Strong Year-Over-Year Revenue Growth in Storage Semiconductors and Systems
Fourth quarter 2006 GAAP* net income was $59 million or 14 cents per diluted share, compared to fourth quarter 2005 GAAP net income of $38 million or 9 cents per diluted share. Fourth quarter 2006 GAAP results compare to third quarter 2006 GAAP net income of $44 million or 11 cents per diluted share. Fourth quarter 2006 GAAP net income included $10.9 million of stock- based compensation expense and a net charge of $5.2 million from special items, acquisition-related amortization, restructuring and their related tax effect.
Fourth quarter 2006 non-GAAP** net income was $75 million or 18 cents per diluted share, an increase of 47% compared to fourth quarter 2005 non-GAAP net income of $51 million or 13 cents per diluted share. Third quarter 2006 non-GAAP net income was $65 million or 16 cents per diluted share.
Cash and short-term investments totaled $1.01 billion at quarter end, with $272 million in repayment of convertible notes completed during the quarter.
"Our solid fourth quarter performance was fueled by the seasonally-strong demand for storage products, with 22% sequential growth and record quarterly revenue in our Engenio systems business," said Abhi Talwalkar, LSI Logic president and chief executive officer. "For the full year, storage semiconductor and system revenues grew at healthy, double-digit rates of 14% and 12% respectively. During the quarter, we also agreed to merge with Agere Systems Inc. to create a storage, networking and consumer powerhouse that we anticipate will better serve our customers, shareholders and employees."
LSI recorded full year 2006 revenues of $1.98 billion, a 3% increase compared to $1.92 billion in 2005. The company reported 2006 GAAP net profit of $170 million or 42 cents per diluted share, which includes $47 million of stock-based compensation expense and a net charge of $19.5 million from special items, acquisition-related amortization, restructuring and their related tax effect. Full year 2006 GAAP results compare to full year 2005 GAAP net loss of $6 million or 1 cent per diluted share which included a $91 million non-cash charge associated with the sale of the company's former Gresham, Oregon manufacturing facility.
Non-GAAP net income for 2006 grew to $236 million or 58 cents per diluted share compared to 2005 non-GAAP net income of $166 million or 42 cents per diluted share.
"GAAP net income for the quarter grew 35% sequentially and 56% compared to the same quarter in 2005," said Bryon Look, LSI Logic chief financial officer. "Our balance sheet remained strong with a net cash position of $659 million. The company generated operating cash flows of $51 million for the quarter and $247 million for the full year."
LSI Logic First Quarter 2007 Business Outlook
GAAP* Special Items Non-GAAP**
Revenue $460 million to $460 million to
$480 million $480 million
Gross Margin 40.5 - 42.5% Approximately 41.0 - 43.0%
$1 million
Operating Expenses $178 million to Approximately $158 million to
$182 million $20 million $162 million
Net Other Income $5 million $5 million
Effective Tax Rate 21% Approximately 15%
($3 million)
Net Income Per Share $0.03 to $0.05 Approximately $0.08 to $0.10
($0.05)
Diluted Share Count 415 million 419 million
Capital spending is projected to be around $15 million in the first quarter and approximately $55 million in total for 2007.
First quarter depreciation and software amortization is expected to be approximately $12 million.
* Generally Accepted Accounting Principles.
** Excludes special items defined as acquisition-related amortization,
restructuring and other special items, and approximately $10.2 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 First Quarter 2007 Business Outlook section of this news release.
LSI Logic Conference Call Information
LSI Logic will hold a conference call today at 2 p.m. PST to discuss fourth quarter financial results and the first quarter 2007 business outlook. The number is 1-303-262-2051. 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 p.m. PST 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 11081403#.
