAAP net loss of $141 million or 20 cents per share. Third quarter 2008 GAAP results compare to second quarter 2008 GAAP net loss of $14 million or 2 cents per share. Third quarter 2008 GAAP net income included a net charge of $83 million from special items, consisting primarily of $60.5 million of amortization of acquisition-related items, $16.9 million of stock-based compensation expense, $1.7 million in write-down of investments, and $1.6 million in net restructuring and other items.
Third quarter 2008 non-GAAP** net income was $94 million or 14 cents per diluted share, compared to third quarter 2007 non-GAAP net income of $44 million or 6 cents per share. Second quarter 2008 non-GAAP net income was $83 million or 13 cents per diluted share.
Cash and short-term investments totaled approximately $1.2 billion at quarter end.
“Healthy demand in the quarter for our HDD and SAN semiconductors provided a foundation for delivering solid results,” said Abhi Talwalkar, LSI president and chief executive officer. “We are also pleased by our progress in securing new opportunities, with recently announced Tier 1 OEM wins for next-generation HDD, SSD and 6Gb/s SAS products.
“Although fourth quarter visibility is limited, we are confident that our strategic focus, continuing design win momentum and strong financial position leave us well positioned for the foreseeable future,” added Talwalkar.
Bryon Look, LSI chief financial officer, said, “Significantly higher gross margins and continued focus on cost control contributed to third quarter EPS near the high end of our guidance range. Compared to the same quarter in 2007 we have grown revenue in our core businesses by 14% while significantly reducing quarterly operating expenses.”
2
LSI Fourth Quarter 2008 Business Outlook
GAAP* | Special Items | Non-GAAP** | ||||||||||
Revenue | $670 million to $710 million | $670 million to $710 million | ||||||||||
Gross Margin | 38.5 — 41.5% | $40 to $50 million | 45.5 — 47.5% | |||||||||
Operating Expenses | $265 million to $285 million | $30 to $40 million | $235 million to $245 million | |||||||||
Net Other Income | ($2) million | ($2) million | ||||||||||
Tax | Approximately $10 million | Approximately 8% | ||||||||||
Net (Loss)/Income Per Share | ($0.07) to $0.03 | ($0.11) to ($0.15) | $0.08 to $0.14 | |||||||||
Diluted Share Count | 647 million | 651 million |
Capital spending is projected to be around $10 million in the fourth quarter and approximately $60 million in total for 2008.
Fourth quarter depreciation and software amortization is expected to be approximately $20 million.
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 2008 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; our ability to achieve anticipated synergies following our acquisition of Agere Systems; fluctuations in the timing and volumes of customer demand; the unavailability of appropriate levels of manufacturing capacity; our ability to successfully and timely transition our assembly and test operations to third parties; 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.
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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 logo design are trademarks or registered trademarks of LSI Corporation or its subsidiaries. | |
3. | All other brand or product names may be trademarks or registered trademarks of their respective companies. |
3
LSI CORPORATION
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited)
September 28, | June 29, | December 31, | ||||||||||
2008 | 2008 | 2007 | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and short-term investments | $ | 1,173.9 | $ | 1,147.2 | $ | 1,397.6 | ||||||
Accounts receivable, net | 401.1 | 359.3 | 406.4 | |||||||||
Inventories | 210.0 | 241.0 | 240.8 | |||||||||
Prepaid expenses and other current assets | 174.6 | 179.1 | 147.8 | |||||||||
Total current assets | 1,959.6 | 1,926.6 | 2,192.6 | |||||||||
