EXHIBIT 99.1
FOR IMMEDIATE RELEASE JULY 23, 2003
Investor Relations Contact: Media Relations Contact:
Diana Matley Kevin Brett
408-433-4365 408-433-7150
DIANA@LSIL.COM KBRETT@LSIL.COM
CC03-85
LSI LOGIC REPORTS SECOND QTR. 2003 FINANCIAL RESULTS
SECOND QUARTER NEWS RELEASE SUMMARY
- - Revenues of $407 million, 9 percent sequential growth.
- - GAAP* net loss of 43 cents per diluted share.
- - Net loss, excluding special items**, of 2 cents per diluted share, beats First
Call consensus estimate.
- - Gross Margin of 41 percent.
- - Generated positive operating cash flow for fifth consecutive quarter.
- - Cash and short-term investments grew $110 million to $1.1 billion.
THIRD QUARTER BUSINESS OUTLOOK
- - Projected sequential revenue growth of approximately 8-12 percent.
- - GAAP net loss per share in the range of 4-7 cents.
- - Net income per share, excluding special items, in the range of 1-3 cents.
* Generally Accepted Accounting Principles
** Acquisition-related amortization, restructuring and other special items.
LSI LOGIC MOVES TOWARD PROFITABILITY IN SECOND HALF
RAPIDCHIP(TM) PLATFORM DESIGN WINS EXCEED EXPECTATIONS
MILPITAS, CALIFORNIA - LSI Logic Corporation (NYSE: LSI) today reported revenues
of $407 million in the second quarter of 2003, a 9 percent sequential increase
compared to the $373 million reported in the first quarter of 2003, and a
decline of 7 percent compared to the $438 million reported in the second quarter
of 2002.
Cash and short-term investments increased $110 million to $1.1 billion at the
end of the 2003-second quarter. The company generated positive operating cash
flow for the fifth consecutive quarter.
The 2003-second quarter GAAP* net loss was $162 million or 43 cents a diluted
share. The 2003-first quarter GAAP net loss was $122 million or 33 cents a
diluted share. The company reported a GAAP net loss of $62 million or 17 cents a
diluted share in the 2002-second quarter.
Second quarter net loss, excluding special items**, was $6 million or 2 cents a
diluted share compared to first quarter net loss of $51 million or 14 cents a
diluted share. The company reported a net loss, excluding special items, of $21
million or 6 cents a diluted share in the second quarter of 2002.
"Each of our four businesses grew sequentially in the second quarter," said
Wilfred Corrigan, LSI Logic chairman and chief executive officer. "Our Consumer
business gained momentum in the second quarter, paving the way for a seasonally
strong third quarter. Our Communications business was up strongly in the second
quarter, particularly enterprise networking, and we expect further improvement
in the second half of the year. Both of our storage businesses, Storage
Components and Storage Systems, are expected to continue their growth ramps in
the third quarter and the two businesses are anticipated to total about $1
billion in combined revenues for the year.
"In the third quarter, we are forecasting sequential revenue growth in the 8-12
percent range, while maintaining our controls on operating expenses. We are on
course to return to profitability in the third quarter, excluding special items,
and in the fourth quarter on a GAAP basis."
In the second quarter, LSI Logic secured a wide variety of design wins with its
RapidChip(TM) semiconductor platform, introduced the RapidWorx(TM) design
system, and this week unveiled two new families of IP-rich slices, the Rapid
Xtreme(TM) and RapidChip Integrator(TM) slice families in 0.11-micron process
technology. The RapidChip platform is demonstrating its broad market appeal as
the company is capturing design wins in a range of sectors including: disk
drives, encryption, embedded processing, broadband modems, and storage systems.
"LSI Logic's RapidChip semiconductor platform is winning with our existing
customers and is generating new business opportunities as evidenced by the fact
that we are already exceeding our own design-win projections," said Rick Marz,
LSI Logic executive vice president of ASIC Technology. "This Platform ASIC
approach is providing greater customer choice and is specifically designed to
meet the design-time and cost requirements of the underserved middle of the
global logic market."
