LSI Logic Reports Record 1998 and Fourth Quarter Revenues
MILPITAS, Calif., Jan. 28 /PRNewswire/ -- The complete news release on LSI Logic's results follows this summary:
Q4 1998
Revenues $445M
Net Income $13M
Per share amounts:
Diluted, before special item*
and $10 million goodwill amortization $0.05
Diluted $0.09
* EPS before special item and after goodwill was $0.00. First Call consensus estimate was a loss of $0.02.
* Fourth quarter revenues up 14 percent over Q3; up 38 percent over Q4 97.
* Symbios acquisition integration completed.
* Expense reduction goals met in the fourth quarter.
* Gresham, Oregon fab started production.
* One-time $17 million gain from sale of investment in Ambit Design Systems, Inc.
LSI Logic Posts 15 percent Revenue Growth in 1998
LSI Logic Corporation (NYSE: LSI) today reported 1998 record revenues of $1.49 billion, a 15 percent increase over the
$1.29 billion reported in 1997.
The company also recorded $445 million in revenues for the 1998 fourth quarter, a 38 percent increase over the $323 million
reported in the fourth quarter of 1997. The 1998 fourth quarter figure also represented sequential growth of 14 percent over
the $390 million reported in the third quarter.
"LSI Logic emerged from 1998 with considerable momentum and with the growing belief that the long-awaited recovery of
the semiconductor industry is about to begin," said Wilfred J. Corrigan, LSI Logic chairman and chief executive officer. "In
the second half of the year we completed our integration of Symbios, Inc., initiated a comprehensive restructuring plan, and
commenced manufacturing at our state-of-the-art Gresham facility. We are well positioned for an industry upturn."
The company recorded a $207 million net loss or a $1.47 a diluted share loss for 1998, including $326 million in special
charges taken in the third quarter, a $17 million special item (one-time gain) reported in the fourth quarter, and $18 million
of goodwill amortization for the year. Net income before special items and goodwill amortization for 1998 was $97 million
or 68 cents per diluted share.
Fourth quarter 1998 net income was $13 million or 9 cents a diluted share, including a $17 million special item associated
with the sale of an equity investment in privately-held Ambit Design Systems, Inc., and $10 million of goodwill
amortization. Fourth quarter net income before the one-time gain and goodwill amortization was $8 million or 5 cents a
diluted share. LSI Logic Business Highlights
The doubling of Internet usage every 100 days* and the rise of e-commerce is reflected in LSI Logic's ongoing business
strategy. Each of LSI Logic's business units is contributing to the expansion of the Internet infrastructure. Networking and
telecom products are used as Internet building blocks. Consumer products will serve as Internet peripherals. Storage and
computer products store Internet content. (*SIA estimate)
"Our overall business strategy is Internet based, as each of our targeted vertical markets is participating in this global trend,"
said John P. Daane, LSI Logic executive vice president of Communications, Computer and ASIC Products. "The
worldwide acceptance of the Internet confirms our decision to acquire Symbios and to assume a leadership position in the
growing storage market."
Daane also noted that LSI Logic's Computer, Telecommunications-Wireless, Networking, and Storage Components
Divisions all achieved sequential bookings increases in the fourth quarter.
"LSI Logic's Storage Systems Division achieved record 1998 and fourth quarter revenues," said Tom Georgens, LSI Logic
senior vice president and general manager of Storage Systems. "We added to our OEM customer base during the past three
months and our MetaStor storage systems products recorded nearly 50 percent year-over-year growth."
The fourth quarter, which is historically a strong quarter for LSI Logic's Consumer Products Division, performed better
than planned, particularly in video games and DVD applications.
"DVD began realizing its potential during the past holiday season and LSI Logic is participating in this growth in a
meaningful way with its system-on-a-chip solution for this high-volume market," said Elias J. Antoun, LSI Logic executive
vice president for Consumer Products. "We began our DVD shipments into China during the fourth quarter and our
investment in digital camera chips is paying off with new design-wins with key players in this growing market."
