LSI Reports First Quarter 2014 Results

News provided by

LSI Corporation

Apr 23, 2014, 04:01 ET

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