SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ___________ to ___________
Commission File Number: 0-11674
LSI LOGIC CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2712976
(State of Incorporation) (I.R.S. Employer
Identification Number)
1551 McCarthy Boulevard
Milpitas, California 95035
(Address of principal executive offices)
(408) 433-8000
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES x NO
As of May 3, 1996 there were 128,851,668 shares of registrant's
Common Stock, $.01 par value, outstanding.
LSI LOGIC CORPORATION
Form 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
INDEX
Page
No.
PART I Financial Information
Item 1 Financial Statements
Consolidated Condensed Balance Sheets -
March 31, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Operations -
Three-Month Periods Ended March 31, 1996
and 1995 4
Consolidated Condensed Statements of Cash Flows -
Three-Month Periods Ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2 Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II Other Information
Item 1 Legal Proceedings 14
Item 6 Exhibits and Reports on Form 8-K 14
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except per share amount)
(Unaudited)
March 31, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 146,388 $ 172,780
Short-term investments 544,911 512,765
Accounts receivable, less
allowance for doubtful
accounts of $3,465 and $3,486 224,583 230,980
Inventories 125,676 139,857
Other current assets 60,251 80,348
Total current assets 1,101,809 1,136,730
Property and equipment, net 679,617 638,282
Other assets 84,326 74,575
Total assets $1,865,752 $1,849,587
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 156,406 $ 165,725
Accrued salaries, wages and benefits 26,327 34,825
Accrued restructuring costs 22,500 22,700
Other accrued liabilities 39,535 42,315
Income taxes payable 70,248 73,649
Current portion of long-term obligations
and short-term borrowings 10,375 56,569
Total current liabilities 325,391 395,783
Long-term obligations 296,693 222,388
Deferred income taxes 13,270 8,514
Minority interest in subsidiaries 5,983 6,656
Commitments and contingencies
Stockholders' equity:
Preferred shares; 2,000 shares
authorized - -
Common stock; $.01 par value;
250,000 shares authorized;
128,808 and 129,303 shares outstanding 1,288 1,293
Additional paid-in capital 832,749 853,538
Retained earnings 347,474 305,190
Cumulative translation adjustment 42,904 56,225
Total stockholders' equity 1,224,415 1,216,246
Total liabilities and stockholders'
equity $1,865,752 $1,849,587
See accompanying notes to unaudited consolidated condensed
financial statements.
</TABLE>
<TABLE>
<CAPTION>
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues $311,352 $280,158
Costs and expenses:
Cost of revenues 176,849 153,399
Research and development 40,945 24,378
Selling, general and
administrative 41,185 39,335
Total costs and expenses 258,979 217,112
Income from operations 52,373 63,046
Interest expense (3,208) (4,183)
Interest income and other 9,776 5,481
Income before income taxes and
minority interest 58,941 64,344
Provision for income taxes 16,508 18,016
Income before minority interest 42,433 46,328
Minority interest in net
income of subsidiaries 149 1,068
Net income $ 42,284 $ 45,260
Net income per share:
Primary $ 0.32 $ 0.37
Fully diluted $ 0.31 $ 0.35
Common share and common share equivalents
used in computing per share amounts:
Primary 131,774 120,770
Fully diluted 143,509 132,640
See accompanying notes to unaudited consolidated condensed
financial statements.
</TABLE>
<TABLE>
<CAPTION>
LSI LOGIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Operating activities:
Net income $ 42,284 $ 45,260
Adjustments:
Depreciation and amortization 33,310 30,750
Minority interest in net income
of subsidiaries 149 1,068
Change in:
Accounts receivable 3,429 (2,809)
Inventories 12,736 (4,378)
Other assets 3,904 (6,278)
Accounts payable (6,372) 21,749
Accrued and other liabilities 1,421 5,681
Accrued restructuring costs (134) (334)
Net cash provided by operating
activities 90,727 90,709
Investing activities:
Purchases of debt and
equity securities (290,446) (56,139)
Maturities and sales of debt
and equity securities 256,746 71,750
Purchase of restricted equity
securities (6,252) (13,966)
Purchases of property and equipment,
net of retirements and refinancings (85,415) (71,598)
Acquisition of stock from minority
interest holders (664) (129,134)
Net cash used for investing activities (126,031) (199,087)
Financing activities:
Proceeds from borrowings 78,176 16,608
Repayment of debt obligations (45,920) (4,186)
Issuance of common stock 6,447 163,633
Repurchase of common stock (27,241) -
Net cash provided by financing
activities 11,462 176,055
Effect of exchange rate changes
on cash and cash equivalents (2,550) 7,431
Increase (decrease) in cash and
cash equivalents (26,392) 75,108
Cash and cash equivalents at
beginning of period 172,780 224,503
Cash and cash equivalents at
end of period $ 146,388 $ 299,611
See accompanying notes to unaudited consolidated condensed
financial statements.
