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Filed by LSI Logic Corporation
Pursuant to Rule 425 under
the Securities Act of 1933
Subject Company: C-Cube Microsystems Inc.
Commission File No.:333-58862
LSI Logic Reports First Quarter 2001 Revenues and Profits
- First Quarter Revenues of $517 million.
- Net income EBG* of $9.5 million.
- Diluted per share EBG of 3 cents; compared to First Call consensus estimate
of 3 cents.
- Cash and short-term investments of $1.1 billion.
* Earnings before goodwill amortization and other special items.
LSI Logic Takes Steps to Reduce Expenditures and Enhance Competitive Position
For Future Growth
MILPITAS, Calif., April 24 /PRNewswire Interactive News Release/ -- LSI
Logic Corporation (NYSE: LSI) today reported 2001 first quarter revenues of $517
million, a 31 percent decrease from the $751 million reported in the fourth
quarter, and 16 percent lower than the $615 million recorded in the first
quarter of 2000.
First quarter 2001 net income, before amortization of goodwill and other
special items (EBG), was $9.5 million or 3 cents a diluted share, compared to
$116 million or 34 cents a diluted share in the fourth quarter, and $88 million
or 26 cents a diluted share in the first quarter of 2000.
"Our first quarter financial results were impacted by the abrupt decline of
the U.S. economy, weakened end-demand and the widespread accumulation of
inventory in the supply chain," said Wilfred J. Corrigan, LSI Logic chairman and
chief executive officer. "While our visibility is limited, there are indicators
that point to the resumption of revenue growth in the second half of the year."
"We announced an accretive transaction to acquire C-Cube Microsystems to
expand our position in global communications and consumer markets. We signed a
process technology collaboration agreement with TSMC, allowing us to more
rapidly deliver advanced products to the marketplace and to reduce our
development costs. We also announced the closure of our Colorado Springs
facility, consolidating our manufacturing to our world-class Gresham and Tsukuba
fabs. LSI Logic will compete from a position of strength when the industry
rebounds with leading-edge technology for the communications, storage and
consumer markets."
Bryon Look, LSI Logic executive vice president and chief financial officer,
said the company will take a $120 million to $150 million charge for fixed asset
write-downs, severance, direct exit costs and other expenses associated with the
August closure of the company's Colorado Springs manufacturing facility. The
restructuring charge will be incurred in the second quarter, and other related
charges will be recorded in the second and third quarters of 2001.
"LSI Logic has responded aggressively to rapidly changing economic
conditions," said Look. "We have taken action to reduce expenditures, invest in
our future and strengthen our balance sheet. We are prepared for the anticipated
resumption of growth in our targeted vertical markets."
LSI Logic also learned today that the Federal Trade Commission has granted
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act with respect to its exchange offer for all of the outstanding
shares of C-Cube common stock. In addition, LSI Logic anticipates that its
registration statement filed in connection with the exchange offer will be
declared effective by the Securities and Exchange Commission
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on April 26. The exchange offer commenced on April 13, and is scheduled to
expire at midnight EDT on May 10, unless extended.
LSI Logic Business Outlook
LSI Logic expects 2001 Q2 revenues to decline approximately 10-15 percent
sequentially from the $517 million reported in the first quarter.
The company anticipates reporting a second quarter loss of 7 cents a
diluted share on an EBG basis.
Second quarter gross margin is expected to be approximately 38 percent.
The company does not anticipate selling any equity investments in the
second quarter.
The 2001 tax rate is expected to be 25 percent.
Capital spending for 2001 is anticipated to be approximately $500 million.
Second quarter depreciation is projected to be about $99 million.
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 Announcements
- LSI Logic Corporation and C-Cube Microsystems Inc. announced a
definitive merger agreement in which LSI Logic has agreed to acquire
C-Cube in a stock-for-stock transaction valued at approximately $878
million. The transaction is expected to be accretive to LSI Logic
earnings (EBG) in 2001.
http://www.lsilogic.com/news/financial_news/fr20010326.html
- LSI Logic and Taiwan Semiconductor Manufacturing Company announced an
agreement to combine their efforts for development of advanced process
technologies and to collaborate on state-of-the-art manufacturing.
http://www.lsilogic.com/news/corporate_news/cr20010404.html
- LSI Logic announced plans to close its Colorado Springs manufacturing
facility in August, taking a $120 million to $150 million charge for
fixed asset write-downs, severance, direct exit costs and other
closure-related expenses.
http://www.lsilogic.com/news/corporate_news/cr20010411.html
- BBC Research & Development and LSI Logic received the Queen's Award
for Industry in the "Innovation" category for the jointly developed
single-chip terrestrial television (DTT) demodulator.