"LSI Logic's projected move to profitability in the second half of the year
reflects the impact of revenue growth and the actions the company has taken to
reduce its break-even points," said Bryon Look, LSI Logic chief financial
officer. "LSI Logic has completed its restructuring program, including the
consolidation of its internal manufacturing at the company's Gresham
manufacturing campus, supplemented by strategic foundry engagements. We made
substantial progress in the second quarter toward our three key financial
initiatives for 2003 - accelerating the return to profitability, generating
positive operating cash flow, and making R&D investments that will provide us
with leadership positions in our target markets."
LSI LOGIC THIRD QUARTER BUSINESS OUTLOOK
GAAP* SPECIAL ITEMS** EXCLUDING SPECIAL ITEMS
----- --------------- -----------------------
REVENUE GROWTH 8-12% Sequentially 8-12% Sequentially
GROSS MARGIN 41-42 percent 41-42 percent
OPERATING EXPENSES $190 to $200 million $25 to $30 million $165 to $170 million
NET OTHER INCOME (EXP.) $(2) to $(4) million $(2) to $(4) million
TAX PROVISION $6 million $6 million
EARNINGS (LOSS)/SHARE $(0.04) to $(0.07) $(0.07) to $(0.08) $0.01 to $0.03
DILUTED SHARE COUNT 380 million 390 million
Common stock equivalents are excluded from share count in loss periods as a
result of their anti-dilutive effect.
Capital spending is projected to be under $30 million in the third quarter, and
less than $100 million in 2003.
Third quarter depreciation and software amortization is expected to be
approximately $46 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 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 2003 financial results. The number is 1-303-262-2171. 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 5 p.m. PDT and will
be available for 48 hours. The number is 1-800-405-2236 (International,
1-303-590-3000), pass code 544423#.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS: This news release and the statements
by LSI Logic management include forward-looking statements that may involve a
number of risks and uncertainties. Readers are cautioned that these
forward-looking statements are only predictions and may differ materially from
the actual future events or results. Forward-looking statements include
projections of growth in the storage components, storage systems, consumer,
communications and enterprise networking, forecasts of sequential revenue
growth, maintaining operating expenses, projections of profitability, net other
income, earnings, gross margins, tax provisions, capital spending, depreciation,
acquisition-related amortization, restructuring expenses, other special items,
common share count made in this news release and our RapidChip platform
generating new business. The company's actual results in future periods may be
materially different from any performance suggested in this news release. Risks
and uncertainties to which the company is subject include, but are not
necessarily limited to, fluctuations in the timing and volumes of customer
demand, the rate of depletion of customer inventory buildup and the company's
achievement of revenue objectives and other financial targets. Other risks and
uncertainties that may affect the company's actual results include, but are not
necessarily limited to, the development of new products, the timing and success
of new product introductions, the RapidChip platform continuing to generate new
business and continuing to find traction with existing customers, the continued
availability of appropriate levels of manufacturing capacity, the realization of
benefits from the company's strategic relationships, competing technologies, R&D
investments, products and other competitive factors and investments and
disruptions in general economic activity due to worsening global business
conditions or caused by the effects of terrorist activities and armed conflict.
The extent to which the company may not realize the cost savings it expects from
the reduction in workforce and operating expenses may also impact its future
performance. The company operates in an industry sector where securities' values
are highly volatile and may be influenced by the cyclical nature of the
industry, the unpredictability of the economy and other factors beyond the
company's control. For additional information, Readers are referred to the
documents filed by LSI Logic with the SEC, and specifically the most recent
reports on Form 10-K, 10-Q and 8-K. In the context of forward-looking
information, reference is made to the discussion of risk factors described in
the company's SEC reports filed during the past 12 months.
