8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

July 26, 2006

LSI LOGIC CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	1-10317	94-2712976
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1621 Barber Lane
Milpitas, California 95035
(Address of principal executive offices, including zip code)

(408) 433-8000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 99.1

Item 2.02 Results of Operation and Financial Condition.

On July 26, 2006, LSI Logic Corporation (referred to here as “LSI Logic” or the “Company”) issued a news release regarding its financial results for the second quarter ended July 2, 2006. A copy of the news release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated by reference herein.

Use of Non-GAAP Financial Information

LSI Logic has referenced non-GAAP financial information in the news release.

LSI Logic management believes that the presentation of a full non-GAAP income statement for the three-month and six-month periods ended July 2, 2006 and July 3, 2005 and the three-month period ended April 2, 2006, including non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP research and development expenses, non-GAAP selling, general and administrative expenses, non-GAAP income from operations, non-GAAP interest income and other, non-GAAP income before income taxes, non-GAAP provision for income taxes and non-GAAP net income excluding special items and non-GAAP income excluding special items per basic and diluted share (collectively referred to herein as non-GAAP measures) provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. Management believes that the use of these non-GAAP financial measures provides consistency and comparability with our past financial reports, and also facilitates comparisons with other companies in our industry, many of which use similar non-GAAP financial measures to supplement their GAAP information.

Management has historically used these non-GAAP measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described below provides an additional measure of our core operating results and facilitates comparisons of our core operating performance against prior periods and our business model objectives. We have chosen to provide this information to investors to enable them to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate our ongoing core operations. Externally, we believe that these non-GAAP measures continue to be useful to investors in their assessment of our operating performance and the valuation of our Company.

Internally, these non-GAAP measures are significant measures used by management for purposes of:

• evaluating the core operating performance of the Company;

• determination of bonus compensation for certain key employees;

• establishing internal budgets;

• calculating return on investment for development programs and growth initiatives;

• comparing performance with internal forecasts and targeted business models;

• strategic planning;

• evaluating and valuing potential acquisition candidates and how their operations compare to the Company’s operations; and

• benchmarking performance externally against our competitors.

Non-GAAP financial measures:

As described above, LSI excludes the following items in one or more of the non-GAAP measures:

• Stock-based compensation. Stock-based compensation relates primarily to stock awards such as options and restricted stock units that are issued by LSI Logic Corporation. Stock-based compensation is a non-cash expense that varies in amount from period to period and is dependent on market forces that are difficult to predict. As a result of this unpredictability,

	management excludes this item from its internal operating forecasts and models. Management believes that non-GAAP measures adjusted for stock-based compensation provide investors with a basis to measure the Company’s core performance against the performance of other companies without the variability created by stock-based compensation. Stock based compensation is excluded from non-GAAP cost of revenues, non-GAAP gross profit, non-GAAP research and development, non-GAAP sales and marketing, general and administrative expenses, non-GAAP income from operations, non-GAAP income before income taxes, non-GAAP net income and non-GAAP net income per basic and dilutive share.
•	Amortization of acquisition related intangibles and in-process research and development. These charges are acquisition-related charges. Amortization of acquisition-related intangibles relate to purchased technology in acquisitions such as existing technology, patents and trademarks. In-process research and development relates to projects in process as of the acquisition date that have not reached technological feasibility and are immediately expensed. These charges are not factored into management’s evaluation of potential acquisitions, or our performance after completion of acquisitions, because they are not related to our core operating performance, and the frequency and amount of such charges vary significantly based on the size and timing of our acquisitions and the maturities of the businesses being acquired. Excluding this data provides investors with a basis to compare the Company against the performance of other companies without this variability. These items are excluded from non-GAAP income from operations, non-GAAP income before income taxes, non-GAAP net income and non-GAAP net income per basic and dilutive share.
•	Restructuring of operations and other items, net. This represents charges/losses and gains that are not directly related to the Company’s ongoing or core business results. Management regularly excludes such items from internal operating forecasts and models because it is not considered a core operating activity for the Company and because the frequency and variability in the nature of the charges can vary significantly from period to period. Excluding this data provides investors with a basis to compare our company against the performance of other companies without this variability. These items are excluded from non-GAAP income from operations, non-GAAP income before income taxes, non-GAAP net income and non-GAAP net income per basic and dilutive share.
•	Other charges and gains. Other charges and gains consist of gains or losses on equity investments and certain non-operating gains and losses that occur on an infrequent basis and vary greatly in amount. We do not regularly trade public equity securities nor do we plan on these securities positions for funding of ongoing operations. Management excludes these items because they do not affect our core operations. Excluding this data provides investors with a basis to compare our company against the performance of other companies without this variability. These items are excluded from non-GAAP income before income taxes, non-GAAP net income and non-GAAP net income per basic and dilutive share.
•	Non-GAAP income tax expense/benefit. This line item represents the amount of tax expense or benefit that the Company would accrue if it used non-GAAP results instead of GAAP results in the calculation of its tax liability. This item is used in the computation of non-GAAP net income and non-GAAP net income per basic and dilutive share.