Property and equipment, net | 234.0 | 240.2 | 229.7 | |||||||||
Goodwill and other intangible assets, net | 1,666.1 | 1,692.3 | 1,724.7 | |||||||||
Other assets | 265.8 | 268.8 | 249.4 | |||||||||
Total assets | $ | 4,125.5 | $ | 4,127.9 | $ | 4,396.4 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities | $ | 633.3 | $ | 683.5 | $ | 762.5 | ||||||
Long-term debt | 715.6 | 716.4 | 718.0 | |||||||||
Pension, tax and other liabilities | 420.7 | 406.6 | 430.7 | |||||||||
Total liabilities | 1,769.6 | 1,806.5 | 1,911.2 | |||||||||
Minority interest in subsidiary | 0.3 | 0.3 | 0.2 | |||||||||
Stockholders’ equity: | ||||||||||||
Common stock and additional paid-in capital | 6,042.4 | 6,019.3 | 6,159.2 | |||||||||
Accumulated deficit | (3,754.4 | ) | (3,765.8 | ) | (3,738.5 | ) | ||||||
Accumulated other comprehensive income | 67.6 | 67.6 | 64.3 | |||||||||
Total stockholders’ equity | 2,355.6 | 2,321.1 | 2,485.0 | |||||||||
Total liabilities and stockholders’ equity | $ | 4,125.5 | $ | 4,127.9 | $ | 4,396.4 | ||||||
4
LSI CORPORATION
Consolidated Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)
Consolidated Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
Revenues | $ | 714,308 | $ | 692,063 | $ | 727,415 | $ | 2,067,118 | $ | 1,862,769 | ||||||||||
Cost of revenues | 369,137 | 360,492 | 411,866 | 1,086,507 | 1,071,143 | |||||||||||||||
Purchase accounting effect on inventory | — | — | — | — | 47,904 | |||||||||||||||
Amortization of acquisition related intangibles | 45,502 | 44,103 | 64,860 | 131,860 | 141,455 | |||||||||||||||
Stock-based compensation expense | 2,252 | 2,572 | 2,824 | 6,885 | 7,916 | |||||||||||||||
Total cost of revenues | 416,891 | 407,167 | 479,550 | 1,225,252 | 1,268,418 | |||||||||||||||
Gross profit | 297,417 | 284,896 | 247,865 | 841,866 | 594,351 | |||||||||||||||
Research and development | 162,958 | 162,546 | 173,375 | 487,398 | 465,460 | |||||||||||||||
Stock-based compensation expense | 6,593 | 7,569 | 8,916 | 21,985 | 22,611 | |||||||||||||||
Total research and development | 169,551 | 170,115 | 182,291 | 509,383 | 488,071 | |||||||||||||||
Selling, general and administrative | 80,720 | 80,473 | 88,769 | 238,901 | 243,296 | |||||||||||||||
Amortization of acquisition related intangibles | 15,019 | 14,491 | 5,714 | 42,944 | 12,390 | |||||||||||||||
Stock-based compensation expense | 8,005 | 9,506 | 10,035 | 25,422 | 25,245 | |||||||||||||||
Total selling, general and administrative | 103,744 | 104,470 | 104,518 | 307,267 | 280,931 | |||||||||||||||
Restructuring of operations and other items, net | 1,586 | 20,719 | 101,231 | 26,869 | 119,071 | |||||||||||||||
Acquired in-process research and development | — | — | — | — | 182,900 | |||||||||||||||
Income/(loss) from operations | 22,536 | (10,408 | ) | (140,175 | ) | (1,653 | ) | (476,622 | ) | |||||||||||
Interest expense | (8,993 | ) | (8,959 | ) | (9,033 | ) | (26,930 | ) | (21,972 | ) | ||||||||||
Interest income and other, net | 8,028 | 8,220 | 11,808 | 30,879 | 33,129 | |||||||||||||||
Income/(loss) before income taxes | 21,571 | (11,147 | ) | (137,400 | ) | 2,296 | (465,465 | ) | ||||||||||||
Provision for income taxes | 10,200 | 2,500 | 3,200 | 18,200 | 23,156 | |||||||||||||||
Net income/(loss) | $ | 11,371 | $ | (13,647 | ) | $ | (140,600 | ) | $ | (15,904 | ) | $ | (488,621 | ) | ||||||
Net income/(loss) per share: | ||||||||||||||||||||
Basic | $ | 0.02 | $ | (0.02 | ) | $ | (0.20 | ) | $ | (0.02 | ) | $ | (0.78 | ) | ||||||
Diluted | $ | 0.02 | $ | (0.02 | ) | $ | (0.20 | ) | $ | (0.02 | ) | $ | (0.78 | ) | ||||||
Shares used in computing per share amounts: | ||||||||||||||||||||
Basic | 643,849 | 639,872 | 715,733 | 648,519 | 623,692 | |||||||||||||||
Diluted | 647,418 | 639,872 | 715,733 | 648,519 | 623,692 | |||||||||||||||
A reconciliation of net income/(loss) on the GAAP basis to non-GAAP net income is included below.
