Second Quarter News Release Summary
- Revenues of $481 million, up 7 percent sequentially.
- Revenues up 7 percent compared to Q2 2004.
- GAAP* net income of 6 cents per diluted share, compared to 2 cents in Q2 2004.
- Net income, excluding special items**, of 11 cents per diluted share, compared to 7 cents in Q2 2004.
- Gross margin expands to 44 percent.
- Generated positive operating cash flow for 13th consecutive quarter.
Third Quarter Business Outlook
- Projected revenue of $470 million to $500 million.
- GAAP* net income range of 5 - 7 cents per diluted share.
- Net income, excluding special items**, in the range of 10 - 12 cents per diluted share.
* Generally Accepted Accounting Principles. ** Acquisition-related amortization, restructuring and other special items.
Storage Components and Storage Systems Lead LSI Logic Q2 Revenue Growth
MILPITAS, Calif., July 27 /PRNewswire-FirstCall/ -- LSI Logic Corporation today reported second quarter 2005 revenues of $481 million, a 7 percent sequential increase compared to the $450 million reported in the first quarter of 2005, and a 7 percent increase compared to the $448 million reported in the second quarter of 2004.
Second quarter 2005 GAAP* net income improved to $25 million or 6 cents per diluted share compared to first quarter 2005 GAAP net income of $5 million or 1 cent per diluted share. Second quarter 2004 GAAP net income was $7 million or 2 cents per diluted share.
Second quarter 2005 net income, excluding special items**, increased to $45 million or 11 cents per diluted share compared to first quarter 2005 net income, excluding special items, of $25 million or 6 cents per diluted share. Excluding special items, second quarter 2004 net income was $28 million or 7 cents per diluted share.
"Increased customer demand for LSI Logic's Storage Components and Storage Systems product offerings provided the momentum for LSI Logic to report a solid second quarter," said Abhi Talwalkar, LSI Logic president and chief executive officer. "Storage Components, comprised of Storage ASICs, Storage Standard Products and RAID Storage Adapters, set the pace for the company with a record second quarter. Our Engenio storage systems subsidiary benefited from the successful introduction of its higher-end product line. Growth in Communications reflected stronger than anticipated demand from enterprise networking customers. In Consumer, we were pleased with the revenue strength in DoMiNo(R) -based DVD-recorder and cable set-top box markets, as well as digital audio products, which was balanced by the seasonal decline in game console revenues."
"LSI Logic generated significant sequential and year-over-year revenue growth," said Bryon Look, LSI Logic chief financial officer. "Our gross margins increased over the prior quarter. Profitability improved, both on a GAAP and excluding special items basis. We generated $60 million in cash from operations, reduced convertible debt by $150 million and ended the second quarter of 2005 with $782 million in cash and short-term investments."
LSI Logic Third Quarter Business Outlook Excluding Special Special GAAP* Items** Items Revenues $470 million to $470 million to $500 million $500 million Gross Margin 43-44 percent 43-44 percent Operating Expenses $175 million to Approximately $156 million to $179 million $19 million** $160 million Net Other Income / (Expense) $(2) to $(3) $(2) to $(3) million million Tax Provision $6.25 million $6.25 million Net Income Per Share $0.05 to $0.07 Approximately $0.10 to $0.12 $0.05 Diluted Share Count 406 million 406 million
Capital spending is projected to be around $20 million in the third quarter, and approximately $60 million in total for 2005.
Third quarter depreciation and software amortization is expected to be approximately $23 million.
* Generally Accepted Accounting Principles ** Acquisition-related amortization, restructuring and other special items.
NOTE: The company's financial guidance will be limited to the comments made on today's public conference call and contained in the Third Quarter Business Outlook section of this news release.
LSI Logic Conference Call Information
LSI Logic will hold a conference call today at 2 p.m. PDT to discuss second quarter financial results and the third quarter business outlook. The number is 1-303-262-2052. Internet users can access the conference call by visiting http://www.lsilogic.com/investors . A replay of the call will be
available today at approximately 4:30 p.m. 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 11034680#.