"We have improved the overall competitive position of LSI Logic," said Corrigan. "We became the worldwide ASIC
merchant market leader and through the Symbios acquisition a major player in the Internet-driven storage market. We began
serving our system-on-a-chip customers through our Gresham manufacturing facility. Through these steps and others, we
are ready to take advantage of the growth opportunities associated with the anticipated upturn in the global semiconductor
industry." 1998 Technology and Product Highlights
* Introduction of LSI Logic's G12(TM) process technology with a drawn gate length of 0.18-micron and effective gate
length of 0.13-micron, enabling the company to integrate multiple systems on a single chip. G12 offers 26 million usable
logic gates to create totally new classes of products on one silicon chip.
* Development of a programmable CDMA baseband processor architecture that performs the key communications functions
for digital wireless handsets.
* Provision of a single-chip decoding engine for Sony Corporation's second-generation DVD video players. The LSI Logic
DVD decoding engine integrates more than two million transistors and 45 memories, combining the functionality of nine
chips into a system-on-a-chip product.
* Selection of LSI Logic's DCAM-101 single-chip solution by CASIO Computer Co., Ltd. for its QV-5000 and 7000 series
digital cameras, which were introduced to the Japanese market last spring.
* The licensing to LSI Logic of Siemens' CARMEL(TM) DSP new open digital signal processor (DSP), providing LSI
Logic customers with an open, standard architecture for wireless communications systems, high speed xDSL modems, and
multimedia applications.
* The announcement of the industry's first single-chip PCI-SCSI RAID I/O processor, enabling OEMs to reduce costs by
building very efficient RAID adapter boards or to integrate RAID directly onto motherboards.
* The immediate availability of LSI Logic's HyperPHY(TM) core, the first modular high-speed backplane transceiver in
CMOS. The HyperPHY core is the first to allow 32 independent high-speed channel interfaces with custom logic in a single
CMOS ASIC.
* The provision of LSI Logic's second generation, single-chip PC DVD decoder with superior quality video and audio
playback for Dell Computer's Inspiron notebook PCs for home and small business customers.
* Joint announcement with the British Broadcasting Corporation of the immediate availability of the L64780, a single-chip
digital terrestrial television (DTT) demodulator. The LSI Logic chip will be used by consumer manufacturers for digital
terrestrial set-top boxes and digital televisions using existing TV antennas.
* The opening of a LSI Logic 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.
* The selection by Minolta of LSI Logic's DCAMO 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.
* The introduction of the newest generation of LSI Logic's GigaBlaze(R) gigabit per second CMOS transceiver cores. The
new GigaBlaze, built in LSI Logic's G11(TM) O.18-micron (Leff) CMOS process is easily integrated into system-level
ASICs to offer a new generation of low-power, high-speed serial interfaces.
* The selection of LSI Logic's L64020 DVD system-on-a-chip for a new family of DVD player systems by Sichuan New
Tech Digital Equipment Corp. (NTC) of Chengdu, China.
* The release of the TinyRISC(TM) EZ4102 (EasyMACRO) microprocessor, pioneered by LSI Logic. EasyMACRO is a
CPU subsystem that incorporates a group of popular logic building blocks, including the world's smallest microprocessor
core.
* The qualification of the new, expanded PTFE-based organic laminate material for flip-chip packages capable of meeting
the demanding requirements of system-on-a-chip complex designs. Accounting Notes:
1. The 1998 results include a $225 million in-process research and development charge previously reported in connection
with the company's acquisition of Symbios, Inc. during the third quarter. Comments since then made by the Securities and
Exchange Commission staff on calculation procedures for in-process R&D charges indicate that the company's 1998
reported results may have to be restated to reflect a reduction of this amount and a corresponding increase in the amount of
goodwill to be amortized in future periods. Due to the SEC's announced interest in how acquisition- related in-process
research and development write-offs are calculated, the company anticipates its future reports filed with the SEC may be
subject to increased attention.
2. The Accounting Standards Executive Committee has released Statement of Position (SOP) No. 98-5, "Reporting on the
Costs of Start-up Activities," requiring companies to expense all costs incurred or unamortized in connection with start-up
activities for fiscal years beginning after December 15, 1998. The company will expense the unamortized preproduction
balance of $92 million on an after tax basis during first quarter 1999. This one-time charge will be presented as a cumulative
effect of a change in accounting principle in accordance with SOP 98-5.