The calculation of non-GAAP net income excluding special items per dilutive share is adjusted in the numerator for all the items discussed above under net income excluding special items. In the denominator, the number of non-GAAP dilutive shares excludes the following item:

• The treasury stock method used to calculate weighted outstanding shares on a dilutive basis requires amounts related to compensation costs attributable to future services and not yet recognized in the financial statements to be treated as proceeds that are assumed to be used to repurchase shares. As a result, this reduces the total number of weighted average shares for purposes of calculating GAAP weighted average shares on a dilutive basis. LSI does not

include the effects of these compensation costs in its non-GAAP net income excluding special items, management believes these amounts should not be applied to the calculation of shares to be repurchased in the computation of non-GAAP net income per diluted share.

Non-GAAP cost of revenues, non-GAAP research and development, non-GAAP selling, general and administrative expenses, non-GAAP income from operations, non-GAAP interest income and other expense, non-GAAP provision for income taxes, non-GAAP net income excluding special items and non-GAAP net income per basic and dilutive share are not calculated in accordance with GAAP, and should be considered for illustrative purposes as being supplemental to, and not a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of the Company’s business in accordance with GAAP and such non-GAAP measures may be different from the computation of non-GAAP measures of other companies. As a result, you should not consider these measures in isolation or as a substitute for analysis as reported under GAAP. Some of the limitations in relying on non-GAAP financial measures are discussed below in relation to the items excluded from those non-GAAP measures.

• Stock-based compensation. LSI’s stock-based incentive plans are important components of our employee incentive compensation arrangements and are reflected in our GAAP results under Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based payment, commencing with the first quarter of 2006. They need to be considered for a complete view of the costs of our compensation arrangements.

• Amortization of acquisition-related intangibles. Acquisitions have been an important part of our business strategy and the corresponding acquisition-related charges reflect the costs of choosing acquisitions as a form of growth strategy.

• Restructuring of operations and other items, net. This item reflects charges for severance, exit costs associated with leased facilities, asset impairment charges and gains on sales of no longer strategic assets. While no longer strategic to the future of the Company, such items reflect the costs of decisions made as part of running a business and are critical to a complete view of our historical results.

• Other charges and gains. These items as discussed above should be included for a complete view of our historical performance even though they are not related to our core operations.

All supplemental non-GAAP financial measures should be read in conjunction with the comparable information presented in accordance with generally accepted accounting principles in the United States of America and the Company’s most recent annual report on Form 10-K for the fiscal year ended December 31, 2005. For a complete reconciliation of special items excluded from our results of operations for the three-month and six-month periods ended July 2, 2006 and July 3, 2005, and the three-month period ended April 2, 2006, refer to the tables furnished in the news release attached as Exhibit 99.1.

Item 8.01 Other Events.

The Company reported revenues of $490 million in the second quarter of 2006, compared to revenues of $476 million reported in the first quarter of 2006, and a two percent increase compared to the $481 million reported in the second quarter of 2005.

Second quarter net income was $54 million or 13 cents per diluted share. The second quarter 2006 results compare to first quarter 2006 net income of $13 million or three cents per diluted share. Second quarter 2005 net income was $25 million or six cent per diluted share.