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||
Reconciliation of GAAP net income/(loss) to non-GAAP net income: | 2008 | 2008 | 2007 | 2008 | 2007 | |||||||||||||||
GAAP net income/(loss) | $ | 11,371 | $ | (13,647 | ) | $ | (140,600 | ) | $ | (15,904 | ) | $ | (488,621 | ) | ||||||
Special items: | ||||||||||||||||||||
a) Stock-based compensation expense — cost of revenues | 2,252 | 2,572 | 2,824 | 6,885 | 7,916 | |||||||||||||||
b) Stock-based compensation expense — R&D | 6,593 | 7,569 | 8,916 | 21,985 | 22,611 | |||||||||||||||
c) Stock-based compensation expense — SG&A | 8,005 | 9,506 | 10,035 | 25,422 | 25,245 | |||||||||||||||
d) Amortization of acquisition related intangibles — cost of revenues | 45,502 | 44,103 | 64,860 | 131,860 | 141,455 | |||||||||||||||
e) Amortization of acquisition related intangibles — SG&A | 15,019 | 14,491 | 5,714 | 42,944 | 12,390 | |||||||||||||||
f) Purchase accounting effect on inventory | — | — | — | — | 47,904 | |||||||||||||||
g) Restructuring of operations and other items, net | 1,586 | 20,719 | 101,231 | 26,869 | 119,071 | |||||||||||||||
h) Acquired in-process research and development | — | — | — | — | 182,900 | |||||||||||||||
i) Write-down of debt and equity securities | 1,673 | 2,827 | — | 4,500 | 2,396 | |||||||||||||||
j) Income tax effect | 2,024 | (4,751 | ) | (8,916 | ) | (2,821 | ) | 979 | ||||||||||||
Total special items | 82,654 | 97,036 | 184,664 | 257,644 | 562,867 | |||||||||||||||
Non-GAAP net income | $ | 94,025 | $ | 83,389 | $ | 44,064 | $ | 241,740 | $ | 74,246 | ||||||||||
Non-GAAP net income per share: | ||||||||||||||||||||
Basic | $ | 0.15 | $ | 0.13 | $ | 0.06 | $ | 0.37 | $ | 0.12 | ||||||||||
Diluted* | $ | 0.14 | $ | 0.13 | $ | 0.06 | $ | 0.37 | $ | 0.12 | ||||||||||
Shares used in computing non-GAAP per share amounts: | ||||||||||||||||||||
Basic | 643,849 | 639,872 | 715,733 | 648,519 | 623,692 | |||||||||||||||
Diluted | 673,498 | 643,106 | 720,317 | 652,208 | 632,563 | |||||||||||||||
* | In computing non-GAAP diluted earnings per share for the three month period ended September 28, 2008, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock equivalents. |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
Reconciliation of GAAP to non-GAAP shares used in the calculation of diluted per share amounts: | September 28, 2008 | June 29, 2008 | September 30, 2007 | September 28, 2008 | September 30, 2007 | |||||||||||||||
Diluted shares used in per-share calculation — GAAP | 647,418 | 639,872 | 715,733 | 648,519 | 623,692 | |||||||||||||||
Dilutive stock awards | — | 3,234 | 4,584 | 3,689 | 8,871 | |||||||||||||||
Effect of $350 million convertible notes considered dilutive | 26,080 | — | — | — | — | |||||||||||||||
Diluted shares used in per-share calculation — non-GAAP | 673,498 | 643,106 | 720,317 | 652,208 | 632,563 | |||||||||||||||
5
LSI CORPORATION
Consolidated Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)
