LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
October 1, July 2, October 2,
2006 2006 2005
Revenues $492,978 $489,635 $481,716
Cost of revenues 276,725 277,970 271,511
Stock-based compensation expense* 1,719 2,458 186
Total cost of revenues 278,444 280,428 271,697
Gross profit 214,534 209,207 210,019
Research and development 98,625 95,719 100,524
Stock-based compensation expense* 3,908 4,643 503
Total research and development 102,533 100,362 101,027
Selling, general and
administrative 54,878 58,439 58,342
Stock-based compensation expense* 5,398 6,197 624
Total selling, general and
administrative 60,276 64,636 58,966
Restructuring of operations and
other items, net 2,614 (21,648) 99,986
Amortization of acquisition
related intangibles 6,436 10,801 15,693
Income/(loss) from operations 42,675 55,056 (65,653)
Interest expense (6,556) (6,428) (6,058)
Interest income and other, net 13,066 10,319 4,567
Income/(loss) before income taxes 49,185 58,947 (67,144)
Provision for income taxes 5,575 5,100 6,250
Net income/(loss) $43,610 $53,847 $(73,394)
Income/(loss) per share:
Basic $0.11 $0.14 $(0.19)
Diluted $0.11 $0.13 $(0.19)
Shares used in computing per share
amounts:
Basic 399,613 397,790 391,017
Diluted 403,715 405,613 391,017
October 1, October 2,
2006 2005
Revenues $1,458,497 $1,413,015
Cost of revenues 824,565 800,782
Stock-based compensation expense* 5,702 511
Total cost of revenues 830,267 801,293
Gross profit 628,230 611,722
Research and development 292,096 299,420
Stock-based compensation expense* 13,073 1,908
Total research and development 305,169 301,328
Selling, general and
administrative 176,411 176,354
Stock-based compensation expense* 17,379 1,521
Total selling, general and
administrative 193,790 177,875
Restructuring of operations and
other items, net (13,384) 108,675
Amortization of acquisition
related intangibles 28,453 50,919
Income/(loss) from operations 114,202 (27,075)
Interest expense (19,314) (19,088)
Interest income and other, net 32,912 21,500
Income/(loss) before income taxes 127,800 (24,663)
Provision for income taxes 17,175 18,750
Net income/(loss) $110,625 $(43,413)
Income/(loss) per share:
Basic $0.28 $(0.11)
Diluted $0.27 $(0.11)
Shares used in computing per share
amounts:
Basic 397,408 389,247
Diluted 403,779 389,247
*The Company adopted the provisions of SFAS No. 123( R ) "Share-Based
Payment" on January 1, 2006, using the modified prospective transition
method.
A reconciliation between net income on a GAAP basis and non-GAAP net
income including items a)-i) is provided in the following table:
Reconciliation of GAAP to Three Months Ended Nine Months Ended
Non-GAAP net income: Oct. 1, July 2, Oct. 2, Oct. 1, Oct. 2,
2006 2006 2005 2006 2005
GAAP net income/(loss) $43,610 $53,847 $(73,394) $110,625 $(43,413)
Special items:
a) Stock-based
compensation expense -
Cost of revenues 1,719 2,458 186 5,702 511
b) Stock-based
compensation expense -
R&D 3,908 4,643 503 13,073 1,908
c) Stock-based
compensation expense -
SG&A 5,398 6,197 624 17,379 1,521
d) Amortization of
acquisition related
intangibles 6,436 10,801 15,693 28,453 50,919
e) Restructuring of
operations and other
items, net 2,614 (21,648) 99,986 (13,384) 108,675
f) Gain on sale of
certain equity
securities (787) - - (2,216) (2,358)
g) Gain on repurchase of
convertible Subordinated
Notes - - - - (4,123)
h) Loss on impairment on
certain equity securities - - 1,487 - 1,487
i) Income tax effect 1,738 453 - 1,421 -
Total special
items 21,026 2,904 118,479 50,428 158,540
Non-GAAP net income $64,636 $56,751 $45,085 $161,053 $115,127
Non-GAAP income per share:
Basic $0.16 $0.14 $0.12 $0.41 $0.30
Diluted** $0.16 $0.14 $0.11 $0.40 $0.29
Shares used in computing
Non-GAAP per share
amounts:
Basic 399,613 397,790 391,017 397,408 389,247
Diluted 431,713 435,312 402,664 406,791 395,406
** In computing diluted earnings per share for the three month period
ended October 1, 2006 and July 2, 2006, net income was increased by
$3,500 for interest, net of taxes, on the $350 million convertible notes
considered dilutive common stock equivalents, respectively.