ABOUT LSI LOGIC
LSI Logic Corporation (NYSE: LSI) is a leading designer and manufacturer of
communications, consumer and storage semiconductors for applications that
access, interconnect and store data, voice and video. 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, June 30, June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Revenues $ 407,213 $ 437,768 $ 779,998 $ 850,277
--------- --------- --------- ---------
Costs and expenses:
Cost of revenues 238,469 269,632 486,537 535,541
Research and development 111,326 112,833 226,453 227,176
Selling, general and administrative 56,870 57,366 114,499 115,546
--------- --------- --------- ---------
Total costs and expenses 406,665 439,831 827,489 878,263
--------- --------- --------- ---------
Income/(loss) from operations 548 (2,063) (47,491) (27,986)
Interest expense (7,314) (15,486) (16,145) (31,320)
Interest income and other, net 6,469 2,621 18,506 6,267
--------- --------- --------- ---------
Loss before income taxes (297) (14,928) (45,130) (53,039)
Provision for income taxes 6,000 6,000 12,000 10,250
--------- --------- --------- ---------
Net loss excluding special items $ (6,297) $ (20,928) $ (57,130) $ (63,289)
========= ========= ========= =========
Loss per share excluding special items:
Basic $ (0.02) $ (0.06) $ (0.15) $ (0.17)
========= ========= ========= =========
Diluted $ (0.02) $ (0.06) $ (0.15) $ (0.17)
========= ========= ========= =========
Shares used in computing per share amounts:
Basic 376,619 369,672 375,745 368,769
========= ========= ========= =========
Diluted 376,619 369,672 375,745 368,769
========= ========= ========= =========
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, 2003, 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 losses
associated with repurchases of a portion of the Company's Convertible
Subordinated Notes, write downs of certain equity securities due to impairment,
offset in part by gains on miscellaneous asset sales.
During the three and six month periods ended June 30, 2002, the special items
represented additional excess inventory and related charges, amortization of
acquisition related items including intangibles and non-cash deferred stock
compensation, restructuring of operations and other items, net, and a $22
million tax benefit as a result of changes in the tax laws in the first quarter
of 2002.
For the three and six month periods ended June 30, 2003, the statements
excluding special items are prepared using the Company's calculated tax expense
of $6,000 and $12,000, respectively when excluding special items. For the three
and six month periods ended June 30, 2002, the statements excluding special
items are prepared using the Company's calculated tax expense of $6,000 and
$10,250 when excluding special items.
In computing diluted loss per share excluding special items for the three and
six month periods ended June 30, 2003 and 2002, common stock equivalents were
excluded from the computation of diluted loss per share as a result of their
antidilutive effect.
A reconciliation from net loss 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 LOSS EXCLUDING SPECIAL ITEMS TO GAAP RESULTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ---------
Net loss excluding special items $ (6,297) $ (20,928) $ (57,130) $ (63,289)
--------- --------- --------- ---------
Special items:
Additional excess inventory and related charges
in cost of revenues -- (4,772) -- (45,526)
Amortization of acquisition related items including
intangibles and non-cash deferred stock compensation (28,151) (42,996) (58,819) (89,074)
Restructuring of operations and other items, net (124,527) 6,405 (160,193) (58,655)
Other special items (3,109) -- (8,367) --
Tax benefit -- -- -- 22,500
--------- --------- --------- ---------
Total special items (155,787) (41,363) (227,379) (170,755)
--------- --------- --------- ---------
Net loss $(162,084) $ (62,291) $(284,509) $(234,044)
========= ========= ========= =========
Basic loss per share:
Net loss excluding special items $ (0.02) $ (0.06) $ (0.15) $ (0.17)
Special items** (0.41) (0.11) (0.61) (0.46)
--------- --------- --------- ---------
Net loss $ (0.43) $ (0.17) $ (0.76) $ (0.63)
========= ========= ========= =========
Diluted loss per share*:
Net loss excluding special items $ (0.02) $ (0.06) $ (0.15) $ (0.17)
Special items** (0.41) (0.11) (0.61) (0.46)
--------- --------- --------- ---------
Net loss $ (0.43) $ (0.17) $ (0.76) $ (0.63)
========= ========= ========= =========
Shares used in computing per share amounts:
Basic 376,619 369,672 375,745 368,769
========= ========= ========= =========
Diluted 376,619 369,672 375,745 368,769
========= ========= ========= =========
* In computing diluted loss per share for the three and six month periods
ended June 30, 2003 and 2002, all common stock equivalents were excluded
as a result of their antidilutive effect.