Cash and short-term investments totaled $1.2 billion at the end of the second quarter of 2006.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit No.	Description
99.1	LSI Logic Corporation News Release issued July 26, 2006.*

*Furnished, not filed.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	LSI LOGIC CORPORATION,
	a Delaware corporation
By:	/s/ Andrew S. Hughes
	Andrew S. Hughes
	Vice President, General Counsel and
	Corporate Secretary

Date: July 26, 2006

EXHIBIT INDEX

Exhibit No.	Description
99.1	LSI Logic Corporation News Release issued July 26, 2006.*

*Furnished, not filed.

EX-99.1

Exhibit 99.1

LSI Logic Reports Q2 Financial Results
July 26, 2006 Page 1 of 4

FINAL DRAFT — NOT FOR RELEASE
FOR IMMEDIATE RELEASE	JULY 26, 2006
Investor Relations Contact:	Media Relations Contact:
Tom Tran	Mitch Seigle
408-433-8105	408-954-3225
tom.tran@lsi.com	mitch.seigle@lsi.com

cc06-50

LSI LOGIC REPORTS STRONG Q2 NET INCOME

Second Quarter 2006 News Release Summary

• Revenues of $490 million; up 3% sequentially

• GAAP* net income of 13 cents per diluted share

• Non-GAAP** net income of 14 cents per diluted share

• Cash and short-term investments of $1.2 billion

Third Quarter 2006 Business Outlook

• Projected revenues of $475 million to $500 million

• GAAP* net income range of 5 — 7 cents per diluted share

• Non-GAAP** net income in the range of 11 — 13 cents per diluted share

*	Generally Accepted Accounting Principles.
**	Excludes acquisition-related amortization, restructuring and other special items, and stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

LSI Logic Reports Q2 Financial Results
July 26, 2006 Page 2 of 4

DOUBLE-DIGIT YEAR-OVER-YEAR REVENUE GROWTH IN
STORAGE SYSTEMS

MILPITAS, Calif. — LSI Logic Corporation (NYSE: LSI) today reported second quarter 2006 revenues of $490 million, a 3% increase sequentially compared to the $476 million reported in the first quarter of 2006, and up 2% year-over-year compared to the $481 million reported in the second quarter of 2005.

Second quarter 2006 GAAP* net income was $54 million or 13 cents per diluted share, compared to first quarter 2006 GAAP net income of $13 million or 3 cents per diluted share. Second quarter 2006 GAAP results compare to second quarter 2005 GAAP net income of $25 million or 6 cents per diluted share. Second quarter GAAP net income included $13 million of stock-based compensation expense and a net gain of $10 million from special items, acquisition-related amortization, restructuring and their related tax effect.

Second quarter 2006 non-GAAP** net income was $57 million or 14 cents per diluted share, an increase of 43% compared to first quarter 2006 non-GAAP net income of $40 million or 10 cents per diluted share. Second quarter non-GAAP 2005 net income was $45 million or 11 cents per diluted share.

Cash and short-term investments grew 16% sequentially to $1.2 billion, from $1.03 billion in the first quarter of 2006 and up 54% from the year-ago period.

“All segments of our business grew sequentially during the quarter. Demand for our Engenio 4 Gb/s Fibre Channel systems strengthened, driving our storage systems revenues to near record levels and 17% higher than the year-ago quarter,” said Abhi Talwalkar, LSI Logic president and chief executive officer. “Our communications revenues grew significantly year-over-year, as demand for existing long-lifecycle products increased and several in-process designs ramped to production. We anticipate accelerating demand for our storage products in the second half of 2006 as broad market transitions to 4Gb/s Fibre Channel interfaces and SAS-enabled servers are now well underway.”

“In the second quarter, GAAP net income grew significantly, driven in part by successful completion of the sale of our Gresham, Oregon manufacturing facility and our ZSP digital signal processor unit,” said Bryon Look, LSI Logic chief financial officer. “Our balance sheet also strengthened, with a $169 million increase in cash and short-term investments during the period.”

LSI Logic Reports Q2 Financial Results
July 26, 2006 Page 3 of 4

LSI Logic Third Quarter 2006 Business Outlook

	GAAP*	Special Items	Non-GAAP**
Revenue	$475 million to $500 million		$475 million to $500 million
Gross Margin	42 — 43%	Approximately $2 million	42.5 — 43.5%
Operating Expenses	$175 million to $178 million	Approximately $21 million	$154 million to $157 million
Net Other Income	$2 million		$2 million
Tax Provision	Approximately $7 million		Approximately $7 million
Net Income Per Share	$0.05 to $0.07	Approximately $.06	$0.11 to $0.13
Diluted Share Count	408 million		412 million

Capital spending is projected to be around $10 million in the third quarter and approximately $45 million in total for 2006.

