Back to GetFilings.com
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended January 2, 1994
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1551 MCCARTHY BOULEVARD, MILPITAS, CALIFORNIA 95035
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 433-8000
-------------------------
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
-------------------- -----------------------------------------
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
(TITLE OF CLASS)
---------------
None
---------------
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 requirement for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing price of the Common Stock on March 3,
1994 as reported on the New York Stock Exchange, was approximately $700,599,510.
Shares of Common Stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
As of March 3, 1994, registrant had 50,058,844 shares of Common Stock
outstanding.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference into Parts
I, II, III and IV of this Form 10-K Report: (1) Proxy Statement for
registrant's 1994 Annual Meeting of Stockholders, and (2) registrant's 1993
Annual Report to Stockholders.
===============================================================================
PART I
ITEM 1. BUSINESS
GENERAL
LSI Logic Corporation (the "Company") is a leader in the design,
development, manufacture and marketing of application-specific integrated
circuit ("ASIC") products. The Company provides computer aided engineering
design and technology services and software design tools that utilize the
Company's proprietary technologies for the design and development of ASICs by
the Company and its customers. The Company's ASIC technologies and engineering
design services enable its customers to reduce component design costs, improve
product performance, retain control over proprietary logic and shorten product
development cycles. The Company's ASIC technologies also are used in the
design, manufacture and marketing of certain types of integrated circuits as
standard products.
The Company has focused its marketing efforts primarily on a broad base of
manufacturers in the electronic data processing, telecommunications and certain
office automation industries and, within these industries, emphasizes desktop
and personal computing, networking and digital video applications. The Company
increasingly directs its marketing and selling efforts towards customers that
are acknowledged industry leaders in these markets. Customers include Alcatel
NV, Digital Equipment Corporation, Intel Corporation, Siemens AG, Silicon
Graphics, Inc. and Sun Microsystems, Inc.
The Company's ASIC design methodology permits very high levels of function
integration, thereby allowing implementation of systems-level solutions on a
single chip. A key factor in this approach is the Company's CoreWare product
library, which is comprised of predefined and characterized cells of industry
standard functions, protocols and interfaces such as the R33000 MIPS
microprocessor core family and DSPs implementing Ethernet, MPEG, JPEG, and ATM.
Using the Company's proprietary software design tools, one or more CoreWare
library elements may be combined with a customer's proprietary logic in an ASIC
design, thereby allowing the customer to significantly shorten product
development cycles when compared to traditional integrated circuit design
approaches.
An integral part of the Company's ability to deliver advanced integrated
circuits is its sophisticated process technologies and manufacturing
capabilities. The Company has developed and uses advanced manufacturing process
technologies, including a 0.6-micron CMOS process for the Company's advanced
products. The Company also has recently introduced a 0.5-micron CMOS process and
has begun performing product engineering services for certain customers that are
intended to result in products to be manufactured using this 0.5-micron process.
The densities achieved by these process technologies allow the Company to
implement systems-level designs on a single chip. The Company's proprietary
design tools are highly integrated with the Company's manufacturing process
requirements, thereby providing very high predictability that the product's
3
physical performance will mirror the computer simulation of the chip and afford
very high predictability of performance of products developed through use of the
Company's design methodology.
The Company obtains substantially all of its wafers from a majority-owned
subsidiary in Japan, Nihon Semiconductor Inc. ("NSI"). To date, the Company has
purchased substantially all of the output of NSI. NSI commenced volume
production at a second wafer fabrication facility in the first quarter of 1994.
The Company markets its products and services on a worldwide basis through
a direct sales, marketing and field technical staff of approximately 775
employees (including its majority-owned subsidiaries in Europe, Canada and
Japan), and through independent sales representatives and distributors. The
Company has over 30 design centers around the world to assist customers in
product design activities.
The Company was incorporated in California on November 6, 1980 and
reincorporated in Delaware on June 11, 1987. Its principal offices are located
at 1551 McCarthy Boulevard, Milpitas, California 95035, and its telephone number
at that location is (408) 433-8000. Except where otherwise indicated,
references to "the Company" shall mean LSI Logic Corporation and its majority-
owned subsidiaries.
PRODUCTS AND SERVICES
STRATEGY
The Company's strategy is to provide its customers with a comprehensive
approach and a continuum of solutions for the design and manufacture of ASICs.
This strategy is intended to maximize the advantages of the Company's ASIC
design methodology while allowing customers substantial flexibility in how they
wish to complete an ASIC design project for products to be purchased from the
Company.
The Company's design environment reflects a high level of technology
integration from design concept through prototype manufacture to volume
production. Within this environment, the customer has a number of choices to
accomplish its design objective:
- The customer may choose the degree of engineering involvement it will
have in the design activities. The Company may provide advice for the
partitioning of systems functions to be implemented in one or more
ASICs for the customer's system. Alternatively, the customer may
establish product specifications for implementation into a particular
chip design by the its engineers, by the Company's engineers on a
"turn-key" basis or through a collaborative effort.
4
- The customer may choose which ASIC software design tools to use for
much of its ASIC design activities. The Company's design environment,
which includes expanded interface capabilities to certain third party
EDA software design tools from companies such as Cadence Designs
Systems, Inc., Mentor Graphics Corporation, and Synopsys, Inc., allows
for such third party tools to be used to perform substantial portions
of an ASIC design for a customer. The Company has expertise in the
use of these tools and can assist the customer if so desired.
- The customer may choose the extent to which the customer's ASIC design
is based upon the customer's proprietary logic and upon the Company's
library elements of predetermined blocks of standard functions. The
Company's CoreWare product library elements are the most complex of
these predetermined blocks of functions.
- The customer can choose the degree of functionality it wishes to
integrate on a single chip. For example, the customer may integrate
an entire electronic system on a single chip or may partition the
system's functionality over two or more chips, depending upon a
variety of factors.
Upon completion of the activities that result in a fully computer-simulated
ASIC design, the Company's design environment supports automated completion of
the physical portions of the design activities such as chip layout and test tape
generation. The Company's proprietary design tools are highly integrated with
the Company's manufacturing process requirements, thereby providing very high
predictability that the product's physical performance will mirror the computer
simulation of the chip.
The Company believes that prompt delivery of ASIC prototypes is an
important element of full customer support in ASIC product development.
Accordingly, the Company schedules its manufacturing operations to permit both
timely delivery of engineering prototype ASICs and efficient volume production
operations.
ASICS
DESIGN AND TECHNOLOGY SERVICES. The Company has developed and offers to
customers its proprietary software design tools. These design tools comprise a
computer aided engineering (CAE) design system consisting of a central design
software module integrated with other software programs that, together, improve
the circuit designer's productivity. The Company's capabilities in design
automation are based upon its proprietary Concurrent Modular Design Environment
System, also known as C-MDE design tools. The C-MDE design tools are a
graphics-based suite of CAE tools that are interactive and provide the designer
with the capability of performing design activities based on a single unified
database. The Company's earlier design automation tools, known as Modular
Design Environment software, or MDE software, continue to be supported by the
Company. The Company's proprietary design tools (which operate on a variety of
generally available advanced
5
computer workstation platforms) are used by the Company and its customers to
design ASICs which meet the customer's specific functionality and performance
requirements.
