Lattice Semiconductor Reports Third Quarter Financial Results (Revenue down 1%)

In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include the disruption of our business activities due to the transition to new executive management, the Company's dependencies on its silicon wafer suppliers, technological and product development risks, and the other risks that are described from time to time in our filings with the Securities and Exchange Commission. 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.

About Lattice Semiconductor:

Lattice is the source for innovative FPGA, CPLD and Mixed Signal programmable logic solutions. For more information, visit www.latticesemi.com.

Lattice Semiconductor Corporation, Lattice (& design), L (& design), 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 Statement of Operations
                    (in thousands, except per share data)
                                (Unaudited)


                           Three months ended           Nine months ended
                     -------------------------------  --------------------
                     September    June,   September   September  September
                        27,        28         29,        27,        29,
                       2008       2008       2007       2008       2007
                     ---------  ---------  ---------  ---------  ---------

Revenue              $  57,610  $  58,079  $  58,304  $ 172,293  $ 175,654

Costs and expenses:
   Cost of products
    sold                26,493     25,551     26,705     77,204     79,516
   Research and
    development         17,534     17,937     20,166     53,139     62,926
   Selling, general
    and
    administrative      14,547     15,195     15,054     44,741     44,405
   Amortization of
    intangible
    assets (1)           1,369      1,368      2,458      4,218      7,790
   Restructuring (2)     3,882        858      1,718      6,530      1,615
                     ---------  ---------  ---------  ---------  ---------
                        63,825     60,909     66,101    185,832    196,252
                     ---------  ---------  ---------  ---------  ---------
Loss from operations    (6,215)    (2,830)    (7,797)   (13,539)   (20,598)

Other (expense)
 income, net (3)          (999)   (10,520)     3,551    (10,186)    10,858
                     ---------  ---------  ---------  ---------  ---------
Loss before (benefit)
 provision for income
 taxes                  (7,214)   (13,350)    (4,246)   (23,725)    (9,740)
(Benefit) Provision
 for income taxes         (236)       221        201         78        551
                     ---------  ---------  ---------  ---------  ---------
Net loss             $  (6,978) $ (13,571) $  (4,447) $ (23,803) $ (10,291)
                     =========  =========  =========  =========  =========

Net loss per share (4):
Basic and diluted    $   (0.06) $   (0.12) $   (0.04) $   (0.21) $   (0.09)
                     =========  =========  =========  =========  =========

Shares used in per
 share calculations:
Basic and diluted      115,370    115,171    115,057    115,240    114,852
                     =========  =========  =========  =========  =========

Notes:

(1) Intangible assets subject to amortization aggregate $1.6 million, net,
    at September 27, 2008 and relate to the acquisition of the FPGA
    business of Agere Systems, Inc. on January 18, 2002. Intangible assets
    related to the acquisition of Cerdelinx Technologies, Inc., became
    fully amortized in the third quarter of 2007. Amortization charges are
    expected to be eliminated after the first quarter of 2009.

(2) Represents costs and adjustments incurred under the corporate
    restructuring plans initiated in the fourth quarter of 2005, the third
    quarter of fiscal 2007 and the third quarter of 2008. During the third
    quarter of 2008, the Company initiated a restructuring plan to lower
    operating expenses and recorded an initial charge of $3.8 million
    comprised primarily of severance and related costs, of which $1.9
    million was paid during the third quarter of 2008. The company expects
    to incur an additional charge of approximately $0.3 million in the
    fourth quarter of 2008 primarily related to costs to vacate leased
    space.

(3) Includes a $1.4 million and $10.3 million loss recorded during the
    three months ended September 27, and June 28, 2008 as a result of the
    Company recognizing an impairment charge related to an
    other-than-temporary decline in fair value of auction rate securities
    held in Long-term marketable securities  and  $0.2  million  and  $1.0
        million  loss  on  the  sale  or  other-than-temporary  impairment  charge  on
        our  common  stock  investment  in  a  foundry  partner.    Includes  a  $1.7
        million  gain  recorded  during  the  three  months  ended    September  29,  2007
        as  a  result  of  the  extinguishment  of  Zero  Coupon  Convertible  Notes.

(4)  For  all  periods  presented,  the  computation  of  diluted  earnings  per
        share  excludes  the  effects  of  stock  options,  restricted  stock  units,
        warrants  and  Convertible  Notes,  as  they  are  antidilutive.



