LSI Reports First Quarter 2013 Results

Strong earnings per share and gross margins

News provided by

LSI Corporation

Apr 24, 2013, 04:01 ET

SAN JOSE, Calif., April 24, 2013 /PRNewswire/ -- LSI Corporation (NASDAQ: LSI) today reported results for its first quarter ended March 31, 2013.

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

First Quarter 2013 Highlights

  • First quarter 2013 revenues of $569 million
  • First quarter 2013 GAAP* net income of $0.03 per diluted share
  • First quarter 2013 non-GAAP** net income of $0.17 per diluted share
  • First quarter 2013 operating cash flows of $63 million

Second Quarter 2013 Business Outlook

  • Projected revenues of $560 million to $600 million
  • GAAP* net income in the range of ($0.02) to $0.07 per share
  • Non-GAAP** net income in the range of $0.10 to $0.16 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 achieved strong results and better than expected revenues in the first quarter, despite a challenging environment for PCs and mobile infrastructure investment," said Abhi Talwalkar, LSI's president and CEO. "Looking forward, we are very excited about the flash application acceleration market and our Nytro flash adapter solutions continue to gain strong acceptance with customers looking to accelerate Virtual Desktop Infrastructure (VDI), Hadoop and other Big Data applications, as well as with leading cloud based services."

First quarter 2013 revenues were $569 million, in line with guidance, compared to $622 million in the first quarter of 2012, and compared to $600 million in the fourth quarter of 2012.

First quarter 2013 GAAP* net income was $18 million or $0.03 per diluted share, compared to first quarter 2012 GAAP net income of $75 million or $0.13 per diluted share. Fourth quarter 2012 GAAP net income was $23 million or $0.04 per diluted share. First quarter 2013 GAAP net income included a net charge of $76 million from special items, consisting primarily of approximately $30 million of amortization of acquisition-related items, $26 million of stock-based compensation expense and $20 million of net restructuring and other items.

First quarter 2013 non-GAAP** net income was $94 million or $0.17 per diluted share, compared to first quarter 2012 non-GAAP net income of $117 million or $0.20 per diluted share. Fourth quarter 2012 non-GAAP net income was $101 million or $0.18 per diluted share.

Cash and short-term investments totaled approximately $659 million at quarter end. The company completed first-quarter purchases of approximately 9 million shares of its common stock for approximately $61 million.

"We delivered solid earnings per share, while investing for growth in current and future product areas," said Bryon Look, LSI's CFO. "We also generated strong gross margins in Q1, and continue to use our healthy cash position to pursue our stock buyback program."

LSI 2Q2013 Business Outlook

GAAP*

Special Items

Non-GAAP**

Revenue

$560 million to $600 million

$560 million to $600 million

Gross Margin

48% to 52%

$18 million to $28 million

53% to 55%

Operating Expenses

$260 million to $280 million

$32 million to $42 million

$228 million to $238 million

Net Other Income

$2 million

$2 million

Tax

Approximately $8 million

Approximately $8 million

Net (Loss)/Income Per Share

($0.02) to $0.07

($0.09) to ($0.12)

$0.10 to $0.16

Diluted Share Count

565 million

565 million

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

Depreciation and software amortization is projected to be around $15 million in the second 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 first quarter 2013 financial results and the second 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; 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)







March 31,

December 31,

April 1,

Assets

2013

2012

2012





Current assets:





    Cash and short-term investments

$     658.5

$           676.0

$    623.1

    Accounts receivable, net

223.2

264.1

302.1

    Inventories

181.1

206.3

200.8

    Prepaid expenses and other current assets

70.0

80.4

62.4





        Total current assets

1,132.8

1,226.8

1,188.4





Property and equipment, net

278.0

269.7

235.1

Goodwill and identified intangible assets, net

711.5

741.1

832.0

Other assets

118.6

118.6

111.6





        Total assets

$  2,240.9

$        2,356.2

$ 2,367.1












Liabilities and Stockholders' Equity












Current liabilities

$     441.5

$           516.9

$    470.3





Pension, tax and other liabilities

658.4

679.6

693.5





        Total liabilities

1,099.9

1,196.5

1,163.8





Stockholders' equity:





    Common stock and additional paid-in capital

5,535.9

5,578.8

5,691.4

    Accumulated deficit

(3,822.4)

(3,840.8)

(3,961.8)

    Accumulated other comprehensive loss

(572.5)

(578.3)

(526.3)





        Total stockholders' equity

1,141.0

1,159.7

1,203.3





        Total liabilities and stockholders' equity

$  2,240.9

$        2,356.2

$ 2,367.1

LSI CORPORATION

Consolidated Statements of Operations (GAAP)

(In thousands, except per share amounts)

(Unaudited)





