EX-99.1 2 a06-3625_1ex99d1.htm EXHIBIT 99

Exhibit 99.1

 

 

For more information contact:

 

Jan Johannessen

Chief Financial Officer

Lattice Semiconductor Corporation

(503) 268-8000

 

LATTICE SEMICONDUCTOR REPORTS FOURTH QUARTER AND YEAR END FINANCIAL RESULTS

 

HILLSBORO, Ore.  -  January 26, 2006  -  Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the fourth quarter and year ended December 31, 2005.

 

For the fourth quarter, revenue was $54.0 million, an increase of 11 percent from the $48.5 million reported in the same quarter a year ago and an increase of one percent from the $53.4 million reported last quarter.  Quarterly revenue from PLD products was $44.1 million, or 82 percent of total revenue, and increased two percent sequentially.  Quarterly revenue from FPGA products was $9.9 million, or 18 percent of total revenue, and decreased three percent sequentially.  Quarterly revenue from New products, now 38 percent of total revenue, grew five percent sequentially and 66 percent on a year over year basis.

 

Net loss for the fourth quarter was $23.0 million ($0.20 per share).  This loss includes charges of $3.7 million for the amortization of intangible assets and $11.9 million for restructuring costs.  Excluding these charges, loss for the quarter was $7.3 million ($0.06 per share).  The non-cash amortization charges have been highlighted as these charges are currently expected to be substantially eliminated in 2008.  Further, the restructuring costs are significant charges that are unique to the fourth quarter of 2005 and are related to severance payments, accrued lease obligations, write-off of an intellectual property license, and other costs incurred prior to year-end. Remaining costs to complete the restructuring will be recorded in future periods as incurred and are not expected to be significant. The Company believes exclusion of these charges more closely approximates its ongoing

 


 

operational performance. In addition to the above, the Company recorded charges related to its last-time buy program to obsolete certain mature parts.

 

Fourth Quarter Business Highlights:

 

•                  Completed volume production release of the full, five-device LatticeXP non-volatile 130nm FPGA product family;

 

•                  Completed volume production release of the full, four-device MachXO non-volatile 130nm cross-over programmable logic family;

 

•                  Released the ispLever 5.1 software design tool, which supports all next generation 130nm product families ( LatticeEC/P, LatticeXP and MachXO);

 

•                  Introduced the second generation Power Manager II devices, the ispPAC-Power1220AT8, and announced the second generation ispClock products with a family of revolutionary zero-delay clock generators, the ispClock5600;

 

•                  Completed the previously announced corporate restructuring by reducing 14 percent of the workforce and streamlining the R&D organization by closing four remote design centers; and

 

•                  Reached an agreement to settle the shareholder derivative litigation.

 

“With our company-wide restructuring and related one-time write-offs behind us, we enter 2006 with a renewed sense of optimism. Our operating expense level has been reduced, and our next generation FPGAs, now fully production released, continue to make inroads into the worldwide customer base. Acceptance of these new FPGA products is increasing across multiple applications, and we are winning a growing number of design-ins,” said Steve Skaggs, President and CEO of Lattice Semiconductor Corporation.

 

For the year 2005, revenue was $211.1 million, a decrease of seven percent from the $225.8 million reported in 2004.

 

Net loss for 2005 was $49.1 million ($0.43 per share), as compared to the net loss of $52.0 million ($0.46 per share) reported in 2004.  These losses also include the previously described non-cash amortization charges and restructuring charges, which total approximately $28.1 million and $47.2 million for the years ended 2005 and 2004, respectively. Excluding these charges, the loss for 2005 was $21.0 million ($0.18 per share) as compared to a loss of $4.7 million ($0.04 per share) for 2004. 

 


 

A reconciliation of non-GAAP net loss to GAAP net loss accompanies the financial tables in this earnings release. 

 

Business Outlook – March 2006 Quarter:

 

•                  Sequential quarterly revenue growth is expected to be approximately 2%-5%; 

•                  Gross margin percentage is expected to be approximately 54%-56%;

•                  Total operating expenses are expected to be approximately $34-$35 million, which includes an estimated $1 million of stock-based compensation expense (inclusion of stock-based compensation in operating expenses adds significant uncertainty to our estimates of expenses due to the effect of the volatility in our stock price, which we can not predict);

•                  Intangible asset amortization is expected to be approximately $2.9 million; and

•                  Other income is expected to be approximately $2.4 million.

