LSI Reports Third Quarter 2013 Results Declares a $0.03 per share quarterly dividend

SAN JOSE, Calif., Oct. 23, 2013 /PRNewswire/ --LSI Corporation (NASDAQ: LSI) today reported results for its third quarter ended September 29, 2013.

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

Third Quarter 2013 Highlights

  • Third quarter 2013 revenues of $607 million
  • Third quarter 2013 GAAP* net income of $0.06 per diluted share
  • Third quarter 2013 non-GAAP** net income of $0.17 per diluted share
  • Third quarter 2013 operating cash flows of $63 million

Fourth Quarter 2013 Business Outlook

  • Projected revenues of $580 million to $620 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
  • Company to limit operating expenses until business model is attained

*

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.

"In a challenging macroeconomic environment we delivered solid third quarter results, with revenues growing sequentially from products for flash and networking as well as hard disk drives," said Abhi Talwalkar, LSI's President and CEO. "While our end markets are mixed, with near-term growth below earlier expectations, our outlook for future growth driven by the massive expansion in data and traffic in datacenters and mobile networks remains intact and we are well positioned to see growth as these markets improve."

Third quarter 2013 revenues were $607 million, in line with guidance, compared to $624 million in the third quarter of 2012, and compared to $590 million in the second quarter of 2013.

Third quarter 2013 GAAP* net income was $37 million or $0.06 per diluted share, compared to third quarter 2012 GAAP net income of $40 million or $0.07 per diluted share. Second quarter 2013 GAAP net income was $25 million or $0.04 per diluted share. Third quarter 2013 GAAP net income included a net charge of $57 million from special items, consisting primarily of approximately $30 million of amortization of acquisition-related items, $20 million of stock-based compensation expense and $7 million of net restructuring and other items.

Third quarter 2013 non-GAAP** net income was $93 million or $0.17 per diluted share, compared to third quarter 2012 non-GAAP net income of $99 million or $0.17 per diluted share. Second quarter 2013 non-GAAP net income was $84 million or $0.15 per diluted share.

Cash and short-term investments totaled approximately $665 million at quarter end. The company completed third-quarter purchases of approximately 5 million shares of its common stock for approximately $41 million.

"In the third quarter we significantly expanded operating margins quarter over quarter and continued to generate strong cash flow," said Bryon Look, LSI's CFO. "Going forward we expect to hold non-GAAP operating expenses flat as we drive to achieve our business model targets."

The company also announced it has declared a quarterly cash dividend of $0.03 per share. This dividend will be paid on December 20, 2013, to stockholders of record as of December 6, 2013.

LSI 4Q2013 Business Outlook


GAAP*

Special Items

Non-GAAP**

Revenue

$580 million to $620 million


$580 million to $620 million

Gross Margin

49% to 53%

$17 million to $27 million

53.5% to 55.5%

Operating Expenses

$253 million to $273 million

$28 million to $38 million

$225 million to $235 million

Net Other Income

$1 million


$1 million

Tax

Approximately $7 million


Approximately $7 million

Net (Loss)/Income Per Share

$0.01 to $0.11

($0.08) to ($0.12)

$0.13 to $0.19

Diluted Share Count

565 million


565 million

Capital spending is projected to be around $20 million in the fourth quarter and approximately $85 million in total for 2013.

Depreciation and software amortization is projected to be around $16 million in the fourth quarter and approximately $62 million in total for 2013.

