** Excludes acquisition-related amortization, restructuring and other special items, and stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) "Share-Based Payment" on January 1, 2006, using the modified prospective transition method.
Third quarter 2006 GAAP* net income was $44 million or 11 cents per diluted share, compared to third quarter 2005 GAAP net loss of $73 million or 19 cents loss per diluted share. Third quarter 2006 GAAP results compare to second quarter 2006 GAAP net income of $54 million or 13 cents per diluted share. Third quarter GAAP net income included $11 million of stock-based compensation expense and a net charge of $10 million from special items, acquisition-related amortization, restructuring and their related tax effect.
Third quarter 2006 non-GAAP** net income was $65 million or 16 cents per diluted share, an increase of 43% compared to third quarter 2005 non-GAAP net income of $45 million or 11 cents per diluted share. Second quarter non-GAAP 2006 net income was $57 million or 14 cents per diluted share.
Cash and short-term investments grew 6% sequentially to $1.3 billion, from $1.2 billion in the second quarter and up 50% from the year-ago period.
"Revenues increased modestly during the quarter, with strong growth in storage semiconductors partially offset by expected lower demand for our portable media player products," said Abhi Talwalkar, LSI Logic president and chief executive officer. "Total storage revenues were 17% higher than the year-ago period, fueled in part by increasing demand for SAS-enabled storage solutions. We further strengthened investments in our storage business, entering into a definitive agreement to acquire StoreAge Networking Technologies, a privately held maker of storage management applications software."
"Higher gross margins and improved operating performance contributed to solid third quarter results, with net income significantly exceeding guidance," said Bryon Look, LSI Logic chief financial officer. "SG&A expenditures as compared to second quarter 2006 declined on both a percentage and an absolute basis. Our balance sheet also strengthened, with a $68 million increase in cash and short-term investments."
LSI Logic Fourth Quarter 2006 Business Outlook
GAAP* Special Items Non-GAAP**
Revenue $500 million to $500 million to
$525 million $525 million
Gross Margin 43.0 - 44.0% Approximately 43.5 - 44.5%
$2 million
Operating
Expenses $177 million to Approximately $155 million to
$181 million $22 million $159 million
Net Other Income $5 million $5 million
Tax Provision Approximately Approximately Approximately
$3 million ($4 million) $7 million
Net Income Per
Share $0.10 to $0.13 Approximately $0.15 to $0.18
($0.05)
Diluted Share Count 409 million 432 million
Capital spending is projected to be around $8 million in the fourth quarter and approximately $45 million in total for 2006.
Fourth quarter depreciation and software amortization is expected to be approximately $13 million.
* Generally Accepted Accounting Principles.
** Excludes special items defined as acquisition-related amortization, restructuring and other special items, and approximately $12.1 million in stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) "Share-Based Payment" on January 1, 2006, using the modified prospective transition method.
NOTE: The Company's financial guidance will be limited to the comments made on today's public conference call and contained in the Fourth Quarter 2006 Business Outlook section of this news release.
LSI Logic Conference Call Information
LSI Logic will hold a conference call today at 2 pm PDT to discuss third quarter financial results and the fourth quarter 2006 business outlook. The number is 1-303-262-2191. Internet users can access the conference call at http://www.lsi.com/investors . A replay of the call will be available today at approximately 5 pm PDT and will be available for 48 hours. The replay access numbers are 1-800-405-2236 within the U.S. and 1-303-590-3000 for all other locations, passcode 11073169#.
Safe Harbor for Forward Looking Statements: This news release contains forward-looking statements, which include the following: projected revenues for the fourth quarter of 2006, projected GAAP net income for the fourth quarter of 2006, projected non-GAAP net income for the fourth quarter of 2006, projected capital spending in the fourth quarter of 2006 and for the year and expected fourth quarter of 2006 depreciation and software amortization. Forward-looking statements also include projections of gross margins, operating expenses, net other income, tax provisions, net income per share and diluted share count. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made and 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 Logic's actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: fluctuations in the timing and volumes of customer demand; the company's inability to achieve revenue objectives; the company's inability to meet financial targets and failure to execute on its financial plan; the company's inability to generate positive operating cash flow or control operating expenses; and the unavailability of appropriate levels of manufacturing capacity. For additional information, readers are referred to the documents filed by LSI Logic with the SEC, and specifically the risk factors set forth in the company's most recent reports on Form 10-K, 10-Q and 8-K. LSI Logic is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document.
About LSI Logic
LSI Logic Corporation is a leading provider of silicon-to-systems solutions that are used at the core of products that create, store and consume digital information. LSI offers a broad portfolio of capabilities including custom and standard product ICs, host bus and RAID adapters, storage area network solutions and software applications. LSI products enable leading technology companies in the Storage and Consumer markets to deliver some of the most advanced and well-known electronic systems in the market today. More information is available at
www.lsi.com .