Safe Harbor for Forward Looking Statements: This news release contains forward-looking statements, which include the following: projected revenues for the first quarter of 2007, projected GAAP net income for the first quarter of 2007, projected non-GAAP net income for the first quarter of 2007, projected capital spending in the first quarter of 2007 and for the year and expected first quarter of 2007 depreciation and software amortization. Forward-looking statements also include projections of gross margins, operating expenses, net other income, tax provisions, net income per share, diluted share count and statements about the benefits that we anticipate from our pending merger with Agere Systems to customers, shareholders and employees. 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: any failure of the LSI or Agere stockholders to approve our proposed merger with Agere or any other failure of the completion of the proposed merger; the challenges and costs of closing of the proposed merger with Agere and integrating and restructuring our operations and achieving anticipated synergies; 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, 8-K and in the Registration Statement on Form S-4 that LSI Logic has filed in connection with the pending merger with Agere Systems. 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 .
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.
LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Oct. 1, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
Revenues $523,651 $492,978 $506,235 $1,982,148 $1,919,250
Cost of revenues 295,426 276,725 286,032 1,119,991 1,086,814
Stock-based
compensation
expense* 1,201 1,719 233 6,903 744
Total cost of
revenues 296,627 278,444 286,265 1,126,894 1,087,558
Gross profit 227,024 214,534 219,970 855,254 831,692
Research and
development 103,939 98,625 97,892 396,035 397,312
Stock-based
compensation
expense* 4,324 3,908 465 17,397 2,373
Total research
and development 108,263 102,533 98,357 413,432 399,685
Selling, general
and administrative 56,409 54,878 59,579 232,820 235,933
Stock-based
compensation
expense* 5,370 5,398 811 22,749 2,332
Total selling,
general and
administrative 61,779 60,276 60,390 255,569 238,265
Restructuring of
operations and
other items, net 4,957 2,614 10,377 (8,427) 119,052
Acquired in-process
research and
development 4,284 -- -- 4,284 --
Amortization of
acquisition related
intangibles 3,636 6,436 11,565 32,089 62,484
Income from
operations 44,105 42,675 39,281 158,307 12,206
Interest expense (4,949) (6,556) (6,195) (24,263) (25,283)
Interest income and
other, net 18,364 13,066 12,494 51,276 33,994
Income before
income taxes 57,520 49,185 45,580 185,320 20,917
(Benefit)/provision
for income taxes (1,493) 5,575 7,790 15,682 26,540
Net income/(loss) $59,013 $43,610 $37,790 $169,638 $(5,623)
Income/(loss) per
share:
Basic $0.15 $0.11 $0.10 $0.43 $(0.01)
Diluted ** $0.14 $0.11 $0.09 $0.42 $(0.01)
Shares used in
computing per
share amounts:
Basic 401,992 399,613 392,850 398,551 390,135
Diluted 434,434 403,715 401,171 405,163 390,135
* The Company adopted the provisions of SFAS No. 123 (R) "Share-Based
Payment" on January 1, 2006, using the modified prospective transition
method.
** In computing diluted earnings per share for the three month period
ended December 31, 2006, net income was increased by $3,500 for
interest, net of taxes, on the $350 million convertible notes
considered dilutive common stock equivalents.
A reconciliation between net income on a GAAP basis and non-GAAP net
income including items a)-j) is provided in the following table:
Reconciliation of
GAAP to Non-GAAP
net income: Three Months Ended Year Ended
Dec. 31, Oct. 1, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
GAAP net income/
(loss) $59,013 $43,610 $37,790 $169,638 $(5,623)
Special items:
a) Stock-based
compensation
expense -
Cost of revenues 1,201 1,719 233 6,903 744
b) Stock-based
compensation
expense - R&D 4,324 3,908 465 17,397 2,373
c) Stock-based
compensation
expense - SG&A 5,370 5,398 811 22,749 2,332
d) Amortization of
acquisition
related
intangibles 3,636 6,436 11,565 32,089 62,484
e) Restructuring of
operations and
other items, net 4,957 2,614 10,377 (8,427) 119,052
f) Acquired in-process
research and
development 4,284 -- -- 4,284 --
g) Gain on sale of
certain equity
securities (4,729) (787) (6,566) (6,945) (8,924)
h) Gain on repurchase
of convertible
Subordinated Notes -- -- -- -- (4,123)
i) Loss on impairment
on certain equity
securities -- -- 900 -- 2,387
j) Income tax
effect (2,950) 1,738 (4,365) (1,529) (4,365)
Total special
items 16,093 21,026 13,420 66,521 171,960
Non-GAAP net income $75,106 $64,636 $51,210 $236,159 $166,337
Non-GAAP income
per share:
Basic $0.19 $0.16 $0.13 $0.59 $0.43
Diluted*** $0.18 $0.16 $0.13 $0.58 $0.42
Shares used in
computing Non-GAAP
per share amounts:
Basic 401,992 399,613 392,850 398,551 390,135
Diluted 437,216 431,713 401,171 434,193 396,936
*** In computing diluted earnings per share for the three month period
ended December 31, 2006 and October 1, 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. In
computing diluted earnings per share for the year ended December 31,
2006, net income was increased by $14,000 for interest, net of taxes,
on the $350 million convertible notes considered dilutive common
stock equivalents.