Safe Harbor for Forward-Looking Statements: This news release contains forward-looking statements, which include the following: projected revenues for the third quarter of 2005, projected GAAP net income for the third quarter of 2005, projected net income, excluding special items, for the third quarter of 2005, projected capital spending in the third quarter of 2005 and for the year, and expected third quarter of 2005 depreciation and software amortization. Forward-looking statements also include projections of gross margins, operating expenses, net other income / (expense), tax provisions, earnings 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 ability to achieve revenue objectives, the company's ability to meet financial targets and failure to execute on its financial plan, the company's ability to generate positive operating cash flow, control operating expenses or drive sustained revenue growth, the company's ability to leverage technology marketplace advantages and the availability 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.
About LSI Logic
LSI Logic Corporation focuses on the design and production of high- performance semiconductors for Consumer, Communications and Storage applications that access, interconnect and store data, voice and video. LSI Logic engineers incorporate reusable, industry-standard intellectual property building blocks that serve as the heart of leading-edge systems. LSI Logic serves its global OEM, channel and distribution customers with standard-cell ASICs, Platform ASICs, standard products, host bus adapters, RAID controllers and software. In addition, the company supplies storage network solutions for the enterprise. LSI Logic is headquartered at 1621 Barber Lane, Milpitas, CA 95035. http://www.lsilogic.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.lsilogic.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 Excluding Special Items (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2005 2005 2004 2005 2004 Revenues $481,292 $450,007 $447,897 $931,299 $900,254 Cost of revenues 269,531 259,740 239,081 529,271 490,006 Gross profit 211,761 190,267 208,816 402,028 410,248 Research and development 99,659 99,237 110,098 198,896 219,039 Selling, general and administrative 59,872 58,140 62,750 118,012 123,908 Income from operations 52,230 32,890 35,968 85,120 67,301 Interest expense (6,320) (6,710) (6,067) (13,030) (11,979) Interest income and other, net 5,062 5,390 3,674 10,452 9,488 Income before income taxes 50,972 31,570 33,575 82,542 64,810 Provision for income taxes 6,250 6,250 6,000 12,500 12,000 Net income excluding special items $44,722 $25,320 $27,575 $70,042 $52,810 Income per share excluding special items: Basic $0.11 $0.07 $0.07 $0.18 $0.14 Diluted $0.11 $0.06 $0.07 $0.18 $0.14 Shares used in computing per share amounts: Basic 389,088 387,664 383,522 388,371 382,571 Diluted 393,427 390,458 388,586 391,954 389,102 Statements of operations excluding special items are intended to present the Company's operating results, excluding special items described below, for the periods presented. During the three and six month periods ended June 30, 2005, the special items represented amortization of acquisition related items including intangibles and non-cash deferred stock compensation, and restructuring of operations and other items, net, and other special items. The other special items consisted of gains on certain equity securities, and gains associated with the repurchase of a portion of the Company's Convertible Subordinated Notes. During the three month period ended March 31, 2005, the special items represented amortization of acquisition related items including intangibles and non-cash deferred stock compensation, and restructuring of operations and other items, net. During the three and six month periods ended June 30, 2004, the special items represented amortization of acquisition related items including intangibles and non-cash deferred stock compensation, restructuring of operations and other items, net, and other special items. The other special