Third quarter depreciation and software amortization is expected to be approximately $13 million.

*	Generally Accepted Accounting Principles.
**	Excludes special items defined as acquisition-related amortization, restructuring and other special items, and approximately $14.5 million in stock-based compensation expense. The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

NOTE: The Company’s financial guidance will be limited to the comments made on today’s public conference call and contained in the Third Quarter 2006 Business Outlook section of this news release.

LSI Logic Reports Q2 Financial Results
July 26, 2006 Page 4 of 4

LSI Logic Conference Call Information
LSI Logic will hold a conference call today at 2 pm PDT to discuss second quarter financial results and the third quarter 2006 business outlook. The number is 1-303-262-2194. Internet users can access the conference call by visiting http://www.lsi.com/investors. A replay of the call will be available today at approximately 5 pm PDT and will be available for 48 hours. The replay access numbers are 1-800-405-2236 within the U.S. and 1-303-590-3000 for all other locations, passcode 11065974#.

Safe Harbor for Forward Looking Statements: This news release contains forward-looking statements, which include the following: the anticipation of accelerating demand for storage products and technology transitions in the company’s storage markets in the second half of 2006, projected revenues for the third quarter of 2006, projected GAAP net income for the third quarter of 2006, projected non-GAAP net income for the third quarter of 2006, projected capital spending in the third quarter of 2006 and for the year and expected third quarter of 2006 depreciation and software amortization. Forward-looking statements also include projections of gross margins, operating expenses, net other income, tax provisions, net income per share and diluted share count. These forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could cause LSI Logic’s actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to: fluctuations in the timing and volumes of customer demand; the company’s inability to achieve revenue objectives; the company’s inability to meet financial targets and failure to execute on its financial plan; the company’s inability to generate positive operating cash flow or control operating expenses; the company’s inability to benefit from increasing demand and technology transitions in its storage markets; and the unavailability of appropriate levels of manufacturing capacity. For additional information, readers are referred to the documents filed by LSI Logic with the SEC, and specifically the risk factors set forth in the company’s most recent reports on Form 10-K, 10-Q and 8-K. LSI Logic is not obligated to update these forward-looking statements to reflect events or circumstances after the date of this document.

About LSI Logic
LSI Logic Corporation is a leading provider of silicon-to-system solutions that are used at the core of products that create, store and consume digital information. LSI offers a broad portfolio of capabilities including custom and standard product ICs, host bus and RAID adapters, storage area network solutions and software applications. LSI products enable leading technology companies in the Storage and Consumer markets to deliver some of the most advanced and well-known electronic systems in the market today. More information is available at www.lsi.com.

# # #

Editor’s Notes:

1.	All LSI Logic news releases (financial, acquisitions, manufacturing, products, technology etc.) are issued exclusively by PR Newswire and are immediately thereafter posted on the company’s external website, http://www.lsi.com.
2.	The LSI Logic logo design is a registered trademark of LSI Logic Corporation.
3.	All other brand or product names may be trademarks or registered trademarks of their respective companies.

LSI LOGIC CORPORATION
Non-GAAP Consolidated Condensed Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended									Six Months Ended
	July 2,			April 2,			July 3,			July 2,			July 3,
	2006			2006			2005			2006			2005
Revenues	$	489,635		$	475,884		$	481,292		$	965,519		$	931,299
Cost of revenues — a)		277,970			269,870			269,531			547,840			529,271
Gross profit		211,665			206,014			211,761			417,679			402,028
Research and development —b)		95,719			97,752			99,659			193,471			198,896
Selling, general and administrative — c)		58,439			63,094			59,872			121,533			118,012
Non-GAAP income from operations — a), b), c), d), e)		57,507			45,168			52,230			102,675			85,120
Interest expense		(6,428	)		(6,330	)		(6,320	)		(12,758	)		(13,030	)
Interest income and other, net — f), g)		10,319			8,098			5,062			18,417			10,452
Income before income taxes		61,398			46,936			50,972			108,334			82,542
Provision for income taxes — h)		4,647			7,270			6,250			11,917			12,500
Non-GAAP net income	$	56,751		$	39,666		$	44,722		$	96,417		$	70,042
Non-GAAP income per share:
Basic	$	0.14		$	0.10		$	0.11		$	0.24		$	0.18
Diluted*	$	0.14		$	0.10		$	0.11		$	0.24		$	0.18
Shares used in computing per share amounts:
Basic		397,790			394,851			389,088			396,312			388,371
Diluted		435,312			405,841			393,427			407,835			391,954