</TABLE>
LSI LOGIC CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1- In the opinion of the Company, the accompanying
unaudited consolidated condensed financial statements contain all
adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the financial information included
therein. While the Company believes that the disclosures are
adequate to make the information not misleading, it is suggested
that these financial statements be read in conjunction with the
audited consolidated financial statements and accompanying notes
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
For financial reporting purposes, the Company reports on a
13 or 14 week quarter and a 52 or 53 week year ending on the
Sunday closest to December 31. For presentation purposes, the
consolidated financial statements refer to the quarter's calendar
month end for convenience. The results of operations for the
quarter ended March 31, 1996 are not necessarily indicative of
the results to be expected for the full year.
Note 2 - Cash equivalents and short-term investments at March 31,
1996, consisted primarily of U.S. and foreign corporate debt
securities, time deposits, auction rate preferred stock,
commercial paper, bank notes, and U.S. and foreign government and
agency securities. Cash equivalents and short-term investments
held at March 31, 1996 and at December 31, 1995 approximate fair
market value and mature in one year or less. The Company
currently does not actively trade securities. Realized gains and
losses are based on book value of specific securities sold and
were not material during the quarters ended March 31, 1996 and
1995.
Note 3 - The Company has foreign subsidiaries which operate and
sell the Company's products in various global markets. As a
result, the Company is exposed to changes in foreign currency
exchange rates and interest rates. The Company utilizes various
hedge instruments, primarily forward exchange, currency swap and
interest rate swap contracts, to manage its exposure associated
with firm intercompany and third-party transactions. The Company
does not speculate in these financial instruments for profit on
exchange rate price fluctuations.
As of March 31, 1996, outstanding forward exchange and
currency swap contracts, settling April 1996 through September
1996, hedge various intercompany loans. Outstanding foreign
currency hedge instruments at December 31, 1995 consisted of
forward exchange and currency swap contracts to manage the
exposure associated with various intercompany loans, firm
obligations to the Company's Japanese manufacturing subsidiary
and third-party borrowings.
Additionally, the Company has several interest rate swap
contracts outstanding which convert the interest associated with
11.25 billion yen ($106 million) of borrowings by the Company's
Japanese manufacturing subsidiary from adjustable to fixed rates
(ranging from 2.65% to 2.90%). The interest rate swaps cover
payments to be made under term borrowings through 2001. In March
1996, the Company entered into an interest rate swap with forward
start dates through October 1996. The swap will convert
approximately 11 billion of future yen credit line drawdowns to
fixed rates ranging from 2.94% to 3.24%.
The following table summarizes by major currency the
forward exchange and currency swap contracts outstanding (in
thousands). The "buy" amounts represent the U.S. dollar
equivalent of commitments to purchase foreign currencies, and the
"sell" amounts represent the U.S. dollar equivalent of
commitments to sell foreign currencies. Foreign currency amounts
are translated at rates current at the reporting date.
<TABLE>
<CAPTION>
March 31, December 31,
Buy/(Sell): 1996 1995
<S> <C> <C>
Japanese Yen $ - $ 18,474
U.S. Dollar - (25,492)
Pound Sterling 3,647 5,614
Deutschemark (3,846) (5,990)
Singapore Dollar - 6,089
</TABLE>
These forward exchange and currency swap contracts are
considered identifiable hedges. Realized and unrealized gains
and losses are deferred until settlement of the underlying
commitments and are recorded in income as part of the purchase or
sale transaction when it is recognized, or as other gains or
losses when a hedged transaction is no longer expected to occur.
Deferred foreign exchange gains and losses were not material at
March 31, 1996 and December 31, 1995.
