LSI Life Storage Inc

MILPITAS, Calif., Jan. 28 /PRNewswire-FirstCall/ -- LSI Corporation (NYSE:LSI) today reported results for its fourth quarter and full year ended December 31, 2008. Fourth Quarter and Full-Year 2008 News Release Summary -- Fourth quarter 2008 revenues of $610 million -- Fourth quarter 2008 GAAP* net loss of 94 cents per share, including goodwill and other intangible asset impairment charges of 84 cents per share -- Fourth quarter 2008 non-GAAP** net income of 6 cents per diluted share -- Fourth quarter operating cash flows of $98 million -- Full-year 2008 revenues of $2.7 billion -- Cash and short-term investments of $1.1 billion First Quarter 2009 Business Outlook -- Projected revenues of $440 million to $500 million -- GAAP* net loss in the range of 10 to 20 cents per share -- Non-GAAP** net loss in the range of breakeven to 7 cents per diluted share * Generally Accepted Accounting Principles. ** Excludes goodwill and other intangible asset 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, gain on repurchase of convertible subordinated notes and acquired in-process research and development. It also excludes the income tax effect associated with the above mentioned items. Fourth quarter 2008 revenues were $610 million, an 18% decrease year-over-year compared to $741 million reported in the fourth quarter of 2007, and down 15% sequentially compared to $714 million reported in the third quarter of 2008. Fourth quarter 2008 GAAP* net loss was $606 million or 94 cents per share, compared to fourth quarter 2007 GAAP net loss of $2.0 billion or $2.87 per share. Fourth quarter 2008 GAAP results compare to third quarter 2008 GAAP net income of $11 million or 2 cents per diluted share. Fourth quarter 2008 GAAP net loss included a net charge of $648 million from special items, including a $542 million non-cash charge for impairment of goodwill and other intangible assets, $61.1 million of amortization of acquisition-related items, $18 million of stock-based compensation expense, $16.8 million in net restructuring and other items, and $10.8 million in write-down of investments. Fourth quarter 2008 non-GAAP** net income was $41 million or 6 cents per diluted share, compared to fourth quarter 2007 non-GAAP net income of $94 million or 13 cents per diluted share. Third quarter 2008 non-GAAP net income was $94 million or 14 cents per diluted share. Cash and short-term investments totaled approximately $1.1 billion at quarter end. "Fourth quarter revenues were within our revised guidance range, with weakening demand for our semiconductor products partially offset by seasonally higher sales of storage systems," said Abhi Talwalkar, LSI president and chief executive officer. "While we continue to execute well, we have taken aggressive steps to lower our operating expenses in light of the current business climate. "Going forward, we intend to play offense by seeking to extend our competitive lead in key areas, increasing our design win momentum, and managing our cash well to position ourselves as a stronger player when economic conditions improve." LSI recorded full-year 2008 revenues of $2.68 billion, a 3% increase compared to $2.60 billion in 2007. The company reported 2008 GAAP net loss of $622 million or 96 cents per share. Full-year 2008 GAAP net loss included a net charge of $905 million from special items, including a $542 million non-cash charge for impairment of goodwill and other intangible assets, $236 million in the amortization of acquisition-related items, $44 million of restructuring costs, and $72 million of stock-based compensation expense. Full-year 2008 GAAP results compare to full-year 2007 GAAP net loss of $2.49 billion or $3.87 per share. Non-GAAP net income for 2008 was $283 million or 44 cents per diluted share compared to 2007 non-GAAP net income of $168 million or 26 cents per diluted share. Bryon Look, LSI CFO and chief administrative officer, said, "Despite challenging conditions in the fourth quarter, we