** 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 Six Months Ended
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Revenues $ 407,213 $ 437,768 $ 779,998 $ 850,277
----------- ----------- ----------- -----------
Costs and expenses:
Cost of revenues 238,469 274,404 486,537 581,067
Research and development 111,326 112,833 226,453 227,176
Selling, general and administrative 56,870 57,366 114,499 115,546
Restructuring of operations and other items, net 124,527 (6,405) 160,193 58,655
Amortization of acquisition related items including
intangibles and non-cash deferred stock compensation* 28,151 42,996 58,819 89,074
----------- ----------- ----------- -----------
Total costs and expenses 559,343 481,194 1,046,501 1,071,518
----------- ----------- ----------- -----------
Loss from operations (152,130) (43,426) (266,503) (221,241)
Interest expense (7,314) (15,486) (16,145) (31,320)
Interest income and other, net 3,360 2,621 10,139 6,267
----------- ----------- ----------- -----------
Loss before income taxes (156,084) (56,291) (272,509) (246,294)
Provision/ (benefit) for income taxes 6,000 6,000 12,000 (12,250)
----------- ----------- ----------- -----------
Net loss $ (162,084) $ (62,291) $ (284,509) $ (234,044)
=========== =========== =========== ===========
Loss per share:
Basic $ (0.43) $ (0.17) $ (0.76) $ (0.63)
=========== =========== =========== ===========
Diluted** $ (0.43) $ (0.17) $ (0.76) $ (0.63)
=========== =========== =========== ===========
Shares used in computing per share amounts:
Basic 376,619 369,672 375,745 368,769
=========== =========== =========== ===========
Diluted 376,619 369,672 375,745 368,769
=========== =========== =========== ===========
* The amortization of acquisition related items including intangibles and
non-cash deferred stock compensation for the three month period ended June
30, 2003 are comprised of the following items:
Amortization of intangibles $ 19,267
Amortization of non-cash deferred stock compensation 8,884
--------
$ 28,151
--------
** In computing diluted loss per share for the three and six month periods
ended June 30, 2003 and 2002, all common stock equivalents were excluded
as a result of their antidilutive effect.
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
June 30, December 31,
ASSETS 2003 2002
- ------ -------- --------
Current assets:
Cash and short-term investments $1,114.8 $ 990.0
Accounts receivable, net 241.1 248.6
Inventories 205.4 194.5
Prepaid expenses and other current assets 199.4 193.0
-------- --------
Total current assets 1,760.7 1,626.1
Property and equipment, net 497.4 747.0
Goodwill and other intangibles 1,187.7 1,251.0
Other assets 594.7 518.6
-------- --------
Total assets $4,040.5 $4,142.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Other current liabilities $ 430.3 $ 397.4
Current portion of long-term debt, capital lease
obligations and short-term borrowings 173.7 0.4
-------- --------
Total current liabilities 604.0 397.8
Long-term debt and capital lease obligations 1,133.2 1,241.2
Deferred tax and other long-term liabilities 263.0 196.9
-------- --------
Total liabilities 2,000.2 1,835.9
Minority interest in consolidated subsidiaries 6.8 6.5
-------- --------
Stockholders' equity:
Common stock 2,945.6 2,958.0
Deferred stock compensation (31.7) (51.2)
Accumulated deficit (896.7) (612.2)
Accumulated other comprehensive income 16.3 5.7
-------- --------
Total stockholders' equity 2,033.5 2,300.3
-------- --------
Total liabilities and stockholders' equity $4,040.5 $4,142.7
======== ========
LSI LOGIC CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS, EXCEPT WHERE NOTED)
(UNAUDITED)
Three Months Ended Six Months Ended
---------------------- ----------------------
Jun. 30, Jun. 30, Jun. 30, Jun. 30,
2003 2002 2003 2002
-------- ------- -------- --------
OPERATING ACTIVITIES:
Net loss (162,084) (62,291) (284,509) (234,044)
Adjustments:
