LSI Logic Reports Q4 and Full-Year 2006 Results

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.
 

Web site: http://www.lsilogic.com//



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