 

Discussion of Non-GAAP Financial Measures:

 

Management evaluates and makes operating decisions using various performance measures. In addition to our GAAP results, we also consider adjusted net loss, which we refer to as non-GAAP net loss. This measure is generally based on the revenues of our products and the costs of those operations, such as cost of revenue, research and development, sales and marketing and general and administrative expenses, that management considers in evaluating our ongoing core operating performance. Non-GAAP net loss consists of net loss excluding amortization of intangible assets and restructuring charges.

 

Intangible assets relate to assets acquired through acquisitions and consist of purchased technology and deferred stock compensation issued in connection with the acquisitions. Restructuring charges consist of expenses incurred under our corporate restructuring plan, and include items such as separation packages, costs to vacate space under long-term lease arrangements, cost to write-off an intellectual property license and other related expenses.

 

Non-GAAP net loss is a supplemental measure of our performance that is not required by and not presented in accordance with GAAP. Moreover, it should not be considered as an alternative to net loss, operating loss or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity.

 


 

Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our net loss, which is our most directly comparable GAAP financial result. For more information, see the consolidated statements of operations contained in this earnings release.

 

On January 26, 2006, Lattice will hold a telephone conference call at 2:00 pm (Pacific Time) with financial analysts.  Investors may listen to our conference call live via the web at www.lscc.com.  Replays of the call will also be available at www.lscc.com.  On March 15, 2006, we plan to publish a “Business Update Statement” on our website.  Our financial guidance will be limited to the comments on our public quarterly earnings call and these public business outlook statements.  Additionally, during the March 2006 quarter, Lattice plans to participate in an investor conference sponsored by Morgan Stanley.  Specific presentation dates and times are posted on our website at www.lscc.com.  

 

The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties.  With respect to particular forward-looking statements in the Business Outlook – March 2006 Quarter section of this release, Lattice believes the factors identified below in connection with each such statement could cause actual results to differ materially from the forward-looking statements.

 

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 pricing pressures, competitive actions, the demand for our products, and the ability to supply products to customers in a timely manner.  Actual gross margin percentage and operating costs could vary from the estimates contained herein on the basis of, among other things, changes in revenue levels, product pricing, changes in wafer, assembly and test costs, and variations in manufacturing yields. 

 

In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements herein include the Securities and Exchange Commission’s informal inquiry and any resulting actions, developments in our pending securities class action litigation, 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.

 


 

Lattice Semiconductor Corporation, the inventor of in-system programmable (ISPTM) logic products, designs, develops and markets the broadest range of Field Programmable Gate Arrays (FPGA), Field Programmable System Chips (FPSCs) and high-performance Programmable Logic Devices (PLDs), including Complex Programmable Logic Devices (CPLD), Programmable Mixed Signal Components (ispPAC®), and Programmable Digital Interconnect (ispGDX®). Lattice also offers industry leading SERDES products.  Lattice offers total solutions for today’s system designs by delivering the most innovative programmable silicon products that embody leading-edge system expertise. 

 

Lattice products are sold worldwide through an extensive network of independent sales representatives and distributors, primarily to OEM customers in the communications, computing, consumer, industrial and military end markets.  Company headquarters are located at 5555 N.E. Moore Court, Hillsboro, Oregon 97124 USA.  For more information access our web site at www.latticesemi.com.

 

#  #  #

 

Lattice Semiconductor Corporation, Lattice (& design), L (& design), LatticeECP, LatticeXP, MachXO, isp, ispLever,  ispPAC, ispGDX, Power Manager, 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 Statement of Operations

(in thousands, except per share data)

 

Description

 

Three months ended

 

Year Ended

 

 

Dec. 31,
2005

 

Sept. 30,
2005

 

Dec. 31,
2004

 

Dec. 31,
2005

 

Dec. 31,
2004

 

 

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

53,991

 

$

53,390

 

$

48,541

 

$

211,060

 

$

225,832

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

Costs of products sold

 

27,494

 

23,398

 

21,058

 

95,925

 

96,857

 

Research and development

 

23,653

 

22,719

 

22,886

 

95,412

 

90,957

 

Selling, general and administrative

 

13,217

 

13,558

 

13,017

 

57,541

 

53,803

 

Amortization of intangible assets (1)(2)

 

3,714

 

3,968

 

5,759

 

16,211

 