The Company's proprietary software design tools include a basic set of
library elements of semiconductor macrocells (these are the basic silicon
structures used in the design of logic circuits and the larger predefined
functional building blocks "megacells" and "megafunctions"), technology data
bases and design automation software programs. In addition, the Company's
CoreWare product library elements are designed for use with the Company's C-MDE
design tools. Engineering resources required for development and productization
of CoreWare elements are substantially greater than for megacells and
megafunctions.
The Company's engineering design service approach allows the customers to
determine the level of participation which the customers will have in the design
process. The Company may provide complete "turn-key" engineering support for
design projects where the customer provides high-level functional objectives.
This type of engineering support is well suited for a customer's system-level
design project in which the Company is engaged to utilize one or more of its
CoreWare library elements for delivering a system on a single chip. However,
the customer may also perform substantial design activity on its own using
either the Company's C-MDE design tools or any of a variety of third party EDA
vendor's design tools. Access to the Company's C-MDE design tools is available
at each of the Company's design centers and for installation at a customer's
site pursuant to a licensing agreement with the Company. See "Properties." In
addition, customers' designs that have originated through the use of certain
third party EDA vendors' design tools are transferrable into the Company's ASIC
design environment for manufacture of ASIC devices.
The ultimate output of the Company's integrated circuit design system is a
pattern generation tape from which the semiconductor "masks" or production
tooling is made. The system also produces a test tape which is readable by
standard industry semiconductor testing equipment. The Company's software
design tools support and automatically perform key elements of the design
process from circuit concept through physical layout of the circuit design and
preparation of pattern generation tapes.
After completion of the engineering design effort, the Company produces and
tests prototype circuits for shipment to the customer. Thereafter, the Company
will commence volume production of integrated circuits that have been developed
through one or more of the arrangements described above in accordance with the
customer's quantity and delivery requirements. The Company generally does not
have volume production contracts with its customers for engineering design
services. Therefore, whether any specific ASIC design will result in volume
production orders and the quantities included in such orders are factors beyond
the control of the Company. Insufficient orders will result in underutilization
of the Company's factory which would adversely impact the Company's operating
results.
As part of its strategy, the Company has granted licenses to certain large
customers for the right to use certain elements of its process technology know-
how to enable the customer to manufacture certain products as an internal
alternate source of supply. Generally, these licenses are
6
granted in connection with development projects of a customer that has licensed
the Company's design tools and has selected the Company as its primary source of
ASIC products. In addition, the Company has entered into alternate source
license agreements pursuant to which the Company has granted to certain
companies the non-exclusive right to utilize and market certain of the Company's
logic array design and production technology in competition with the Company.
The Company believes that these agreements are important for the long-term
development of the logic array semiconductor market.
COMPONENTS AND TECHNOLOGIES. The Company offers its customers ASIC
solutions based upon metal programmable array, cell-based and Embedded Array
architectures which utilize the Company's CoreWare product libraries, the
customer's proprietary logic, or a combination of both approaches. The Company
offers a wide variety of die sizes and functionality configurations, including
both logic and memory elements, for its ASIC products. These products are
available in different feature sizes and are based on different process
technologies.
A metal programmable array, also known as a gate array, is a matrix of
uncommitted transistors contained on a single chip of silicon. The gate array
is "programmed" (I.E., customized) only in the last steps of the fabrication
process. This enables the manufacturer to produce large quantities of
uncommitted gate arrays, known as "base arrays," and to benefit from the
economies of volume chip production. These basic silicon substrates, sometimes
referred to as "masterslices", are designed and manufactured in a fashion
similar to standard integrated circuits. The individual elements are
interconnected at the metallization step in the manufacturing process to
implement user defined functions. Gate arrays, when compared to many standard
logic circuits, provide the system manufacturer with lower cost, higher
reliability, lower power consumption, increased performance and smaller end
products.
The Company emphasizes its proprietary Channel-Free gate array architecture
for gate array designs. The Company's gate array products offer high levels of
design complexity. Base arrays for the Company's different gate arrays are mass
produced in a variety of die sizes and are held in inventory by the Company for
customization at a later time. During customization, the array is programmed
quickly by the interconnection of its logic elements into the exact circuit
specified by the customer.
The Company's cell-based technology allows the customer to combine standard
cells, memories such as fully static random access memory (RAM), static multi-
port RAM, metal programmable read only memory (ROM) and other dedicated very
large scale integration (VLSI) building blocks called megacells on a single
chip. Through combinations of these various cell-based structures, the Company
can provide the customer with customized solutions to a wide variety of digital
design problems.
In addition, the Company offers its customers the opportunity to create
proprietary masterslices by utilizing a combination of the Company's standard
cell technology with metal programmable Channel-Free gate array technology.
This Embedded Array option can provide the
7
customer with both high performance and density features normally associated
with cell-based technology and with fast turnaround times resembling those
available only for gate array-based designs.
During 1992, the Company expanded its ASIC product lines with the addition
of its CoreWare product library elements. CoreWare library elements are complex
VLSI or large system-level pre-designed building blocks of integrated circuit
logic functions. CoreWare elements may be either developed by the Company or
acquired under technology transfer or licensing agreements between the Company
and other developers. In addition, CoreWare elements are highly integrated for
use with the Company's proprietary software design tools and those advanced
manufacturing processes to which individual cores are targeted.
The Company intends the CoreWare elements it offers to be based upon
industry standard functions, protocols and interfaces, thereby positioning them
to be useful in a wide variety of systems applications. The additional
capability afforded by the Company's CoreWare product libraries allows customers
to increase functional integration, including system-level applications on a
single chip. The Company's CoreWare product libraries are designed to allow
CoreWare elements to be used with the customer's proprietary logic in gate
array, cell-based or Embedded Array designs based upon the Company's design
methodology. Expansion of the Company's CoreWare library elements continued
during 1993 and is expected to continue into the foreseeable future.
The Company is increasingly emphasizing engineering development and
acquisition of CoreWare products and integration of CoreWare libraries into its
ASIC design capabilities in the Company's transition from manufacturing products
substantially based on the customer's proprietary logic design to emphasizing
ASIC opportunities that utilize the Company's CoreWare product libraries. There
can be no assurance, however, that the cores selected for investment of the
Company's financial and engineering resources will enjoy market acceptance or
that such cores can be successfully integrated into the Company's ASIC design
environment on a timely basis. See "Marketing and Customers."
STANDARD PRODUCTS
The Company's product engineering activities for its standard products
operations employ the same proprietary computer aided design tools that are used
in the Company's ASIC operations. As a result, many of the Company's standard
integrated circuit products are available both as standard devices and as large
building blocks, and as "cores" through the Company's CoreWare product library
elements, that may be implemented into a customer's design with the Company's
design tools. See "Products and Services -- ASICs." The Company believes that
this use of its ASIC technologies affords its standard products operations many
of the engineering benefits associated with ASIC designs and offers its
customers added flexibility in their systems engineering.
8
The Company's principal microprocessor product focus is on the two 32-bit
RISC (Reduced Instruction Set Computer) microprocessor architectures that have
met with broad market acceptance. These are the MIPS and the SPARC
architectures, which were originally developed by MIPS Computer Systems, Inc.
