Lattice Semiconductor Reports First Quarter 2017 Results

You should not unduly rely on forward-looking statements because actual results could differ materially from those expressed in any forward-looking statements. In addition, any forward-looking statement applies only as of the date on which it is made. The Company does not intend to update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Non-GAAP Financial Measures:

Included within this press release and the accompanying tables and notes are non-GAAP financial measures that supplement the Company's consolidated financial information prepared in accordance with U.S. GAAP. The non-GAAP measures presented exclude charges and adjustments primarily related to stock-based compensation, restructuring charges, acquisition-related charges, amortization of acquired intangible assets, purchase accounting adjustments, and the estimated tax effect of these items. These charges and adjustments may be nonrecurring in nature but are a result of periodic or non-core operating activities of the Company. The Company describes these non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures in the tables and notes attached to this press release.

The Company's management believes that these non-GAAP financial measures provide an additional and useful way of viewing aspects of our performance that, when viewed in conjunction with our GAAP results, provide a more comprehensive understanding of the various factors and trends affecting our ongoing financial performance and operating results than GAAP measures alone. In particular, investors may find the non-GAAP measures useful in reviewing our operating performance without the significant accounting charges resulting from the Silicon Image acquisition, alongside the comparably adjusted prior year results. Management also uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting, and resource allocation processes and believes that investors should have access to similar data when making their investment decisions.

In addition, the Company uses Adjusted EBITDA to measure compliance with certain of its debt covenants. These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP and should be considered together with the consolidated financial information located in the tables attached to this press release.

About Lattice Semiconductor Corporation:

Lattice Semiconductor Corporation (NASDAQ: LSCC) provides smart connectivity solutions powered by our low power FPGA, video ASSP, 60 GHz millimeter wave, and IP products to the consumer, communications, industrial, computing, and automotive markets worldwide. Our unwavering commitment to our customers enables them to accelerate their innovation, creating an ever better and more connected world.

For more information, visit www.latticesemi.com. You can also follow us via LinkedIn, Twitter, Facebook, YouTube or RSS.

Lattice Semiconductor Corporation, Lattice (& design), L (& design), iCE40 and MachXO3L, and specific product designations are either registered trademarks or trademarks of Lattice Semiconductor Corporation or its subsidiaries in the United States and/or other countries.

GENERAL NOTICE: Other product names used in this publication are for identification purposes only and may be trademarks of their respective holders.

 

Lattice Semiconductor Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

       
Three Months Ended
April 1,
2017
  December 31,
2016
  April 2,
2016
Revenue $ 104,587   $ 118,108   $ 96,512  
Costs and expenses:
Cost of sales 43,755 54,628 39,408
Research and development 27,389 26,248 32,608
Selling, general, and administrative 23,905 22,745 23,608
Amortization of acquired intangible assets 8,514 8,283 8,721
Restructuring 66 951 5,431
Acquisition related charges 1,660   6,211   94  
105,289   119,066   109,870  
Loss from operations (702 ) (958 ) (13,358 )
Interest expense (5,568 ) (5,070 ) (4,960 )
Other (expense) income, net (148 ) 745   817  
Loss before income taxes and equity in net loss of an unconsolidated affiliate (6,418 ) (5,283 ) (17,501 )
Income tax expense 518 2,507 1,900
Equity in net loss of an unconsolidated affiliate, net of tax (339 ) (374 ) (310 )
Net loss $ (7,275 ) $ (8,164 ) $ (19,711 )
 
Net loss per share, basic and diluted $ (0.06 ) $ (0.07 ) $ (0.17 )
 
Shares used in per share calculations, basic and diluted 121,800   121,236   118,833  
 
 

Lattice Semiconductor Corporation

Consolidated Balance Sheets

(in thousands)

(unaudited)

         
April 1,
2017
December 31,
2016
Assets
Current assets:
Cash, cash equivalents and short-term marketable securities $ 109,448 $ 116,860
Accounts receivable, net 66,074 99,637
Inventories 77,775 79,168
Other current assets 19,660   19,035
Total current assets 272,957 314,700
 
