LSI: Fiscal 2Q11 Financial Results

LSI Corporation reported results for its second quarter ended July 3, 2011.

On May 6, 2011, LSI completed the sale of its external storage systems business to NetApp. The financial results of the external systems business have been classified as discontinued operations in LSI’s financial statements. Our ongoing business is referred to as ‘continuing operations.’

Second Quarter 2011 Summary

• revenues from continuing operations of $501 million
• GAAP income from continuing operations of 5 cents per diluted share
• non-GAAP income from continuing operations of 10 cents per diluted share
• operating cash flows of $38 million

Third Quarter 2011 Business Outlook

• projected revenues from continuing operations of $535 million to $565 million
• GAAP income from continuing operations in the range of $0.01 to $0.11 per share
• non-GAAP income from continuing operations in the range of $0.11 to $0.17 per share

"Our strong execution in the second quarter and guidance for the third quarter, which represents 10 percent sequential revenue growth at the mid-point, reflect share gains and program ramps at key customers across multiple businesses," said Abhi Talwalkar, LSI president and CEO. "LSI is now entering an exciting new phase in our evolution. With our transformation complete, we are well positioned to drive above-market growth, generate greater profitability and increase shareholder value."

Second quarter 2011 revenues from continuing operations were $501 million, above the high end of guidance, compared to $473 million generated from continuing operations in the second quarter of 2010, and compared to $473 million generated from continuing operations in the first quarter of 2011.

Second quarter 2011 GAAP income from continuing operations was $28 million or 5 cents per diluted share, compared to second quarter 2010 GAAP income from continuing operations of $3 million or break-even per diluted share. Second quarter 2011 GAAP results compare to first quarter 2011 GAAP income from continuing operations of $19 million or 3 cents per diluted share. Second quarter 2011 GAAP income from continuing operations included a net charge of $31 million from special items, consisting primarily of $29 million of amortization of acquisition-related items and $14 million of stock-based compensation expense, offset by an $11 million credit for net restructuring and other items.

Second quarter 2011 GAAP net income was $294 million or 48 cents per diluted share, compared to second quarter 2010 GAAP net income of $7 million or 1 cent per diluted share. Second quarter 2011 GAAP net income includes a gain of $260 million or 43 cents per diluted share related to the sale of the external storage systems business to NetApp. Second quarter 2011 GAAP net income compares to first quarter 2011 GAAP net income of $10 million or 2 cents per diluted share.

Second quarter 2011 non-GAAP income from continuing operations was $60 million or 10 cents per diluted share, compared to second quarter 2010 non-GAAP income from continuing operations of $61 million or 9 cents per diluted share. First quarter 2011 non-GAAP income from continuing operations was $65 million or 10 cents per diluted share.

Second quarter 2011 non-GAAP net income was $79 million or 13 cents per diluted share, compared to second quarter 2010 non-GAAP net income of $71 million or 11 cents per diluted share. First quarter 2011 non-GAAP net income was $82 million or 13 cents per diluted share.

Cash and short-term investments totaled approximately $907 million at quarter end. The company completed second-quarter purchases of approximately 42 million shares of its common stock for approximately $300 million. On a year-to-date basis, the company has purchased approximately 56 million shares of its common stock for approximately $397 million under its $750 million share repurchase program.

Bryon Look, LSI CFO and chief administrative officer, said: "In addition to exceeding the high end of our revenue guidance in the second quarter, we were active in buying back stock and have repurchased 56 million shares year to date. We remain committed to driving earnings growth and getting to our target business model. Our guidance implies strong operating margin expansion in the third quarter, demonstrating the earnings leverage we have created."