delivered a 68% improvement in non-GAAP net income in 2008 compared to 2007 and generated strong positive operating cash flows. We ended the year with more than $1.1 billion in cash, and repurchased approximately $119 million of debt during the quarter." LSI First Quarter 2009 Business Outlook GAAP* Special Items Non-GAAP** Revenue $440 million to $500 $440 million to $500 million million Gross Margin 30 - 34% $30 to $40 million 41 - 43% Operating $265 million to $285 $45 to $55 million $220 million to Expenses million $230 million Net Other ($2) million ($2) million Income Tax Approximately ($14) Approximately 15% million Net (Loss)/ ($0.20) to ($0.10) ($0.10) to ($0.13) ($0.07) to $0.00 Income Per Share Diluted 649 million 649 million Share Count Capital spending is projected to be around $13 million in the first quarter and approximately $50 million in total for 2009. Depreciation and software amortization is projected to be around $20 million in the first quarter and approximately $85 million in total for 2009. 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 2009 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; 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 http://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 logo design 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, September 28, December 31, Assets 2008 2008 2007 Current assets: Cash and short-term investments $1,119.1 $1,173.9 $1,397.6 Accounts receivable, net 304.0 401.1 406.4 Inventories 220.5 210.0 240.8 Prepaid expenses and other current assets 155.9 174.6 147.8 Total current assets 1,799.5 1,959.6 2,192.6 Property and equipment, net 236.0 234.0 229.7 Goodwill and other intangible assets, net 1,065.6 1,666.1 1,724.7 Other assets 243.1 265.8 249.4 Total assets $3,344.2 $4,125.5 $4,396.4 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term debt $245.1 $- $- Other current liabilities 552.4 633.3 762.5 Total current liabilities 797.5 633.3 762.5 Long-term debt 350.0 715.6 718.0 Pension, tax and other liabilities 755.8 420.7 430.7 Total liabilities 1,903.3 1,769.6 1,911.2 Minority interest in subsidiary - 0.3 0.2 Stockholders' equity: Common stock and additional paid-in capital 6,065.3 6,042.4 6,159.2 Accumulated deficit (4,360.8) (3,754.4) (3,738.5) Accumulated other comprehensive income (263.6) 67.6 64.3 Total stockholders' equity 1,440.9 2,355.6 2,485.0 Total liabilities and stockholders' equity $3,344.2 $4,125.5 $4,396.4 LSI CORPORATION Consolidated Statements of Operations (GAAP) (In thousands, except per share amounts) (Unaudited) Three Months Ended December 31, September 28, December 31, 2008 2008 2007 Revenues $609,959 $714,308 $740,874 Cost of revenues 334,398 369,137 394,730 Purchase accounting effect on inventory - - - Amortization of acquisition related intangibles 46,074 45,502 33,842 Stock-based compensation expense 2,384 2,252 2,795 Total cost of revenues 382,856 416,891 431,367 Gross profit 227,103 297,417 309,507 Research and development 155,899 162,958 158,021 Stock-based compensation expense 7,229 6,593 9,132 Total research and development 163,128 169,551 167,153 Selling, general and administrative 76,211 80,720 86,158 Amortization of acquisition related intangibles 15,019 15,019 4,752 Stock-based compensation expense 8,378 8,005 9,568 Total selling, general and administrative 99,608 103,744 100,478 Restructuring of operations and other items, net 16,848 1,586 29,050 Goodwill and other intangible asset impairment charges 541,586 - 2,021,463 Acquired in-process research and development - - 5,972 (Loss)/income from operations (594,067) 22,536 (2,014,609) Interest expense (8,013) (8,993) (9,048) Interest income and other, net 5,231 8,028 13,629 (Loss)/income before income taxes (596,849) 21,571 (2,010,028) Provision/(benefit) for income taxes 9,500 10,200 (11,830) Net (loss)/income $(606,349) $11,371 $(1,998,198) Net (loss)/income per share: Basic $(0.94) $0.02 $(2.87) Diluted $(0.94) $0.02 $(2.87) Shares used in computing