http://www.lsilogic.com/news/corporate_news/cr20010423.html
- LSI Logic licensed NewLogic Technology's Bluetooth intellectual
property core in order to offer this capability for integration into
custom and standard chips for next-generation communications products.
http://www.lsilogic.com/news/corporate_news/cr20010416.html
- LSI Logic introduced the LSI403Z digital signal processor, intended
for the Small Office Home Office (SOHO) and residential gateway
applications.
http://www.lsilogic.com/news/product_news/pr20010306.html
- LSI Logic introduced the newest product in the company's
SignalSphere(TM) wireless family, the CBP 4.0, a highly integrated
single-chip CDMA baseband processor supporting the 3G standard.
http://www.lsilogic.com/news/product_news/pr20010319.html
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- Conexant Systems Inc. licensed LSI Logic's ZSP?400 digital signal
processor (DSP) core for integration across its product lines
supporting wireless mobile and communications applications. Broadcom,
Brecis Communications, Virata and IBM also to license LSI Logic's open
architecture DSP core.
http://www.lsilogic.com/news/corporate_news/cr20010316.html
- LSI Logic announced two products in the SpeedREACH(TM) family,
designed to fuel the growth of the consumer ADSL market by providing
better performance at a lower cost for both central office and
customer premise equipment applications.
http://www.lsilogic.com/news/product_news/pr20010129.html
- LSI Logic announced the availability of its Fusion-MPT(TM)
architecture integrated mirroring for servers and high-end
workstations. The new integrated mirroring feature provides
fault-tolerant solutions for NAS (Network Attached Storage) connected
servers. http://www.lsilogic.com/news/product_news/pr20010316.html
- LSI Logic introduced a set of environmentally friendly, lead-free ball
grid array packages widely used in communications and storage
products. These advanced lead-free packaging solutions comply with
government directives and environmental regulations in the United
States, Europe and Japan.
http://www.lsilogic.com/news/product_news/pr20010314.html
- LSI Logic announced the first fully integrated Ethernet switch for HP
Procurve Networking 10/100/1000 switches that achieves the highest
level of integration in the industry today.
http://www.lsilogic.com/news/product_news/pr20010115.html
LSI Logic Conference Call Information: LSI Logic will hold a conference
call today at 2 p.m. PDT to discuss first quarter financial results. The access
number is 212-346-0184. The call will be webcast real time through
http://www.StreetFusion.com. 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
800-633-8284, (858-812-6440, international) access code 18521690. The replay
will also be available over the Internet at the StreetFusion website. The
StreetFusion replay will be available until May 1.
LSI Logic has filed a Registration Statement on Form S-4 and a Schedule TO.
C-Cube has filed a Solicitation/Recommendation Statement on Schedule 14D-9 with
the Securities and Exchange Commission in connection with LSI Logic's exchange
offer for the outstanding shares of C-Cube. LSI Logic and C-Cube have mailed a
prospectus, the Schedule 14D-9 and related tender offer materials to
shareholders of C-Cube. These documents contain important information about the
transaction. Investors and security holders are urged to read these documents
carefully. Investors and security holders can obtain free copies of these
documents through the website maintained by the U.S. Securities and Exchange
Commission at http://www.sec.gov. In addition to the Registration Statement,
Schedule TO, Prospectus and Schedule 14D-9, LSI Logic and C-Cube file annual,
quarterly and special reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any reports,
statements or other information filed by LSI Logic or C-Cube at the SEC public
reference room at 450 Fifth Street, N.W., Washington, DC 20549 or at any of the
commission's other public reference rooms in New York, N.Y. or Chicago, Ill.
Please call the Securities and Exchange Commission at 800-SEC-0330 for further
information on the public reference rooms. LSI Logic's and C-Cube's filings with
the Securities and Exchange Commission are also available to the public from
commercial document-retrieval services and at the website maintained by the
commission, http://www.sec.gov.
Safe Harbor for Forward-Looking Statements: The statements by LSI Logic
management and the above statements regarding acceleration or deceleration of
future bookings, revenues and earnings, gross margins, gains from investment
income, tax rates, capital spending, and future depreciation estimates made in
this news release include forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities and Exchange Act of 1934, as amended. 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 may
include, but may not necessarily
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be 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
include, but are not necessarily limited to the timing and success of new
product introductions, the continued availability of appropriate levels of
manufacturing capacity and the realization of benefits from the company's
strategic relationships and investments. The extent to which the company's plans
for future cost reductions are realized may also impact its future performance.
The company operates in an industry sector where securities' values are highly
volatile and may be influenced by economic and other factors beyond the
company's control. In the context of forward-looking information provided in
this news release, reference is made to the discussion of risk factors detailed
in the Company's filings from time to time with the Securities and Exchange
Commission, including but not limited to filings made during the past 12 months.
