LSI Logic Reports Record Q3 Revenues
MILPITAS, Calif., Oct. 21 /PRNewswire/ -- LSI Logic Corporation (NYSE: LSI) today reported 1999 third quarter
revenues of $540 million, a 36 percent increase over the $397 million posted in the third quarter of 1998.
The 1999 third quarter revenues were also 8 percent higher than the $501 million reported in the second quarter of this
year, marking the seventh quarter of sequential sales growth. All LSI Logic operating divisions reported sequential
revenue growth from the second to the third quarter.
Net income before amortization of goodwill and other special items (EBG) was $55 million or 35 cents a diluted share,
up from $31 million or 21 cents a diluted share in the second quarter. The third quarter EBG net income figure
represented an increase of 139 percent over the $23 million or 16 cents a diluted share in the third quarter of 1998.
Gross margin improved 250 basis points to 39.7 percent in the third quarter from the 37.2 percent in the second
quarter, and 480 basis points from the 34.9 percent in the first quarter of the year.
Operating expenses, excluding goodwill amortization, declined to 25.7 percent of total revenues in the second quarter
from 27.5 percent in the third quarter.
Cash and short-term investments grew more than $100 million to $457 million in the third quarter of the year from $345
million in the second quarter, and $166 million from $291 million in the first quarter.
"Our solid financial performance reflected across-the-board improvements in all of our operating units," said Wilfred J.
Corrigan, LSI Logic chairman and chief executive officer. "The company also benefited from increased factory
utilization in the third quarter, which contributed to an expansion of our gross margin. We are well positioned for
continued growth in the fourth quarter."
Corrigan said the Taiwan earthquake had negligible impact on LSI Logic's business.
"Customers are requiring their suppliers to demonstrate that their products can be produced in more than one geographic
location," said Corrigan. "That's exactly why LSI Logic maintains advanced manufacturing operations in Oregon,
Japan, Colorado and California as well as foundry relationships in East Asia." LSI Logic Global Market Overview
"LSI Logic's revenue of $1.50 billion in the first three quarters of this year has already nearly equaled the $1.51 billion
in annual revenue reported in 1998," said Doug Norby, LSI Logic executive vice president and chief financial officer.
"The results of the first three quarters of the year demonstrate that the company is exceeding its financial targets."
"The rapid growth of the Internet infrastructure is proving to be a magnet for our highly integrated system-on-a-chip
solutions," said John Daane, LSI Logic executive vice president of Communications, Computer and ASIC Products.
"New design wins for our system-on-a-chip solutions were strong in the third quarter, setting a record for projected
revenues per program."
"The third quarter reflected strength in both satellite set-top boxes and video games," said Elie Antoun, LSI Logic
executive vice president of Consumer Products. "Sales of our single-chip solution for DVD doubled in the third quarter
as the product is now shipping in volume to multiple customers."
"The Storage Systems division produced record revenues and bookings in the third quarter as the growth of the Internet
drove the demand for LSI Logic's storage systems solutions," said Tom Georgens, LSI Logic senior vice president for
Storage Systems.
Third Quarter 1999 Business and Technology Highlights
-- Dataquest named LSI Logic as the number one worldwide merchant market
share leader for both standard cells and total ASIC products in 1998. Aided in
part by the 1998 Symbios acquisition, LSI Logic's total ASIC revenues grew by
29 percent, the largest annual growth among market leaders.
- -- LSI Logic announced the addition of an embedded FPGA core into the
company's CoreWare(R) library for high-volume programmable applications. The
addition of embedded FPGA capability provides designers with both FPGA
flexibility and the ASIC/ASSP advantages of lower cost, reduced size, lower
power and higher performance.
-- LSI Logic announced a licensing strategy for the new ZSP(TM) digital
signal processor (DSP) architecture. LSI Logic's high-performance DSP is
available to customers either as an intellectual property core or as a
standard product.
-- LSI Logic Storage Systems, Inc. concluded a multi-year agreement with
the Hewlett-Packard Company to supply advanced fibre channel storage array
controller technology for integration into HP storage solutions.
-- LSI Logic and Hana Technologies Ltd. announced that Hana will license
LSI Logic's Enhanced Plastic Ball Grid Array (EPBGA) and Chip Scale Package
(CSP) technologies. The Hana endorsement is another step toward establishing
LSI Logic's packaging technology as an industry standard.
-- LSI Logic introduced the CW1008, an ARM7TDMI-based processor core,
which is available as part of LSI Logic's extensive CoreWare(R) library.
-- LSI Logic announced the AMCU silicon development platform, a fully
integrated microprocessor device specifically targeted at easing development
of embedded ARM7TDMI ASIC designs.