Reconciliation of shares
used in the calculation
of GAAP to Non-GAAP
diluted net income
per share: Three Months Ended Year Ended
Dec. 31, Oct. 1, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
Diluted shares used
in per-share
calculation - GAAP 434,434 403,715 401,171 405,163 390,135
Effect of SFAS (R) 2,782 1,918 -- 2,950 --
Effect of dilutive
common stock
equivalents -- -- -- -- 6,801
Effect of $350 million
convertible notes
considered dilutive*** -- 26,080 -- 26,080 --
Diluted shares used
in per-share
calculation -
Non-GAAP 437,216 431,713 401,171 434,193 396,936
LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
December 31, October 1, December 31,
Assets 2006 2006 2005
Current assets:
Cash and short-term
investments $1,008.9 $1,268.1 $938.9
Accounts receivable, net 348.6 320.3 323.3
Inventories 209.5 183.7 194.8
Prepaid expenses and
other current assets 68.7 64.0 163.1
Total current assets 1,635.7 1,836.1 1,620.1
Property and equipment, net 86.0 83.3 98.3
Goodwill and other intangibles 991.8 941.4 974.5
Other assets 138.6 118.1 103.2
Total assets $2,852.1 $2,978.9 $2,796.1
Liabilities and
Stockholders' Equity
Current liabilities:
Other current liabilities $526.8 $470.2 $468.9
Current portion of
long-term debt -- 272.0 273.9
Total current liabilities 526.8 742.2 742.8
Long-term debt 350.0 350.0 350.0
Tax related liabilities and other 79.4 82.5 75.1
Total liabilities 956.2 1,174.7 1,167.9
Minority interest in subsidiary 0.2 0.2 0.2
Stockholders' equity:
Common stock and additional
paid-in capital 3,106.2 3,070.2 3,000.0
Accumulated deficit (1,220.3) (1,279.3) (1,389.9)
Accumulated other
comprehensive income 9.8 13.1 17.9
Total stockholders'
equity 1,895.7 1,804.0 1,628.0
Total liabilities and
stockholders' equity $2,852.1 $2,978.9 $2,796.1
LSI LOGIC CORPORATION
Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)
Three Months Ended Year Ended
Dec. 31, Oct. 1, Dec. 31, Dec. 31, Dec. 31,
2006 2006 2005 2006 2005
Operating Activities:
Net income/(loss) $59,013 $43,610 $37,790 $169,638 $(5,623)
Adjustments:
Depreciation &
amortization * 16,570 17,527 25,701 82,263 146,169
Stock-based
compensation
expense 10,895 11,025 1,509 47,049 5,449
Non-cash
restructuring and
other items 1,863 173 1,563 (713) 88,224
Acquired in-process
research and
development 4,284 -- -- 4,284 --
Gain on sale of
intellectual
property -- -- -- (15,000) --
Gain on sale of
Gresham manufacturing
facility and
associated
intellectual
property -- -- -- (12,553) --
Write-off of
intangible assets
acquired in a
purchase business
combination -- -- -- 3,325 --
Non-cash foreign
exchange gain (617) (941) -- (1,089) (11,491)
Gain on sale of
equity securities (4,729) (787) (5,651) (6,727) (6,475)
Gain on repurchase
of Convertible
Subordinated Notes -- -- -- -- (4,123)
(Gain)/loss on sales
of property
and equipment (7) (240) 118 (252) 27
Changes in deferred
tax assets and
liabilities (122) 4 14,108 (98) 14,220
Changes in assets and
liabilities, net of
assets acquired and
liabilities assumed
in business combinations:
Accounts
receivable (27,680) (9,460) (24,839) (24,617) (51,305)
