The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties, including statements relating to our business outlook, statements relating to our confidence entering the third quarter based on a stronger backlog, continued traction with new products, and a significant win at one of the world's largest flat panel display companies, and its expected contribution to revenue, our expectation that these positive trends will off-set an approximately $2.0 million expected negative revenue impact in the third quarter from changing certain distributors from a sell-in to a sell-through business model, our belief that these changes will improve for us transparency and visibility at our end customers, statements regarding the moving of our warehouse to Singapore, our expectation that this will improve our shipping times to most of our customers, reduce our cost of supply and reduce inventory, our statement that we are taking certain actions to reduce staff as we work to even better align our resources with our new operating model, our statement that the actions will bring us closer to our goal of sustained profitability, our expectation that we will receive the remaining $30.0 million of other receivables from Fujitsu in the fourth quarter of 2009, our expectation that the charge for the staff reductions planned for the third quarter will be approximately $1.2 million, our expectation that our cost reduction actions will reduce our on-going expenses by approximately $1.5 million per quarter and the statements under the heading "Business Outlook-Third Quarter 2009 Quarter." Lattice also believes the factors identified below in connection with each such statement could cause actual results to differ materially from the forward-looking statements.
We may be unable to improve our cost structure or reduce cost out of our supply chain. Fujitsu may fail to pay some or all of the remaining receivable owed to us on a timely basis, if at all. We may be unsuccessful in utilizing our balance sheet to provide innovative solutions to our customers, and unexpected events could impair our ability to make expected investments. Estimates of future revenue are inherently uncertain due to the high percentage of quarterly "turns" business. In addition, revenue is affected by such factors as current uncertainty in global macroeconomic conditions which may affect customer demand, pricing pressures, competitive actions, the demand for our Mature, Mainstream and New products, and the ability to supply products to customers in a timely manner. Actual gross margin percentage and operating expenses could vary from the estimates contained herein on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly and test costs, variations in manufacturing yields, the effects of transitioning certain distributors from the sell-to to the sell-through business model, and compensation charges due to stock price changes.
In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include global economic uncertainty, overall semiconductor market conditions, market acceptance and demand for our new products, the Company's transition of distributors to a sell-through business model, the Company's dependencies on its silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks, the compromised liquidity of the Company's auction rate securities, ability to improve customer service and reduce costs by moving our warehouse to Singapore, the effects of planned third quarter staff reductions, and the other risks that are described herein and that are otherwise 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.
Lattice Semiconductor Corporation
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
------------------------------- --------------------
July 4, April 4, June 28, July 4, June 28,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
Revenue $ 46,900 $ 43,336 $ 58,079 $ 90,236 $ 114,683
Costs and expenses:
Cost of products
sold 22,314 20,658 25,551 42,972 50,711
Research and
development 13,811 14,891 17,937 28,702 35,605
Selling, general
and
administrative 13,573 12,943 15,195 26,516 30,194
Amortization of
intangible
assets (1) - 228 1,368 228 2,849
Restructuring (2) (15) (25) 858 (40) 2,648
--------- --------- --------- --------- ---------
49,683 48,695 60,909 98,378 122,007
--------- --------- --------- --------- ---------
Loss from operations (2,783) (5,359) (2,830) (8,142) (7,324)
Other income
(expense), net (3) 189 (512) (10,520) (323) (9,187)
--------- --------- --------- --------- ---------
Loss before
provision (benefit)
for income taxes (2,594) (5,871) (13,350) (8,465) (16,511)
Provision (benefit)
for income taxes 125 (121) 221 4 314
--------- --------- --------- --------- ---------
Net loss $ (2,719) $ (5,750) $ (13,571) $ (8,469) $ (16,825)
========= ========= ========= ========= =========
Net loss per share
(4):
Basic and diluted $ (0.02) $ (0.05) $ (0.12) $ (0.07) $ (0.15)
========= ========= ========= ========= =========
Shares used in per
share calculations:
Basic and diluted 115,538 115,430 115,171 115,517 115,159
========= ========= ========= ========= =========
Notes:
(1) Intangible assets subject to amortization relate to the acquisition
of the FPGA business of Agere Systems, Inc. on January 18, 2002 which
became fully amortized during the first quarter of 2009.
(2) Represents costs and adjustments incurred under the corporate
restructuring plans initiated in the fourth quarter of fiscal 2005,
the third quarter of fiscal 2007 and the third quarter of fiscal 2008.
During the first and second quarter of fiscal 2009, the Company
incurred a net credit of less than $0.1 million primarily resulting
from changes in original estimates under these restructuring plans.
During the second quarter of fiscal 2008, the Company incurred costs
of $0.9 million, primarily comprised of severance costs related to
the resignation of the Company's former President and Chief Executive
Officer.
(3) Includes a $0.5 million loss for the three months ended July 4, 2009,
a $0.7 million loss recorded during the three months ended April 4,
2009, and a $10.3 million loss recorded during the three months ended
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.
Also included, for the three months ended July 4, 2009, was a
realized gain of $0.2 million on sale of auction rate securities.