*	In computing diluted earnings per share for the three month period ended July 2, 2006, net income was increased by $3,500 for interest, net of taxes, on the $350 million convertible notes considered dilutive common stock equivalents.
A reconciliation between net income on a GAAP basis and non-GAAP net income including items a)-h) is provided in the following table:

Reconciliation of GAAP to Non-GAAP net income:

	Three Months Ended									Six Months Ended
	July 2,			April 2,			July 3,			July 2,			July 3,
	2006			2006			2005			2006			2005
GAAP net income	$	53,847		$	13,168		$	25,262		$	67,015		$	29,981
Special items:
a) Stock-based compensation expense — Cost of revenues		2,458			1,525			164			3,983			325
b) Stock-based compensation expense — R&D		4,643			4,522			570			9,165			1,405
c) Stock-based compensation expense — SG&A		6,197			5,784			438			11,981			897
d) Amortization of acquisition related intangibles		10,801			11,216			17,613			22,017			35,226
e) Restructuring of operations and other items, net		(21,648	)		5,650			7,156			(15,998	)		8,689
f) Gain on sale of certain equity securities		—			(1,429	)		(2,358	)		(1,429	)		(2,358	)
g) Gain on repurchase of convertible Subordinated Notes		—			—			(4,123	)		—			(4,123	)
h) Income tax effect		453			(770	)		—			(317	)		—
Total special items		2,904			26,498			19,460			29,402			40,061
Non-GAAP net income	$	56,751		$	39,666		$	44,722		$	96,417		$	70,042

Reconciliation of shares used in the calculation of GAAP to
Non-GAAP diluted net income per share:

	Three Months Ended						Six Months Ended
	July 2,		April 2,		July 3,		July 2,		July 3,
	2006		2006		2005		2006		2005
Diluted shares used in per-share calculation — GAAP		405,613		402,189		393,427		404,213		391,954
Effect of SFAS (R)		3,619		3,652		—		3,622		—
Effect of $350 million convertible notes considered dilutive*		26,080		—		—		—		—
Diluted shares used in per-share calculation — Non-GAAP		435,312		405,841		393,427		407,835		391,954

LSI LOGIC CORPORATION
Consolidated Condensed Statements of Operations (GAAP)
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended									Six Months Ended
	July 2,			April 2,			July 3,			July 2,			July 3,
	2006			2006			2005			2006			2005
Revenues	$	489,635		$	475,884		$	481,292		$	965,519		$	931,299
Cost of revenues		277,970			269,870			269,531			547,840			529,271
Stock-based compensation expense*		2,458			1,525			164			3,983			325
Total cost of revenues		280,428			271,395			269,695			551,823			529,596
Gross profit		209,207			204,489			211,597			413,696			401,703
Research and development		95,719			97,752			99,659			193,471			198,896
Stock-based compensation expense*		4,643			4,522			570			9,165			1,405
Total research and development		100,362			102,274			100,229			202,636			200,301
Selling, general and administrative		58,439			63,094			59,872			121,533			118,012
Stock-based compensation expense*		6,197			5,784			438			11,981			897
Total selling, general and administrative		64,636			68,878			60,310			133,514			118,909
Restructuring of operations and other items, net		(21,648	)		5,650			7,156			(15,998	)		8,689
Amortization of acquisition related intangibles		10,801			11,216			17,613			22,017			35,226
Income from operations		55,056			16,471			26,289			71,527			38,578
Interest expense		(6,428	)		(6,330	)		(6,320	)		(12,758	)		(13,030	)
Interest income and other, net		10,319			9,527			11,543			19,846			16,933
Income before income taxes		58,947			19,668			31,512			78,615			42,481
Provision for income taxes		5,100			6,500			6,250			11,600			12,500
Net income	$	53,847		$	13,168		$	25,262		$	67,015		$	29,981
Income per share:
Basic	$	0.14		$	0.03		$	0.06		$	0.17		$	0.08
Diluted	$	0.13		$	0.03		$	0.06		$	0.17		$	0.08
Shares used in computing per share amounts:
Basic		397,790			394,851			389,088			396,312			388,371
Diluted		405,613			402,189			393,427			404,213			391,954