Consolidated Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 28, | June 29, | September 30, | September 28, | September 30, | ||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
Operating activities: | ||||||||||||||||||||
Net income/(loss) | $ | 11,371 | $ | (13,647 | ) | $ | (140,600 | ) | $ | (15,904 | ) | $ | (488,621 | ) | ||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization * | 82,327 | 79,290 | 96,545 | 239,945 | 216,720 | |||||||||||||||
Stock-based compensation expense | 16,850 | 19,647 | 21,775 | 54,292 | 55,772 | |||||||||||||||
Non-cash restructuring and other items | 82 | 46 | 88,155 | (3,163 | ) | 88,354 | ||||||||||||||
Acquired in-process research and development | — | — | — | — | 182,900 | |||||||||||||||
Write-down of debt and equity securities | 1,673 | 2,827 | — | 4,500 | 2,396 | |||||||||||||||
Loss/(gain) on sale of property and equipment, including assets held-for-sale | 37 | (11 | ) | (11 | ) | 14 | (9,513 | ) | ||||||||||||
Non-cash foreign exchange loss/(gain) | 1,939 | (7,869 | ) | 7,109 | 6,988 | 3,221 | ||||||||||||||
Changes in deferred tax assets and liabilities | 268 | 2,014 | (1,327 | ) | 4,397 | (6,797 | ) | |||||||||||||
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: | ||||||||||||||||||||
Accounts receivable, net | (41,782 | ) | (27,253 | ) | (6,167 | ) | 5,237 | 143,998 | ||||||||||||
Inventories | 30,983 | 17,620 | 49,906 | 30,884 | 95,148 | |||||||||||||||
Prepaid expenses and other assets | 18,784 | (5,275 | ) | 1,197 | 9,192 | 35,061 | ||||||||||||||
Accounts payable | (41,515 | ) | (11,376 | ) | (3,567 | ) | (92,323 | ) | (134,621 | ) | ||||||||||
Accrued and other liabilities | (24,604 | ) | (28,762 | ) | (14,202 | ) | (64,194 | ) | 658 | |||||||||||
Net cash provided by operating activities | 56,413 | 27,251 | 98,813 | 179,865 | 184,676 | |||||||||||||||
Investing activities: | ||||||||||||||||||||
Purchases of debt securities available-for-sale | (51,969 | ) | (62,481 | ) | (31,851 | ) | (158,601 | ) | (154,087 | ) | ||||||||||
Proceeds from maturities and sales of debt securities available-for-sale | 38,516 | 42,299 | 118,897 | 131,719 | 493,029 | |||||||||||||||
Purchases of equity securities | (5,000 | ) | — | (7,500 | ) | (8,500 | ) | (10,500 | ) | |||||||||||
Purchases of property, equipment and software | (27,150 | ) | (32,625 | ) | (36,272 | ) | (95,005 | ) | (76,986 | ) | ||||||||||
Proceeds from sale of property and equipment | 150 | 4,917 | 5 | 11,400 | 13,790 | |||||||||||||||
Proceeds from sale of Consumer Group | — | — | 22,555 | — | 22,555 | |||||||||||||||
Cash acquired from acquisition of Agere, net of acquisition costs | — | — | — | — | 517,712 | |||||||||||||||
Acquisitions of other companies, net of cash acquired | — | (95,137 | ) | — | (95,137 | ) | (52,079 | ) | ||||||||||||
Increase in non-current assets and deposits | — | (13,300 | ) | — | (13,300 | ) | — | |||||||||||||
Adjustment to goodwill acquired in a prior year for resolution of a pre-acquisition income tax contingency | — | — | — | 4,821 | 2,442 | |||||||||||||||