LSI Logic Corporation is a leading designer and manufacturer of
communications 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 1551
McCarthy Boulevard, Milpitas, CA 95035, 866-574-5741 (within U.S.), 719-533-7679
(outside U.S.), http://www.lsilogic.com.
LSI LOGIC CORPORATION
Pro Forma Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, March 31,
2001 2000
--------- ---------
Revenues ....................................... $ 517,199 $ 615,186
Costs and expenses:
Cost of revenues ............................ 311,145 354,400
Research and development .................... 118,767 80,229
Selling, general and administrative ......... 78,971 70,240
Total costs and expenses .............. 508,883 504,869
Income from operations ......................... 8,316 110,317
Interest expense ............................... (9,940) (9,704)
Interest income and other, net ................. 8,979 7,129
Recurring investment income .................... 5,302 9,500
Income before income taxes ..................... 12,657 117,242
Provision for income taxes ..................... 3,164 29,311
Pro forma net income ........................... $ 9,493 $ 87,931
Pro forma earnings per share:
Basic ....................................... $ 0.03 $ 0.29
Diluted ..................................... $ 0.03 $ 0.26
Shares used in computing per share amounts:
Basic ....................................... 320,369 302,682
Diluted ..................................... 330,384 349,159
Pro forma statements of operations are intended to present the Company's
operating results, excluding special items described below, for the periods
presented.
During the three month period ended March 31, 2001, the special items
represented amortization of acquisition related items including intangibles and
non-cash deferred stock compensation.
During the three month period ended March 31, 2000, the special items
represented restructuring of operations and other non-recurring items, net and
other special items. The other special items consisted of an unplanned gain on
sale of equity securities, charges associated with the elimination of a
non-strategic product area and the write-off of debt issuance costs resulting
from repayment of bank debt during the quarter.
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The pro forma statements are prepared using the Company's calculated tax
rate of 25% when excluding special items.
In computing diluted pro forma earnings per share for the three month
period ended March 31, 2000, pro forma net income was increased by $2,750 for
interest, net of taxes, on the $345 million convertible notes considered
dilutive common stock equivalents.
A reconciliation from pro forma net income 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 Pro Forma Net Income to Reported Results
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, March 31,
2001 2000
--------- ---------
Pro forma net income ............................................. $ 9,493 $ 87,931
Special items:
Amortization of acquisition related items including
intangibles and non-cash deferred stock compensation ........ (43,356) (11,836)
Restructuring of operations and other non-recurring
items, net .................................................. -- (2,781)
Other special items ........................................... -- 12,383
Tax benefit ................................................... 7,615 546
Total special items ..................................... (40,741) (1,688)
Net (loss)/income ................................................ $ (31,248) $ 86,243
Pro forma earnings per share:
Pro forma net income .......................................... $ 0.03 $ 0.29
Special items** ............................................... (0.13) (0.01)
Net (loss)/income ............................................. $ (0.10) $ 0.28
Diluted earnings per share*:
Pro forma net income .......................................... $ 0.03 $ 0.26
Special items** ............................................... (0.13) (0.01)
Net (loss)/income ............................................. $ (0.10) $ 0.25
Shares used in computing per share amounts:
Basic ......................................................... 320,369 302,682
Diluted ....................................................... 330,384 349,159
* In computing diluted earnings per share for the three month period ended
March 31, 2001, common stock equivalents were excluded from the computation
of diluted earnings per share as a result of their antidilutive effect. In
computing diluted earnings per share for the three month period ended March
31, 2000, net income was increased by $2,750 for interest, net of taxes, on
the $345 million convertible notes considered dilutive common stock
equivalents.
** This line item includes rounding adjustments and the difference in diluted
shares for pro forma purposes as compared to GAAP.