per share amounts: Basic 646,315 643,849 695,624 Diluted 646,315 647,418 695,624 Year Ended December 31, December 31, 2008 2007 Revenues $2,677,077 $2,603,643 Cost of revenues 1,420,905 1,465,873 Purchase accounting effect on inventory - 47,904 Amortization of acquisition related intangibles 177,934 175,297 Stock-based compensation expense 9,269 10,711 Total cost of revenues 1,608,108 1,699,785 Gross profit 1,068,969 903,858 Research and development 643,297 623,481 Stock-based compensation expense 29,214 31,743 Total research and development 672,511 655,224 Selling, general and administrative 315,112 329,454 Amortization of acquisition related intangibles 57,963 17,142 Stock-based compensation expense 33,800 34,813 Total selling, general and administrative 406,875 381,409 Restructuring of operations and other items, net 43,717 148,121 Goodwill and other intangible asset impairment charges 541,586 2,021,463 Acquired in-process research and development - 188,872 (Loss)/income from operations (595,720) (2,491,231) Interest expense (34,943) (31,020) Interest income and other, net 36,110 46,758 (Loss)/income before income taxes (594,553) (2,475,493) Provision/(benefit) for income taxes 27,700 11,326 Net (loss)/income $(622,253) $(2,486,819) Net (loss)/income per share: Basic $(0.96) $(3.87) Diluted $(0.96) $(3.87) Shares used in computing per share amounts: Basic 647,953 641,823 Diluted 647,953 641,823 A reconciliation of net (loss)/income on the GAAP basis to non-GAAP net income is included below. Reconciliation of GAAP net Three Months Ended (loss)/income to non-GAAP net December 31, September 28, December 31, income: 2008 2008 2007 GAAP net (loss)/income $(606,349) $11,371 $(1,998,198) Special items: a) Stock-based compensation expense - cost of revenues 2,384 2,252 2,795 b) Stock-based compensation expense - R&D 7,229 6,593 9,132 c) Stock-based compensation expense - SG&A 8,378 8,005 9,568 d) Amortization of acquisition related intangibles - cost of revenues 46,074 45,502 33,842 e) Amortization of acquisition related intangibles - SG&A 15,019 15,019 4,752 f) Purchase accounting effect on inventory - - - g) Restructuring of operations and other items, net 16,848 1,586 29,050 h) Goodwill and other intangible asset impairment charges 541,586 - 2,021,463 i) Acquired in-process research and development - - 5,972 j) Write-down of debt and equity securities 10,773 1,673 - k) Gain on repurchase of convertible subordinated notes (3,178) - - l) Income tax effect of above items 2,529 2,024 (24,158) Total special items 647,642 82,654 2,092,416 Non-GAAP net income $41,293 $94,025 $94,218 Non-GAAP net income per share: Basic $0.06 $0.15 $0.14 Diluted* $0.06 $0.14 $0.13 Shares used in computing non-GAAP per share amounts: Basic 646,315 643,849 695,624 Diluted 646,512 673,498 726,710 Reconciliation of GAAP net Year Ended (loss)/income to non-GAAP December 31, December 31, net income: 2008 2007 GAAP net (loss)/income $(622,253) $(2,486,819) Special items: a) Stock-based compensation expense - cost of revenues 9,269 10,711 b) Stock-based compensation expense - R&D 29,214 31,743 c) Stock-based compensation expense - SG&A 33,800 34,813 d) Amortization of acquisition related intangibles - cost of revenues 177,934 175,297 e) Amortization of acquisition related intangibles - SG&A 57,963 17,142 f) Purchase accounting effect on inventory - 47,904 g) Restructuring of operations and other items, net 43,717 148,121 h) Goodwill and other intangible asset impairment charges 541,586 2,021,463 i) Acquired in-process research and development - 188,872 j) Write-down of debt and equity securities 15,273 2,396 k) Gain on repurchase of convertible subordinated notes (3,178) - l) Income tax effect of above items (292) (23,179) Total special items 905,286 2,655,283 Non-GAAP net income $283,033 $168,464 Non-GAAP net income per share: Basic $0.44 $0.26 Diluted* $0.44 $0.26 Shares used in computing non-GAAP per share amounts: Basic 647,953 641,823 Diluted 649,176 659,077 * In computing non-GAAP diluted earnings per share for the three months ended September 28, 2008 and December 31, 2007, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock equivalents. Reconciliation of GAAP to non-GAAP shares used in Three Months Ended the calculation of diluted December 31, September 28, December 31, per share amounts: 2008 2008 2007 Diluted shares used in per-share computation - GAAP 646,315 647,418 695,624 Dilutive stock awards 197 - 5,006 Effect of $350 million convertible notes considered dilutive - 26,080 26,080 Diluted shares used in per-share computation - non-GAAP 646,512 673,498 726,710 Reconciliation of GAAP to non-GAAP Year Ended shares used in the calculation December 31, December 31, of diluted per share amounts: 2008 2007 Diluted shares used in per-share computation - GAAP 647,953 641,823 Dilutive stock awards 1,223 17,254 Effect of $350 million convertible notes considered dilutive - - Diluted shares used in per-share computation - non-GAAP 649,176 659,077 LSI CORPORATION Consolidated Statement of Cash Flows (In thousands) (Unaudited) Three Months Ended December 31, September 28, December 31, 2008 2008 2007 Operating activities: Net (loss)/income $(606,349) $11,371 $(1,998,198) Adjustments: Depreciation and amortization * 84,278 82,327 61,822 Stock-based compensation expense 17,991 16,850 21,495 Non-cash restructuring and other items (1,052) 82 10,555 Goodwill and amortizing intangible impairment charges 541,586 - 2,021,463 Acquired in-process research and development - - 5,972 Gain on repurchase of convertible subordinated notes (3,178) - - Write-down of debt and equity securities 10,773 1,673 - (Gain)/loss on sale of property and equipment, including assets held-for-sale (137) 37 114 Non-cash foreign exchange loss 18,481 1,939 986 Changes in deferred tax assets and liabilities 5,630 268 3,178 Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable, net 97,149 (41,782) 30,964 Inventories (10,577) 30,983 (20,440) Prepaid expenses and other assets 42,832 18,784 (13,504) Accounts payable (37,806) (41,515) 95,459 Accrued and other liabilities (61,434) (24,604) (109,543) Net cash provided by operating activities 98,187 56,413 110,323 Investing activities: Purchases of debt securities available-for-sale (31,947) (51,969) (149,320) Proceeds from maturities and sales of debt securities available-for-sale 108,438 38,516 123,195 Purchases of equity securities - (5,000) - Purchases of property, equipment and software (39,584) (27,150) (25,837) Proceeds from sale of property and equipment 2,274 150 2,376 Cash acquired from acquisition of Agere, net of acquisition costs - - - Acquisitions of other companies, net of cash acquired - - (80,751) Proceeds from sale of Consumer Group - - - Proceeds from sale of Mobility Products Group, net of transaction costs - - 445,500 Proceeds from sale of semiconductor operations in Thailand, net of transaction costs - - 49,600 Proceeds from maturity of notes receivable associated with sale of semiconductor operations in Thailand 20,000 - - Increase in non-current assets and deposits - - - Proceeds received from the resolution of a pre-acquisition income tax contingency - - 788 Net cash provided by/(used in) investing activities 59,181 (45,453) 365,551 Financing activities: Repurchase of convertible subordinated notes (116,636) - - Issuance of common stock 6,558 6,821 17,286 Purchase of minority interest in subsidiary (70) - - Purchase of common stock under repurchase programs - - (221,639) Net cash (used in)/provided by financing activities (110,148) 6,821 (204,353) Effect of exchange rate changes on cash and cash equivalents (2,829) (1,932) 115 Increase/(decrease) in cash and cash equivalents 44,391 15,849 271,636 Cash and cash equivalents at beginning of period 784,910 769,061 749,933 Cash and cash equivalents at end of period $829,301 $784,910 $1,021,569 Year Ended December 31, December 31, 2008 2007 Operating activities: Net (loss)/income $(622,253) $(2,486,819) Adjustments: Depreciation and amortization * 324,223 278,542 Stock-based compensation expense 72,283 77,267 Non-cash restructuring and other items (4,215) 98,909 Goodwill and amortizing intangible impairment charges 541,586 2,021,463 Acquired in-process research and development - 188,872 Gain on repurchase of convertible subordinated notes (3,178) - Write-down of debt and equity securities 15,273 2,396 (Gain)/loss on sale of property and equipment, including assets held-for-sale (123) (9,399) Non-cash foreign exchange loss 25,469 4,207 Changes in deferred tax assets and liabilities 10,027 (3,619) Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable, net 102,386 174,962 Inventories 20,307 74,708 Prepaid expenses and other assets 52,024 21,557 Accounts payable (130,129) (39,162) Accrued and other liabilities (125,628) (108,885) Net cash provided by operating activities 278,052 294,999 Investing activities: Purchases of debt securities available-for-sale (190,548) (303,407) Proceeds from maturities and sales of debt securities available-for-sale 240,157 616,224 Purchases of equity securities (8,500) (10,500) Purchases of property, equipment and software (134,589) (102,823) Proceeds from sale of property and equipment 13,674 16,166 Cash acquired from acquisition of Agere, net of acquisition costs - 517,712 Acquisitions of other companies, net of cash acquired (95,137) (132,830) Proceeds from sale of Consumer Group - 22,555 Proceeds from sale of Mobility Products Group, net of transaction costs - 445,500 Proceeds from sale of semiconductor operations in Thailand, net of transaction costs - 49,600 Proceeds from maturity of notes receivable associated with sale of semiconductor operations in Thailand 20,000 - Increase in non-current assets and deposits (13,300) - Proceeds received from the resolution of a pre-acquisition income tax contingency 4,821 3,230 Net cash provided by/(used in) investing activities (163,422) 1,121,427 Financing activities: Repurchase of convertible subordinated notes (116,636) - Issuance of common stock 42,928 46,280 Purchase of minority interest in subsidiary (70) - Purchase of common stock under repurchase programs (229,231) (770,752) Net cash (used in)/provided by financing activities (303,009) (724,472) Effect of exchange rate changes on cash and cash equivalents (3,889) 1,815 Increase/(decrease) in cash and cash equivalents (192,268) 693,769 Cash and cash equivalents at beginning of period 1,021,569 327,800 Cash and cash equivalents at end of period $829,301 $1,021,569 * Depreciation of fixed assets and amortization of intangible assets, software, capitalized intellectual property, premiums on short-term investments, debt issuance costs, accrued debt premium. LSI CORPORATION Selected Financial Information (GAAP) (In millions) (Unaudited) Three Months Ended December 31, September 28, December 31, 2008 2008 2007 Semiconductor revenues $373.8 $500.4 $491.7 Storage Systems revenues $236.2 $213.9 $249.2 Total revenues $610.0 $714.3 $740.9 Percentage change in revenues- qtr./qtr. (a) -14.6% 3.2% 1.9% Percentage change in revenues- yr./yr. (b) -17.7% -1.8% 41.5% Days sales outstanding 45 51 49 Days of inventory 52 45 50 Current ratio 2.3 3.1 2.9 Quick ratio 1.8 2.5 2.4 Gross margin as a percentage of revenues 37.2% 41.6% 41.8% R&D as a percentage of revenues 26.7% 23.7% 22.6% SG&A as a percentage of revenues 16.3% 14.5% 13.6% Employees (c) 5,488 5,356 6,193 Revenues per employee (in thousands) (d) $444.6 $533.5 $478.5 Selected Cash Flow Information: Purchases of property and equipment (e) $17.1 $14.1 $13.6 Depreciation and amortization (f) $23.1 $22.1 $21.9 (a) Represents sequential quarterly change in revenues. (b) Represents 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. DATASOURCE: LSI Corporation CONTACT: Investor Relations, Sujal Shah, +1-610-712-5471, , or Media Relations, Mitch Seigle, +1-408-954-3225, , both of LSI Corporation Web site: http://www.lsi.com/

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