Note 4 - Balance sheet and cash flow information (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Inventories:
Raw materials $ 35,046 $ 44,758
Work-in-process 59,714 47,193
Finished goods 30,916 47,906
Total $ 125,676 $ 139,857
March 31, March 31,
1996 1995
<S> <C> <C>
Cash Paid for:
Income taxes $ 7,800 $ 4,400
Interest 5,800 6,000
</TABLE>
Note 5 - During the first quarter of 1996, $200,000 was charged
against the restructuring reserves. These charges were primarily
related to ongoing maintenance costs of the Company's vacant
German facility, including a decrease in reserves due to
translation adjustments as a result of the weakening
Deutschemark. Remaining reserves at March 31, 1996 include
approximately $4.5 million for remaining costs related to the
California manufacturing facilities and continued maintenance of
the vacant Braunschweig facility and $19 million for legal and
other corporate matters. These reserves are accounted for as
components of fixed assets and current liabilities at March 31,
1996 and December 31, 1995. Management believes that the total
reserves established are adequate to cover uncertainties in
connection with these matters. See further discussion in
Management's Discussion and Analysis of Results of Operations and
Financial Condition, Part I, Item 2 of this Form 10-Q.
Note 6 - The Company's effective tax rate differs from the
statutory rate due to the Company's expected earnings mix in its
foreign subsidiaries taxed at lower rates and anticipated
utilization of prior loss carryovers and other tax credits.
Note 7- On May 12, 1995, the Company's Board of Directors
approved a two-for-one stock split in the form of a stock
dividend for stockholders of record on May 23, 1995. The payment
date was June 21, 1995. Share information for all periods
presented has been retroactively adjusted to reflect this stock
dividend.
In February 1996, the Company's Board of Directors approved an
action which allows the Company to acquire up to 4 million shares
of the its own stock in the open market at current market prices.
During the first quarter of 1996, the Company repurchased one
million shares of its common stock from the open market for
approximately $27 million. The transactions were recorded as
reductions to common stock and additional paid-in capital.
Note 8 - A discussion of certain pending legal proceedings is
included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995. The information provided
therein remains unchanged. The Company continues to believe that
the final outcome of such matter discussed will not have a
material adverse effect on the Company's consolidated financial
position or results of operations. No assurance can be given,
however, that this matter will be resolved without the payment of
damages and other costs or that damages will not be increased to
an amount in excess of the Company's reserves with the potential
for having an adverse effect on the Company.
Certain additional claims and litigation against the Company
have also arisen in the normal course of business. The Company
believes that it is unlikely that the outcome of these claims and
lawsuits will have a materially adverse effect on the Company's
consolidated financial position or results of operations.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
General
The Company believes that its future operating results are and
will continue to be subject to quarterly variations based upon a
wide variety of factors, including the cyclical nature of both
the semiconductor industry and the markets addressed by the
Company's products, price erosion, competitive factors, the
availability and extent of utilization of manufacturing capacity,
fluctuations in manufacturing yields, the timing of new product
introductions, changes in product mix, product obsolescence and
the ability to develop and implement new technologies. The
Company's operating results could also be impacted by sudden
fluctuations in customer requirements, currency exchange rate
fluctuations and other economic conditions affecting customer
demand and the cost of operations in one or more of the global
markets in which the Company does business. As a participant in
the semiconductor industry, the Company operates in a
technologically advanced, rapidly changing and highly competitive
environment. The Company predominately sells custom products to
customers operating in a similar environment. Accordingly,
changes in the circumstances of the Company's customers may have
a greater impact on the Company than if the Company offered
standard products that could be sold to many purchasers. While
the Company cannot predict what effect these various factors may
have on its financial results, the aggregate effect of these and
other factors could result in significant volatility in the
Company's future performance and stock price. To the extent the
Company's performance may not satisfy expectations published
by external sources, public reaction could result in a sudden and
significantly adverse impact on the market price of the Company's
securities, particularly on a short-term basis.
The Company currently has international subsidiaries which
operate and sell the Company's products in various global
markets. The Company purchases a substantial portion of its raw
materials and equipment from foreign suppliers, and incurs labor
and other operating costs, particularly at its Japanese
manufacturing facility, in foreign currencies. As a result, the
Company is exposed to international factors such as changes in
foreign currency exchange rates or weak economic conditions of
the respective countries in which the Company operates. The
Company utilizes various instruments, primarily forward exchange
and currency swap contracts, to manage its exposure associated
with currency fluctuation on intercompany transactions and
certain foreign currency denominated commitments. At March 31,
1996, the Company had various forward exchange currency contracts
outstanding (see Note 3 to the Unaudited Consolidated Condensed
Financial Statements). These contracts hedge various
intercompany loans maturing during the second and third quarters
of 1996.
The Company's corporate headquarters and manufacturing facilities
are located near major earthquake faults. As a result, in the
event of a major earthquake the Company could suffer damages
which could materially and adversely affect the operating results
and financial condition of the Company.