("Mips") and Sun Microsystems, Inc. ("Sun"), respectively. In 1992 as a result
of a merger, Mips became part of Silicon Graphics, Inc. Both the Mips and Sun
architectures are "open systems" designs, which various computer and systems
companies have adopted for their new products.
The Company offers several microprocessor products that implement the MIPS
and the SPARC 32-bit RISC architectures. Currently, these microprocessor
products are based on certain rights that the Company has received under license
agreements from Mips and Sun, respectively. As part of its microprocessor
product strategy, the Company also offers a number of peripheral chips that are
designed for use in systems based on the two RISC architectures that the Company
supports. These chips, which are offered as "chipsets", reduce the time
required for complete systems design, thereby allowing a systems customer an
enhanced opportunity for earlier market entry of its system-level products.
To address the telecommunications market, in 1993 the Company announced a
reprogrammable asynchronous transfer mode (ATM) termination device which
features an on-chip RISC based ATM processing unit. The Company also announced
its Compact and Scalable Dedicated Ethernet (CASCADE) product line for
implementing single-chip network hubs and routers for internetworking
applications.
The Company offers a family of high-speed digital signal and image
processing devices that perform a wide variety of common DSP operations. These
components are designed to operate in stand-alone or in multi-processing
configurations that offer flexibility and precision. In 1991, the Company
introduced a set of devices which may be combined to allow customers to design
high performance video compression "engines", such as in video-telephony and
high-definition television. In addition, a chipset supporting the JPEG (Joint
Photographic Experts Group) standard for still picture compression was
introduced in 1991. In 1993, the Company introduced its second generation JPEG
device. This JPEG co-processor is a single-chip device targeted at cost
sensitive imaging and desktop video applications. Also in 1993, the Company
introduced its MPEG2 (Motion Picture Experts Group) video decoder chip, used to
create products for digital TV set-top decoders. Many of the DSP devices are
available in both commercial and military versions and may be integrated as
"cores" in a customer's ASIC designs.
MANUFACTURING
The Company's manufacturing operations convert a customer's design into
packaged silicon chips and support customer volume production requirements.
Manufacturing begins with fabrication of uncommitted ("masterslice") wafers (for
gate array ASICs) or custom diffused wafers (for cell-based ASICs). Although
base layers for cell-based designs are themselves customized, gate array
9
masterslices are not and therefore may be inventoried by the Company pending
customization accomplished in the metallization stage of fabrication. In the
next stage of manufacture, metallization, layers of metal interconnects are
diffused onto the masterslice using customized masks. Wafers are then tested,
cut into die and sorted. The die that have passed initial test are then
assembled (embedded in and connected to one of a wide variety of packages) and
encapsulated. The finished devices then undergo additional tests before
shipment.
In 1985, the Company and Kawasaki Steel Corporation ("Kawasaki") formed a
Japanese subsidiary, Nihon Semiconductor Inc. ("NSI"), as part of a
comprehensive business relationship, including licensing certain technology to
Kawasaki. The Company maintains a majority ownership interest in NSI and is the
customer for substantially all of NSI's production. The Company has licensed to
NSI, on a non-exclusive basis, certain technology rights and is providing NSI
related support services. NSI has been in commercial production since August of
1988. NSI commenced volume production at a second wafer fabrication facility in
the first quarter of 1994. The Company manufactures substantially all of its
wafers at the two NSI facilities in Tsukuba, Japan pursuant to an agreement with
NSI and Kawasaki. The Company's ability to supply semiconductors currently
depends on an adequate continued supply of wafers from NSI. If the supply of
wafers from NSI were interrupted for any reason, including work stoppages, or
natural disasters, or if such supplies of wafers were inadequate to meet the
Company's demand, the Company would need to purchase wafers from one or more
alternate suppliers. There can be no assurance that alternate supplies of
wafers would be available on a timely basis or at all or that if available, they
could be purchased on favorable terms. The Company continues to perform certain
fabrication activities for metallization and for custom diffused wafers in its
wafer fabrication facilities in California.
The semiconductor industry is capital intensive. In order to remain
competitive, the Company must continue to make significant investments in new
facilities and capital equipment. In the last three years, the Company has
expended over $300 million in property and equipment, net of retirements. In
the first quarter of 1994, the Company commenced volume production at its
Japanese affiliate's second wafer fabrication facility and anticipates incurring
in excess of $100 million during 1994 for capital equipment and significant
amounts thereafter to bring this facility to full capacity. The Company
believes that in order to remain competitive, it will need to continue making
significant capital expenditures. There can be no assurance that the Company
will have the resources available when needed to meet these requirements. In
addition, these significant capital expenditures result in a relatively high
level of fixed costs. Accordingly, fluctuations in revenues may significantly
affect profitability.
Over the past four years, the Company has restructured its worldwide
manufacturing operations. This process has included, among other things, the
phase-down of older process technology facilities in Germany, the United Kingdom
and Canada, the consolidation of certain manufacturing to facilities in the
United States and Japan, the construction of a second wafer fabrication facility
in Japan, and the transfer of certain packaging, assembly and final test
operations to subcontractors in various locations. The Company continues to
evaluate its worldwide manufacturing operations to effect additional cost-
savings and technological improvements.
10
To remain competitive, the Company must be able to develop and implement
new process technologies to reduce semiconductor die size, increase device
performance, and manufacturing yields. The Company utilizes different high
performance complementary metal oxide semiconductor ("CMOS") process
technologies in the volume manufacture of its products, including a 0.6-micron
"drawn" CMOS process for the Company's most advanced products. The Company also
has recently introduced a 0.5-micron "drawn" CMOS process and has begun
performing product engineering services for certain customers that are intended
to result in products to be manufactured using this 0.5-micron process. The
Company is currently implementing this new 0.5-micron process technology at
NSI's second Japanese wafer manufacturing facility. If the Company is not able
to successfully implement new process technologies and to achieve volume
production of new products at acceptable yields using new manufacturing
processes, the Company's operating results will be adversely affected.
Development of advanced manufacturing technologies in the semiconductor
industry frequently requires that critical selections be made as to those
vendors from which essential equipment (including future enhancements) and after
sales services and support will be purchased by the Company. Similarly,
procurement of certain types of materials required by the Company's
manufacturing technologies also are closely linked with certain equipment
selections. When the Company implements specific technology choices, it may
become dependent upon certain sole- or single- source vendors. Accordingly, the
Company's capability to switch to other technologies and vendors may be
substantially restricted and may involve significant expense and delay in the
Company's technology advancements and manufacturing capabilities. The
semiconductor equipment and materials industries also contain a number of
vendors that are relatively small and have limited resources. Several of these
vendors provide equipment and or services to the Company. The Company does not
have long term supply or service agreements with vendors of certain critical
items. Additionally, there can be no assurances that disruptions in these
vendors' ability to perform will not occur. Should the Company experience such
disruptions, the Company's operations could be adversely affected.
The Company has in the past and will in the future, consider developing
foundry relationships with certain other semiconductor manufacturers whereby the
Company may purchase quantities of masterslices (both unmetallized and
metallized) that are manufactured to the Company's specifications. The Company
believes that the combination of the Company's own wafer fabrication facilities
and these relationships will provide the Company with adequate sources for
meeting its masterslice wafer and custom diffused wafer requirements for the
foreseeable future.
