2014

LSI Reports First Quarter 2014 Results

SAN JOSE, Calif., April 23, 2014 /PRNewswire/ -- LSI Corporation (NASDAQ: LSI) today reported results for its first quarter ended March 30, 2014.

On December 15, 2013, LSI entered into a definitive agreement with Avago Technologies Limited (NASDAQ: AVGO) under which Avago has agreed to acquire LSI for $11.15 per share in an all-cash transaction valued at approximately $6.6 billion. In anticipation of this transaction, which is expected to close in early May, LSI will not issue financial guidance for the upcoming quarter or conduct a first quarter results conference call. LSI has also discontinued its quarterly dividend and stock repurchases.

First Quarter 2014 Financial Highlights

  • First quarter 2014 revenues of $569 million
  • First quarter 2014 GAAP* net income of $0.06 per diluted share
  • First quarter 2014 non-GAAP** net income of $0.17 per diluted share
  • First quarter 2014 operating cash flows of $43 million
  • First quarter 2014 operating expenses of $266 million on a GAAP basis and $223 million on a non-GAAP basis

First quarter 2014 revenues were $569 million, compared to $569 million in the first quarter of 2013 and $605 million in the fourth quarter of 2013.

First quarter 2014 GAAP net income was $33 million or $0.06 per diluted share, compared to first quarter 2013 GAAP net income of $18 million or $0.03 per diluted share. Fourth quarter 2013 GAAP net income was $45 million or $0.08 per diluted share.

First quarter 2014 GAAP net income included a net charge of $66.5 million from special items, consisting primarily of approximately $30 million of amortization of acquisition-related items, $21 million of stock-based compensation expense, and $15.5 million of net restructuring and other items, including merger-related costs.

First quarter 2014 non-GAAP net income was $100 million or $0.17 per diluted share, compared to first quarter 2013 non-GAAP net income of $94 million or $0.17 per diluted share. Fourth quarter 2013 non-GAAP net income was $113 million or $0.20 per diluted share.

Cash and short-term investments totaled approximately $883 million at quarter end. LSI did not repurchase any shares in the first quarter.

*

Generally Accepted Accounting Principles.

**

Excludes stock-based compensation, amortization of acquisition-related intangibles, purchase accounting effect on inventory, restructuring of operations and other items, net, gain on remeasurement of a pre-acquisition equity interest to fair value, and gain/loss on sale/write-down of investments. It also excludes the income tax effect associated with the above-mentioned items.

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: the risk that the conditions to the closing of the merger of LSI and a subsidiary of Avago are not satisfied; litigation relating to the merger; uncertainties as to the ability of each of LSI and Avago to consummate the merger; risks that the proposed transaction disrupts the current plans and operations of LSI; the ability of LSI to retain and hire key personnel; competitive responses to the proposed merger; unexpected costs, charges or expenses resulting from the merger; the failure by Avago to obtain the necessary debt financing arrangements set forth in the commitment letters received in connection with the merger; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; legislative, regulatory and economic developments; our ability to achieve anticipated synergies and to develop integrated new products following our acquisition of SandForce; 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 macro-economic 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 report on Form 10-K. 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 (NASDAQ: LSI) designs semiconductors and software that accelerate storage and networking in datacenters, mobile networks and client computing. Our technology is the intelligence critical to enhanced application performance, and is applied in solutions created in collaboration with our partners. More information is available at www.lsi.com.

LSI, the LSI & Design logo and Storage.Networking.Accelerated. are trademarks or registered trademarks of LSI Corporation in the United States and/or other countries.

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)
























March 30,


December 31,


March 31,

Assets


2014


2013


2013








Current assets:







    Cash and short-term investments


$     883.3


$           809.8


$     658.5

    Accounts receivable, net


251.2


270.8


223.2

    Inventories


161.9


156.3


181.1

    Prepaid expenses and other current assets


85.1


71.7


70.0








        Total current assets


1,381.5


1,308.6


1,132.8








Property and equipment, net


298.6


302.3


278.0

Goodwill and identified intangible assets, net


592.5


622.6


711.5

Other assets


126.9


128.2


118.6








        Total assets


$  2,399.5


$        2,361.7


$  2,240.9















Liabilities and Stockholders' Equity














Current liabilities


$     453.9


$           483.0


$     441.5








Pension, tax and other liabilities


421.1


443.0


658.4








        Total liabilities


875.0


926.0


1,099.9








Stockholders' equity:







    Common stock and additional paid-in capital


5,626.5


5,576.0


5,535.9

    Accumulated deficit


(3,715.8)


(3,749.0)


(3,822.4)

    Accumulated other comprehensive loss


(386.2)


(391.3)


(572.5)








        Total stockholders' equity


1,524.5


1,435.7


1,141.0








        Total liabilities and stockholders' equity


$  2,399.5


$        2,361.7


$  2,240.9

 

 

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)








