LSI Reports Second Quarter 2013 Results Initiates $0.03 per share quarterly dividend

SAN JOSE, Calif., July 24, 2013 /PRNewswire-FirstCall/ -- LSI Corporation (NASDAQ: LSI) today reported results for its second quarter ended June 30, 2013.

(Logo: http://photos.prnewswire.com/prnh/20120222/SF57952LOGO)

Second Quarter 2013 Highlights

  • Second quarter 2013 revenues of $590 million
  • Second quarter 2013 GAAP* net income of $0.04 per diluted share
  • Second quarter 2013 non-GAAP** net income of $0.15 per diluted share
  • Second quarter 2013 operating cash flows of $78 million

Third Quarter 2013 Business Outlook

  • Projected revenues of $590 million to $630 million
  • GAAP* net income in the range of $0.01 to $0.11 per share
  • Non-GAAP** net income in the range of $0.13 to $0.19 per share

* 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.

"LSI delivered solid second quarter results as we established key inroads at strategic customers who are choosing LSI storage and networking solutions to improve performance and deliver higher service levels to their customers," said Abhi Talwalkar, LSI's President and CEO.  "We expect both our storage and networking businesses to be up in the third quarter, with new product cycles contributing to our growth."

Second quarter 2013 revenues were $590 million, in line with guidance, compared to $660 million in the second quarter of 2012, and compared to $569 million in the first quarter of 2013.

Second quarter 2013 GAAP* net income was $25 million or $0.04 per diluted share, compared to second quarter 2012 GAAP net income of $59 million or $0.10 per diluted share. First quarter 2013 GAAP net income was $18 million or $0.03 per diluted share. Second quarter 2013 GAAP net income included a net charge of $59 million from special items, consisting primarily of approximately $29 million of amortization of acquisition-related items, $22 million of stock-based compensation expense and $8 million of net restructuring and other items.

Second quarter 2013 non-GAAP** net income was $84 million or $0.15 per diluted share, compared to second quarter 2012 non-GAAP net income of $121 million or $0.21 per diluted share. First quarter 2013 non-GAAP net income was $94 million or $0.17 per diluted share.

Cash and short-term investments totaled approximately $673 million at quarter end. The company completed second-quarter purchases of approximately 9 million shares of its common stock for approximately $62 million.

"We are generating cash and healthy gross margins, while carefully managing spending in what continues to be an uncertain external environment," said Bryon Look, LSI's CFO. "The dividend we announced today, coupled with our ongoing share buyback program, further demonstrates our confidence and continued commitment to shareholder return."

LSI 3Q2013 Business Outlook


GAAP*

Special Items

Non-GAAP**

Revenue

$590 million to $630 million


$590 million to $630 million

Gross Margin

49% to 53%

$17 million to $27 million

53.5% to 55.5%

Operating Expenses

$259 million to $279 million

$28 million to $38 million

$231 million to $241 million

Net Other Income

$2 million


$2 million

Tax

Approximately $11 million


Approximately $11 million

Net (Loss)/Income Per Share

$0.01 to $0.11

($0.08) to ($0.12)

$0.13 to $0.19

Diluted Share Count

563 million


563 million

Capital spending is projected to be around $25 million in the third quarter and approximately $85 million in total for 2013.

Depreciation and software amortization is projected to be around $15 million in the third quarter and approximately $60 million in total for 2013.

LSI Conference Call Information
LSI will hold a conference call today at 2 p.m. PDT to discuss second quarter 2013 financial results and the third quarter 2013 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 ability to achieve anticipated synergies and to develop integrated new products following our acquisition of SandForce; our ability to repurchase our common stock at prices we believe to be advantageous; 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; our ability to generate cash at levels sufficient to pay a dividend; our ability to maintain sufficient surplus out of which we can pay dividends; whether we determine that continuing to pay a dividend is in our stockholders' interest, 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 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 (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)
































June 30,


March 31,


December 31,

Assets




2013


2013


2012










Current assets:








    Cash and short-term investments


$    673.4


$     658.5


$           676.0

    Accounts receivable, net


242.0


223.2


264.1

    Inventories



173.6


181.1


206.3

    Prepaid expenses and other current assets


68.6


70.0


80.4










        Total current assets



1,157.6


1,132.8


1,226.8










Property and equipment, net


281.5


278.0


269.7

Goodwill and identified intangible assets, net


681.9


711.5


741.1

Other assets



113.6


118.6


118.6










        Total assets



$ 2,234.6


$  2,240.9


$        2,356.2



















Liabilities and Stockholders' Equity
















Current liabilities



$    443.8


$     441.5


$           516.9










Pension, tax and other liabilities


650.5


658.4


679.6










        Total liabilities



1,094.3


1,099.9


1,196.5










Stockholders' equity:








    Common stock and additional paid-in capital


5,516.8


5,535.9


5,578.8

    Accumulated deficit



(3,797.8)


(3,822.4)


(3,840.8)

    Accumulated other comprehensive loss


(578.7)


(572.5)


(578.3)










        Total stockholders' equity


1,140.3


1,141.0


1,159.7










        Total liabilities and stockholders' equity


$ 2,234.6


$  2,240.9


$        2,356.2








 


LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)












