LSI Life Storage Inc

MILPITAS, Calif., Jan. 27 /PRNewswire-FirstCall/ -- LSI Corporation (NYSE: LSI) today reported results for its fourth quarter and full year ended December 31, 2009. Fourth Quarter and Full-Year 2009 News Release Summary -- Fourth quarter 2009 revenues of $638 million -- Fourth quarter 2009 GAAP* net income of 10 cents per diluted share -- Fourth quarter 2009 non-GAAP** net income of 18 cents per diluted share -- Fourth quarter operating cash flows of $77 million -- Full-year 2009 revenues of $2.2 billion First Quarter 2010 Business Outlook -- Projected revenues of $590 million to $620 million -- GAAP* net (loss)/income in the range of ($0.06) to $0.03 cents per share -- Non-GAAP** net income in the range of $0.04 to $0.10 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. Fourth quarter 2009 revenues were $638 million, a 5% increase year-over-year compared to $610 million reported in the fourth quarter of 2008, and up 10% sequentially compared to $578 million reported in the third quarter of 2009. Fourth quarter 2009 GAAP* net income was $65 million or 10 cents per diluted share, compared to fourth quarter 2008 GAAP net loss of $606 million or 94 cents per share. Fourth quarter GAAP results included a $31 million tax benefit, or 5 cents per diluted share, primarily related to the settlement of a multi-year foreign tax audit. Fourth quarter 2009 GAAP results compare to third quarter 2009 GAAP net income of $52 million or 8 cents per diluted share. Fourth quarter 2009 GAAP net income included a net charge of $59 million from special items, consisting primarily of $43 million of amortization of acquisition-related items, $14 million of stock-based compensation expense, and $2 million in net restructuring and other items. Fourth quarter 2009 non-GAAP** net income was $124 million or 18 cents per diluted share, compared to fourth quarter 2008 non-GAAP net income of $41 million or 6 cents per diluted share. Third quarter 2009 non-GAAP net income was $119 million or 18 cents per diluted share. Cash and short-term investments totaled approximately $962 million at quarter end. "With increasing signs in the fourth quarter that an early-stage recovery of enterprise IT spending is now underway, LSI achieved double-digit sequential revenue growth, with revenues coming in at the high end of our guidance range," said Abhi Talwalkar, LSI president and chief executive officer. "With more than 80% of our revenues tied to enterprise technology spending, we are well positioned to benefit as this recovery gains strength going forward." LSI recorded full-year 2009 revenues of $2.22 billion, a 17% decrease compared to $2.68 billion in 2008. The company reported 2009 GAAP net loss of $48 million or 7 cents per share. Full-year 2009 GAAP results compare to full-year 2008 GAAP net loss of $622 million or 96 cents per share. Full-year 2009 GAAP results included an $83 million tax benefit, or 13 cents per share, primarily related to the settlement of multi-year foreign tax audits. Full-year 2009 GAAP net loss included a net charge of $280 million from special items, consisting primarily of $172 million in the amortization of acquisition-related items, $64 million of stock-based compensation expense, and $38 million of restructuring costs. Non-GAAP net income for 2009 was $232 million or 35 cents per diluted share compared to 2008 non-GAAP net income of $283 million or 44 cents per diluted share. Bryon Look, LSI CFO and chief administrative officer, said, "We demonstrated strong fourth quarter performance, with significant improvements in revenues, gross margin, operating income and cash flows. Our storage systems business achieved record quarterly revenues, growing 24% sequentially and contributing to a second-half consisting of two consecutive quarters of double-digit revenue growth. We ended the year with nearly $1 billion in cash and short-term investments while our net cash position increased to $612 million." LSI First Quarter 2010 Business Outlook GAAP* Special Items Non-GAAP** ----- ------------- ---------- Revenue $590 million to $590 million to ------- $620 million $620 million ------------ ------------ Gross Margin 39% - $25 million to 45% - ------------ 43% $35 million 47% -- ----------- ---- Operating Expenses $238 million to $20 million to $218 million to ------------------ $258 million $30 million $228 million ------------ ----------- ------------ Net Other (Loss)/Income ($1 million) ($1 million) -------------- ------------ ------------ Tax Approximately Approximately --- $8 million $8 million ---------- ---------- Net (Loss)/Income Per Share ($0.06) to ($0.07) to $0.04 to ----------------- $0.03 ($0.10) $0.10 --------- ---------- --------- Diluted Share Count 658 million 667 million ------------------- ----------- ----------- Capital spending is projected to be around $15 million in the first quarter and approximately $55 million in total for 2010. Depreciation and software amortization is projected to be around $25 million in the first quarter and approximately $100 million in total for 2010. 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 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 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 & 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 4, December 31, Assets 2009 2009 2008 ------ ---- ---- ---- Current assets: Cash and short-term investments $962.1 $907.1 $1,119.1 Accounts receivable, net 339.0 307.2 304.0 Inventories 169.3 155.5 220.5 Prepaid expenses and other current assets 115.1 140.3 155.9 ----- ----- ----- Total current assets 1,585.5 1,510.1 1,799.5 Property and equipment, net 219.0 215.9 236.0 Goodwill and identified intangible assets, net 927.9 970.7 1,065.6 Other assets 235.5 228.5 243.1 ----- ----- ----- Total assets $2,967.9 $2,925.2 $3,344.2 -------- -------- -------- Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Current portion of long-term debt $350.0 $350.0 $245.1 Other current liabilities 504.4 484.6 552.4 ----- ----- ----- Total current liabilities 854.4 834.6 797.5 Long-term debt, net of current portion - - 350.0 Pension, tax and other liabilities 652.4 690.6 755.8 ----- ----- ----- Total liabilities 1,506.8 1,525.2 1,903.3 ------- ------- ------- Stockholders' equity: Common stock and additional paid-in capital 6,149.2 6,129.6 6,065.3 Accumulated deficit (4,408.5) (4,473.3) (4,360.8) Accumulated other comprehensive loss (279.6) (256.3) (263.6) ------ ------ ------ Total stockholders' equity 1,461.1 1,400.0 1,440.9 ------- ------- ------- Total liabilities and stockholders' equity $2,967.9 $2,925.2 $3,344.2 -------- -------- -------- LSI CORPORATION Consolidated Statements of Operations (GAAP) (In thousands, except per share amounts) (Unaudited) Three Months Ended ------------------ December 31, October 4, December 31, 2009 2009 2008 ---- ---- ---- Revenues $637,796 $578,419 $609,959 Cost of revenues 335,792 315,067 334,398 Purchase accounting effect on inventory 56 1,892 - Amortization of acquisition related intangibles 33,448 34,177 46,074 Stock-based compensation expense 1,650 1,697 2,384 ----- ----- ----- Total cost of revenues 370,946 352,833 382,856 ------- ------- ------- Gross profit 266,850 225,586 227,103 ------- ------- ------- Research and development 146,526 144,661 155,899 Stock-based compensation expense 6,536 6,386 7,229 ----- ----- ----- Total research and development 153,062 151,047 163,128 ------- ------- ------- Selling, general and administrative 63,239 66,323 76,211 Amortization of acquisition related intangibles 9,123 9,123 15,019 Stock-based compensation expense 5,993 6,729 8,378 ----- ----- ----- Total selling, general and administrative 78,355 82,175 99,608 ------ ------ ------ Restructuring of operations and other items, net 2,286 4,745 16,848 Goodwill and identified intangible asset impairment charges - - 541,586 --- --- ------- Income/(loss) from operations 33,147 (12,381) (594,067) Interest expense (3,932) (3,899) (8,013) Interest income and other, net 4,530 3,535 5,231 ----- ----- ----- Income/(loss) before income taxes 33,745 (12,745) (596,849) (Benefit)/provision for income