In the assembly process, the fabricated circuit is encapsulated into
ceramic or plastic packages. Plastic packaging is normally associated with
lower cost, commercially oriented products. Ceramic packaging is primarily
utilized in applications involving the need to protect the circuit against a
potentially harsh operating environment, such as in military applications.
The Company performs ceramic package assembly for its products at its
Fremont, California facility. This assembly line has been specially equipped to
support both the packaging needs of military as well as selected commercial
applications. The proportion of ceramic packaging being
11
done by independent assembly plants continues to increase and the Company
intends to begin ceramic packaging offshore in the next year. The Company has
subcontracted its plastic packaging requirements to several independent offshore
assembly plants.
Testing includes final test and final quality assurance acceptance.
Dedicated computer systems are used in this comprehensive testing sequence. The
test programs utilize the basic functional test criteria from the design
simulation which was generated and approved by the customers' design engineers.
Most product testing operations are currently conducted in close proximity to
the particular facility where assembly activities are performed. The Company
intends to continue increasing its use of independent assembly plants to test
its products.
Certain of the raw materials used in the manufacture of circuits are
available from a limited number of suppliers in the United States and elsewhere.
For example, for several types of the integrated circuit packages that are
purchased by the Company, as well as by the majority of other companies in the
semiconductor industry, the Company must rely on one vendor for the majority of
its supply. The Company does not have long-term fixed supply contracts with its
suppliers. Shortages could occur in various essential materials due to
interruption of supply or increased demand in the industry. If the Company were
unable to procure certain of such materials from any source, it would be
required to reduce its manufacturing operations. To date, the Company has
experienced no significant difficulty in obtaining the necessary raw materials.
The Company's operations depend upon a continuing adequate supply of
electricity, natural gas and water.
The Company purchases substantially all of the semiconductor wafers used
for its products from NSI, its Japanese affiliate. These transactions are
denominated in Japanese yen. In addition, the Company purchases a substantial
portion of its raw materials and equipment from foreign suppliers and incurs
labor costs in foreign locations. A portion of these transactions are
denominated in currencies other than in U.S. dollars, principally in Japanese
yen. The Company also has borrowings denominated in yen, which totaled
approximately 15 billion yen (approximately $136 million) at December 31, 1993.
Such transactions and borrowings expose the Company to exchange rate
fluctuations for the period of time from inception of the transaction until it
is settled. In recent years, the yen has fluctuated substantially against the
U.S. dollar. There can be no assurance that fluctuations in the currency
exchange rates in the future will not have an adverse impact on the Company's
results of operations. The Company has entered and will from time to time enter
into hedging transaction in order to minimize exposure to currency rate
fluctuations. In addition, there can be no assurance that inflation rates in
countries where the Company conducts operations will not adversely affect the
Company's operating results in the future.
Both manufacturing and sales of the Company's products may be adversely
affected by political and economic conditions abroad. Protectionist trade
legislation in either the United States or foreign countries, such as a change
in the current tariff structures, export compliance laws or other trade
policies, could adversely affect the Company's ability to manufacture or sell in
foreign markets. In countries in which the Company is conducting business in
local currency, currency exchange fluctuations could adversely affect the
Company's revenues or costs.
12
MARKETING AND CUSTOMERS
The Company has focused its marketing efforts primarily on a broad base of
manufacturers in the electronic data processing, telecommunications and certain
office automation industries and, within these industries emphasizes desktop and
personal computing, networking and digital video applications.
An essential element of the Company's marketing strategy is to develop
close working relationships with its major customers' engineers by using the
Company's proprietary software design tools for design support and training
services. The customers' product or system design engineers typically attend a
training session at one of the Company's design centers. Alternatively, the
customer may elect to have the Company design the circuit, or may design the
circuit at its own facility through the licensing of the Company's proprietary
design tools. The Company currently has regional design centers in Canada,
Japan, other Asia Pacific countries and throughout the United States and Western
Europe. See "Properties".
The Company markets its products and services through its worldwide direct
sales and marketing organization which consists of approximately 775 employees
(including subsidiaries), and through independent sales representatives and
distributors. All of the Company's design centers also include a direct sales
office. See "Properties". For information concerning foreign operations, see
Note 7 of Notes to Consolidated Financial Statements in the 1993 Annual Report
to Stockholders and "Products and Services--Strategy." International sales are
generally denominated in local currencies. International sales are subject to
risks common to export activities, including governmental regulations, trade
barriers, tariff increases and currency fluctuations. To date, the Company has
not experienced any material difficulties because of these risks.
In 1993, 1992 and 1991 Sun Microsystems, Inc. accounted for approximately
12%, 15% and 16%, respectively, of the Company's revenues. The Company has
increasingly directed its efforts on developing strategic relationships with key
technology leaders with differentiated products. This strategy provides the
Company with access to leading technologies, some of which may be included in
its CoreWare library. The Company, however, expects that this strategy will
result in the Company becoming increasingly dependent on a limited number of
customers for a substantial portion of its revenues.
BACKLOG
Generally, the Company's customers are not subject to long-term contracts,
but to purchase orders which are accepted by the Company. Quantities of the
Company's products to be delivered and delivery schedules under purchase orders
outstanding from time to time are frequently revised to reflect changes in
customer needs. In addition, the timing of the performance of design services
13
included in the Company's backlog at any particular time is generally within the
control of the customer, not the Company. For these reasons, the Company's
backlog as of any particular date is not a meaningful indicator of future sales.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
rapid technological change, rapid product obsolescence and price erosion. The
semiconductor industry has historically been characterized by wide fluctuations
in product supply and demand. From time to time, the industry also has
experienced significant downturns, often in connection, or in anticipation of
maturing product cycles (of both the Company and its customers) and declines in
general economic conditions. These downturns have been characterized by
diminished product demand, production overcapacity and subsequent accelerated
erosion of average selling prices, and in some cases have lasted for more than a
year. Currently, the semiconductor industry in general, including the Company,
is experiencing a period of increased demand. There is no assurance that these
conditions will continue. The Company may experience substantial period-to-
period fluctuations in future operating results due to general industry
conditions or events occurring in the general economy and the Company's business
could be materially and adversely affected by a significant industry-wide
downturn in the future.
The Company's competitors include many large domestic and foreign companies
which have substantially greater financial, technical and management resources
than the Company, as well as emerging companies attempting to sell products to
specialized markets such as those addressed by the Company. Several major
diversified electronics companies, including Fujitsu, Ltd., Toshiba Corporation,
NEC Corporation and a number of United States semiconductor manufacturers offer
ASIC products and/or offer products which are competitive to the product lines
of the Company. In addition, there is no assurance that certain large
customers, some of whom the Company has licensed to use elements of its process
and product technologies, will not develop internal design and production
operations to produce their own ASICs.
The principal factors on which competition in the ASIC market is based
include design capabilities (including both the software design tool features,
compatibility with industry standard design tools, CoreWare library and the
skills of the design team), quality, delivery time and price. The Company
believes that it presently competes favorably on these bases, and that its
success will depend on its continued ability to provide its customers with a
complete range of design services and manufacturing capabilities. There can be
no assurance, however, that other custom logic design approaches will not be
developed which could have an adverse impact on the Company's business and
results of operations.