While management believes that the discussion and analysis in
this report is adequate for a fair presentation of the
information, management recommends that this discussion and
analysis be read in conjunction with Management's Discussion and
Analysis included in the Company's 1995 Annual Report on Form
10-K for the year ended December 31, 1995.
Results of Operations
Revenues for the first quarter of 1996 increased 11% to $311.4
million as compared to $280.2 million during the same period in
1995. The increase in revenues was primarily due to increased
customer demand and increased volume relating to the production
of higher technology products. Production volume grew during the
first quarter of 1996 compared to the same period a year ago due
to the Company's continued increase in manufacturing capacity at
its Japanese and U.S. manufacturing facilities throughout 1995
and during the first quarter of 1996.
Key elements of the statements of operations, expressed as a
percentage of revenues, were as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Gross margin 43.2% 45.2%
Research and development expenses 13.2% 8.7%
Selling, general and administrative
expenses 13.2% 14.0%
Income from operations 16.8% 22.5%
</TABLE>
Gross margin declined to 43.2% during the first quarter of 1996
from 45.2% in the same period a year ago. The decline was
primarily attributable to lower factory utilization. The
Company's operating environment, combined with the resources
required to operate in the semiconductor industry, requires
managing a wide variety of factors such as factory and capacity
utilization, manufacturing yields, product mix, availability of
certain raw materials, terms negotiated with third-party
subcontractors and foreign currency exchange rate fluctuations.
Gross profit margin for the first quarter of 1996 may not be
indicative of expected results for the remainder of the fiscal
year.
The Company has significantly increased its volume production
capability from operating levels in the same period a year ago
resulting primarily from the installation of additional
production equipment in the Company's Japanese wafer
manufacturing facilities and improving manufacturing yields. The
Company has slowed construction of its Gresham manufacturing
facility based on expected future capacity requirements and
current capacity availability. This new facility is currently
expected to become operational by the middle of 1997. If demand
does not absorb the Company's available capacity at a sufficient
rate, the Company's gross margins and operating results could be
negatively impacted in future periods.
Changes in the relative strength of the yen may have a greater
impact on the Company's gross margin than other foreign exchange
fluctuations due to the Company's large wafer fabrication
operations in Japan. Although the average yen exchange rate for
the first quarter of 1996 decreased approximately 10% from the
same period in 1995, the effect on gross margin and net income
was not material as the Company's yen denominated sales offset
a substantial portion of its yen denominated costs during those
periods, and the Company hedged a significant portion of its
remaining yen exposures during the period. However, there is no
assurance that future changes in the relative strength of the yen
will not have a material effect on gross margins or operating
results.
Research and development (R&D) expenses increased approximately
$16.6 million in the first quarter of 1996 compared to the same
period in 1995. The increase in R&D expenses is primarily
attributed to increased staffing levels as the Company continues
to invest in the development of higher technology sub-micron
products and the related manufacturing processes, packaging and
design processes. As a percentage of revenue, R&D expenses
increased to approximately 13% in the first quarter of 1996
primarily resulting from a decline in revenues from levels during
the fourth quarter of 1995. The Company anticipates continuing
its investment in R&D at a rate of 12% to 14% of revenues
throughout the remainder of 1996.
Selling, general and administrative (SG&A) expenses increased
$1.9 million in the first quarter of 1996 compared to the same
period in 1995. The increase in total SG&A expenses was
primarily due to increased staffing levels. SG&A expenses
declined as a percentage of revenue to 13% in the first quarter
of 1996 compared to 14% for the same period in 1995. The decline
in SG&A expenses as a percentage of revenue reflects the trend of
more rapidly increasing revenues across the period. The Company
expects that SG&A expenses will continue to increase in absolute
dollars although such expenses may fluctuate as a percentage of
revenue on a quarterly basis.
Interest expense for the first quarter of 1996 decreased
approximately $1.0 million as compared to the same period in
1995. The decrease is attributed to lower interest rates on
primarily yen-denominated borrowings during 1996.
Interest income and other for the first quarter of 1996 increased
$4.3 million as compared to the same period in 1995. The
increase is primarily attributable to increased interest income
as a result of higher average cash and investment balances.
The Company recorded a provision for income taxes for the first
quarter of 1996 and 1995 with an effective rate of 28%. The
Company's effective tax rate is lower than the U.S. statutory
rate primarily due to the Company's expected earnings mix in its
foreign subsidiaries which are taxed at lower rates and
anticipated utilization of prior loss carryovers and other tax
credits.