LSI Conference Call Information
LSI will hold a conference call today at 2 p.m. PDT to discuss third quarter 2013 financial results and the fourth 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)
































September 29,


June 30,


December 31,

Assets




2013


2013


2012










Current assets:








    Cash and short-term investments


$             664.6


$    673.4


$           676.0

    Accounts receivable, net


292.6


242.0


264.1

    Inventories



170.1


173.6


206.3

    Prepaid expenses and other current assets


66.7


68.6


80.4










        Total current assets



1,194.0


1,157.6


1,226.8










Property and equipment, net


286.9


281.5


269.7

Goodwill and identified intangible assets, net


652.2


681.9


741.1

Other assets



118.2


113.6


118.6










        Total assets



$          2,251.3


$ 2,234.6


$        2,356.2



















Liabilities and Stockholders' Equity
















Current liabilities



$             460.1


$    443.8


$           516.9










Pension, tax and other liabilities


638.7


650.5


679.6










        Total liabilities



1,098.8


1,094.3


1,196.5










Stockholders' equity:








    Common stock and additional paid-in capital


5,503.8


5,516.8


5,578.8

    Accumulated deficit



(3,777.5)


(3,797.8)


(3,840.8)

    Accumulated other comprehensive loss


(573.8)


(578.7)


(578.3)










        Total stockholders' equity


1,152.5


1,140.3


1,159.7










        Total liabilities and stockholders' equity


$          2,251.3


$ 2,234.6


$        2,356.2

 

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)












Three Months Ended


Nine Months Ended


September 29,


June 30,


September 30,


September 29,


September 30,


2013


2013


2012


2013


2012











Revenues

$               606,943


$      589,583


$               623,962


$            1,765,162


$            1,905,959











    Cost of revenues

272,458


268,341


287,390


797,310


886,876

    Amortization of acquisition-related intangibles

19,746


19,746


21,348


59,238


64,086

    Purchase accounting effect on inventory

-


-


-


-


14,458

    Stock-based compensation expense

2,059


2,237


2,573


7,171


9,088

       Total cost of revenues

294,263


290,324


311,311


863,719


974,508











Gross profit 

312,680


299,259


312,651


901,443


931,451











    Research and development

163,486


166,829


156,318


489,211


477,472

    Stock-based compensation expense

8,810


9,619


11,170


30,838


35,451

       Total research and development

172,296


176,448


167,488


520,049


512,923











    Selling, general and administrative

66,199


67,540


69,722


203,089


206,046

    Amortization of acquisition-related intangibles

9,883


9,883


8,667


29,649


26,001

    Stock-based compensation expense

9,340


10,009


13,643


29,611


38,999

       Total selling, general and administrative

85,422


87,432


92,032


262,349


271,046











    Restructuring of operations and other items, net

6,739


7,807


4,221


34,998


26,174











Income from operations

48,223


27,572


48,910


84,047


121,308











    Interest income and other, net

836


2,248


5,855


10,964


30,105











Income before income taxes 

49,059


29,820


54,765


95,011


151,413

Provision for/(benefit from) income taxes

12,500


5,200


15,100


15,400


(22,162)





















Net income

$                 36,559


$        24,620


$                 39,665


$                 79,611


$               173,575











Net income per share:










    Basic 

$                     0.07


$            0.04


$                     0.07


$                     0.15


$                     0.31











    Diluted

$                     0.06


$            0.04


$                     0.07


$                     0.14


$                     0.30











Shares used in computing per share amounts:










    Basic

545,451


548,282


555,197


547,978


561,708











    Diluted

563,621


561,801


572,022


565,570


582,296











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


















Three Months Ended


Nine Months Ended











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

September 29,

2013


June 30,

2013


September 30,

2012


September 29,

2013


September 30,

2012











GAAP net income

$                 36,559


$        24,620


$                 39,665


$                 79,611


$               173,575











Special items:










a)   Stock-based compensation expense - cost of revenues

2,059


2,237


2,573


7,171


9,088

b)   Stock-based compensation expense - R&D

8,810


9,619


11,170


30,838


35,451

c)   Stock-based compensation expense - SG&A

9,340


10,009


13,643


29,611


38,999

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

19,746


19,746


21,348


59,238


64,086

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

9,883


9,883


8,667


29,649


26,001

f)   Purchase accounting effect on inventory

-


-


-


-


14,458

g)   Restructuring of operations and other items, net

6,739


7,807


4,221


34,998


26,174

h)  Gain on sale of investments

-


-


(2,550)