Three Months Ended

March 31,

December 31,

April 1,

2013

2012

2012




Revenues

$      568,636

$             600,128

$      622,424




    Cost of revenues

256,511

275,538

296,152

    Amortization of acquisition-related intangibles

19,746

21,318

21,390

    Purchase accounting effect on inventory

-

-

14,458

    Stock-based compensation expense

2,875

2,858

3,512

       Total cost of revenues

279,132

299,714

335,512




Gross profit 

289,504

300,414

286,912




    Research and development

158,896

165,758

157,563

    Stock-based compensation expense

12,409

11,613

12,308

       Total research and development

171,305

177,371

169,871




    Selling, general and administrative

69,350

64,919

66,419

    Amortization of acquisition-related intangibles

9,883

8,667

8,667

    Stock-based compensation expense

10,262

10,291

15,014

       Total selling, general and administrative

89,495

83,877

90,100




    Restructuring of operations and other items, net

20,452

22,917

15,462




Income from operations

8,252

16,249

11,479




    Interest income and other, net

7,880

7,606

14,656




Income before income taxes 

16,132

23,855

26,135

(Benefit from)/provision for income taxes 

(2,300)

1,202

(49,062)










Net income

$        18,432

$               22,653

$        75,197




Net income per share:




    Basic 

$            0.03

$                   0.04

$            0.13




    Diluted

$            0.03

$                   0.04

$            0.13




Shares used in computing per share amounts:




    Basic

550,227

552,761

566,709




    Diluted

567,092

568,611

590,556




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








Three Months Ended

March 31,

December 31,

April 1,

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

2013

2012

2012




GAAP net income

$        18,432

$               22,653

$        75,197




Special items:




a)   Stock-based compensation expense - cost of revenues

2,875

2,858

3,512

b)   Stock-based compensation expense - R&D

12,409

11,613

12,308

c)   Stock-based compensation expense - SG&A

10,262

10,291

15,014

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

19,746

21,318

21,390

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

9,883

8,667

8,667

f)   Purchase accounting effect on inventory

-

-

14,458

g)   Restructuring of operations and other items, net

20,452

22,917

15,462

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

-

-

(5,765)

i)   Income tax effect

-

833

(43,198)

     Total special items

75,627

78,497

41,848




Non-GAAP net income 

$        94,059

$             101,150

$      117,045




Non-GAAP income per share: 




    Basic

$            0.17

$                   0.18

$            0.21




    Diluted 

$            0.17

$                   0.18

$            0.20




Shares used in computing non-GAAP per share amounts:




    Basic

550,227

552,761

566,709




    Diluted

567,092

568,611

590,556

LSI CORPORATION

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)





Three Months Ended

March 31,

December 31,

April 1,

2013

2012

2012

Operating activities:




Net income

$   18,432

$         22,653

$   75,197

Adjustments:




    Depreciation and amortization 

44,285

44,166

45,368

    Stock-based compensation expense

25,546

24,762

30,834

    Non-cash restructuring of operations and other items, net

1,536

221

2,140

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

-

-

(5,765)

    (Gain)/loss on sale of property and equipment

(4)

(46)

25

    Unrealized foreign exchange loss/(gain)

589

(518)

1,461

    Deferred taxes 

(26)

(9,972)

(43,202)

    Changes in assets and liabilities, net of assets acquired and liabilities 




        assumed in business combination:




        Accounts receivable

40,652

(7,620)

(44,845)

        Inventories

25,123

2,748

3,453

        Prepaid expenses, assets held for sale and other assets

(7,955)

(16,850)

(2,290)

        Accounts payable

(33,054)

23,208

47,119

        Accrued and other liabilities

(52,294)

12,103

(59,270)

Net cash provided by operating activities

62,830

94,855

50,225




Investing activities:




    Purchases of debt securities available-for-sale

(53,345)

(37,206)

(21,263)

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

24,117

28,320

9,506

    Purchases of other investments

(750)

(500)

-

    Purchases of property and equipment

(25,075)

(27,494)

(64,982)

    Proceeds from sale of property and equipment

27

67

21

    Acquisition of business, net of cash acquired 

-

-

(319,231)

Net cash used in investing activities

(55,026)

(36,813)

(395,949)




Financing activities:




   Issuance of common stock

8,165

20,985

65,274

   Purchases of common stock under repurchase program

(60,765)

(46,338)

(38,206)

Net cash (used in)/provided by financing activities

(52,600)

(25,353)

27,068




Effect of exchange rate changes on cash and cash equivalents

(1,507)

(1,668)

(495)




Net change in cash and cash equivalents

(46,303)

31,021

(319,151)




Cash and cash equivalents at beginning of period

471,528

440,507

779,811




Cash and cash equivalents at end of period

$ 425,225

$       471,528

$ 460,660

SOURCE LSI Corporation