RESEARCH AND DEVELOPMENT
The market for the Company's products is characterized by rapid changes in
both product and process technologies. Because of continual improvements in
these technologies, the Company
14
believes that its future success will depend, in part, upon its ability to
continue to improve its product and process technologies and to develop new
technologies in order to maintain the performance advantages of its products and
processes relative to competitors, to adapt products and processes to
technological changes and to adopt emerging industry standards.
The Company's research and development emphasizes the design of new
products, improvements in process technologies, enhancements of design tools,
and cost reduction of existing products. During 1993, 1992 and 1991, the
Company expended $78,995,000, $78,825,000, and $80,802,000, respectively, on its
research and development activities. The Company expects to continue to make
significant investments in research and development activities and believes such
investments are critical to its ability to continue to compete with other ASIC
manufacturers. See "Management's Discussion and Analysis" in the 1993 Annual
Report to Stockholders.
PATENTS, TRADEMARKS AND LICENSES
The Company owns various United States and international patents and has
additional patent applications pending relating to certain of its products and
technologies. The Company also maintains trademarks on certain of its products
and services. Although the Company believes that patent and trademark
protection have value, the rapidly changing technology in the semiconductor
industry makes the Company's future success dependent primarily upon the
technical competence and creative skills of its personnel rather than on patent
and trademark protection.
As is typical in the semiconductor industry, the Company has from time to
time received, and may in the future receive, communications from other parties
asserting patent rights, mask work rights, copyrights or trademark rights that
such other parties allege cover certain of the Company's products, processes,
technologies or information. Several such assertions relating to patents are in
various stages of evaluation. The Company is considering whether to seek
licenses with respect to certain of these claims. Litigation has arisen with
respect to one of these assertions. Based on industry practice, the Company
believes that licenses or other rights, if necessary, could be obtained on
commercially reasonable terms. Nevertheless, no assurance can be given that
licenses can be obtained, or if obtained will be on acceptable terms or that
litigation or other administrative proceedings will not occur. The inability to
obtain licenses or other rights or to obtain licenses or rights on favorable
terms, should such become necessary, or litigation arising out of such other
parties' assertions, could have a material adverse effect on the Company's
future operating results. See "Legal Proceedings."
The Company has also entered into certain license agreements which
generally provide for the non-exclusive licensing of design and product
manufacturing rights and for cross-licensing of future improvements developed by
either party. See "Products and Services--Strategy" and "Competition".
15
ENVIRONMENTAL REGULATION
Federal, state and local regulations impose various environmental controls
on the use and discharge of certain chemicals and gases used in semiconductor
processing. The Company's facilities have been designed to comply with these
regulations and the Company believes that its activities conform to present
environmental regulations. Increasing public attention has, however, been
focused on the environmental impact of electronics and semiconductor
manufacturing operations. While the Company to date has not experienced any
materially adverse effects on its business from environmental regulations, there
can be no assurance that such regulations will not be amended so as to impose
expensive obligations on the Company. In addition, violations of environmental
regulations or unpermitted discharges of hazardous substances could result in
the necessity for additional capital improvements to comply with such
regulations or to restrict discharges, liability to Company employees and/or
third parties, and business interruptions as a consequence of permit suspensions
or revocations or as a consequence of the granting of injunctions requested by
governmental agencies or private parties.
EMPLOYEES
At January 2, 1994, the Company and its subsidiaries had approximately
3,370 employees, including approximately 775 in field marketing and sales,
approximately 425 in product marketing and support, approximately 525 in
engineering and research and development activities, approximately 1,370 in
manufacturing and approximately 275 in executive and administrative activities.
Many of the Company's employees are highly skilled, and the Company's
continued success will depend in part upon its ability to attract and retain
such employees, who are in great demand. The Company has never had a work
stoppage, slow-down or strike and no United States employees are represented by
a labor organization. The Company considers its employee relations to be good.
16
ITEM 2. PROPERTIES
The following table sets forth certain information concerning the Company's
principal facilities.
PRINCIPAL LOCATIONS
No. of Leased/ Total
Buildings Location Owned Sq. Ft. Use
- --------- ------------- ------ ------- ----------------------------------
6 Milpitas, CA Leased 485,760 Corporate Offices, Administration,
Engineering, Manufacturing
1 Fremont, CA Leased 74,000 Manufacturing
1 Fremont, CA Owned 65,000 Manufacturing
2 Santa Clara, CA Leased 83,290 Research and Development
1 Fremont, CA Leased 39,246 Shipping and Receiving
1 Bracknell, Leased 18,000 Executive Offices, Design Center
United Kingdom Sales
2 Tokyo, Japan Leased 18,000 Executive Offices, Design Center
Sales
2 Tsukuba, Japan Owned 221,000 Executive Offices, Manufacturing
1 Calgary, Canada Leased 15,000 Executive Offices, Design Center
Sales
The Company maintains leased regional office space for its field sales
offices at the locations described below, some of which also contain design
centers as indicated. In addition, the Company maintains design centers at
various distributor locations.
17
Regional Offices
- ----------------
U.S. Locations:
- --------------
*Encino, CA
Grass Valley, CA
*Irvine, CA
Mountain View, CA
San Diego, CA
*San Jose, CA
Boca Raton, FL
*Melbourne, FL
Atlanta, GA
*Schaumburg, IL
*Waltham, MA
*Bethesda, MD
Columbia, MD
*Minneapolis, MN
*Raleigh, NC
*Edison, NJ
Hopewell Junction, NY
Victor, NY
Beaverton, OR
Hanover, PA
Willow Grove, PA
Austin, TX
*Dallas, TX
*Bellevue, WA
Non-U.S. Locations:
- ------------------
*Burnaby, British Columbia, Canada
*Etobicoke, Ontario, Canada
*Kanata, Ontario, Canada
*Montreal, Quebec, Canada
*Paris, France
Berlin, Germany
*Munich, Germany
*Stuttgart, Germany
*Ramat Hasharon, Israel
*Milan, Italy
Kanagawa, Japan
*Osaka, Japan
*Seoul, Korea
*Livingstone, Scotland
Madrid, Spain
*Kista, Sweden
*Taipei, Taiwan
___________________________
* Indicates location of Design Center as well as Sales Office
Leased facilities described above are subject to operating leases which
expire in 1994 through 2003. See Note 8 of Notes to Consolidated Financial
Statements in the 1993 Annual Report to Stockholders.
The Company believes that its existing facilities and equipment are well
maintained, in good operating condition and are adequate to meet its current
requirements.
18
ITEM 3. LEGAL PROCEEDINGS
On July 9, 1990, Texas Instruments Incorporated ("TI") filed a complaint in
the United States District Court in Dallas, Texas and with the International
Trade Commission ("ITC") against the Company and four other defendants, Analog
Devices, Inc., Integrated Device Technology, Inc., VLSI Technology, Inc. and
Cypress Semiconductor Corporation. In these complaints, TI alleged that the
Company's manufacturing processes relating to device encapsulation in certain
types of plastic packages infringe certain of TI's patents.
