LSI Logic Announces Comprehensive Plan To Improve Profitability;
LSI Logic Reports Third Quarter Results; Symbios Acquisition Charges
MILPITAS, Calif., Oct. 14 /PRNewswire/ -- LSI Logic
Corporation (NYSE: LSI) today reported combined third quarter
operating results, reflecting the acquisition of storage solutions
leader Symbios, Inc., and announced a comprehensive
restructuring plan to capitalize upon synergies created by the
purchase.
LSI Q3 Earnings, Symbios Purchase, Restructuring Summary
The complete news release on LSI Logic's third quarter 1998
results follows this summary:
Revenues Income EPS
LSI/Symbios Consolidated* $390M ($283M) ($2.01)
(including special charges)
LSI Logic $301M $21M 15 cents
(excluding Symbios acquisition and special charges)
LSI Logic also announced the following:
-- Special charges totaling $326 million including: In-process R&D charges
of $225 million related to the acquisition of Symbios, Inc.; Pre-tax
non-recurring charges of $101 million, including $75 million for
restructuring.
-- Reduce global workforce by approximately 1,200 jobs, or about
17 percent.
-- Close an 11-year-old wafer fab in Tsukuba, Japan.
-- Close a test facility in Colorado Springs and an assembly plant in
Ft. Collins.
-- Consolidate LSI Logic-Symbios design centers, sales offices, and
administrative functions to eliminate redundancies.
-- Goodwill of $243 million, resulting from the Symbios acquisition.
* Reflects Symbios, Inc. acquisition on August 7, 1998.
Third Quarter 1998 Results
LSI Logic total corporate revenues were $390 million in the third
quarter ended September 30. Including special charges associated
with the purchase of Symbios, Inc. and non-recurring charges
related to restructuring activities, the company reported a net loss
of $283 million or $2.01 a diluted share. In-process R&D and
restructuring are included among the special charges. Excluding
special charges, earnings were $19 million or 14 cents a diluted
share. These results include Symbios since August 7.
Revenues for LSI Logic (excluding Symbios) in the third quarter
were $301 million, down 8 percent from $327 million in the same
period a year ago. Excluding special charges LSI Logic's net
income would have been $21 million or 15 cents a share on a
diluted share basis, down 52 percent from net income of $44
million or 31 cents a diluted share in the third quarter a year ago.
Business Climate Commentary
"The unprecedented three-year slowdown in the worldwide
semiconductor industry and the global economic downturn has
made it necessary to implement a comprehensive restructuring
plan to reduce costs," said Wilfred J. Corrigan chairman and chief
executive officer. "The recent acquisition of Symbios, Inc. is also
providing the company with the unique opportunity to position
itself for growth once the global industry environment improves."
"This comprehensive plan, when completed, positions LSI Logic
for stronger profitability in 1999," said Corrigan. "Next year, LSI
Logic will be offering next-generation 0.18-micron ASIC
technology, new system-on-a-chip building blocks, and a number
of new standard products and board solutions."
Restructuring and Cost Reduction Plan
"We have made substantial progress integrating the two
companies, which will be completed in the fourth quarter," said
Corrigan. "Substantial efficiencies will be accomplished through
this combination, and the Symbios acquisition will be accretive to
LSI Logic earnings in 1999.
"When the integration process is complete and the restructuring
plan is fully implemented, LSI Logic will be well positioned with
a range of products and services to serve high-volume major
customers in the networking, storage components, consumer,
telecommunications, computer and storage systems markets."
The company announced the following actions:
-- Reduction in the company's workforce by 1,200 jobs or 17 percent.
-- Reduction of existing wafer fabrication capacity by approximately
30 percent through the closure of an 11-year old factory in Tsukuba, Japan,
and the reduction of asset values at three other facilities.
-- Consolidation of test and assembly plants and a reduction of capacity
at the company's Fremont, California facilities.
-- Closure of a test facility in Colorado Springs and an assembly plant in
Ft. Collins, Colorado. Transference of Colorado production test functions to
offshore contractors.
-- Consolidation of LSI Logic and Symbios design centers, sales offices
and administrative functions to more efficiently serve customers and to
eliminate redundancies.
As a result of these actions, LSI Logic will take a total of $326
million in pre-tax charges in the third quarter, including $225
million for in-process R&D related to the Symbios acquisition.
The company will incur pre-tax non-recurring charges of $101
million, including $75 million for restructuring. The company will
also record goodwill of $243 million, resulting from the
acquisition of Symbios, Inc.
