LSI CORP - FORM 8-K - EX-99.1

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8-K - FORM 8-K - LSI CORP	d714186d8k.htm

Exhibit 99.1

LOGO

NEWS RELEASE

cc14-10/C1404

LSI Reports First Quarter 2014 Results

SAN JOSE, Calif., April 23, 2014 – 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, 2014			December 31, 2013			March 31, 2013
Assets
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, 2014			December 31, 2013			March 31, 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
Reconciliation of GAAP net income to non-GAAP net income:	March 30, 2014		December 31, 2013		March 31, 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, 2014			December 31, 2013			March 31, 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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