LSI Reports Second Quarter 2013 Results

Initiates $0.03 per share quarterly dividend

News provided by

LSI Corporation

Jul 24, 2013, 04:02 ET

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