Safe Harbor for Forward Looking Statements: Statements in this news release include forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and
Exchange Act of 1934, as amended. The company's actual results in future periods may be materially different from
any performance suggested in this news release. Risks and uncertainties to which the company is subject may include,
but may not necessarily be limited to fluctuations in the timing and volumes of customer demand and the achievement of
revenue objectives by the company. Other risks and uncertainties include, but are not necessarily limited to the timing
and success of new product introductions. The extent to which the company's plans for future cost reductions are
realized also may impact its future performance. 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, 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 9002 certifications. LSI Logic is headquartered at 1551 McCarthy Boulevard,
Milpitas, CA 95035, 408-433-8000, www.lsilogic.com.
Editor's Notes:
1. The LSI Logic logo design, The System on a Chip Company and CoreWare
are registered trademarks of LSI Logic Corporation.
2. All other brand or product names may be trademarks or registered
trademarks of their respective companies.
3. Reader inquiries should be directed to 800-574-4286 within the US and
Canada, or 32-11-300351 within Europe, or 408-433-7700 for all other
countries. Ask for Dept. CPNR14.
LSI LOGIC CORPORATION
Pro Forma 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,
1999 1998 1999 1998
Revenues $539,959 $396,871 $1,504,588 $1,065,873
Costs and expenses:
Cost of revenues 325,785 225,400 942,074 592,792
Research and development 71,878 79,301 223,447 210,158
Selling, general and
administrative 66,881 61,146 191,153 158,747
Total costs and expenses 464,544 365,847 1,356,674 961,697
Income from operations 75,415 31,024 147,914 104,176
Interest expense (9,404) (6,028) (29,604) (6,203)
Interest income and other 7,006 5,503 11,201 18,983
Income before income taxes 73,017 30,499 129,511 116,956
Provision for income taxes 18,254 7,625 32,378 29,239
Pro forma net income $54,763 $22,874 $97,133 $87,717
Pro forma earnings per share:
Basic $0.37 $0.16 $0.67 $0.61
Diluted $0.35 $0.16 $0.64 $0.61
Shares used in computing
per share amounts:
Basic 146,767 143,159 145,514 142,852
Diluted 166,471 144,617 152,023 144,858
Pro forma net income is intended to present the Company's operating
results, excluding amortization of goodwill and special items, for the
three and nine month periods ended September 30, 1999, and 1998.
During the three month period ended September 30, 1999, the special item
was the reversal of a portion of restructuring reserves originally
established in the third quarter of 1998 due to changes in management's
estimate.
During the nine month period ended September 30, 1999, the special items
also included acquired in-process research and development related to the
acquisition of a non-public technology company, expenses related to
effecting a business combination with Seeq Technology, Inc. and the
cumulative effect of change in accounting principle in addition to the
reversal of the restructuring reserves.
During the three and the nine month periods ended September 30, 1998,
special items included acquired in-process research and development
related to the acquisition of Symbios, Inc. and restructuring charges.
Other special items primarily consisted of the impairment of stock
investments, write-offs of assets not relating to restructuring and
litigation settlement costs.
Note that the provision for income taxes for the pro forma statements was
calculated using the Company's normal 25% tax rate for the periods
presented.
A reconciliation from pro forma net income to the reported results is
presented on the following page.
The format presented above is not in accordance with Generally Accepted
Accounting Principles.
LSI LOGIC CORPORATION
Reconciliation of Pro Forma Net Income to Reported Results
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1999 1998 1999 1998
Pro forma net income $54,763 $22,874 $97,133 $87,717
Amortization of goodwill
and special items:
Amortization of goodwill (11,767) (7,338) (34,789) (10,110)
Acquired in-process
research and development -- (145,500) (4,600) (145,500)
Restructuring of operations
and other non-recurring
charges 7,934 (75,400) 2,063 (75,400)
Other special items -- (28,898) -- (28,898)
Tax benefit 994 22,232 5,958 22,956
Total amortization of
goodwill and special
items (2,839) (234,904) (31,368) (236,952)
Income / (loss) before
cumulative effect of
change in accounting
principle 51,924 (212,030) 65,765 (149,235)
Cumulative effect of change
in accounting principle -- -- (91,774) --
Net income / (loss) $51,924 ($212,030) ($26,009) ($149,235)
Basic earnings per share:
Pro forma net income $0.37 $0.16 $0.67 $0.61
Amortization of goodwill
and special items (0.02) (1.64) (0.22) (1.65)
Income / (loss) before
cumulative effect of change
in accounting principle 0.35 (1.48) 0.45 (1.04)
Cumulative effect of change
in accounting principle -- -- (0.63) --
Net income / (loss) $0.35 ($1.48) ($0.18) ($1.04)
Diluted earnings per share:
Pro forma net income $0.35 $0.16 $0.64 $0.61
Amortization of goodwill
and special items (0.02) (1.64) (0.21) (1.65)
Income / (loss) before
cumulative effect of change
in accounting principle 0.33 (1.48) 0.43 (1.04)
Cumulative effect of change
in accounting principle -- -- (0.60) --
Net income / (loss) $0.33 ($1.48) ($0.17) ($1.04)
Shares used in computing
per share amounts:
Basic 146,767 143,159 145,514 142,852
Diluted 166,471 143,159* 152,023 142,852*
*The difference between diluted shares for purposes of computing diluted
earnings per share and pro forma earnings per share relates to common
equivalent shares of 1,458 and 2,006 for the three and nine month periods
ended September 30, 1998, respectively, which are excluded from diluted
earnings per share because of their antidilutive effect.Common equivalents
in the either period did not significantly impact earnings per share.