Property and equipment, net 48,780 49,481
Intangible assets, net of amortization 106,695 118,863
Goodwill 269,758 269,758
Deferred income taxes 384 372
Other long-term assets 12,802   13,709
$ 711,376   $ 766,883
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 53,340 $ 90,798
Current portion of long-term debt 23,154 33,767
Deferred income and allowances on sales to sell-through distributors and deferred license revenue 29,829   32,985
Total current liabilities 106,323 157,550
 
Long-term debt 301,621 300,855
Other long-term liabilities 35,937   38,048
Total liabilities 443,881 496,453
 
Stockholders' equity 267,495   270,430
$ 711,376   $ 766,883
 
 

Lattice Semiconductor Corporation

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

       
Three Months Ended
April 1, 2017   April 2, 2016
Cash flows from operating activities:
Net loss $ (7,275 ) $ (19,711 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 15,296 17,331
Amortization of debt issuance costs and discount 933 241
Loss on sale or maturity of marketable securities 170
(Gain) loss on forward contracts (78 ) 152
Stock-based compensation expense 3,843 4,556
Equity in net loss of an unconsolidated affiliate, net of tax 339 310
Changes in assets and liabilities:
Accounts receivable, net 33,563 4,072
Inventories 1,393 (6,702 )
Prepaid expenses and other assets 1,137 1,457
Accounts payable and accrued expenses (includes restructuring) (35,029 ) 17,881
Accrued payroll obligations (1,706 ) (3,448 )
Income taxes payable (1,765 ) (101 )
Deferred income and allowances on sales to sell-through distributors (2,720 ) 6,907
Deferred licensing and services revenue (436 ) 179  
Net cash provided by operating activities 7,665   23,124  
Cash flows from investing activities:
Proceeds from sales of and maturities of short-term marketable securities 5,700 5,997
Purchases of marketable securities (7,420 )
Capital expenditures (3,374 ) (5,700 )
Cash paid for software licenses (1,617 ) (3,362 )
Net cash used in investing activities (6,711 ) (3,065 )
Cash flows from financing activities:
Restricted stock unit withholdings (693 ) (525 )
Proceeds from issuance of common stock 1,144 1,117
Repayment of debt (10,780 ) (875 )
Net cash used in financing activities (10,329 ) (283 )
Effect of exchange rate change on cash 274   237  
Net (decrease) increase in cash and cash equivalents (9,101 ) 20,013
Beginning cash and cash equivalents 106,552   84,606  
Ending cash and cash equivalents $ 97,451   $ 104,619  
 
Supplemental cash flow information:
Change in unrealized loss related to marketable securities, net of tax, included in Accumulated other comprehensive loss $ 43 $ 28
Income taxes paid, net of refunds $ 222 $ 2,496
Interest paid $ 5,025 $ 4,671
Accrued purchases of plant and equipment $ 1,297 $ 1,494
 
 

Lattice Semiconductor Corporation

- Supplemental Historical Financial Information -

(unaudited)

       
Three Months Ended
April 1,
2017
  December 31,
2016
  April 2,
2016
Operations Information
Percent of Revenue
Gross Margin 58.2 % 53.7 % 59.2 %
R&D Expense 26.2 % 22.2 % 33.8 %
SG&A Expense 22.9 % 19.3 % 24.5 %
Depreciation and amortization (in thousands) 15,296 13,898 17,331
Capital expenditures (in thousands) 3,374 2,726 5,700
Stock-based compensation expense (in thousands) 3,843 4,106 4,556
Restructuring and severance related charges (in thousands) 66 951 5,431
Taxes paid (cash, in thousands) 222 2,109 2,496
 
Balance Sheet Information
Current Ratio 2.6 2.0 2.4
A/R Days Revenue Outstanding 57 77 80
Inventory Months 5.3 4.3 6.3
 
Revenue% (by Geography)
Asia 70 % 75 % 68 %
Europe (incl. Africa) 11 % 14 % 17 %
Americas 19 % 11 % 15 %
 
Revenue% (by End Market)
Communications and Computing 29 % 26 % 34 %
Mobile and Consumer 30 % 36 % 26 %
Industrial and Automotive 30 % 31 % 31 %
Licensing and Services 11 % 7 % 9 %
 
Revenue% (by Channel)
Sell-through distribution 60 % 68 % 53 %
Direct 40 % 32 % 47 %
 
 

Lattice Semiconductor Corporation

- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -

(in thousands, except per share data)

(unaudited)