taxes (31,081) (65,230) 9,500 ------- ------- ----- Net income/(loss) $64,826 $52,485 $(606,349) ------- ------- --------- Net income/(loss) per share: Basic $0.10 $0.08 $(0.94) ----- ----- ------ Diluted $0.10 $0.08 $(0.94) ----- ----- ------ Shares used in computing per share amounts: Basic 654,560 651,865 646,315 ------- ------- ------- Diluted 663,237 658,963 646,315 ------- ------- ------- Year Ended ---------- December 31, December 31, 2009 2008 ---- ---- Revenues $2,219,159 $2,677,077 Cost of revenues 1,228,776 1,420,905 Purchase accounting effect on inventory 4,498 - Amortization of acquisition related intangibles 135,102 177,934 Stock-based compensation expense 7,382 9,269 ----- ----- Total cost of revenues 1,375,758 1,608,108 --------- --------- Gross profit 843,401 1,068,969 --------- --------- Research and development 580,333 643,297 Stock-based compensation expense 27,979 29,214 ------ ------ Total research and development 608,312 672,511 ------- ------- Selling, general and administrative 260,900 315,112 Amortization of acquisition related intangibles 36,492 57,963 Stock-based compensation expense 28,622 33,800 ------ ------ Total selling, general and administrative 326,014 406,875 ------- ------- Restructuring of operations and other items, net 38,246 43,717 Goodwill and identified intangible asset impairment charges - 541,586 --- ------- Income/(loss) from operations (129,171) (595,720) Interest expense (21,931) (34,943) Interest income and other, net 20,272 36,110 ------ ------ Income/(loss) before income taxes (130,830) (594,553) (Benefit)/provision for income taxes (83,111) 27,700 ------- ------ Net income/(loss) $(47,719) $(622,253) -------- --------- Net income/(loss) per share: Basic $(0.07) $(0.96) ------ ------ Diluted $(0.07) $(0.96) ------ ------ Shares used in computing per share amounts: Basic 651,238 647,953 ------- ------- Diluted 651,238 647,953 ------- ------- A reconciliation of net income/(loss) on the GAAP basis to non-GAAP net income is included below. Reconciliation of GAAP net income/ Three Months Ended (loss) to ------------------ non-GAAP net December 31, October 4, December 31, income: 2009 2009 2008 ------------ ---- ---- ---- GAAP net income/ (loss) $64,826 $52,485 $(606,349) ------- ------- --------- Special items: a) Stock-based compensation expense - cost of revenues 1,650 1,697 2,384 b) Stock-based compensation expense - R&D 6,536 6,386 7,229 c) Stock-based compensation expense - SG&A 5,993 6,729 8,378 d) Amortization of acquisition related intangibles - cost of revenues 33,448 34,177 46,074 e) Amortization of acquisition related intangibles - SG&A 9,123 9,123 15,019 f) Purchase accounting effect on inventory 56 1,892 - g) Restructuring of operations and other items, net 2,286 4,745 16,848 h) Goodwill and identified intangible asset impairment charges - - 541,586 i) Write-down of debt and equity securities - 1,650 10,773 j) Gain on repurchase of convertible subordinated notes - - (3,178) k) Income tax effect of above items - - 2,529 --- --- ----- Total special items 59,092 66,399 647,642 ------ ------ ------- Non-GAAP net income $123,918 $118,884 $41,293 -------- -------- ------- Non-GAAP net income per share: Basic $0.19 $0.18 $0.06 ----- ----- ----- Diluted * $0.18 $0.18 $0.06 ----- ----- ----- Shares used in computing non-GAAP per share amounts: Basic 654,560 651,865 646,315 ------- ------- ------- Diluted 689,317 685,043 646,512 ------- ------- ------- Year Ended ---------- Reconciliation of GAAP net income/ (loss) to December 31, December 31, non-GAAP net income: 2009 2008 -------------------- ---- ---- GAAP net income/(loss) $(47,719) $(622,253) -------- --------- Special items: a) Stock-based compensation expense - cost of revenues 7,382 9,269 b) Stock-based compensation expense - R&D 27,979 29,214 c) Stock-based compensation expense - SG&A 28,622 33,800 d) Amortization of acquisition related intangibles - cost of revenues 135,102 177,934 e) Amortization of acquisition related intangibles - SG&A 36,492 57,963 f) Purchase accounting effect on inventory 4,498 - g) Restructuring of operations and other items, net 38,246 43,717 h) Goodwill and identified intangible asset impairment charges - 541,586 i) Write-down of debt and equity securities 1,650 15,273 j) Gain on repurchase of convertible subordinated notes - (3,178) k) Income tax effect of above items - (292) --- ---- Total special items 279,971 905,286 ------- ------- Non-GAAP net income $232,252 $283,033 -------- -------- Non-GAAP net income per share: Basic $0.36 $0.44 ----- ----- Diluted * $0.35 $0.44 ----- ----- Shares used in computing non-GAAP per share amounts: Basic 651,238 647,953 ------- ------- Diluted 658,679 649,176 ------- ------- * In computing non-GAAP diluted earnings per share for three months ended December 31 and October 4, 2009, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock. Reconciliation of GAAP to non-GAAP shares used in the Three Months Ended calculation ------------------ of diluted per share December 31, October 4, December 31, amounts: 2009 2009 2008 -------------------- ---- ---- ---- Diluted shares used in per-share computation - GAAP 663,237 658,963 646,315 Dilutive stock awards - - 197 Effect of $350 million convertible notes considered dilutive 26,080 26,080 - ------ ------ --- Diluted shares used in per-share computation - non-GAAP 689,317 685,043 646,512 ------- ------- ------- Reconciliation of GAAP to non-GAAP shares used in the Year Ended calculation ---------- of diluted per share December 31, December 31, amounts: 2009 2008 -------------------- ---- ---- Diluted shares used in per-share computation - GAAP 651,238 647,953 Dilutive stock awards 7,441 1,223 Effect of $350 million convertible notes considered dilutive - - --- --- Diluted shares used in per-share computation - non- GAAP 658,679 649,176 ------- ------- LSI CORPORATION Consolidated Statement of Cash Flows (In thousands) (Unaudited) Three Months Ended ------------------ December 31, October 4, December 31, 2009 2009 2008 ---- ---- ---- Operating activities: Net income/(loss) $64,826 $52,485 $(606,349) Adjustments: Depreciation and amortization * 69,244 67,600 84,278 Stock-based compensation expense 14,179 14,812 17,991 Non-cash restructuring of operations and other items, net - 699 (1,052) Goodwill and identified intangible asset impairment charges - - 541,586 Gain on redemption/repurchase of convertible subordinated notes - - (3,178) Write-down of debt and equity securities, net of gain on sale of equity securities - 1,529 10,773 Loss/(gain) on sale of property and equipment 75 (337) (137) Non-cash foreign exchange loss 986 8,431 18,481 Deferred taxes 3,316 (242) 5,630 Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable, net (31,769) (39,271) 97,149 Inventories (13,814) 4,824 (10,577) Prepaid expenses and other assets 20,197 4,814 42,832 Accounts payable 15,001 46,807 (37,806) Accrued and other liabilities (65,490) (93,493) (61,434) ------- ------- ------- Net cash provided by operating activities 76,751 68,658 98,187 ------ ------ ------ Investing activities: Purchases of debt securities available-for-sale - - (31,947) Proceeds from maturities and sales of debt securities available-for-sale 12,932 13,695 108,438 Purchases of equity securities (4,625) (4,534) - Proceeds from sales of equity securities 165 Purchases of property, equipment and software (21,266) (20,137) (39,584) Proceeds from sale of property and equipment 24 2,637 2,274 Acquisition of business and companies, net of cash acquired - (26,141) - Decrease/(increase) in non- current assets and deposits - - - Proceeds from maturity of notes receivable associated with sale of semiconductor operations in Thailand - 10,000 20,000 Proceeds received from the resolution of a pre- acquisition income tax contingency - - - ------- ------- ------ Net cash (used in)/provided by investing activities (12,935) (24,315) 59,181 ------- ------- ------ Financing activities: Redemption/repurchase of convertible subordinated notes - - (116,636) Issuance of common stock 8,707 3,367 6,558 Purchase of minority interest in subsidiary (70) Purchase of common stock