* The Company adopted the provisions of SFAS No. 123(R) “Share-Based Payment” on January 1, 2006, using the modified prospective transition method.

LSI LOGIC CORPORATION
Consolidated Condensed Balance Sheets
(In millions)
(Unaudited)

	July 2,			April 2,			December 31,
	2006			2006			2005
Assets
Current assets:
Cash and short-term investments	$	1,200.6		$	1,031.6		$	938.9
Accounts receivable, net		310.8			266.4			323.3
Inventories		173.8			186.1			194.8
Prepaid expenses and other current assets		85.6			159.8			163.1
Total current assets		1,770.8			1,643.9			1,620.1
Property and equipment, net		94.1			94.3			98.3
Goodwill and other intangibles		949.1			963.3			974.5
Other assets		108.0			107.9			103.2
Total assets	$	2,922.0		$	2,809.4		$	2,796.1
Liabilities and Stockholders’ Equity
Current liabilities:
Other current liabilities	$	482.9		$	451.0		$	468.9
Current portion of long-term debt		272.6			273.2			273.9
Total current liabilities		755.5			724.2			742.8
Long-term debt		350.0			350.0			350.0
Tax related liabilities and other		73.5			74.4			75.1
Total liabilities		1,179.0			1,148.6			1,167.9
Minority interest in subsidiary		0.2			0.2			0.2
Stockholders’ equity:
Common stock and additional paid-in capital		3,055.4			3,022.8			3,000.0
Accumulated deficit		(1,322.9	)		(1,376.7	)		(1,389.9	)
Accumulated other comprehensive income		10.3			14.5			17.9
Total stockholders’ equity		1,742.8			1,660.6			1,628.0
Total liabilities and stockholders’ equity	$	2,922.0		$	2,809.4		$	2,796.1

LSI LOGIC CORPORATION
Statement of Cash Flows
(In thousands, except where noted)
(Unaudited)