items consisted of gains on certain equity securities, offset in part by fees related to the proposed initial public offering and our separation from Engenio. For the three month periods ended June 30, 2005, March 31, 2005 and June 30, 2004, the statements excluding special items are prepared using the Company's calculated tax expense of $6,250, $6,250 and $6,000, respectively when excluding special items. For the six month periods ended June 30, 2005 and 2004, the statements excluding special items are prepared using the Company's calculated tax expense of $12,500 and $12,000, respectively when excluding special items. For the three month periods ended June 30, 2005, March 31, 2005 and June 30, 2004, 4,339, 2,794 and 5,064 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share excluding special items. For the six month periods ended June 30, 2005 and 2004, 3,583 and 6,531 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share excluding special items. A reconciliation from net income excluding special items to the reported results is presented on the following page. The format presented above is not intended to be in accordance with Generally Accepted Accounting Principles. LSI LOGIC CORPORATION Reconciliation of Net Income Excluding Special Items to GAAP Results (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2005 2005 2004 2005 2004 Net income excluding special items $44,722 $25,320 $27,575 $70,042 $52,810 Special items: Amortization of acquisition related items including intangibles and non- cash deferred stock compensation (18,785) (19,068) (21,401) (37,853) (41,501) Restructuring of operations and other items, net (7,156) (1,533) (3,029) (8,689) (2,431) Other special items 6,481 -- 4,097 6,481 7,449 Total special items (19,460) (20,601) (20,333) (40,061) (36,483) Net income $25,262 $4,719 $7,242 $29,981 $16,327 Basic income per share: Net income excluding special items $0.11 $0.07 $0.07 $0.18 $0.14 Special items ** (0.05) (0.06) (0.05) (0.10) (0.10) Net income $0.06 $0.01 $0.02 $0.08 $0.04 Diluted income per share*: Net income excluding special items $0.11 $0.06 $0.07 $0.18 $0.14 Special items ** (0.05) (0.05) (0.05) (0.10) (0.10) Net income $0.06 $0.01 $0.02 $0.08 $0.04 Shares used in computing per share amounts: Basic 389,088 387,664 383,522 388,371 382,571 Diluted 393,427 390,458 388,586 391,954 389,102 * For the three month periods ended June 30, 2005, March 31, 2005 and June 30, 2004, 4,339, 2,794 and 5,064 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share. For the six month periods ended June 30, 2005 and 2004, 3,583 and 6,531 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share. ** This line item includes rounding adjustments. LSI LOGIC CORPORATION Consolidated Condensed Statements of Operations (GAAP) (In thousands, except per share amounts) (Unaudited) Three Months Ended June 30, March 31, June 30, 2005 2005 2004 Revenues $481,292 $450,007 $447,897 Cost of revenues 269,531 259,740 239,081 Gross profit 211,761 190,267 208,816 Research and development 99,659 99,237 110,098 Selling, general and administrative 59,872 58,140 63,757 Restructuring of operations and other items, net 7,156 1,533 3,029 Amortization of acquisition related items including intangibles and non-cash deferred stock compensation * 18,785 19,068 21,401 Income from operations 26,289 12,289 10,531 Interest expense (6,320) (6,710) (6,067) Interest income and other, net 11,543 5,390 8,778 Income before income taxes 31,512 10,969 13,242 Provision for income taxes 6,250 6,250 6,000 Net income $25,262 $4,719 $7,242 Income per share: Basic $0.06 $0.01 $0.02 Diluted ** $0.06 $0.01 $0.02 Shares used in computing per share amounts: Basic 389,088 387,664 383,522 Diluted 393,427 390,458 388,586 Six Months Ended June 30, June 30, 2005 2004 Revenues $931,299 $900,254 Cost of revenues 529,271 490,006 Gross profit 402,028 410,248 Research and development 198,896 219,039 Selling, general and administrative 118,012 124,915 Restructuring of operations and other items, net 8,689 2,431 Amortization of acquisition related