(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 (Loss) Income
(in thousands)
(unaudited)
Three months ended Six months ended
------------------------------- --------------------
July 4, April 4, June 28, July 4, June 28,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
GAAP net loss $ (2,719) $ (5,750) $ (13,571) $ (8,469) $ (16,825)
Reconciling
items:
Amortization
of
intangible
assets (1) - 228 1,368 228 2,849
Stock-based
compensation 1,091 1,259 1,294 2,350 2,662
Impairment of
Long-term
marketable
securities,
net (2) 366 665 11,337 1,031 11,337
Restructuring
(3) (15) (25) 858 (40) 2,648
--------- --------- --------- --------- ---------
Non-GAAP net
(loss) income $ (1,277) $ (3,623) $ 1,286 $ (4,900) $ 2,671
========= ========= ========= ========= =========
Reconciliation of GAAP Net Loss per Share to Non-GAAP
Net (Loss) Income per Share
(unaudited)
Three months ended Six months ended
------------------------------- --------------------
July 4, April 4, June 28, July 4, June 28,
2009 2009 2008 2009 2008
--------- --------- --------- --------- ---------
Basic and
Diluted:
GAAP net loss $ (0.02) $ (0.05) $ (0.12) $ (0.07) $ (0.15)
Reconciling
items:
Amortization
of
intangible
assets (1) 0.00 0.00 0.01 0.00 0.02
Stock-based
compensation 0.01 0.01 0.01 0.02 0.02
Impairment of
Long-term
marketable
securities,
net (2) 0.00 0.01 0.10 0.01 0.10
Restructuring
(3) (0.00) (0.00) 0.01 (0.00) 0.02
--------- --------- --------- --------- ---------
Non-GAAP net
(loss) income
(5) $ (0.01) $ (0.03) $ 0.01 $ (0.04) $ 0.02
========= ========= ========= ========= =========
Shares used in
per share
calculations (in
thousands):
Basic 115,538 115,430 115,171 115,517 115,159
========= ========= ========= ========= =========
Diluted (4) 115,538 115,430 119,083 115,517 119,211
========= ========= ========= ========= =========
Notes:
(1) Intangible assets subject to amortization relate to the acquisition of
the FPGA business of Agere Systems, Inc. on January 18, 2002 which
became fully amortized during the first quarter of 2009.
(2) Includes a $0.5 million loss for the three months ended
July 4, 2009, a $0.7 million loss recorded during the three months
ended April 4, 2009, and a $10.3 million loss recorded during the
three months ended 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. Also included, for the three months ended July 4, 2009,
was a realized gain of $0.2 million on sale of auction rate securities.
(3) Represents costs and adjustments incurred under the corporate
restructuring plans initiated in the fourth quarter of fiscal 2005,
the third quarter of fiscal 2007 and the third quarter of fiscal 2008.
During the first and second quarter of fiscal 2009, the Company
incurred a net credit of less than $0.1 million primarily resulting
from changes in original estimates under these restructuring plans.
During the second quarter of fiscal 2008, the Company incurred
costs of $0.9 million, primarily comprised of severance costs related
to the resignation of the Company's former President and Chief
Executive Officer.
(4) For the three months ended July 4, 2009 and April 4, 2009, the
computation of diluted earnings per share excludes the effects of
stock options, restricted stock units and warrants, as they are
antidilutive. There were no outstanding Convertible Notes during
these quarters. For the three months ended June 28, 2008, the
computation of diluted earnings per share includes the effects of
stock options, restricted stock units, warrants and Convertible Notes,
as they are dilutive.
(5) Per share amounts may not add up due to rounding.
Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
July 4, January 3,
2009 2009
---------- ----------
Assets
Current assets:
Cash, cash equivalents and short-term marketable
securities $ 104,283 $ 65,909
Accounts receivable, net 26,641 26,404
Other receivable 30,000 60,000
Inventories 28,087 32,703
Other current assets 31,447 26,820
---------- ----------
Total current assets 220,458 211,836
Property and equipment, net 36,981 40,307
Long-term marketable securities (1) 18,435 19,485
Foundry advances and other assets 5,651 20,080
Intangible assets, net - 228
---------- ----------
$ 281,525 $ 291,936
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities $ 19,556 $ 23,640
Deferred income and allowances on sales to
distributors 6,515 5,741
---------- ----------
Total current liabilities 26,071 29,381
Other long-term liabilities 5,893 7,616
---------- ----------
Total liabilities 31,964 36,997
Stockholders' equity 249,561 254,939
---------- ----------
$ 281,525 $ 291,936
========== ==========
Notes:
(1) Long-term marketable securities include auction rate securities that
have experienced multiple failed auctions, and as a result, such
securities are presently considered to be illiquid.
Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -
Q209 Q109 Q208
----- ----- -----
Operations Information
Percent of Revenue
Gross Margin 52.4% 52.3% 56.0%
R&D Expense 29.4% 34.4% 30.9%
SG&A Expense 28.9% 29.9% 26.2%
Depreciation Expense (in thousands) 2,703 3,091 3,379
Capital Expenditures (in thousands) 1,670 798 3,917
Balance Sheet Information
Current Ratio 8.5 7.5 2.5
A/R Days Revenue Outstanding 51 52 45
Inventory Months 3.8 4.4 4.6
Revenue% (by Product Family)
FPGA 37% 36% 23%
PLD 63% 64% 77%
Revenue% (by Product Classification)
New 45% 39% 21%
Mainstream 37% 40% 49%
Mature 18% 21% 30%
Revenue% (by Geography)
Americas 20% 20% 20%
Europe (incl. Africa) 16% 21% 20%
Asia 64% 59% 60%
Revenue% (by End Market)
Communications 57% 63% 52%
Industrial & Other 17% 18% 23%
Consumer & Automotive 14% 11% 14%
Computing 12% 8% 11%
Revenue% (by Channel)
Direct 64% 68% 67%
Distribution 36% 32% 33%