47,249

 

Restructuring costs

 

11,936

 

¾

 

¾

 

11,936

 

¾

 

Total costs and expenses

 

80,014

 

63,643

 

62,720

 

277,025

 

288,866

 

Loss from operations

 

(26,023

)

(10,253

)

(14,179

)

(65,965

)

(63,034

)

Other income, net

 

2,829

 

3,405

 

1,141

 

17,079

 

11,373

 

Loss before (benefit) provision for
income taxes

 

(23,194

)

(6,848

)

(13,038

)

(48,886

)

(51,661

)

(Benefit) provision for income taxes

 

(204

)

237

 

100

 

233

 

318

 

Net loss

 

$

(22,990

)

$

(7,085

)

$

(13,138

)

$

(49,119

)

$

(51,979

)

Basic net loss per share

 

$

(0.20

)

$

(0.06

)

$

(0.12

)

$

(0.43

)

$

(0.46

)

Diluted net loss per share

 

$

(0.20

)

$

(0.06

)

$

(0.12

)

$

(0.43

)

$

(0.46

)

Shares used in per share calculations:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

113,619

 

113,544

 

113,307

 

113,525

 

112,976

 

Diluted (3)

 

113,619

 

113,544

 

113,307

 

113,525

 

112,976

 

 

Notes:

 

(1) Intangible assets subject to amortization aggregate $26.4 million, net, at December 31, 2005 and relate to the acquisition of Cerdelinx Technologies, Inc. on August 26, 2002, the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 and the acquisition of Integrated Intellectual Property Inc. on March 16, 2001. These intangible assets are amortized to expense generally over three to seven years on a straight-line basis.

 

(2) Includes $0.2 million, $0.4 million and $0.6 million of deferred stock compensation expense for the quarters ended December 31, 2005, September 30, 2005, December 31, 2004, respectively, attributable to Research and Development activities. Includes $1.8 million, and $3.4 million of deferred stock compensation expense for the years ended December 31, 2005, and December 31, 2004, respectively, attributable to Research and Development activities.

 

(3) For all periods presented, the computation of diluted net loss per share excludes the effect of stock options and our convertible notes as they are antidilutive.

 


 

Reconciliation of GAAP Net Loss to Non-GAAP Net Loss

(unaudited)

 

 

 

Three months ended

 

Year Ended

 

 

 

Dec. 31,
2005

 

Sep. 30,
2005

 

Dec. 31,
2004

 

Dec. 31,
2005

 

Dec. 31,
2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss

 

$

(22,990

)

$

(7,085

)

$

(13,138

)

$

(49,119

)

$

(51,979

)

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangibles (1)

 

3,714

 

3,968

 

5,759

 

16,211

 

47,249

 

Restructuring charges (2)

 

11,936

 

¾

 

¾

 

11,936

 

¾

 

Non-GAAP net loss

 

$

(7,340

)

$

(3,117

)

$

(7,379

)

$

(20,972

)

$

(4,730

)

 

Reconciliation of GAAP Net Loss per Share to Non-GAAP Net Loss per Share

(unaudited)

 

 

 

Three months ended

 

Year Ended

 

 

 

Dec. 31,
2005

 

Sep. 30,
2005

 

Dec. 31,
2004

 

Dec. 31,
2005

 

Dec. 31,
2004

 

Basic and Diluted:

 

 

 

 

 

 

 

 

 

 

 

GAAP net loss per share

 

$

(0.20

)

$

(0.06

)

$

(0.12

)

$

(0.43

)

$

(0.46

)

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

Amortization of intangibles (1)

 

0.03

 

0.03

 

0.05

 

0.14

 

0.42

 

Restructuring charges (2)

 

0.11

 

¾

 

¾

 

0.11

 

¾

 

Non-GAAP net loss per share

 

$

(0.06

)

$

(0.03

)

$

(0.07

)

$

(0.18

)

$

(0.04

)

 

(1)          Relates to intangible assets acquired through our acquisition of Cerdelinx Technologies, Inc. on August 26, 2002, the acquisition of the FPGA business of Agere Systems, Inc. on January 18, 2002 and the acquisition of Integrated Intellectual Property Inc. on March 16, 2001. Includes deferred compensation expense attributable to Research and Development activities.