Three Months Ended


Six Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2013


2013


2012


2013


2012











Revenues

$   589,583


$   568,636


$   659,573


$    1,158,219


$    1,281,997











    Cost of revenues

268,341


256,511


303,334


524,852


599,486

    Amortization of acquisition-related intangibles

19,746


19,746


21,348


39,492


42,738

    Purchase accounting effect on inventory

-


-


-


-


14,458

    Stock-based compensation expense

2,237


2,875


3,003


5,112


6,515

       Total cost of revenues

290,324


279,132


327,685


569,456


663,197











Gross profit 

299,259


289,504


331,888


588,763


618,800











    Research and development

166,829


158,896


163,591


325,725


321,154

    Stock-based compensation expense

9,619


12,409


11,973


22,028


24,281

       Total research and development

176,448


171,305


175,564


347,753


345,435











    Selling, general and administrative

67,540


69,350


69,905


136,890


136,324

    Amortization of acquisition-related intangibles

9,883


9,883


8,667


19,766


17,334

    Stock-based compensation expense

10,009


10,262


10,342


20,271


25,356

       Total selling, general and administrative

87,432


89,495


88,914


176,927


179,014











    Restructuring of operations and other items, net

7,807


20,452


6,491


28,259


21,953











Income from operations

27,572


8,252


60,919


35,824


72,398











    Interest income and other, net

2,248


7,880


9,594


10,128


24,250











Income before income taxes 

29,820


16,132


70,513


45,952


96,648

Provision for/(benefit from) income taxes 

5,200


(2,300)


11,800


2,900


(37,262)





















Net income

$     24,620


$     18,432


$     58,713


$         43,052


$       133,910











Net income per share:










    Basic 

$         0.04


$         0.03


$         0.10


$             0.08


$             0.24











    Diluted

$         0.04


$         0.03


$         0.10


$             0.08


$             0.23











Shares used in computing per share amounts:










    Basic

548,282


550,227


563,686


549,249


564,945











    Diluted

561,801


567,092


581,344


565,426


586,431











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





























Three Months Ended


Six Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,

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

2013


2013


2012


2013


2012











GAAP net income

$     24,620


$     18,432


$     58,713


$         43,052


$       133,910











Special items:










a)   Stock-based compensation expense - cost of revenues

2,237


2,875


3,003


5,112


6,515

b)   Stock-based compensation expense - R&D

9,619


12,409


11,973


22,028


24,281

c)   Stock-based compensation expense - SG&A

10,009


10,262


10,342


20,271


25,356

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

19,746


19,746


21,348


39,492


42,738

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

9,883


9,883


8,667


19,766


17,334

f)   Purchase accounting effect on inventory

-


-


-


-


14,458

g)   Restructuring of operations and other items, net

7,807


20,452


6,491


28,259


21,953

h)   Gain on re-measurement of a pre-acquisition equity interest to fair value

-


-


-


-


(5,765)

i)   Income tax effect

-


-


-


-


(43,198)

     Total special items

59,301


75,627


61,824


134,928


103,672











Non-GAAP net income 

$     83,921


$     94,059


$   120,537


$       177,980


$       237,582











Non-GAAP income per share: 










    Basic

$         0.15


$         0.17


$         0.21


$             0.32


$             0.42











    Diluted 

$         0.15


$         0.17


$         0.21


$             0.31


$             0.41











Shares used in computing non-GAAP per share amounts:










    Basic

548,282


550,227


563,686


549,249


564,945











    Diluted

561,801


567,092


581,344


565,426


586,431











 

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)












Three Months Ended


Six Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2013


2013


2012


2013


2012

Operating activities:










Net income

$   24,620


$   18,432


$   58,713


$   43,052


$ 133,910

Adjustments:










    Depreciation and amortization 

45,547


44,285


45,279


89,832


90,647

    Stock-based compensation expense

21,865


25,546


25,318


47,411


56,152

    Non-cash restructuring of operations and other items, net

(266)


6,596


2,901


6,330


5,041

    Gain on re-measurement of a pre-acquisition equity interest to fair value

-


-


-


-


(5,765)

    Gain on sale of property and equipment

-


(4)


(95)


(4)


(70)

    Unrealized foreign exchange (gain)/loss

(2,843)


589


(4,196)


(2,254)


(2,735)

    Deferred taxes 

(25)


(26)


28


(51)


(43,174)

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



















        Accounts receivable

(18,962)


40,652


5,428


21,690


(39,417)

        Inventories

7,447


25,123


(3,226)


32,570


227

        Prepaid expenses, assets held for sale and other assets

(1,162)


(7,955)


460


(9,117)


(1,830)

        Accounts payable

22,453


(33,054)


(17,598)


(10,601)


29,521

        Accrued and other liabilities

(20,854)


(57,354)


4,260


(78,208)


(55,010)

Net cash provided by operating activities

77,820


62,830


117,272


140,650


167,497











Investing activities:










    Purchases of debt securities available-for-sale

(63,833)


(53,345)


(51,106)


(117,178)


(72,369)

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

26,900


24,117


8,250


51,017


17,756

    Purchases of other investments

-


(750)


-


(750)


-

    Purchases of property and equipment

(18,282)


(25,075)


(12,636)


(43,357)


(77,618)

    Proceeds from sale of property and equipment

55


27


231


82


252

    Acquisition of business, net of cash acquired 

-


-


-


-


(319,231)

Net cash used in investing activities

(55,160)


(55,026)


(55,261)


(110,186)


(451,210)











Financing activities:










   Issuance of common stock

23,724


8,165


16,854


31,889


82,128

   Purchases of common stock under repurchase program

(61,515)


(60,765)


(137,979)


(122,280)


(176,185)

Net cash used in financing activities

(37,791)


(52,600)


(121,125)


(90,391)


(94,057)











Effect of exchange rate changes on cash and cash equivalents

(523)


(1,507)


598


(2,030)


103











Net change in cash and cash equivalents

(15,654)


(46,303)


(58,516)


(61,957)


(377,667)











Cash and cash equivalents at beginning of period

425,225


471,528


460,660


471,528


779,811











Cash and cash equivalents at end of period

$ 409,571


$ 425,225


$ 402,144


$ 409,571


$ 402,144

SOURCE LSI Corporation



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