Safe Harbor for Forward-Looking Statements: Statements made 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. These statements involve known and unknown risks and uncertainties. The company's
actual results in future periods may be materially different from any performance suggested by this 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, currency exchange rates and the availability and utilization of manufacturing capacity by
the company. Other risks and uncertainties include, but are not necessarily limited to the timing and success of new product
introductions and unexpected obsolescence of existing products. The extent to which the company's plans for future cost
reductions are realized also may impact its future financial 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
addition, the actual results reported here may be restated on the advice of independent accountants to the company in
response to recent comments by the SEC regarding calculation of acquisition-related in-process research and development
charges as described in the accounting notes contained in this news release. 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 9000 certifications. LSI Logic is headquartered at 1551 McCarthy Boulevard, Milpitas, CA 95035,
408-433-8000, www.lsilogic.com.
NOTE: 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. To request copies of annual reports
or other investor information, phone 800-574-4286.
LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
Revenues $445,385 $323,036 $1,490,701 $1,290,275
Costs and expenses:
Cost of revenues 287,498 178,305 867,278 675,153
Research and development 79,620 60,021 286,041 226,219
Selling, general and
administrative 66,169 47,312 219,566 190,680
Total costs and expenses
before goodwill, special
charges, net interest
and other 433,287 285,638 1,372,885 1,092,052
Net interest (expense)/income
and other (1,780) 8,625 10,808 32,535
Income from operations before
goodwill and special items 10,318 46,023 128,624 230,758
Goodwill and special
income/(expense), net * 7,145 (1,284) (327,395) (7,322)
Income/(loss) before income
taxes and cumulative effect
of change in accounting
principle 17,463 44,739 (198,771) 223,436
Provision for income taxes 4,330 12,575 8,445 62,748
Income/(loss) before
cumulative effect of change
in accounting principle 13,133 32,164 (207,216) 160,688
Cumulative effect of change
in accounting principle -- (1,440) -- (1,440)
Net income/(loss) $13,133 $30,724 ($207,216) $159,248
Earnings (loss) per share:
Basic $0.09 $0.22 ($1.47) $1.15
Diluted ** $0.09 $0.22 ($1.47) $1.11
Shares used in computing per
share amounts:
Basic 141,279 140,752 140,799 138,576
Diluted *** 141,978 142,526 140,799 144,027
Three Months Ended Year Ended
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1998 1997 1998 1997
* Goodwill and special items:
Acquired in-process research
and development -- -- (224,800) (2,850)
Amortization of goodwill (9,526) (1,284) (18,124) (4,472)
Restructuring of operations -- -- (75,400) --
Other special
income/(expense) 16,671 -- (9,071) --
Total goodwill and
special income/(expense) 7,145 (1,284) (327,395) (7,322)
** 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 year ended
December 31, 1998 and 1997, respectively) considered dilutive common stock
equivalents.
*** For the year ended December 31, 1998, common equivalent shares of 965
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 Sheet
(In millions)
(Unaudited)
Dec. 31, Dec. 31,
1998 1997
Assets
Current assets:
Cash and short-term investments $281.3 $490.9
Accounts receivable, net 245.5 210.1
Inventories 178.1 102.3
Prepaid expenses and other current assets 114.6 67.2
Total current assets 819.5 870.5
Property and equipment, net 1,480.1 1,123.9
Goodwill 256.3 20.9
Other assets 169.4 111.6
Total assets $2,725.3 $2,126.9
Liabilities And Stockholders' Equity
Current liabilities:
Current liabilities $455.7 $393.6
Current portion of long-term debt,
capital lease obligations and
short-term borrowings 186.2 44.6
Total current liabilities 641.9 438.2
Long-term debt, capital lease obligations
and other noncurrent liabilities 643.6 117.5
Total liabilities 1,285.5 555.7
Minority interest in consolidated subsidiaries 5.2 5.2
Stockholders' equity:
Common stock 1,010.7 966.8
Retained earnings 404.4 611.6
Cumulative translation adjustment 19.5 (12.4)
Total stockholders' equity 1,434.6 1,566.0
Total liabilities and stockholders' equity $2,725.3 $2,126.9
/CONTACT: investors, Diana Matley, 408-433-4365, or media, Kevin Brett, 408-433-7150, both of LSI Logic
Corporation/
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