 

(2)          Represents costs incurred year to date under the corporate restructuring plan, which was implemented in the fourth quarter of 2005. These costs primarily relate to separation packages and costs to vacate space under long-term lease arrangements. Also includes $2.7 million related to the write-off of an intellectual property license.

 


 

Lattice Semiconductor Corporation

Consolidated Balance Sheet

(in thousands)

 

Description

 

Dec. 31,
2005

 

Dec. 31,
2004

 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and short-term investments

 

$

264,192

 

$

296,295

 

Accounts receivable, net

 

23,577

 

19,587

 

Inventories

 

28,581

 

38,634

 

Other current assets

 

24,614

 

46,527

 

Total current assets

 

340,964

 

401,043

 

Property and equipment, net

 

45,450

 

47,586

 

Foundry investments, advances and other assets

 

79,432

 

97,877

 

Goodwill and other intangible assets, net (1)

 

250,011

 

264,400

 

 

 

$

715,857

 

$

810,906

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and other accrued
liabilities

 

$

53,438

 

$

61,161

 

Deferred income on sales to distributors

 

10,449

 

11,399

 

Total current liabilities

 

63,887

 

72,560

 

Zero Coupon Convertible notes due in 2010

 

133,500

 

169,000

 

Other long-term liabilities

 

20,386

 

26,755

 

 

 

153,886

 

195,755

 

Stockholders’ equity

 

498,084

 

542,591

 

 

 

$

715,857

 

$

810,906

 

 

Note:

 

(1)   At December 31, 2005, includes approximately $223.6 million in goodwill and $26.4 million of other intangible assets, net, related to previous acquisitions. The other intangible assets will be amortized to expense generally over three to seven years. Goodwill is not amortized effective with the March 2002 quarter.

 


 

Lattice Semiconductor Corporation

- Supplemental Historic Financial Information -

 

 

 

Q405

 

Q305

 

Q404

 

Operations Information

 

 

 

 

 

 

 

Percent of Revenue:

 

 

 

 

 

 

 

Gross Margin

 

49.1

%

56.2

%

56.6

%

R&D Expense

 

43.8

%

42.6

%

47.1

%

SG&A Expense

 

24.5

%

25.4

%

26.8

%

Restructuring Expense

 

22.1

%

¾

 

¾

 

 

 

 

 

 

 

 

 

Depreciation Expense ($000)

 

3,047

 

3,199

 

3,890

 

Capital Expenditures ($000)

 

3,327

 

3,305

 

2,301

 

 

 

 

 

 

 

 

 

Balance Sheet Information

 

 

 

 

 

 

 

Current Ratio

 

5.3

 

6.3

 

5.5

 

A/R Days Revenue Outstanding

 

40

 

45

 

37

 

Inventory Months

 

3.2

 

4.1

 

5.5

 

 

 

 

 

 

 

 

 

Revenue% (by Product Family)

 

 

 

 

 

 

 

FPGA

 

18

%

19

%

18

%

PLD

 

82

%

81

%

82

%

 

 

 

 

 

 

 

 

Revenue% (by Product Classification*)

 

 

 

 

 

 

 

New

 

38

%

36

%

26

%

Mainstream

 

28

%

29

%

35

%

Mature

 

34

%

35

%

39

%

 

 

 

 

 

 

 

 

Revenue% (by Geography)

 

 

 

 

 

 

 

Americas

 

28

%

31

%

33

%

Europe (incl. Africa)

 

23

%

24

%

26

%

Asia (incl. ROW)

 

49

%

45

%

41

%

 

 

 

 

 

 

 

 

Revenue% (by End Market)

 

 

 

 

 

 

 

Communications

 

49

%

51

%

48

%

Computing

 

18

%

18

%

20

%

Other

 

33

%

31

%

32

%

 

 

 

 

 

 

 

 

Revenue% (by Channel)

 

 

 

 

 

 

 

Direct

 

65

%

65

%

59

%

Distribution

 

35

%

35

%

41

%

 

* Product Classification:

New:                                                                     LatticeEC/P, LatticeXP, MachXO, FPSC, XPLD, XPGA, GDX2, ORCA 4, ispMACH 4000/Z, ispPAC-PWR, ispCLK

 

Mainstream:                              ORCA 3, GDX/V, ispMACH L/V, ispLSI 2000V, ispLSI 5000V, ispLSI 8000V, ispMACH 5000VG, and Other

 

Mature:                                                      ORCA 2, All 5-Volt CPLDs, all SPLDs