LSI Reports Third Quarter 2013 Results

Declares a $0.03 per share quarterly dividend

News provided by

LSI Corporation

Oct 23, 2013, 04:15 ET

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