Restructuring
The Company implemented a restructuring plan in the third quarter
of 1992 revising its global manufacturing strategy, streamlining
operations, discontinuing certain commodity products and focusing
its product strategy on high-end technology solutions.
Specifically, it involved the shutdown of the Braunschweig,
Germany test and assembly facility, the planned phase-out of the
Milpitas, California wafer fabrication facility, the
consolidation of certain U.S. manufacturing operations, the
downsizing of the chipset operation of its former subsidiary,
Headland Technology Inc., and severance costs for approximately
500 employees worldwide. The $102 million restructuring charge
included: the write-down and write-off of manufacturing
facilities, equipment and improvements; the estimated operating
costs attributable to the phase-out, closure and consolidation of
these manufacturing facilities; the write-down of commodity
chipset product inventories; the severance of manufacturing and
other personnel; the consolidation of certain U.S. and foreign
sales offices, design centers and administrative organizations;
and certain legal matters and other costs.
By the end of 1995, the Company had completed the phase-out of
the German test and assembly operation and written off the
facility, discontinued the chipset business, substantially
completed phased-down of its Milpitas wafer manufacturing
facility and certain U.S. assembly and test operations, and
completed consolidation of certain U.S. sales offices and design
centers. These actions included termination of approximately 400
employees.
The following table sets forth the remaining 1992
restructuring reserves at March 31, 1996 and December 31,
1995 (which are accounted for as components of fixed assets and
current liabilities) and charges taken during the first three
months of 1996 (in thousands):
Balance Balance
12/31/95 Utilized* 3/31/96
[S] [C] [C] [C]
Fixed asset related charges $ 1,900 $ (35) $ 1,865
Other provisions for phase-down
and consolidation
of manufacturing facilities 2,800 (165) 2,635
Relocation, lease terminations
and other corporate matters 19,000 - 19,000
Total $23,700 $ (200) $23,500
* Net of cumulative currency translation adjustments. Cash
charges totaled $125,000 during the first three months of 1996.
During the first three months of 1996, $200,000 was charged
against the restructuring reserves. These charges were for the
continued phase-down of its U.S. manufacturing facilities
relating to the write-off and disposition of equipment ($35,000)
and ongoing maintenance costs of its vacant German facility
($90,000), offset in part by a decrease in reserves due to
translation adjustments as a result of the weakening Deutschemark
($75,000). Reserves at March 31, 1996 include approximately $4.5
million for remaining costs related to the phase-down
of the California manufacturing facilities and continued
maintenance of the vacant Braunschweig facility and $19 million
for legal and other corporate matters. Management believes that
the total reserves established are adequate to cover
uncertainties in connection with these matters.
Financial Condition
The Company's cash, cash equivalents and short-term investments
increased $5.8 million during the first quarter of 1996 to $691.3
million from $685.5 million at the end of 1995. The slight
increase is due to cash provided from operations and net proceeds
from borrowings, offset almost fully by purchases of fixed assets
and repurchases of common stock. Working capital increased $35.5
million to $776.4 million at March 31, 1996 from $740.9 million
at December 31, 1995.
During the first quarter of 1996, the Company generated $90.7
million of cash and cash equivalents from its operating
activities, which is consistent with cash and cash equivalents
provided from operating activities during the first quarter of
1995. Cash and cash equivalents used for investing activities
during the first quarter of 1996 were $126.0 million compared to
$199.1 million during the same period in 1995. The decrease was
primarily attributable to the repurchase of all the minority
interest in the Company's manufacturing subsidiary during the
first quarter of 1995 for $125.9 million and was partially offset
by a $49.3 million increase in the net purchasing activity of
short-term investments during the first quarter of 1996 compared
to the same period in 1995. Cash and cash equivalents provided
by financing activities during the first quarter of 1996 were
$11.5 million compared to $176.1 million in the first quarter of
1995. The decrease is primarily attributed to proceeds of
$157.6 million received by the Company from a stock offering in
February 1995. Additionally, during the first quarter of 1996,
the Company had net borrowings of $32.3 million relating
primarily to financing arrangements at its Japanese manufacturing
subsidiary and repurchases of one million shares of the Company's
common stock for $27.2 million.
Net property and equipment was $679.6 million at March 31, 1996,
an increase of $41.3 million compared to $638.3 million at the
end of 1995. The increase was primarily due to $85.4 million of
fixed asset purchases (primarily equipment for the Company's
Japanese manufacturing facilities) and construction costs related
to a new wafer fabrication facility in Oregon (see below) net of
retirements and $11.8 million of equipment refinanced through
operating leases by its Japanese manufacturing subsidiary (see
additional discussion at Note 10 of the Unaudited Consolidated
Condensed Financial Statements), partially offset by $30.5
million of depreciation on fixed assets and the effect of
translation, primarily related to the weakening of the yen.