"Considering that we are presently completing the integration of
Symbios and implementing our restructuring plan, we see the
fourth quarter as a transition quarter," said Corrigan. "Heading
into the new year and beyond, the decisive actions we are taking
today are expected to result in greater profitability and a stronger
competitive position for LSI Logic in 1999."
Third Quarter Highlights
-- LSI Logic Corporation and Hyundai Electronics America announced the
completion of LSI Logic's strategic $760 million acquisition of Symbios, Inc.
The purchase increases LSI Logic's presence in global storage markets and
enhances the company's intellectual property offerings to major customers.
-- LSI Logic opened a sales, marketing and design facility in Beijing to
address the rapidly growing Chinese consumer electronics market. The company
also announced a joint engineering agreement with DSP Center of Beijing to
support original equipment manufacturers of consumer DVD players.
-- NEC chooses LSI Logic's advanced SCSI technology for its newest line of
high-performance EXPRESS 5800 servers. The company's SCSI I/O processor was
integrated into two NEC PC server models. The SCSI I/O processor transfers
data at speeds up to 80 Mbps on a wide SCSI bus, and upgrades an earlier SCSI
device, which was used in a previous version of the product line.
-- LSI Logic announced that it will supply Hitachi Home Electronics, U.K.
with a comprehensive channel-to-source digital terrestrial silicon solution
for Hitachi's newest line of digital set-top boxes and integrated TVs. The
highly integrated chipset makes it easy for digital TV designers to quickly
produce a performance-optimized digital terrestrial solution at a very
competitive cost.
-- Minolta selected LSI Logic's DCAM(TM)-101 single-chip image processor
as the hardware engine for its Dimage EX ZOOM 1500, the first of a new series
of high-performance digital cameras offering photorealistic images and high-
speed continuous capture.
-- LSI Logic introduced a new DVD (digital video disk) decoder chip,
enabling consumer electronic manufacturers to develop consumer DVD players
that accurately play back movie soundtracks encoded with DTS (digital theater
systems) Digital Surround.
Safe Harbor for forward looking statements: Statements in this
news release looking forward in time involve known and
unknown risks and uncertainties, which may cause the company's
actual results in future periods to be materially different from any
performance suggested in this release. Such factors may include,
but may not necessarily be limited to fluctuations in customer
demand, both in timing and volumes, and in currency exchange
rates. Also, the company's ability to have available amount of
production capacity in a timely manner can significantly impact the
company's financial performance. The timing of new technology
and product introductions and risk of early obsolescence are also
important factors. Further, the company operates in an industry
sector where securities values are highly volatile and may be
influenced by economic and other factors beyond the company's
control. In the context of forward-looking information provided in
this news release, reference is made to the discussion of risk
factors detailed in the company's filings with the Securities and
Exchange Commission during the past 12 months.
LSI Logic Corporation (NYSE: LSI), The System on a Chip
Company(R), is a leading supplier of custom high-performance
semiconductors with operations worldwide. The company enables
customers to build complete systems on a single chip with its
CoreWare(R) design program, thereby increasing performance,
lowering system costs and accelerating time to market. LSI Logic
develops application-optimized products in partnership with
trendsetting customers and operates leading edge, high-volume
manufacturing facilities to produce submicron chips. The
company maintains a high level of quality, as demonstrated by its
ISO 9000 certifications. LSI Logic is headquartered at 1551
McCarthy Blvd., Milpitas, California 95035, 408-433-8000,
www.lsilogic.com.
The LSI Logic logo design, CoreWare and The System on a Chip
Company are registered trademarks. All other brand and product
names may be trademarks of their respective companies.
Additional information about LSI Logic Corporation is available at
www.lsilogic.com. Full text copies of news releases are also
available by fax (800-457-4286). To request copies of annual
reports or other investor information, phone 1-800-574-4286.
LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1998 1997 1998 1997
Revenues $390,365 $326,847 $1,045,316 $967,239
Costs and expenses:
Cost of revenues 220,829 163,729 579,780 496,848
Research and development 77,733 57,746 206,421 166,198
Selling, general
and administrative 59,055 49,036 153,397 143,368
Total costs and expenses
before intangibles and
special charges 357,617 270,511 939,598 806,414
Income from operations before
intangibles and special charges32,748 56,336 105,718 160,825
Intangibles and special charges:
Acquired in-process research
and development 224,800 2,850 224,800 2,850
Amortization of intangibles 5,826 1,156 8,598 3,188
Restructuring of operations 75,400 -- 75,400 --
Income (loss) from operations (273,278) 52,330 (203,080) 154,787
Interest expense (5,917) -- (5,917) (1,497)
Interest income and other (20,394) 9,295 (7,237) 25,407
Income (loss) before
income taxes (299,589) 61,625 (216,234) 178,697
Provision (benefit) for
income taxes (16,763) 17,307 4,115 50,173
Net income (loss) ($282,826) $44,318 ($220,349) $128,524
Earnings (loss) per share:
Basic ($2.01) $0.31 ($1.57) $0.93
Diluted* ($2.01) $0.31 ($1.57) $0.90
Shares used in computing
per share amounts:
Basic 140,827 141,827 140,523 135,873
Diluted 140,827 144,506 140,523 144,543
* Diluted earnings per share are based on average common and
common equivalent shares outstanding. In computing diluted
earnings per share for the periods presented, net income is
increased for interest (net of tax effect) on the convertible
debentures ($0 and $1,279 for the nine month periods ended
September 30, 1998 and 1997, respectively) considered dilutive
common stock equivalents. For the three and nine month periods
ended September 30, 1998, common equivalent shares of 1,454
and 1,934, respectively, were excluded from the computation of
diluted shares as a result of their antidilutive effect on earnings per
share.
LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended September 30, 1998
LSI Logic Symbios *Consolidated
Revenues $300,972 $89,393 $390,365
Costs and expenses:
Cost of revenues 163,808 57,021 220,829
Research and development 64,444 13,289 77,733
Selling, general and administrative 48,388 10,667 59,055
Total costs and expenses before
intangibles and special charges 276,640 80,977 357,617
Income from operations before
intangibles and special charges 24,332 8,416 32,748
Intangibles and special charges:
Acquired in-process research
and development -- 224,800 224,800
Amortization of intangibles 1,386 4,440 5,826
Restructuring of operations 75,400 -- 75,400
Income (loss) from operations (52,454) (220,824) (273,278)
Interest expense -- (5,917) (5,917)
Interest income and other (20,241)** (153) (20,394)
Income (loss) before income taxes (72,695) (226,894) (299,589)
Provision (benefit) for income taxes (18,158) 1,395 (16,763)
Net income (loss) ($54,537) ($228,289) ($282,826)
Earnings (loss) per share:
Basic ($0.39) ($1.62) ($2.01)
Diluted ($0.39) ($1.62) ($2.01)
Shares used in computing per share amounts:
Basic 140,827
Diluted *** 140,827
* Symbios activity is for the period from August 7, 1998, and
reflects all acquisition related charges. ** Amount includes
non-restructuring special charges of $25,742.
*** For the period reported, common equivalent shares of 1,454
were excluded from the computation of diluted shares as a result
of their antidilutive effect on earnings per share.
LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
September 30, June 30, March 31, Dec. 31,
Assets 1998 1998 1998 1997
Current assets:
Cash and short-term investments$228.0 $409.2 $457.8 $490.9
Accounts receivable, net 284.0 231.5 228.3 210.1
Inventories 183.9 101.4 100.4 102.3
Prepaid expenses and
other current assets 95.6 82.1 65.0 67.2
Total current assets 791.5 824.2 851.5 870.5
Property and equipment, net 1,411.5 1,165.2 1,143.8 1,123.9
Goodwill 263.0 19.1 19.5 20.9
Other assets 108.7 123.6 117.4 111.6
Total assets $2,574.7 $2,132.1 $2,132.2 $2,126.9
Liabilities And Stockholders' Equity
Current liabilities:
Current liabilities 455.4 357.9 365.7 $393.6
Current portion of long-term
debt, capital lease obligations
and short-term borrowings 152.9 41.0 44.8 44.6
Total current liabilities 608.3 398.9 410.5 438.2
Long-term debt, capital lease
obligations and other
noncurrent liabilities 599.7 111.8 117.9 117.5
Total liabilities 1,208.0 510.7 528.4 555.7
Minority interest in
consolidated subsidiaries 4.6 4.9 5.3 5.2
Stockholders' equity:
Common stock 998.8 978.8 967.9 966.8
Retained earnings 391.3 674.1 642.1 611.6
Cumulative translation adjustment(28.0) (36.4) (11.5) (12.4)
Total stockholders' equity 1,362.1 1,616.5 1,598.5 1,566.0
Total liabilities and
stockholders' equity 2,574.7 2,132.1 2,132.2 2,126.9
/CONTACT: Investor Relations: Diana Matley, 408-433-4365, or
Media Relations: Kevin Brett, 408-433-7150, both of LSI Logic
Corporation/
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