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,
1999 1998 1999 1998
Revenues $539,959 $396,871 $1,504,588 $1,065,873
Costs and expenses:
Cost of revenues 325,785 225,400 942,074 592,792
Research and development 71,878 79,301 223,447 210,158
Selling, general and
administrative 66,881 61,146 191,153 158,747
Acquired in-process
research and development -- 145,500 4,600 145,500
Restructuring of operations
and other non-recurring
charges (7,934) 75,400 (2,063) 75,400
Amortization of Intangibles 11,767 7,338 34,789 10,110
Total costs and expenses 468,377 594,085 1,394,000 1,192,707
Income / (loss) from
operations 71,582 (197,214) 110,588 (126,834)
Interest expense (9,404) (6,028) (29,604) (6,203)
Interest income and other 7,006 (23,395) 11,201 (9,915)
Income / (loss) before
income taxes and
cumulative effect of
change in accounting
principle 69,184 (226,637) 92,185 (142,952)
Provision for income taxes 17,260 (14,607) 26,420 6,283
Income / (loss) before
cumulative effect of change
in accounting principle 51,924 (212,030) 65,765 (149,235)
Cumulative effect of change
in accounting principle -- -- (91,774) --
Net income / (loss) $51,924 ($212,030) ($26,009) ($149,235)
Basic earnings per share:
Income / (loss) before
cumulative effect of
change in accounting
principle $0.35 ($1.48) $0.45 ($1.04)
Cumulative effect of change
in accounting principle -- -- (0.63) --
Net income / (loss) $0.35 ($1.48) ($0.18) ($1.04)
Diluted earnings per share*:
Income / (loss) before
cumulative effect of change
in accounting principle $0.33 ($1.48) $0.43 ($1.04)
Cumulative effect of change
in accounting principle -- -- (0.60) --
Net income / (loss) $0.33 ($1.48) ($0.17) ($1.04)
Shares used in computing
per share amounts:
Basic 146,767 143,159 145,514 142,852
Diluted 166,471 143,159 152,023 142,852
*Diluted earnings per share are based on average common and common
equivalent shares outstanding. In computing diluted earnings per share
for the three month period ended September 30, 1999, net income is
increased by $2,749 for interest, net of taxes, on the convertible
debentures considered dilutive common stock equivalents.
For the nine month period ended September 30, 1999, common equivalent
shares of 8,018 and interest expense of $5,523, net of taxes, associated
with the convertible debentures were excluded from the computation of
diluted earnings per share as a result of their antidilutive effect.
No convertible debentures were outstanding in 1998.
LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
Sept. 30, Dec. 31,
1999 1998
Assets
Current Assets:
Cash and short-term investments $457.0 $291.5
Accounts receivable, net 369.8 249.1
Inventories 217.5 181.4
Prepaid expenses and other current assets 107.7 115.0
Total current assets 1,152.0 837.0
Property and equipment, net 1,297.2 1,486.2
Goodwill and other intangibles 305.4 332.8
Other assets 220.7 167.8
Total assets $2,975.3 $2,823.8
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other current
liabilities $447.6 $410.5
Current portion of long-term debt,
capital lease obligations and
short-term borrowings 84.0 187.8
Total current liabilities 531.6 598.3
Long-term debt and capital lease
obligations and other long-term liabilities 811.1 695.8
Total liabilities 1,342.7 1,294.1
Minority interest in subsidiaries 6.0 5.2
Stockholders' equity:
Common stock 1,185.4 1,136.6
Retained earnings 342.4 368.4
Accumulated other comprehensive income 98.8 19.5
Total stockholders' equity 1,626.6 1,524.5
Total liabilities and
stockholders' equity $2,975.3 $2,823.8
/CONTACT: Diana Matley, Investor Relations, 408-433-4365, or Kevin Brett, Media Relations, 408-433-7150, both
of LSI Logic Corporation/
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