Reconciliation of shares used
in the calculation of GAAP to
Non-GAAP diluted net income
per share: Three Months Ended Nine Months Ended
Oct. 1, July 2, Oct. 2, Oct. 1, Oct. 2,
2006 2006 2005 2006 2005
Diluted shares used in per-
share calculation - GAAP 403,715 405,613 391,017 403,779 389,247
Effect of SFAS (R) 1,918 3,619 - 3,012 -
Effect of dilutive common
stock equivalents - - 11,647 - 6,159
Effect of $350 million
convertible notes considered
dilutive** 26,080 26,080 - - -
Diluted shares used in per-
share calculation - Non-GAAP 431,713 435,312 402,664 406,791 395,406
LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
October 1, July 2, December 31,
Assets 2006 2006 2005
Current assets:
Cash and short-term
investments $1,268.1 $1,200.6 $938.9
Accounts receivable, net 320.3 310.8 323.3
Inventories 183.7 173.8 194.8
Prepaid expenses and other
current assets 64.0 85.6 163.1
Total current assets 1,836.1 1,770.8 1,620.1
Property and equipment, net 83.3 94.1 98.3
Goodwill and other intangibles 941.4 949.1 974.5
Other assets 118.1 108.0 103.2
Total assets $2,978.9 $2,922.0 $2,796.1
Liabilities and Stockholders' Equity
Current liabilities:
Other current liabilities $470.2 $482.9 $468.9
Current portion of
long-term debt 272.0 272.6 273.9
Total current liabilities 742.2 755.5 742.8
Long-term debt 350.0 350.0 350.0
Tax related liabilities
and other 82.5 73.5 75.1
Total liabilities 1,174.7 1,179.0 1,167.9
Minority interest in
subsidiary 0.2 0.2 0.2
Stockholders' equity:
Common stock and
additional paid-in
capital 3,070.2 3,055.4 3,000.0
Accumulated deficit (1,279.3) (1,322.9) (1,389.9)
Accumulated other
comprehensive income 13.1 10.3 17.9
Total stockholders'
equity 1,804.0 1,742.8 1,628.0
Total liabilities and
stockholders' equity $2,978.9 $2,922.0 $2,796.1
LSI LOGIC CORPORATION
Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)
Three Months Ended Nine Months Ended
Oct. 1, July 2, Oct. 2, Oct. 1, Oct. 2,
2006 2006 2005 2006 2005
Operating Activities:
Net income/(loss) $43,610 $53,847 $(73,394) $110,625 $(43,413)
Adjustments:
Depreciation
& amortization * 17,527 22,831 38,175 65,693 120,468
Stock-based
compensation expense 11,025 13,298 1,313 36,154 3,940
Non-cash restructuring
and other items 173 209 85,311 (2,576) 86,661
Gain on sale of
intellectual property - (15,000) - (15,000) -
Gain on sale of
Gresham manufacturing
facility and
associated
intellectual
property - (12,553) - (12,553) -
Write-off of intangible
assets acquired in a
purchase business
combination - 3,325 - 3,325 -
Non-cash foreign
exchange
(gain)/loss (941) 1,057 - (472) -
(Gain)/loss on sale
of equity securities/
loss on write-down (787) 218 1,487 (1,998) (824)
Gain on repurchase of
Convertible Subordinated
Notes - - - - (4,123)
(Gain)/Loss on sales
of property and
equipment (240) (5) (88) (245) (91)
Changes in deferred
tax assets and
liabilities 4 23 58 24 112
Changes in assets and
liabilities, net of
assets acquired and
liabilities assumed
in business
combinations:
Accounts
receivable (9,460) (44,366) (13,615) 3,063 (26,468)
Inventories (10,148) 8,613 (3,393) 7,158 29,767
Prepaid expenses
and other assets (7,403) (15,381) 6,070 (13,380) (2,090)
Accounts payable (9,904) 31,751 8,496 (1,161) 6,118
Accrued and other
liabilities 13,303 1,575 27,120 17,104 26,627
Net cash provided
by operating
activities 46,759 49,442 77,540 195,761 196,684
Investing activities:
Purchases of debt
securities
available-
for-sale (116,196) (216,019) (134,708) (498,408)(397,240)
Proceeds from
maturities and
sales of debt
securities available-
for-sale 96,494 97,747 82,045 302,407 365,228