	Three Months Ended									Six Months Ended
	July 2,			April 2,			July 3,			July 2,			July 3,
	2006			2006			2005			2006			2005
Operating Activities:
Net income	$	53,847		$	13,168		$	25,262		$	67,015		$	29,981
Adjustments:
Depreciation & amortization *		22,831			25,335			41,528			48,166			82,293
Stock-based compensation expense		13,298			11,831			1,172			25,129			2,627
Non-cash restructuring and other items		209			(2,958	)		501			(2,749	)		1,350
Gain on sale of intellectual property		(15,000	)		—			—			(15,000	)		—
Gain on sale of Gresham manufacturing facility and associated intellectual property		(12,553	)		—			—			(12,553	)		—
Write-off of intangible assets acquired in a purchase business combination		3,325									3,325
Non-cash foreign exchange loss/(gain)		1,057			(588	)		—			469			—
Loss/(gain) on sale of equity securities		218			(1,429	)		(2,311	)		(1,211	)		(2,311	)
Gain on repurchase of Convertible Subordinated Notes		—			—			(4,123	)		—			(4,123	)
(Gain)/Loss on sales of property and equipment		(5	)		—			51			(5	)		(3	)
Changes in deferred tax assets and liabilities		23			(3	)		17			20			54
Changes in assets and liabilities, net of assets acquired and liabilities assumed in business combinations:
Accounts receivable		(44,366	)		56,889			(25,429	)		12,523			(12,853	)
Inventories		8,613			8,693			17,626			17,306			33,160
Prepaid expenses and other assets		(15,381	)		9,404			(3,045	)		(5,977	)		(8,160	)
Accounts payable		31,751			(23,008	)		7,088			8,743			(2,378	)
Accrued and other liabilities		1,575			2,226			1,476			3,801			(493	)
Net cash provided by operating activities		49,442			99,560			59,813			149,002			119,144
Investing activities:
Purchases of debt securities available-for-sale		(216,019	)		(166,193	)		(150,207	)		(382,212	)		(262,532	)
Proceeds from maturities and sales of debt securities available-for-sale		97,747			108,166			180,870			205,913			283,183
Purchases of equity securities		(5,000	)		(150	)		—			(5,150	)		—
Proceeds from sales of equity securities		2,026			1,555			3,871			3,581			3,871
Purchases of property, equipment and software		(12,679	)		(15,978	)		(10,987	)		(28,657	)		(19,420	)
Proceeds from sale of property and equipment		40			—			1,804			40			3,215
Proceeds from sale of intellectual property		15,000			—			—			15,000			—
Proceeds from sale of Fort Collins facility		10,998			—			—			10,998			—
Proceeds from sale of Colorado Springs facility		7,029			—			—			7,029			—
Proceeds from sale of Gresham manufacturing facility		81,426			—			—			81,426			—
Proceeds from sale of Gresham manufacturing facility associated intellectual property		5,100			—			—			5,100			—
Adjustment to goodwill acquired in a prior year for resolution of a pre-acquisition income tax contingency					—			1,870			—			7,662
Net cash (used in)/provided by investing activities		(14,332	)		(72,600	)		27,221			(86,932	)		15,979
Financing activities:
Issuance of common stock		20,149			11,988			11,472			32,137			12,826
Repurchase of Convertible Subordinated Notes		—			—			(148,126	)		—			(148,126	)
Repayment of debt obligations		—			—			(32	)		—			(129	)
Net cash provided by/(used in) financing activities		20,149			11,988			(136,686	)		32,137			(135,429	)
Effect of exchange rate changes on cash and cash equivalents		365			233			(3,626	)		598			(6,961	)
Increase/ (decrease) in cash and cash equivalents		55,624			39,181			(53,278	)		94,805			(7,267	)
Cash and cash equivalents at beginning of period		303,830			264,649			264,734			264,649			218,723
Cash and cash equivalents at end of period	$	359,454		$	303,830		$	211,456		$	359,454		$	211,456

* Depreciation of fixed assets, amortization of intangible assets, software, capitalized intellectual property, debt issuance costs and deferred gains on cancelled interest rate swaps.

LSI LOGIC CORPORATION
Selected Financial Information (GAAP)
(In millions, except where noted)
(Unaudited)

	Three Months Ended
	July 2,			April 2,			July 3,
	2006			2006			2005
Semiconductor revenues ( a )	$	307.4		$	298.4		$	325.2
Storage Systems revenues ( a )	$	182.2		$	177.5		$	156.1
Total revenues	$	489.6		$	475.9		$	481.3
Percentage change in revenues-qtr./qtr. ( b )		2.9	%		-6.0	%		7.0	%
Percentage change in revenues-yr./yr. ( c )		1.7	%		5.8	%		7.5	%
Days sales outstanding		57			50			53
Days of inventory		56			62			62
Current ratio		2.3			2.3			3.3
Quick ratio		2.0			1.8			2.7
Gross margin as a percentage of revenues		42.7	%		43.0	%		44.0	%
R&D as a percentage of revenues		20.5	%		21.5	%		20.8	%
SG&A as a percentage of revenues		13.2	%		14.5	%		12.5	%
Employees ( d )		3,867			4,321			4,342
Revenues per employee (in thousands) ( e )	$	506.5		$	440.5		$	443.4
Selected Cash Flow information
Purchases of property and equipment ( f )	$	7.6		$	13.8		$	8.2
Depreciation / amortization ( g )	$	10.8		$	12.0		$	22.3

( a )	For the three months ended July 3, 2005, amounts presented have been recast to include RAID Storage Adapter (RSA) revenues into Storage Systems revenues from Semiconductor revenues.
( b )	Represents sequential quarter growth in revenues.
( c )	Represents growth in revenues in the quarter presented as compared to the same quarter of the previous year.
( 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 )	Excludes purchases of software.
( g )	Represents depreciation of fixed assets and amortization of software.