Inventories (25,220) (10,148) (5,681) (18,062) 24,086
Prepaid expenses
and other assets (11,478) (7,403) (20,275) (24,858) (22,582)
Accounts payable 24,499 (9,904) 40,861 23,338 46,998
Accrued and other
liabilities 4,119 13,303 (2,083) 21,223 25,129
Net cash provided
by operating
activities 51,390 46,759 63,121 247,151 248,703
Investing activities:
Purchases of debt
securities
available-for-
sale (105,216) (116,196) (153,672) (603,624) (550,912)
Proceeds from
maturities and
sales of debt
securities
available-for-
sale 292,728 96,494 97,302 595,135 462,530
Purchases of
equity securities -- (3,000) (150) (8,150) (150)
Proceeds from sales
of equity
securities 5,784 2,511 7,234 11,876 11,105
Purchases of
property, equipment
and software (14,427) (15,587) (12,729) (58,671) (48,055)
Proceeds from sale
of property and
equipment 29 49 1,495 118 4,894
Proceeds from sale
of intellectual
property -- 7,670 -- 22,670 --
Proceeds from sale
of Fort Collins
facility -- -- -- 10,998 --
Proceeds from sale
of Colorado Springs
facility -- -- -- 7,029 --
Proceeds from sale
of Gresham
manufacturing
facility -- 15,000 -- 96,426 --
Proceeds from sale of
Gresham manufacturing
facility associated
intellectual property -- -- -- 5,100 --
Acquisitions of
companies, net of
cash acquired (55,328) -- -- (55,328) --
Adjustment to
goodwill acquired
in a prior year
for resolution of
a pre-acquisition
income tax
contingency 909 1,373 28,645 2,282 36,307
Net cash provided
by/(used in)
investing
activities 124,479 (11,686) (31,875) 25,861 (84,281)
Financing activities:
Issuance of common
stock 25,009 3,868 10,789 61,014 30,862
Repurchase of
Convertible
Subordinated Notes -- -- -- -- (148,126)
Repayment of debt
obligations (271,848) -- -- (271,848) (129)
Net cash (used in)/
provided by
financing
activities (246,839) 3,868 10,789 (210,834) (117,393)
Effect of exchange
rate changes on
cash and cash
equivalents 360 15 (3,040) 973 (1,103)
(Decrease)/increase in
cash and cash
equivalents (70,610) 38,956 38,995 63,151 45,926
Cash and cash
equivalents at
beginning of
period 398,410 359,454 225,654 264,649 218,723
Cash and cash
equivalents at
end of period $327,800 $398,410 $264,649 $327,800 $264,649
* 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
December 31, October 1, December 31,
2006 2006 2005
Semiconductor revenues $304.1 $313.3 $303.3
Storage Systems revenues $219.6 $179.7 $202.9
Total revenues $523.7 $493.0 $506.2
Percentage change in
revenues-qtr./qtr. (a) 6.2% 0.7% 5.1%
Percentage change in
revenues-yr./yr. (b) 3.4% 2.3% 20.6%
Days sales outstanding 60 58 57
Days of inventory 64 59 61
Current ratio 3.1 2.5 2.2
Quick ratio 2.6 2.1 1.7
Gross margin as a percentage
of revenues 43.4% 43.5% 43.5%
R&D as a percentage of revenues 20.7% 20.8% 19.3%
SG&A as a percentage of revenues 11.8% 12.2% 11.8%
Employees (c) 4,010 3,884 4,324
Revenues per employee
(in thousands) (d) $522.3 $507.7 $468.3
Selected Cash Flow information
Purchases of property and
equipment (e) $10.3 $6.0 $10.1
Depreciation / amortization (f) $10.5 $10.5 $12.1
(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.
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