In the ITC action, TI sought to prohibit the importation into the U.S. of
such plastic encapsulated devices assembled offshore and to enjoin the sale of
any inventory of such devices which were previously imported. On October 15,
1991, the Administrative Law Judge ("ALJ") determined that the TI patent was
valid and that the plastic encapsulation process used by the Company referred to
as "opposite-side" gated encapsulation infringed the TI patent. The ALJ also
determined that the plastic encapsulation process referred to as "same-side"
gated encapsulation did not infringe the TI patent. On December 3, 1991, the
ITC issued a notice of its intent not to review the ALJ's determination on non-
infringement by the "same-side" gated process, thereby confirming the ALJ's
determination. On February 19, 1992, the ITC issued its final order which
confirmed the ALJ's determination regarding validity of the TI patent and
infringement by the "opposite-side" gated process. Pursuant thereto, the ITC
issued a limited exclusion order applicable to future imports of integrated
circuits manufactured using the "opposite-side" gated process into the United
States and a cease and desist order applicable to sales of previously imported
integrated circuits manufactured using the "opposite-side" gated process. Since
the beginning of 1992, the Company's plastic encapsulation operations have only
used the non-infringing "same-sided" gating process. The Court of Appeals for
the Federal Circuit has affirmed the ruling of the ITC in all respects in March
1993.
In TI's United States District Court action, TI also seeks to enjoin the
Company from assembling and selling plastic encapsulated integrated circuits in
the U.S. and seeks damages in an unspecified amount for alleged prior patent
infringement. Although at one point in the District Court proceedings a trial
date was set for mid-1992, that date was taken off the calendar and no new trial
date has been scheduled. The Company anticipates that the judge will consider
and rule on a number of pretrial motions, including motions on what
significance, if any, various elements of the prior ITC action should or should
not have on trial proceedings in the District Court, before a new trial date is
scheduled.
The Company believes that it has meritorious defenses to the District Court
action and intends to defend itself vigorously. The Company also believes that
the ultimate outcome of this action will not result in 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
19
payment of damages and other costs, thereby having an adverse effect on the
Company.
The Company is a party to other litigation matters and claims which are
normal in the course of its operations, and while the results of such litigation
and claims cannot be predicted with certainty, the Company believes that the
final outcome of such matters will not have a materially adverse effect on the
Company's consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
20
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is incorporated by reference to page
31 of the Company's 1993 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference to pages
32-33 of the Company's 1993 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this Item is incorporated by reference to pages
13-16 of the Company's 1993 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by reference to pages
17-31 of the Company's 1993 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
21
PART III
Certain information required by Part III is omitted from this Report in
that the registrant will file a definitive proxy statement within 120 days after
the end of its fiscal year pursuant to Regulation 14A (the "Proxy Statement")
for its Annual Meeting of Stockholders to be held May 6, 1994, and certain of
the information included therein is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by this Item is
incorporated by reference to "ELECTION OF DIRECTORS--Nominees" in the Company's
Proxy Statement.
The executive officers of the Company, who are elected by and serve at the
discretion of the Board of Directors, are as follows:
Employed
Name Age Position Since
- ---- --- -------- --------
Wilfred J. Corrigan 55 Chairman, Chief Executive Officer 1981
Bruce L. Entin 43 Vice President, Investor Relations 1984
and Corporate Communications
Brian L. Halla 47 Executive Vice President, 1988
LSI Logic Products
Cyril F. Hannon 55 Executive Vice President, 1984
Worldwide Operations
Albert A. Pimentel 38 Senior Vice President, Finance 1992
and Chief Financial Officer
David E. Sanders 46 Vice President, General Counsel and 1986
Secretary
Horst G. Sandfort 51 Executive Vice President, 1984
Geographic Markets
Lewis C. Wallbridge 50 Vice President, Human Resources 1984
22
Except as set forth below, all of the officers have been associated with
the Company in their present position or other capacities for more than the past
five years.
Brian C. Halla joined the Company in August of 1988 as Vice President,
Microprocessor Products. He was promoted to Executive Vice President, LSI Logic
Products in May 1992. From January, 1975 to August, 1988, Mr. Halla was
employed by Intel Corporation in positions of increasing responsibility,
including posts in product marketing management for Intel's Development Systems
Group and more recently as Director of Marketing for Intel's Microcomputer
Group.
Albert A. Pimentel joined the Company in July 1992 as Senior Vice
President, Finance and Chief Financial Officer. From December 1990 until
February 1991, Mr. Pimentel served as Vice President of Finance, Chief Financial
Officer and Secretary of Momenta Corporation, a start up company in the pen
computing business. As the result of a corporate reorganization, Momenta
Corporation became a wholly-owned subsidiary of Momenta International Ltd. and
Mr. Pimentel assumed the same positions for Momenta International Ltd. until
July 1992. In August 1992, Momenta International Ltd. and its subsidiaries
filed a petition for relief in Federal bankruptcy court. Mr. Pimentel served as
Vice President, Finance of Conner Peripherals, Inc., a manufacturer of disk
drives, from May of 1986 until December of 1990.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
"EXECUTIVE COMPENSATION" in the Company's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
"SECURITY OWNERSHIP -- Principal Stockholders and Security Ownership of
Management" in the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
"CERTAIN TRANSACTIONS" in the Company's Proxy Statement.
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. FINANCIAL STATEMENTS. The following Consolidated Financial
Statements of LSI Logic Corporation and Report of Independent Accountants are
incorporated by reference to the Company's 1993 Annual Report to Stockholders:
Page in
Annual Report
-------------
Consolidated Balance Sheets -
As of December 31, 1993 and 1992 17
Consolidated Statements of Operations -
For the Three Years Ended December 31, 1993 18
Consolidated Statement of Stockholders' Equity -
For the Three Years Ended December 31, 1993 19
Consolidated Statements of Cash Flows -
For the Three Years Ended December 31, 1993 20
Notes to Consolidated Financial Statements 21
Report of Independent Accountants 30
Report of Independent Accountants on Financial
Statement Schedules - See page 32 of this Report.
Effective beginning 1990, the Company changed its fiscal year end from
December 31 to the 52 or 53 week period which ends on the Sunday closest to
December 31. For presentation purposes, the consolidated financial statements,
notes and financial statement schedules will continue to refer to December 31 as
the year end. Fiscal 1993 was a 53 week year that ended on January 2, 1994.
24
2. FINANCIAL STATEMENT SCHEDULES. For years ended December 31,
1993, 1992 and 1991:
Schedule Page
- -------- ----
II Amounts Receivable from Related Parties
and Underwriters, Promoters and Employees
other than Related Parties S-1
V Property and Equipment S-2
VI Accumulated Depreciation of Property and Equipment S-3
VIII Valuation and Qualifying Accounts and Reserves S-4
X Supplementary Income Statement Information S-5
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.
3. EXHIBITS:
3.1 Restated Certificate of Incorporation of Registrant.
(1)
3.2 By-laws of Registrant. (1)
4.1 Articles 4 and 9 of the Restated Certificate of
Incorporation of Registrant (included in Exhibit 3.1).
(1)
4.2 Indenture dated April 14, 1987 between LSI Logic
Corporation and United States Trust Company of New
York, Trustee, covering $125,000,000 principal amount
of 6 1/4% Convertible Subordinated Debentures due 2002
(including form of Debenture). (2)
4.3 Stockholder Rights Plan dated November 16, 1988. (3)
10.1 Lease dated March 26, 1981 for 1601 McCarthy Boulevard
between the Registrant and McCarthy Industrial
Investors. (4)
10.1A First Amendment to Lease dated May 1, 1991 to Lease
dated March 26, 1981 for 1601 McCarthy Boulevard
between the Registrant and McCarthy Industrial
Investors. (11)
25
10.2 Registrant's 1982 Incentive Stock Option Plan, as
amended, and forms of Stock Option Agreement. (9)
10.3 Registrant's Employee Stock Purchase Plan, as amended,
and form of subscription Agreement.