                      Reconciliation  of  GAAP  Net  Loss  to  Non-GAAP  Net  Income
                                                            (in  thousands)
                                                                (Unaudited)


                                                          Three  months  ended                  Nine  months  ended
                                              -----------------------------    --------------------
                                              September        June      September    September    September
                                                    27,                28,              29,              27,                29,
                                                  2008              2008            2007            2008              2007
                                              --------    ---------    --------    ---------    ---------
GAAP  net  loss  (1)            $  (6,978)  $  (13,571)  $  (4,447)  $  (23,803)  $  (10,291)
Reconciling  items:
    Amortization  of
      intangibles
      assets  (2)                          1,369            1,368          2,458            4,218            7,790
    Stock-based
      compensation                      1,495            1,294          1,349            4,157            4,063
    Impairment/loss  on
      sale  of  Long-term
      marketable  securities
      and  Other  current
      assets  (3)                          1,652          11,337                  -          12,989                    -
    Gain  on  sale  of  land                -                    -                  -                    -          (1,604)
    Restructuring  (4)              3,882                858          1,718            6,530            1,615
                                              --------    ---------    --------    ---------    ---------
Non-GAAP  net  income        $    1,420    $      1,286    $    1,078    $      4,091    $      1,573
                                              ========    =========    ========    =========    =========



Reconciliation  of  GAAP  Net  Loss  per  Share  to  Non-GAAP  Net  Income  per  Share
                                                                  (unaudited)

                                                          Three  months  ended                  Nine  months  ended
                                              -----------------------------    --------------------
                                              September      June        September    September    September
                                                    27,              28,              29,                27,                29,
                                                  2008            2008              2007            2008              2007
                                              --------    ---------    --------    ---------    ---------
Basic  and  diluted:
GAAP  net  loss  (1)            $    (0.06)  $      (0.12)  $    (0.04)  $      (0.21)  $      (0.09)
Reconciling  items:
    Amortization  of
      intangibles
      assets  (2)                            0.01              0.01            0.02              0.04              0.07
    Stock-based
      compensation                        0.01              0.01            0.01              0.04              0.04
    Impairment/loss  on
      sale  of  Long-term
      marketable  securities
      and  Other  current
      assets  (3)                            0.01              0.10                  -              0.11                    -
    Gain  on  sale  of  land                -                    -                  -                    -            (0.01)
    Restructuring  (4)                0.03              0.01            0.01              0.06              0.01
                                              --------    ---------    --------    ---------    ---------
Non-GAAP  net  income  (5)$      0.01    $        0.01    $      0.01    $        0.04    $        0.01
                                              ========    =========    ========    =========    =========
Shares  used  in  per
  share  calculations  (in
  thousands):
    Basic                                  115,370        115,171      115,057        115,240        114,852
                                              ========    =========    ========    =========    =========
    Diluted  (6)                      116,901        119,083      120,659        118,256        122,462
                                              ========    =========    ========    =========    =========


Notes:

(1)  GAAP  net  loss  for  the  three  and  nine  month  periods  ended  September  29,
        2007,  include  a  gain  related  to  the  early  extinguishment  of  Zero  Coupon
        Convertible  Notes  of  $1.7  million  and  $2.7  million,  respectively.

(2)  Intangible  assets  subject  to  amortization  aggregate  $1.6  million,  net,
        at  September  27,  2008  and  relate  to  the  acquisition  of  the  FPGA
        business  of  Agere  Systems,  Inc.  on  January  18,  2002.  Intangible  assets
        related  to  the  acquisition  of  Cerdelinx  Technologies,  Inc.,  became
        fully  amortized  in  the  third  quarter  of  2007.  Amortization  charges  are
        expected  to  be  eliminated  after  the  first  quarter  of  2009.

(3)  Includes  a  $1.4  million  and  $10.3  million  loss  recorded  during  the
        three  months  ended  September  27,  and  June  28,  2008,  respectively,  as  a
        result  of  the  Company  recognizing  an  impairment  charge  related  to  an
        other-than-temporary  decline  in  fair  value  of  auction  rate  securities
        held  in  Long-term  marketable  securities  and  $0.2  million  and  $1.0
        million  loss  on  the  sale  or  other-than-temporary  impairment  charge  on
        our  common  stock  investment  in  a  foundry  partner.

(4)  Represents  costs  and  adjustments  incurred  under  the  corporate
        restructuring  plans  initiated  in  the  fourth  quarter  of  2005,  the  third
        quarter  of  fiscal  2007  and  the  third  quarter  of  2008.  During  the  third
        quarter  of  2008,  the  Company  initiated  a  restructuring    plan  to  lower
        operating  expenses  and  recorded  an  initial  charge  of  $3.8  million
        comprised  primarily  of  severance  and  related  costs,  of  which  $1.9
        million  was  paid  during  the  third  quarter  of  2008.  The  company  expects
        to  incur  an  additional  charge  of  approximately  $0.3  million  in  the
        fourth  quarter  of  2008  primarily  related  to  costs  to  vacate  leased
        space.

(5)  For  all  periods  presented,  the  computation  of  diluted  earnings  per
        share  includes  the  effects  of  stock  options,  restricted  stock  units,
        warrants  and  Convertible  Notes,  as  they  are  dilutive.

(6)  Per  share  amounts  may  not  add  up  due  to  rounding.