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LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31, March 31,
2001 2000
--------- ---------
Revenues ................................................. $ 517,199 $ 615,186
Costs and expenses:
Cost of revenues ...................................... 311,145 365,500
Research and development .............................. 118,767 80,229
Selling, general and administrative ................... 78,971 70,240
Restructuring of operations and other non-recurring
items, net .......................................... -- 2,781
Amortization of acquisition related items including
intangibles and non-cash deferred stock compensation* 48,356 11,836
Total costs and expenses ........................ 557,239 530,586
(Loss)/income from operations ............................ (40,040) 84,600
Interest expense ......................................... (9,940) (10,893)
Interest income and other, net ........................... 8,979 7,129
Gain on sale of equity securities ........................ 5,302 34,172
(Loss)/income before income taxes ........................ (35,699) 115,008
(Benefit)/provision for income taxes ..................... (4,451) 28,765
Net (loss)/income ........................................ $ (31,248) $ 86,243
(Loss)/earnings per share:
Basic ................................................. $ (0.10) $ 0.28
Diluted*** ............................................ $ (0.10) $ 0.25
Shares used in computing per share amounts:
Basic ................................................. 320,369 302,682
Diluted ............................................... 330,384 349,159
* The amortization of acquisition related items including intangibles and
non-cash deferred stock compensation for the quarter ended March 31, 2001
are comprised of the following items:
Amortization of continuing intangibles................................ $27,089
Amortization of non-cash deferred stock compensation **............... 21,267
$48,356
** On July 1, 2000, FASB Interpretation ("FIN") No. 44, "Accounting For
Certain Transactions Involving Stock Compensation" was adopted by the
Company. The acquisition of DataPath Systems, Inc. closed on July 14, 2000
and Syntax Systems, Inc. closed on November 29, 2000, after the effective
date of the new interpretation. In accordance with FIN No. 44, the
intrinsic value of the options and restricted stock awards assumed as part
of the transaction and not vested as of the closing date was recorded as
deferred compensation and included as a component of stockholders' equity.
The deferred compensation is being amortized over the respective vesting
periods of the options and awards.
*** In computing diluted earnings per share for the three month period ended
March 31, 2001, common stock equivalents were excluded from the computation
of diluted earnings per share as a result of their antidilutive effect. In
computing diluted earnings per share for the three month period ended March
31, 2000, net income was increased by $2,750 for interest, net of taxes, on
the $345 million convertible notes considered dilutive common stock
equivalents.
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LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)
Three Months Ended
Assets March 31, March 31,
2001 2000
---------- ----------
Current assets:
Cash and short-term investments ............................. $ 1,059.6 $ 1,133.2
Accounts receivable, net .................................... 359.6 522.7
Inventories ................................................. 358.9 290.4
Prepaid expenses and other current assets ................... 133.3 125.9
Total current assets ......................... 1,911.4 2,072.2
Property and equipment, net .................................... 1,333.9 1,278.7
Goodwill and other intangibles ................................. 554.4 580.9
Other assets ................................................... 282.9 265.7
Total assets ................................. $ 4,082.6 $ 4,197.5
Liabilities and Stockholders' Equity
Current liabilities:
Current liabilities ........................................ $ 558.1 $ 626.0
Current portion of long-term debt, capital lease obligations
and short-term borrowings ................................ 0.6 1.0
Total current liabilities .................... 558.7 627.0
Long-term debt, capital lease obligations and other noncurrent . 1,055.0 1,066.7
liabilities
Total liabilities ............................ 1,613.7 1,693.7
Minority interest in consolidated subsidiaries ................. 5.6 5.7
Stockholders' equity:
Common stock ................................................ 1,946.9 1,934.7
Deferred stock compensation ................................. (141.7) (163.0)
Retained earnings ........................................... 641.0 672.2
Accumulated other comprehensive income ...................... 17.1 54.2
Total stockholders' equity ................... 2,463.3 2,498.1
Total liabilities and stockholders' equity ... $ 4,082.6 $ 4,197.5
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LSI LOGIC CORPORATION
Selected Financial Information
(In millions, except where noted)
(Unaudited)
Three Months Ended
March 31, Dec. 31, March 31,
2001 2000 2000
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Semiconductor revenues........................................ $455.0 $642.5 $530.4
SAN Systems revenues.......................................... $62.2 $108.1 $84.8
Total revenues.............................. $517.2 $750.6 $615.2
Percentage change in revenues-qtr./qtr.(a).................... -31.1% 3.2% 5.2%
Percentage change in revenues-yr./yr.(b)...................... -15.9% 28.3% 32.7%
Capital additions............................................. $186.8 $247.9 $80.7
Depreciation / amortization(c)................................ $89.5 $87.8 $80.3
Days sales outstanding........................................ 63 63 58
Days of inventory............................................. 104 62 63
Current ratio................................................. 3.4 3.3 3.8
Quick ratio................................................... 2.5 2.6 2.9
R&D as a percentage of revenues............................... 23.0% 14.7% 13.0%
SG&A as a percentage of revenues.............................. 15.3% 11.0% 11.4%
Gross margin as a percentage of revenues...................... 39.8% 43.8% 40.6%
Employees(d).................................................. 7,298 7,221 6,557
Revenues per employee (in thousands)(e)....................... $283.5 $415.8 $375.3
Diluted shares (in thousands)(f).............................. 330,384 353,408 349,159
(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) Excludes amortization of acquisition related intangibles and non-cash
deferred stock compensation.
(d) Actual number of employees at the end of each period presented.
(e) Revenue per employee is calculated by annualizing revenue for each quarter
presented and dividing it by the number of employees.
(f) Shares used in determining pro forma diluted earnings per share.
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