10.6 Series B Preferred Shares Purchase Agreement for
1,395,864 shares of Series B Preferred Stock dated as
of February 8, 1982. (4)
10.7 Modification Agreement dated as of February 8, 1982
between the Registrant and holders of its Series A
Preferred Stock. (4)
10.8 Lease Agreement dated November 22, 1983 for 48580 Kato
Road, Fremont, California between the Registrant and
Bankamerica Realty Investors. (6)
10.19 Registrant's 1985 Nonstatutory Stock Option Plan for
Shares of LSI Logic Europe plc and form of Nonstatutory
Stock Option Agreement. (5)
10.20 LSI Logic Europe plc 1984 Nonstatutory Stock Option
Plan and form of Nonstatutory Share Option Agreement.
(5)
10.21 Registrant's 1985 Nonstatutory Stock Option Plan for
Shares of LSI Logic Corporation of Canada, Inc. and
form of Nonstatutory Stock Option Agreement. (5)
10.24 Registrant's 1986 Directors' Stock Option Plan and
forms of stock option agreements. (7)
10.25 LSI Logic Europe plc 1986 Share Option Scheme. (7)
10.26 LSI Logic Europe plc Share Acquisition Scheme. (7)
10.27 LSI Logic Corporation of Canada, Inc. 1985 Stock Option
Plan and form of Stock Option Agreement. (7)
10.29 Form of Indemnification Agreement entered and to be
entered into between Registrant and its officers,
directors and certain key employees. (8)
10.35 LSI Logic Corporation 1991 Equity Incentive Plan.
26
10.36 Lease Agreement dated February 28, 1991 for 765
Sycamore Drive, Milpitas, California between the
Registrant and the Prudential Insurance Company of
America. (10)
11.1 Statement Re Computation of Earnings Per Share
13.1 Annual Report to Stockholders for the year ended
January 2, 1994 (to be deemed filed only to the extent
required by the instructions to exhibits for Reports on
Form 10-K).
21.1 List of Subsidiaries.
23.1 Consent of Independent Accountants (see page 33).
24.1 Power of Attorney (included on page 30).
____________
(1) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 26, 1988.
(2) Incorporated by reference to exhibits filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 27, 1988.
(3) Incorporated by reference to exhibits filed with the Registrant's Form 8-A
filed on November 21, 1988.
(4) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1 (No. 2-83035) which became effective
May 13, 1983.
(5) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1 (No. 33-3612), and Amendment No. 1
thereto, which became effective March 20, 1986.
(6) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1983.
(7) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1986.
(8) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987.
27
(9) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988.
(10) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1991.
(11) Incorporated by reference to exhibits filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
____________
(b) Reports on Form 8-K.
-------------------
None.
28
TRADEMARK ACKNOWLEDGMENTS
- LSI Logic is a registered trademark of the Company and CoreWare is a
trademark of the Company. All other brandnames or trademarks
appearing in the Form 10-K are the property of their respective
owners.
- Channel-Free, Embedded Array, LDS, Modular Design Environment, MDE and
Headland Technology are registered trademarks of the Company. C-MDE,
CASCADE, Compacted Array and CoreWare are trademarks of the Company.
29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ WILFRED J. CORRIGAN
-------------------------------
Wilfred J. Corrigan, Chairman
and Chief Executive Officer
Dated: March 4, 1994
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Wilfred J. Corrigan and David E. Sanders, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on
Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
30
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Wilfred J. Corrigan Chairman of the Board and March 4, 1994
- ----------------------- Chief Executive Officer
(Wilfred J. Corrigan) (Principal Executive Officer)
/s/ Albert A. Pimentel Senior Vice President, Finance March 4, 1994
- ----------------------- and Chief Financial Officer
(Albert A. Pimentel) (Principal Financial Officer
and Principal Accounting Officer)
/s/ T.Z. Chu Director March 4, 1994
- -----------------------
(T.Z. Chu)
/s/ Malcolm R. Currie Director March 4, 1994
- -----------------------
(Malcolm R. Currie)
/s/ James H. Keyes Director March 4, 1994
- -----------------------
(James H. Keyes)
/s/ R. Douglas Norby Director March 4, 1994
- -----------------------
(R. Douglas Norby)
31
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of LSI Logic Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 25, 1994 appearing on Page 30 of the 1993 Annual Report to
Stockholders of LSI Logic Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedules listed Item in 14(a)
of this 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related financial statements.
Price Waterhouse
San Jose, California
January 25, 1994
32
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 2-86474, No. 2-91907, No. 2-98732, No. 33-6188, No.
33-6203, No. 33-13265, No. 33-17720, No. 33-30385, No. 33-30386, No. 33-36249,
No. 33-41999, No. 33-42000, No. 33-53054, No. 33-66548, No.33-66546) of LSI
Logic Corporation of our report dated January 25, 1994 appearing on page 30 in
the Annual Report to Stockholders, which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation by reference of our report
on the Financial Statement Schedules, which appears on page 32 of this Annual
Report on Form 10-K.
PRICE WATERHOUSE
San Jose, California
March 4, 1994
33
SCHEDULE II
LSI LOGIC CORPORATION
ACCOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
DEDUCTIONS BALANCE AT END OF PERIOD
BALANCE AT ----------------------------- ------------------------
BEGINNING AMOUNTS AMOUNTS NOT
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN-OFF CURRENT CURRENT
- -------------- ----------- --------- --------- ----------- ------- --------
1993:
James S. Koford $436 $395 (A) $436 (B) $ - $395 $ -
Horst G. Sandfort 377 150 (C) - - - 527
Lewis C. Wallbridge 106 - 106 - - -
Jack Ordway - 94 (D) - - 94 -
William Hata - 25 (E) - - - 25
Frank Tornaghi - 100 (F) - - 20 80
Richard Mannherz - 25 (G) - - - 25
1992:
James S. Koford $183 $436 (H) $183 $ - $436 $ -
Horst G. Sandfort 366 11 (I) - - - 377
Lewis C. Wallbridge 80 106 (J) 80 - 106 -
1991:
Perry Constantine $331 $ - $331 $ - $ - $ -
John Dickson - 250 (K) 250 - - -
James S. Koford 165 183 (K) 165 - 183 -
Horst G. Sandfort - 366 (I) - - - 366
Lewis C. Wallbridge 100 80 (K) 100 - 80 -
(A) Represents unsecured promissory note bearing interest at 8% per annum due
in 1994, or upon Mr. Koford's departure from the Company.
(B) Represents a $41 payment and a $395 rollover to a new note. See Note (A)
above.
(C) Represents unsecured promissory note bearing interest at 8% per annum due
in 1996. Principal and interest will be forgiven in equal increments at
the end of each annum as long as Mr. Sandfort maintains continuous
employment with the Company.
(D) Represents unsecured promissory note bearing interest at 8% per annum due
in 1994, or upon Mr. Ordway's departure from the Company.
(E) Represents unsecured promissory note bearing interest at 7.5% per annum due
in 1996.