Depreciation & amortization 65,053 87,029 152,111 175,928
Amortization of non-cash deferred stock compensation 8,884 23,849 19,427 50,770
Non-cash restructuring and non-recurring items, net 97,569 (7,303) 127,323 49,598
Loss on write down of equity securities, net 2,068 -- 9,074 --
Loss on repurchase of Convertible Subordinated Notes 2,029 -- 2,029 --
Gain on sale of property and equipment (857) -- (2,560) --
Changes in deferred tax assets and liabilities 447 (3,341) 37 (3,171)
Changes in assets and liabilities
Accounts receivable, net (15,660) (19,057) 8,500 (49,577)
Inventories, net 1,826 1,787 (10,040) 61,115
Prepaid expenses and other assets 52,776 13,846 52,440 (9,308)
Accounts payable 13,134 (7,766) 12,028 (41,398)
Accrued and other liabilities 17,000 (1,686) 18,205 (9,847)
-------- ------- -------- --------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 82,185 25,067 104,065 (9,934)
-------- ------- -------- --------
INVESTING ACTIVITIES:
Purchases of debt and equity securities available-for-sale (552,298) (386,122) (1,409,529) (937,742)
Maturities and sales of debt and equity securities available-for-sale 570,318 303,380 1,455,927 627,823
Purchases of equity securities -- (8,500) -- (9,894)
Proceeds from (purchases)/sale of property and equipment, net (8,586) (7,397) 140,337 (12,148)
Decrease/(increase) in non-current assets and deposits 4,642 7,083 (145,768) 236
-------- ------- -------- --------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 14,076 (91,556) 40,967 (331,725)
-------- ------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings 350,000 -- 350,000 --
Repurchase of Convertible Subordinated Notes (288,587) -- (288,587) --
Cash paid for call spread options (28,000) -- (28,000) --
Debt issuance costs (10,566) -- (10,566) --
Repayment of debt obligations (86) (83) (174) (191)
Issuance of common stock, net 15,648 24,967 15,890 26,589
-------- ------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 38,409 24,884 38,563 26,398
-------- ------- -------- --------
-------- ------- -------- --------
Effect of exchange rate changes on cash and cash equivalents 2,966 2,434 3,722 4,065
-------- ------- -------- --------
Increase/(decrease) in cash and cash equivalents 137,636 (39,171) 187,317 (311,196)
Cash and cash equivalents at beginning of period 498,528 485,113 448,847 757,138
-------- ------- -------- --------
Cash and cash equivalents at end of period 636,164 445,942 636,164 445,942
======== ======= ======== ========
LSI LOGIC CORPORATION
SELECTED FINANCIAL INFORMATION (GAAP)
(IN MILLIONS, EXCEPT WHERE NOTED)
(UNAUDITED)
Three Months Ended
--------------------------------------
June 30, Mar. 31, June 30,
2003 2003 2002
---------- ---------- ----------
Semiconductor revenues $ 306.2 $ 273.1 $ 354.8
Storage Systems revenues $ 101.0 $ 99.7 $ 83.0
Total revenues $ 407.2 $ 372.8 $ 437.8
Percentage change in revenues-qtr./qtr.(a) 9.2% -22.3% 6.1%
Percentage change in revenues-yr./yr.(b) -7.0% -9.6% -5.9%
Days sales outstanding 53 54 50
Days of inventory 78 75 65
Current ratio 2.9 2.3 3.7
Quick ratio 2.2 1.7 2.6
R&D as a percentage of revenues 27.3% 30.9% 25.8%
SG&A as a percentage of revenues 14.0% 15.5% 13.1%
Gross margin as a percentage of revenues 41.4% 33.5% 37.3%
Employees(c) 5,044 5,323 5,445
Revenues per employee (in thousands)(d) $ 322.9 $ 280.1 $ 321.6
Diluted shares (in thousands) 376,619 374,628 369,672
Selected Cash Flow information;
Purchase of property and equipment(e) $ 13.0 $ 14.7 $ 8.8
Depreciation/amortization(f) $ 41.8 $ 61.1 $ 62.1
In-process research and development $ -- $ -- $ --
Issuance of common stock for employee stock
purchase and option programs $ 15.6 $ 0.2 $ 25.0
(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) Represents gross addition of property and equipment.
(f) Represents depreciation of fixed assets and amortization of software.
Excludes amortization of intangibles and non-cash deferred stock
compensation.