-


(2,550)

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

-


-


-


-


(5,765)

j)   Income tax effect

-


-


-


-


(43,198)

     Total special items

56,577


59,301


59,072


191,505


162,744











Non-GAAP net income 

$                 93,136


$        83,921


$                 98,737


$               271,116


$               336,319











Non-GAAP income per share: 










    Basic

$                     0.17


$            0.15


$                     0.18


$                     0.49


$                     0.60











    Diluted 

$                     0.17


$            0.15


$                     0.17


$                     0.48


$                     0.58











Shares used in computing non-GAAP per share amounts:










    Basic

545,451


548,282


555,197


547,978


561,708











    Diluted

563,621


561,801


572,022


565,570


582,296

     

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)












Three Months Ended


Nine Months Ended


September 29,


June 30,


September 30,


September 29,


September 30,


2013


2013


2012


2013


2012

Operating activities:










Net income

$           36,559


$   24,620


$           39,665


$           79,611


$         173,575

Adjustments:










    Depreciation and amortization 

46,335


45,547


45,671


136,167


136,318

    Stock-based compensation expense

20,209


21,865


27,386


67,620


83,538

    Non-cash restructuring of operations and other items, net

85


(266)


698


6,415


5,739

    Gain on sale of investments

-


-


(2,550)


-


(2,550)

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

-


-


-


-


(5,765)

    (Gain)/loss on sale of property and equipment

(54)


-


2,644


(58)


2,574

    Unrealized foreign exchange (gain)/loss

(1,452)


(2,843)


2,655


(3,706)


(80)

    Deferred taxes 

(416)


(25)


(72)


(467)


(43,246)

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










        Accounts receivable

(50,605)


(18,962)


40,348


(28,915)


931

        Inventories

3,436


7,447


(5,091)


36,006


(4,864)

        Prepaid expenses, assets held for sale and other assets

(1,398)


(1,162)


1,110


(10,515)


(720)

        Accounts payable

(28,186)


22,453


(25,186)


(38,787)


4,335

        Accrued and other liabilities

38,416


(20,854)


(15,471)


(39,792)


(70,481)

Net cash provided by operating activities

62,929


77,820


111,807


203,579


279,304











Investing activities:










    Purchases of debt securities available-for-sale

(45,941)


(63,833)


(22,087)


(163,119)


(94,456)

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

42,686


26,900


11,767


93,703


29,523

    Purchases of other investments

-


-


-


(750)


-

    Proceeds from sale of other investments

-


-


2,550


-


2,550

    Purchases of property and equipment

(21,697)


(18,282)


(25,667)


(65,054)


(103,285)

    Proceeds from sale of property and equipment

183


55


1,374


265


1,626

    Increase in non-current assets 

(3,821)


-


-


(3,821)


-

    Acquisition of business, net of cash acquired 

-


-


-


-


(319,231)

Net cash used in investing activities

(28,590)


(55,160)


(32,063)


(138,776)


(483,273)











Financing activities:










   Issuance of common stock

9,416


23,724


8,515


41,305


90,643

   Payment of dividends to stockholders

(16,311)


-


-


(16,311)


-

   Purchases of common stock under repurchase program

(41,207)


(61,515)


(50,062)


(163,487)


(226,247)

Net cash used in financing activities

(48,102)


(37,791)


(41,547)


(138,493)


(135,604)











Effect of exchange rate changes on cash and cash equivalents

443


(523)


166


(1,587)


269











Net change in cash and cash equivalents

(13,320)


(15,654)


38,363


(75,277)


(339,304)











Cash and cash equivalents at beginning of period

409,571


425,225


402,144


471,528


779,811











Cash and cash equivalents at end of period

$         396,251


$ 409,571


$         440,507


$         396,251


$         440,507

 

SOURCE LSI Corporation



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