items including intangibles and non-cash deferred stock compensation * 37,853 41,501 Income from operations 38,578 22,362 Interest expense (13,030) (11,979) Interest income and other, net 16,933 17,944 Income before income taxes 42,481 28,327 Provision for income taxes 12,500 12,000 Net income $29,981 $16,327 Income per share: Basic $0.08 $0.04 Diluted ** $0.08 $0.04 Shares used in computing per share amounts: Basic 388,371 382,571 Diluted 391,954 389,102 * The amortization of acquisition related items including intangibles and non-cash deferred stock compensation for the three month period ended June 30, 2005 are comprised of the following items: Amortization of intangibles $17,613 Amortization of non-cash deferred stock compensation 1,172 $18,785 ** For the three month periods ended June 30, 2005, March 31, 2005 and June 30, 2004, 4,339, 2,794 and 5,064 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share. For the six month periods ended June 30, 2005 and 2004, 3,583 and 6,531 shares, respectively were considered dilutive common stock equivalents and included in the computation of diluted income per share. LSI LOGIC CORPORATION Consolidated Condensed Balance Sheets (In millions) (Unaudited) June 30, March 31, December 31, Assets 2005 2005 2004 Current assets: Cash and short-term investments $782.0 $865.9 $814.6 Accounts receivable, net 284.9 259.5 272.1 Inventories 185.7 203.4 218.9 Prepaid expenses and other current assets 61.0 58.9 59.7 Total current assets 1,313.6 1,387.7 1,365.3 Property and equipment, net 288.5 301.6 311.9 Goodwill and other intangibles 1,038.7 1,058.2 1,081.6 Other assets 106.7 115.2 115.2 Total assets $2,747.5 $2,862.7 $2,874.0 Liabilities and Stockholders' Equity Current liabilities: Other current liabilities $394.5 $386.5 $396.2 Current portion of long-term obligations -- -- 0.1 Total current liabilities 394.5 386.5 396.3 Long-term debt 626.0 779.8 781.9 Tax related liabilities and other 75.3 77.0 77.6 Total liabilities 1,095.8 1,243.3 1,255.8 Minority interest in subsidiary 0.2 0.3 0.3 Stockholders' equity: Common stock 2,990.1 2,980.8 2,973.4 Deferred stock compensation (10.6) (13.6) (8.9) Accumulated deficit (1,354.3) (1,379.6) (1,384.3) Accumulated other comprehensive income 26.3 31.5 37.7 Total stockholders' equity 1,651.5 1,619.1 1,617.9 Total liabilities and stockholders' equity $2,747.5 $2,862.7 $2,874.0 LSI LOGIC CORPORATION Statement of Cash Flows (In thousands, except where noted) (Unaudited) Three Months Ended June 30, March 31, June 30, 2005 2005 2004 Operating Activities: Net income $25,262 $4,719 $7,242 Adjustments: Depreciation & amortization * 41,528 40,765 46,325 Amortization of non-cash deferred stock compensation 1,172 1,455 2,003 Non-cash restructuring and other items 501 849 4,156 Gain on sale and exchange of equity securities (2,311) -- (5,104) Gain on repurchase of Convertible Subordinated Notes (4,123) -- -- Loss/(gain) on sales of property and equipment 51 (54) (836) Changes in deferred tax assets and liabilities 17 37 105 Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable (25,429) 12,576 (41,612) Inventories 17,626 15,534 (5,511) Prepaid expenses and other assets (3,045) (5,115) (18,306) Accounts payable 7,088 (9,466) 23,024 Accrued and other liabilities 1,476 (1,969) 16,600 Net cash provided by operating activities 59,813 59,331 28,086 Investing activities: Purchases of debt securities available-for-sale (150,207) (112,325) (225,316) Maturities and sales of debt securities available-for-sale 180,870 102,313 150,418 Purchases of equity securities -- -- -- Proceeds from sales of equity securities 3,871 -- 10,518 Purchases of property, equipment and software (10,987) (8,433) (13,661) Proceeds from sale of property and equipment 1,804 1,411 1,822 Decrease in non-current assets and deposits -- -- 11,880 Increase in non-current assets and deposits -- -- (17) Acquisitions of companies, net of cash acquired -- -- (31,710) Adjustment to goodwill acquired in a prior year for resolution of a pre-acquisition income tax contingency 1,870 5,792 4,462 