under repurchase programs - - - --- --- --- Net cash provided by/(used in) financing activities 8,707 3,367 (110,148) ----- ----- -------- Effect of exchange rate changes on cash and cash equivalents 383 2,721 (2,829) --- ----- ------ Increase/(decrease) in cash and cash equivalents 72,906 50,431 44,391 Cash and cash equivalents at beginning of period 705,385 654,954 784,910 ------- ------- ------- Cash and cash equivalents at end of period $778,291 $705,385 $829,301 ======== ======== ======== Year Ended ---------- December 31, December 31, 2009 2008 ---- ---- Operating activities: Net income/(loss) $(47,719) $(622,253) Adjustments: Depreciation and amortization* 268,162 324,223 Stock-based compensation expense 63,983 72,283 Non-cash restructuring of operations and other items, net 690 (4,215) Goodwill and identified intangible asset impairment charges - 541,586 Gain on redemption/repurchase of convertible subordinated notes (149) (3,178) Write-down of debt and equity securities, net of gain on sale of equity securities 1,529 15,273 Loss/(gain) on sale of property and equipment (145) (123) Non-cash foreign exchange loss 1,301 25,469 Deferred taxes 3,063 10,027 Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable, net (34,986) 102,386 Inventories 64,592 20,307 Prepaid expenses and other assets 68,469 52,024 Accounts payable 8,420 (130,129) Accrued and other liabilities (192,736) (125,628) -------- -------- Net cash provided by operating activities 204,474 278,052 ------- ------- Investing activities: Purchases of debt securities available-for-sale (10) (190,548) Proceeds from maturities and sales of debt securities available-for-sale 90,572 240,157 Purchases of equity securities (14,159) (8,500) Proceeds from sales of equity securities 165 - Purchases of property, equipment and software (90,004) (134,589) Proceeds from sale of property and equipment 2,773 13,674 Acquisition of business and companies, net of cash acquired (46,981) (95,137) Decrease/(increase) in non-current assets and deposits 13,501 (13,300) Proceeds from maturity of notes receivable associated with sale of semiconductor operations in Thailand 10,000 20,000 Proceeds received from the resolution of a pre-acquisition income tax contingency - 4,821 ------- -------- Net cash (used in)/provided by investing activities (34,143) (163,422) ------- -------- Financing activities: Redemption/repurchase of convertible subordinated notes (244,047) (116,636) Issuance of common stock 18,747 42,928 Purchase of minority interest in subsidiary - (70) Purchase of common stock under repurchase programs - (229,231) --- -------- Net cash provided by/(used in) financing activities (225,300) (303,009) -------- -------- Effect of exchange rate changes on cash and cash equivalents 3,959 (3,889) ----- ------ Increase/(decrease) in cash and cash equivalents (51,010) (192,268) Cash and cash equivalents at beginning of period 829,301 1,021,569 ------- --------- Cash and cash equivalents at end of period $778,291 $829,301 ======== ======== * 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 4, December 31, 2009 2009 2008 ---- ---- ---- Semiconductor revenues $380.8 $371.8 $373.8 Storage Systems revenues $257.0 $206.6 $236.2 Total revenues $637.8 $578.4 $610.0 Percentage change in revenues-qtr./qtr. ( a ) 10.3% 11.1% -14.6% Percentage change in revenues-yr./yr. ( b ) 4.6% -19.0% -17.7% Days sales outstanding 48 48 45 Days of inventory 41 40 52 Current ratio 1.9 1.8 2.3 Quick ratio 1.5 1.5 1.8 Gross margin as a percentage of revenues 41.8% 39.0% 37.2% R&D as a percentage of revenues 24.0% 26.1% 26.7% SG&A as a percentage of revenues 12.3% 14.2% 16.3% Employees ( c ) 5,397 5,318 5,488 Revenues per employee (in thousands) ( d ) $472.7 $435.1 $444.6 Selected Cash Flow Information: ------------------ Purchases of property and equipment ( e ) $14.1 $11.4 $17.1 Depreciation and amortization ( f ) $26.2 $23.9 $23.1 ( 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. 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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