Three Months Ended


March 30,


December 31,


March 31,


2014


2013


2013







Revenues

$      569,066


$             605,067


$      568,636







    Cost of revenues

254,618


272,284


256,511

    Amortization of acquisition-related intangibles

20,865


19,746


19,746

    Stock-based compensation expense

2,458


2,203


2,875

       Total cost of revenues

277,941


294,233


279,132







Gross profit 

291,125


310,834


289,504







    Research and development

163,818


162,691


158,896

    Stock-based compensation expense

10,295


9,628


12,409

       Total research and development

174,113


172,319


171,305







    Selling, general and administrative

58,736


62,437


69,350

    Amortization of acquisition-related intangibles

9,200


9,883


9,883

    Stock-based compensation expense

8,232


8,757


10,262

       Total selling, general and administrative

76,168


81,077


89,495







    Restructuring of operations and other items, net

15,473


17,405


20,452







Income from operations

25,371


40,033


8,252







    Interest income and other, net

2,669


2,746


7,880







Income before income taxes 

28,040


42,779


16,132

Benefit from income taxes

(5,193)


(2,264)


(2,300)













Net income

$        33,233


$               45,043


$        18,432







Net income per share:






    Basic 

$            0.06


$                   0.08


$            0.03







    Diluted

$            0.06


$                   0.08


$            0.03







Shares used in computing per share amounts:






    Basic

558,490


547,347


550,227







    Diluted

588,455


570,206


567,092







Reconciliations of certain GAAP measures to non-GAAP measures are included below.












Three Months Ended


March 30,


December 31,


March 31,

Reconciliation of GAAP net income to non-GAAP net income:

2014


2013


2013







GAAP net income

$        33,233


$               45,043


$        18,432







Special items:






a)   Stock-based compensation expense - cost of revenues

2,458


2,203


2,875

b)   Stock-based compensation expense - R&D

10,295


9,628


12,409

c)   Stock-based compensation expense - SG&A

8,232


8,757


10,262

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

20,865


19,746


19,746

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

9,200


9,883


9,883

f)   Restructuring of operations and other items, net

15,473


17,405


20,452

     Total special items

66,523


67,622


75,627







Non-GAAP net income 

$        99,756


$             112,665


$        94,059







Non-GAAP income per share: 






    Basic

$            0.18


$                   0.21


$            0.17







    Diluted 

$            0.17


$                   0.20


$            0.17







Shares used in computing non-GAAP per share amounts:






    Basic

558,490


547,347


550,227







    Diluted

588,455


570,206


567,092







Reconciliation of GAAP operating expenses to non-GAAP operating expenses:












Operating expenses- GAAP

$      265,754


$             270,801


$      281,252

Special items:






a)   Stock-based compensation expense - R&D

10,295


9,628


12,409

b)   Stock-based compensation expense - SG&A

8,232


8,757


10,262

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

9,200


9,883


9,883

d)   Restructuring of operations and other items, net

15,473


17,405


20,452

Operating expenses- Non-GAAP

$      222,554


$             225,128


$      228,246

 

 

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)








Three Months Ended


March 30,


December 31,


March 31,


2014


2013


2013

Operating activities:






Net income

$   33,233


$         45,043


$   18,432

Adjustments:






    Depreciation and amortization 

45,929


45,111


44,285

    Stock-based compensation expense

20,985


20,588


25,546

    Non-cash restructuring of operations and other items, net

434


247


6,596

    Gain on sale of property and equipment

-


-


(4)

    Unrealized foreign exchange loss

494


425


589

    Deferred taxes 

(51)


22,783


(26)

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











        Accounts receivable

19,626


21,718


40,652

        Inventories

(5,616)


13,837


25,123

        Prepaid expenses, assets held for sale and other assets

(32,903)


(13,956)


(7,955)

        Accounts payable

7,936


5,980


(33,054)

        Accrued and other liabilities

(47,054)


(27,560)


(57,354)

Net cash provided by operating activities

43,013


134,216


62,830







Investing activities:






    Purchases of debt securities available-for-sale

(26)


(43,300)


(53,345)

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

25,601


40,732


24,117

    Purchases of other investments

(232)


(800)


(750)

    Purchases of property and equipment

(20,527)


(21,521)


(25,075)

    Proceeds from sale of property and equipment

12


155


27

Net cash provided by/(used in) investing activities

4,828


(24,734)


(55,026)







Financing activities:






   Issuance of common stock

51,965


52,798


8,165

   Payment of dividends to stockholders

-


(16,478)


-

   Purchases of common stock under repurchase program

-


-


(60,765)

Net cash provided by/(used in) financing activities

51,965


36,320


(52,600)







Effect of exchange rate changes on cash and cash equivalents

14


715


(1,507)







Net change in cash and cash equivalents

99,820


146,517


(46,303)







Cash and cash equivalents at beginning of period

542,768


396,251


471,528







Cash and cash equivalents at end of period

$ 642,588


$       542,768


$ 425,225

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SOURCE LSI Corporation



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