Purchases of equity
securities (3,000) (5,000) - (8,150) -
Proceeds from
sales of equity
securities 2,511 2,026 - 6,092 3,871
Purchases of
property, equipment
and software (15,587) (12,679) (15,906) (44,244) (35,326)
Proceeds from sale
of property and
equipment 49 40 184 89 3,399
Proceeds from sale
of intellectual
property 7,670 15,000 - 22,670 -
Proceeds from sale
of Fort Collins
facility - 10,998 - 10,998 -
Proceeds from sale
of Colorado Springs
facility - 7,029 - 7,029 -
Proceeds from sale
of Gresham
manufacturing
facility 15,000 81,426 - 96,426 -
Proceeds from sale
of Gresham
manufacturing
facility associated
intellectual property - 5,100 - 5,100 -
Adjustment to
goodwill acquired in
a prior year for
resolution of a
pre-acquisition
income tax
contingency 1,373 - - 1,373 7,662
Net cash used in
investing
activities (11,686) (14,332) (68,385) (98,618) (52,406)
Financing activities:
Issuance of
common stock 3,868 20,149 7,247 36,005 20,073
Repurchase of
Convertible
Subordinated Notes - - - - (148,126)
Repayment of
debt obligations - - - - (129)
Net cash provided by/
(used in) financing
activities 3,868 20,149 7,247 36,005 (128,182)
Effect of exchange
rate changes on
cash and cash
equivalents 15 365 (2,204) 613 (9,165)
Increase in cash
and cash
equivalents 38,956 55,624 14,198 133,761 6,931
Cash and cash
equivalents at
beginning of
period 359,454 303,830 211,456 264,649 218,723
Cash and cash
equivalents at
end of period $398,410 $359,454 $225,654 $398,410 $225,654
* Depreciation of fixed assets, amortization of intangible assets,
software, capitalized intellectual property, debt issuance costs
and deferred gains on cancelled interest rate swaps.
LSI LOGIC CORPORATION
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)
Three Months Ended
October 1, July 2, October 2,
2006 2006 2005
Semiconductor revenues $313.3 $307.4 $311.7
Storage Systems revenues $179.7 $182.2 $170.0
Total revenues $493.0 $489.6 $481.7
Percentage change in revenues-
qtr./qtr. (a) 0.7% 2.9% 0.1%
Percentage change in revenues-
yr./yr. (b) 2.3% 1.7% 26.7%
Days sales outstanding 58 57 56
Days of inventory 59 56 63
Current ratio 2.5 2.3 3.5
Quick ratio 2.1 2.0 2.7
Gross margin as a percentage of
revenues 43.5% 42.7% 43.6%
R&D as a percentage of revenues 20.8% 20.5% 20.9%
SG&A as a percentage of revenues 12.2% 13.2% 12.1%
Employees (c) 3,884 3,867 4,415
Revenues per employee (in
thousands) (d) $507.7 $506.5 $436.4
Selected Cash Flow information
Purchases of property and
equipment (e) $6.0 $7.6 $14.8
Depreciation / amortization (f) $10.5 $10.8 $20.6
(a) Represents sequential quarter growth in revenues.
(b) Represents growth in revenues in the quarter presented as compared to
the same quarter of the previous year.
(c) Actual number of employees at the end of each period presented.
(d) Revenue per employee is calculated by annualizing revenue for each
quarter presented and dividing it by the number of employees.
(e) Excludes purchases of software.
(f) Represents depreciation of fixed assets and amortization of software.
Editor's Notes:
1. All LSI Logic news releases (financial, acquisitions, manufacturing,
products, technology etc.) are issued exclusively by PR Newswire and
are immediately thereafter posted on the company's external website,
http://www.lsi.com .
2. The LSI Logic logo design is a registered trademark of LSI Logic
Corporation.
3. All other brand or product names may be trademarks or registered
trademarks of their respective companies.
Web site: http://www.lsilogic.com/
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