                 
Three Months Ended
April 1,
2017
  December 31,
2016
  April 2,
2016
 
Gross Margin Reconciliation
GAAP Gross margin $ 60,832 $ 63,480 $ 57,104
Inventory step-up expense 523
Stock-based compensation - gross margin 228   232   259  
Non-GAAP Gross margin $ 61,060 $ 63,712 $ 57,886
 
 
Gross Margin % Reconciliation
GAAP Gross margin % 58.2 % 53.7 % 59.2 %
Cumulative effect of non-GAAP Gross Margin adjustments 0.2 % 0.2 % 0.8 %
Non-GAAP Gross margin % 58.4 % 53.9 % 60.0 %
 
 
Operating Expenses Reconciliation
GAAP Operating expenses $ 61,534 $ 64,438 $ 70,462
Amortization of acquired intangible assets (8,514 ) (8,283 ) (8,721 )
Restructuring charges (66 ) (951 ) (5,431 )
Acquisition related charges (1) (1,660 ) (6,211 ) (94 )
Stock-based compensation - operations (3,615 ) (3,874 ) (4,297 )
Non-GAAP Operating expenses $ 47,679 $ 45,119 $ 51,919
 
 
Income (Loss) from Operations Reconciliation
GAAP Loss from operations $ (702 ) $ (958 ) $ (13,358 )
Inventory step-up expense 523
Stock-based compensation - gross margin 228 232 259
Amortization of acquired intangible assets 8,514 8,283 8,721
Restructuring charges 66 951 5,431
Acquisition related charges (1) 1,660 6,211 94
Stock-based compensation - operations 3,615   3,874   4,297  
Non-GAAP Income from operations $ 13,381 $ 18,593 $ 5,967
 
 
Income (Loss) from Operations % Reconciliation
GAAP Loss from operations % (0.7 )% (0.8 )% (13.8 )%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments 13.5 % 16.5 % 20.0 %
Non-GAAP Income from operations % 12.8 % 15.7 % 6.2 %
 
 
(1) Legal fees and outside services in connection with our pending acquisition by Canyon Bridge Acquisition Company, Inc.
 
Lattice Semiconductor Corporation
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -
(in thousands, except per share data)
(unaudited)
         
Three Months Ended
April 1,
2017
December 31,
2016
April 2,
2016
 
Income Tax Expense Reconciliation
GAAP Income tax expense $ 518 $ 2,507 $ 1,900
Estimated tax effect of non-GAAP adjustments (2) (303 ) (438 ) 548  
Non-GAAP Income tax expense $ 215 $ 2,069 $ 2,448
 
 
Net Income (Loss) Reconciliation
GAAP Net loss $ (7,275 ) $ (8,164 ) $ (19,711 )
Inventory step-up expense 523
Stock-based compensation - gross margin 228 232 259
Amortization of acquired intangible assets 8,514 8,283 8,721
Restructuring charges 66 951 5,431
Acquisition related charges (1) 1,660 6,211 94
Stock-based compensation - operations 3,615 3,874 4,297
Estimated tax effect of non-GAAP adjustments (2) 303   438   (548 )
Non-GAAP Net income (loss) $ 7,111 $ 11,825 $ (934 )
 
 
Net Income (Loss) Per Share Reconciliation
GAAP Net loss per share - basic and diluted $ (0.06 ) $ (0.07 ) $ (0.17 )
Cumulative effect of Non-GAAP adjustments 0.12   0.17   0.16  
Non-GAAP Net income (loss) per share - basic and diluted $ 0.06 $ 0.10 $ (0.01 )
 
 
Shares used in per share calculations:
Basic 121,800 121,236 118,833
Diluted - GAAP (3) 121,800 121,236 118,833
Diluted - Non-GAAP (3) 124,343 123,621 118,833
 
 
 
 
 
(1) Legal fees and outside services in connection with our pending acquisition by Canyon Bridge Acquisition Company, Inc.
(2) During the second quarter of fiscal 2016, we refined our calculation of non-GAAP tax expense by applying our tax
provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between
calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of
non-GAAP adjustments.” Prior periods have been similarly recalculated to conform to the current presentation.
(3) Diluted shares are calculated using the GAAP treasury stock method. In a loss position, diluted shares equal basic shares.

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