                                        Lattice  Semiconductor  Corporation
                                                Consolidated  Balance  Sheet
                                                        (in  thousands)
                                                          (unaudited)


                                                                                                September  27,  December  29,
                                                                                                        2008                    2007
                                                                                                -------------  -------------

                                          Assets
Current  assets:
      Cash,  cash  equivalents  and  short-term
        marketable  securities  (1)                                      $            68,592  $            85,063
      Accounts  receivable,  net                                                        29,879                29,293
      Inventories                                                                                  35,756                40,005
      Other  current  assets                                                                32,918                37,185
                                                                                                -------------  -------------
            Total  current  assets                                                        167,145              191,546

Property  and  equipment,  net                                                        42,017                43,617
Long-term  marketable  securities  (1)                                        27,436                44,900
Foundry  advances,  investments  and  other  assets                  76,674                90,407
Intangible  assets,  net                                                                    1,596                  5,815
                                                                                                -------------  -------------
                                                                                                $          314,868  $          376,285
                                                                                                =============  =============

          Liabilities  and  Stockholders'  Equity

Current  liabilities:
      Accounts  payable  and  other  accrued
        liabilities                                                                  $            32,414  $            32,978
      Deferred  income  and  allowances  on  sales  to
        distributors                                                                                6,700                  8,033
      Zero  Coupon  Convertible  Notes  due  in  2010  (2)                        -                40,000
                                                                                                -------------  -------------
            Total  current  liabilities                                                39,114                81,011

Other  long-term  liabilities                                                          7,640                  9,042
                                                                                                -------------  -------------
            Total  liabilities                                                                46,754                90,053

Stockholders'  equity                                                                    268,114              286,232
                                                                                                -------------  -------------
                                                                                                $          314,868  $          376,285
                                                                                                =============  =============


Notes:

(1)  Long-term  marketable  securities  include  auction  rate  securities  that
        were  reclassified  from  Cash,  cash  equivalents  and  short-term  marketable
        securities  because  recent  auctions  have  been  unsuccessful,  and  as  a
        result,  such  securities  are  presently  considered  to  be  illiquid.    As  a
        result  of  an  other-than-temporary  decline  in  fair  value  for  the
        securities,  we  recorded  an  impairment  charge  of    $11.8  million  to  Net
        loss  for  the  nine  months  ended  September  27,  2008.

(2)  On  July  2,  2008,  the  Company  completed  the  purchase  of  $40.0  million  in
        principal  amount  of  its  Zero  Coupon  Convertible  Notes  ("Notes")  due
        July  1,  2010.  The  Notes  were  purchased  pursuant  to  the  exercise  by  the
        noteholders  of  their  repurchase  rights.  Based  on  these  purchases,  no
        such  Notes  remain  outstanding



                                          Lattice  Semiconductor  Corporation
                          -  Supplemental  Historic  Financial  Information  -


                                                                                                      Q308          Q208          Q307
                                                                                                  =======    =======    =======
Operations  Information
Percent  of  Revenue
Gross  Margin                                                                                54.0%        56.0%        54.2%
R&D  Expense                                                                                  30.4%        30.9%        34.6%
SG&A  Expense                                                                                25.3%        26.2%        25.8%

Depreciation  Expense  (in  thousands)                                3,502        3,379        3,398
Capital  Expenditures  (in  thousands)                                1,406        3,917        2,110

Balance  Sheet  Information
Current  Ratio                                                                                4.3            2.5            2.9
A/R  Days  Revenue  Outstanding                                                    47              46              49
Inventory  Months                                                                          4.0            4.6            4.1

Revenue%  (by  Product  Family)
FPGA                                                                                                    29%            23%            23%
PLD                                                                                                      71%            77%            77%

Revenue%  (by  Product  Classification)
New                                                                                                      30%            21%            14%
Mainstream                                                                                        44%            49%            53%
Mature                                                                                                26%            30%            33%

Revenue%  (by  Geography)
Americas                                                                                            20%            20%            21%
Europe  (incl.  Africa)                                                                  20%            20%            20%
Asia                                                                                                    60%            60%            59%

Revenue%  (by  End  Market)
Communications                                                                                54%            52%            54%
Industrial  &  Other                                                                        21%            23%            24%
Computing                                                                                          11%            14%            12%
Consumer  &  Automotive                                                                  14%            11%            10%

Revenue%  (by  Channel)
Direct                                                                                                69%            67%            66%
Distribution                                                                                    31%            33%            34%


New:                    LatticeXP2,  LatticeSC,  LatticeECP2/M,  LatticeECP,  LatticeXP,
                            MachXO,  Power  Manager,  ispClock

Mainstream:      FPSC,  ispXPLD,  ispGDX2,  ispMACH  4/LV,  ispGDX/V,  ispMACH
                            4000/Z,  ispXPGA,  Software  and  IP

Mature:              ORCA  2,  ORCA  3,  ORCA  4,  ispPAC,  ispLSI  8000V,  ispMACH  5000B,
                            ispMACH  2LV,  ispMACH  5LV,  ispLSI  2000V,  ispLSI  5000V,  ispMACH
                            5000VG,  all  5  Volt  CPLDs,  all  SPLDs
 

 

 




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