Management expects net capital additions (excluding operating
leases) to approximate $300 to $350 million for 1996. In August
1995, the Company announced that it had selected Gresham, Oregon
as the site for a new 8-inch wafer manufacturing facility and
began construction. The initial phase is expected to require
capital spending of approximately $600 to $800 million and, when
fully ramped, will have the capacity to run approximately 4,000
eight-inch wafers per week.
During 1995, the Company's manufacturing subsidiary entered into
a 25 billion yen credit line arrangement. As of March 31, 1996,
the Company had 11.25 billion yen ($106 million) outstanding
under the facility. Borrowings under the line of credit are for a
term of five years with principle payments due semiannually
beginning in July 1997. All borrowings under this credit line
have been converted to fixed rates through the use of interest
rate swaps (see Note 3 of Notes to Unaudited Consolidated
Condensed Financial Statements). Each of the Company's
significant foreign affiliates have lines of credit available for
local currency borrowings. These foreign bank lines of credit
were not material as of March 31, 1996.
The Company believes that its level of financial resources is
an important competitive factor in its industry. Accordingly, the
Company may, from time to time, seek additional equity or debt
financing. The Company believes that existing liquid resources
and funds generated from operations combined with funds from such
financing and its ability to borrow funds will be adequate to
meet its operating and capital requirements and obligations
through the foreseeable future. There can be no assurance that
such additional financing will be available when needed or, if
available, will be on favorable terms. Any future equity
financing will decrease existing stockholders' percentage equity
ownership and may, depending on the price at which the equity is
sold, result in dilution.
Part II
Item 1 Legal Proceedings
Reference is made to Item 3, Legal Proceedings, of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 for a discussion of certain pending legal
proceedings. The information provided at such reference remains
unchanged. The Company continues to believe that the final
outcome of this matter will not have a material adverse effect on
the Company's consolidated financial position or results of
operations. No assurance can be given, however, that this matter
will be resolved without the payment of damages and other costs
or that damages will not be increased to an amount in excess of
the Company's reserves with the potential for having an adverse
effect on the Company.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Calculation of Earnings Per Share
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
LSI LOGIC CORPORATION
(Registrant)
Date: May 13, 1996 By /s/ Albert A. Pimentel
Albert A. Pimentel
Senior Vice President Finance &
Chief Financial Officer
EXHIBIT 11.1
<TABLE>
<CAPTION>
LSI LOGIC CORPORATION
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Primary Earnings Per Share
Net income $ 42,284 $ 45,260
Average common and common
equivalent shares:
Average common shares outstanding 129,193 117,222
Dilutive options 2,581 3,548
131,774 120,770
Earnings per common and common
equivalent share $ 0.32 $ 0.37
Fully Diluted Earnings Per share
Net income $ 42,284 $ 45,260
Interest expense on convertible
subordinated debt,
net of tax effect 1,542 1,525
Adjusted net income $ 43,826 $ 46,785
Average common and common equivalent
shares on a fully diluted basis:
Average common shares outstanding 129,193 117,223
Convertible subordinated debt 11,734 11,734
Dilutive options 2,582 3,683
143,509 132,640
Fully diluted earnings per common
and common equivalent share $ 0.31 $ 0.35
</TABLE>
On May 12, 1995, the Company's Board of Directors approved a
two-for-one stock split in the form of a stock dividend for
stockholders of record on May 23, 1995. The payment date was on
June 21, 1995. Accordingly, share information for all periods
presented has been retroactively adjusted to reflect this stock
dividend.
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<CAPTION>
FINANCIAL DATA SCHEDULE
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 146,388
<SECURITIES> 544,911
<RECEIVABLES> 228,048
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<CURRENT-ASSETS> 1,101,809
<PP&E> 1,206,677
<DEPRECIATION> 527,060
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<BONDS> 143,750
<COMMON> 1,288
0
0
<OTHER-SE> 1,223,127
<TOTAL-LIABILITY-AND-EQUITY> 1,865,752
<SALES> 311,352
<TOTAL-REVENUES> 311,352
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<OTHER-EXPENSES> 82,130
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<INTEREST-EXPENSE> 3,208
<INCOME-PRETAX> 58,941
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<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.31
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