Net cash (used in)/provided by investing activities | (45,453 | ) | (156,327 | ) | 65,834 | (222,603 | ) | 755,876 | ||||||||||||
Financing activities: | ||||||||||||||||||||
Issuance of common stock | 6,821 | 29,203 | 7,077 | 36,370 | 28,994 | |||||||||||||||
Purchase of common stock under repurchase programs | — | — | (148,758 | ) | (229,231 | ) | (549,113 | ) | ||||||||||||
Net cash provided by/(used in) financing activities | 6,821 | 29,203 | (141,681 | ) | (192,861 | ) | (520,119 | ) | ||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (1,932 | ) | (944 | ) | 1,497 | (1,060 | ) | 1,700 | ||||||||||||
Increase/(decrease) in cash and cash equivalents | 15,849 | (100,817 | ) | 24,463 | (236,659 | ) | 422,133 | |||||||||||||
Cash and cash equivalents at beginning of period | 769,061 | 869,878 | 725,470 | 1,021,569 | 327,800 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 784,910 | $ | 769,061 | $ | 749,933 | $ | 784,910 | $ | 749,933 | ||||||||||
* | 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. |
6
LSI CORPORATION
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)
Three Months Ended | ||||||||||||
September 28, | June 29, | September 30, | ||||||||||
2008 | 2008 | 2007 | ||||||||||
Semiconductor revenues | $ | 500.4 | $ | 462.0 | $ | 530.0 | ||||||
Storage Systems revenues | $ | 213.9 | $ | 230.1 | $ | 197.4 | ||||||
Total revenues | $ | 714.3 | $ | 692.1 | $ | 727.4 | ||||||
Percentage change in revenues-qtr./qtr. (a) | 3.2 | % | 4.7 | % | 8.6 | % | ||||||
Percentage change in revenues-yr./yr. (b) | -1.8 | % | 3.3 | % | 47.6 | % | ||||||
Days sales outstanding | 51 | 47 | 54 | |||||||||
Days of inventory | 45 | 53 | 41 | |||||||||
Current ratio | 3.1 | 2.8 | 3.3 | |||||||||
Quick ratio | 2.5 | 2.2 | 2.1 | |||||||||
Gross margin as a percentage of revenues | 41.6 | % | 41.2 | % | 34.1 | % | ||||||
R&D as a percentage of revenues | 23.7 | % | 24.6 | % | 25.1 | % | ||||||
SG&A as a percentage of revenues | 14.5 | % | 15.1 | % | 14.4 | % | ||||||
Employees (c) | 5,356 | 5,378 | 8,302 | |||||||||
Revenues per employee (in thousands) (d) | $ | 533.5 | $ | 514.7 | $ | 350.5 | ||||||
Selected Cash Flow Information: | ||||||||||||
Purchases of property and equipment (e) | $ | 14.1 | $ | 14.3 | $ | 13.4 | ||||||
Depreciation and amortization (f) | $ | 22.1 | $ | 20.6 | $ | 24.6 |
(a) | Represents sequential quarter growth in revenues. | |
(b) | Represents growth 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. |
7
LSI CORPORATION
Reconciliations of Non-GAAP to GAAP measures
(In thousands)
(Unaudited)
Reconciliations of Non-GAAP to GAAP measures
(In thousands)
(Unaudited)
Three Months Ended | ||||||||
September 28, | September 30, | |||||||
2008 | 2007 | |||||||
Consolidated revenues | $ | 714,308 | $ | 727,415 | ||||
Less: | ||||||||
Mobility revenues | — | 93,305 | ||||||
Consumer revenues | — | 5,600 | ||||||
Consolidated revenues excluding Mobility & Consumer | $ | 714,308 | $ | 628,510 | ||||
% change in revenues-yr./yr. | 14 | % |
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