Decrease in a payable for an acquisition of a company -- -- (17,592) Net cash provided by/(used in) investing activities 27,221 (11,242) (109,196) Financing activities: Issuance of common stock 11,472 1,354 14,262 Repurchase of Convertible Subordinated Notes (148,126) -- -- Purchase of minority interest in subsidiary -- -- (6,394) Repayment of debt obligations (32) (97) (94) Net cash (used in)/provided by financing activities (136,686) 1,257 7,774 Effect of exchange rate changes on cash and cash equivalents (3,626) (3,335) (1,675) (Decrease)/increase in cash and cash equivalents (53,278) 46,011 (75,011) Cash and cash equivalents at beginning of period 264,734 218,723 273,414 Cash and cash equivalents at end of period $211,456 $264,734 $198,403 Six Months Ended June 30, June 30, 2005 2004 Operating Activities: Net income $29,981 $16,327 Adjustments: Depreciation & amortization * 82,293 92,441 Amortization of non-cash deferred stock compensation 2,627 3,829 Non-cash restructuring and other items 1,350 6,385 Gain on sale and exchange of equity securities (2,311) (8,104) Gain on repurchase of Convertible Subordinated Notes (4,123) -- Loss/(gain) on sales of property and equipment (3) (3,937) Changes in deferred tax assets and liabilities 54 625 Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations: Accounts receivable (12,853) (56,980) Inventories 33,160 (11,701) Prepaid expenses and other assets (8,160) (5,777) Accounts payable (2,378) 10,263 Accrued and other liabilities (493) (5,178) Net cash provided by operating activities 119,144 38,193 Investing activities: Purchases of debt securities available-for-sale (262,532) (454,756) Maturities and sales of debt securities available-for-sale 283,183 339,458 Purchases of equity securities -- (2,250) Proceeds from sales of equity securities 3,871 10,518 Purchases of property, equipment and software (19,420) (25,218) Proceeds from sale of property and equipment 3,215 5,836 Decrease in non-current assets and deposits -- 39,633 Increase in non-current assets and deposits -- (40) Acquisitions of companies, net of cash acquired -- (36,487) Adjustment to goodwill acquired in a prior year for resolution of a pre-acquisition income tax contingency 7,662 4,462 Decrease in a payable for an acquisition of a company -- -- Net cash provided by/(used in) investing activities 15,979 (118,844) Financing activities: Issuance of common stock 12,826 17,810 Repurchase of Convertible Subordinated Notes (148,126) -- Purchase of minority interest in subsidiary -- (7,453) Repayment of debt obligations (129) (216) Net cash (used in)/provided by financing activities (135,429) 10,141 Effect of exchange rate changes on cash and cash equivalents (6,961) (769) (Decrease)/increase in cash and cash equivalents (7,267) (71,279) Cash and cash equivalents at beginning of period 218,723 269,682 Cash and cash equivalents at end of period $211,456 $198,403 * 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 June 30, March 31, June 30, 2005 2005 2004 Semiconductor revenues $362.4 $343.6 $335.6 Storage Systems revenues $118.9 $106.4 $112.3 Total revenues $481.3 $450.0 $447.9 Percentage change in revenues- qtr./qtr. (a) 7.0% 7.2% -1.0% Percentage change in revenues- yr./yr. (b) 7.5% -0.5% 10.0% Days sales outstanding 53 52 58 Days of inventory 62 70 79 Current ratio 3.3 3.6 3.7 Quick ratio 2.7 2.9 2.9 R&D as a percentage of revenues 20.7% 22.1% 24.6% SG&A as a percentage of revenues 12.4% 12.9% 14.2% Gross margin as a percentage of revenues 44.0% 42.3% 46.6% Employees (c) 4,342 4,307 4,846 Revenues per employee (in thousands) (d) $443.4 $417.9 $369.7 Diluted shares (in thousands) 393,427 390,458 388,586 Selected Cash Flow information Purchases of property and equipment (e) $8.2 $7.1 $12.5 Depreciation / amortization (f) $22.3 $22.2 $24.8 (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.
CONTACT: Tara Yingst, Media Relations, +1-408-433-7139, or tara@lsil.com; or Investor Relations, Diana Matley, +1-408-433-4365, or diana@lsil.com, both of LSI Logic Corporation
Web site: http://www.lsilogic.com/