(F) Represents unsecured promissory note bearing interest at 7% per annum
payable in annual installments of $20 over 5 years. Interest is forgiven
at the end of each annum as long as Mr. Tornaghi maintains continuous
employment with the Company for the full term of the note.
(G) Represents unsecured promissory note bearing interest at 7% per annum due
in 1995. Principal and interest will be forgiven in equal increments at
the end of each year as long as Mr. Mannherz maintains continuous
employment with the Company.
(H) Represents unsecured promissory note bearing interest at 8% per annum due
in 1993.
(I) Represents unsecured promissory note due in 1995, or upon Mr. Sandfort's
departure from the Company. The note has a variable interest rate which is
equal to the Lombard rate in the Federal Republic of Germany, which was 8%
at December 31, 1993.
(J) Represents unsecured promissory note bearing interest at 7% per annum,
which was due and repaid in 1993.
(K) Represents unsecured promissory note(s) bearing interest at 10% per annum
due and repaid during 1992.
SCHEDULE V
LSI LOGIC CORPORATION
PROPERTY AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993, 1992 AND 1991
(In thousands)
Balance at Additions Effect of Balance at
Beginning & Transfers Exchange End of
Classification of Period at Cost Retirements Other (1) Rate Changes Period
- ---------------------------------------------------------------------------------------------------------------------
1993:
Land $19,075 $ - $37 $ - $1,752 $20,790
Building 46,626 318 609 - 3,213 49,548
Equipment 380,684 43,182 38,339 - 13,267 398,794
Leasehold improvements 44,356 7,452 - - 2,242 54,050
Furniture and fixtures 17,045 1,402 451 - (124) 17,872
Preproduction engineering 15,290 27,461 15,312 - (22) 27,417
Construction in progress 154,400 10,020 - - 17,295 181,715
-------- -------- -------- --------- -------- --------
$677,476 $89,835 $54,748 $ - $37,623 $750,186
-------- -------- -------- --------- -------- --------
-------- -------- -------- --------- -------- --------
1992:
Land $35,918 $ - $ - ($17,232) $389 $19,075
Building 83,113 354 1,050 (34,878) (913) 46,626
Equipment 399,047 29,617 30,902 (16,430) (648) 380,684
Leasehold improvements 51,969 1,253 4,153 (4,807) 94 44,356
Furniture and fixtures 22,113 273 607 (4,205) (529) 17,045
Preproduction engineering 17,879 378 2,715 - (252) 15,290
Construction in progress 40,894 110,556 167 - 3,117 154,400
-------- --------- -------- --------- -------- --------
$650,933 $142,431 $39,594 ($77,552) $1,258 $677,476
-------- --------- -------- --------- -------- --------
-------- --------- -------- --------- -------- --------
1991:
Land $34,895 $ - $ - $ - $1,023 $35,918
Building 80,410 396 33 - 2,340 83,113
Equipment 410,408 33,999 59,574 - 14,214 399,047
Leasehold improvements 53,353 2,081 4,233 - 768 51,969
Furniture and fixtures 20,523 2,480 824 - (66) 22,113
Preproduction engineering 23,500 - 5,950 - 329 17,879
Construction in progress - 38,581 - 2,313 40,894
-------- --------- -------- --------- -------- --------
$623,089 $77,537 $70,614 $ - $20,921 $650,933
-------- --------- -------- --------- -------- --------
-------- --------- -------- --------- -------- --------
(1) As disclosed in the Company's 1992 Consolidation Financial Statements, in
connection with the 1992 restructuring of operations, the Company
identified certain facilities and equipment that are considered
inconsistent with its new strategic focus. Such fixed assets were included
in other assets at December 31, 1992.
Schedule VI
LSI LOGIC CORPORATION
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
YEAR ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
Balance at Additions Effect of Balance at
Beginning & Transfers Exchange End of
Classification of Period at Cost Retirements Other (1) Rate Changes Period
- -------------------------------------------------------------------------------------------------------------------------------
1993:
Building $ 9,603 $ 1,239 $ 212 $ - $ 670 $ 11,300
Equipment 280,680 59,782 43,917 - 6,344 302,889
Leasehold improvements 31,356 2,673 - - 2,306 36,335
Furniture and fixtures 13,117 1,918 382 - (54) 14,599
Preproduction engineering 14,919 282 15,313 - 112 -
------- ------ ------ ------ ----- -------
$349,675 $65,894 $59,824 $ - $9,378 $365,123
------- ------ ------ ------ ----- -------
------- ------ ------ ------ ----- -------
1992:
Building $11,576 $3,084 $300 ($4,671) ($86) $9,603
Equipment 230,148 92,504 30,782 (8,626) (2,564) 280,680
Leasehold improvements 36,945 3,467 3,893 (4,807) (356) 31,356
Furniture and fixtures 14,005 3,013 416 (3,192) (293) 13,117
Preproduction engineering 17,145 858 2,975 - (109) 14,919
------- ------- ------ ------ ----- -------
$309,819 $102,926 $38,366 ($21,296) ($3,408) $349,675
------- ------ ------ ------ ----- -------
------- ------ ------ ------ ----- -------
1991:
Building $7,833 $3,339 $ - $ - $404 $11,576
Equipment 221,963 62,513 57,274 - 2,946 230,148
Leasehold improvements 34,082 9,833 7,428 - 451 36,938
Furniture and fixtures 11,904 3,070 756 - (213) 14,005
Preproduction engineering 18,600 - 1,702 - 254 17,152
------- ------ ------ ------ ----- -------
$294,382 $78,755 $67,160 $ - $3,842 $309,819
------- ------ ------ ------ ----- -------
------- ------ ------ ------ ----- -------
(1) As disclosed in the Company's 1992 Consolidation Financial Statements, in
connection with the 1992 restructuring of operations, the Company identified
certain facilities and equipment that are considered inconsistent with its
new strategic focus. Such fixed assets were included in other assets at
December 31, 1992.
SCHEDULE VIII
LSI LOGIC CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1993, 1992, AND 1991
(IN THOUSANDS)
Balance at Additions Balance at
Beginning Charged to Costs End
of Period and Expenses Deductions of Period
-------------- ---------------- -------------- --------------
Allowance for doubtful accounts:
1993 $2,141 $169 $632 $1,678
1992 $3,185 $1,740 $2,784 $2,141
1991 $3,996 $580 $1,391 $3,185
SCHEDULE X
LSI LOGIC CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATIONe
Years ended December 31, 1993, 1992 and 1991
(In thousands)
CHARGED TO COSTS AND EXPENSES
--------------------------------
1993 1992 1991
Maintenance and repairs $23,578 $20,759 $19,312
Advertising $1,473 $1,515 $3,458
Taxes, other than payroll and income taxes:
Property taxes $5,834 $5,474 $5,958
INDEX TO EXHIBITS
EXHIBIT NUMBER
10.3 Employee Stock Purchase Plan and form of
Subscription Agreement
10.35 LSI Logic Corporation 1991 Equity Incentive Plan
11.1 Statement Re Computation of Earnings Per Share
13.1 Annual Report to Stockholders for the year
ended January 2, 1994 (to be deemed filed
only to the extent required by the instructions
to exhibits for Reports on Form 10-K)
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants (see page 33)
24.1 Power of Attorney (included on page 30)