LSI CORP - FORM 8-K - EX-99.1

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8-K - FORM 8-K - LSI CORP	d572934d8k.htm

Exhibit 99.1

LOGO

NEWS RELEASE

cc13-36/C1317

LSI Reports Second Quarter 2013 Results

Initiates $0.03 per share quarterly dividend

SAN JOSE, Calif., July 24, 2013 – LSI Corporation (NASDAQ: LSI) today reported results for its second quarter ended June 30, 2013.

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.


Investor Relations Contact:		Media Relations Contact:
Sujal Shah		Dave Miller
610-712-5471		408-712-7813
sujal.shah@lsi.com		dave.c.miller@lsi.com

LSI CORPORATION

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)


	June 30, 2013			March 31, 2013			December 31, 2012
Assets
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, 2013		March 31, 2013			July 1, 2012		June 30, 2013		July 1, 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, 2013		March 31, 2013		July 1, 2012		June 30, 2013		July 1, 2012
Reconciliation of GAAP net income to non-GAAP net income:
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, 2013			March 31, 2013			July 1, 2012			June 30, 2013			July 1, 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

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