EX-99 3 a4438418_ex991.txt LATTICE EXHIBIT 99.1 Exhibit 99.1 Lattice Semiconductor Reports Second Quarter Results HILLSBORO, Ore.--(BUSINESS WIRE)--July 21, 2003--Lattice Semiconductor Corporation (NASDAQ:LSCC) today announced financial results for the second quarter of 2003. Revenue for the quarter was $58.2 million, flat with last quarter's revenue and an increase of three percent from the $56.5 million reported in the same quarter a year ago. Quarterly revenue from high density CPLD products was $40.3 million, down one percent from last quarter while quarterly revenue from FPGA products was $9.0 million, an increase of seven percent from last quarter. On a GAAP basis, net loss for the quarter was $16.9 million ($0.15 per share). This loss includes an $18.7 million charge for amortization of intangible assets. Non-GAAP income for the quarter was $1.8 million ($0.02 per share). Non-GAAP earnings exclude non-cash acquisition related amortization expenses and more closely approximates our cash earnings performance. A reconciliation of non-GAAP to GAAP earnings accompanies the financial tables in this earnings release. "We remain pleased with the progress of our new product initiatives," stated Cyrus Y. Tsui, chairman and chief executive officer. "Since 2002, we have brought to market five major new product families: our advanced field programmable system chips (FPSC), our technologically differentiated ispXP(TM) products, our innovative ispPAC(R) PWR devices, our low power ispMACH(R) 4000Z CPLDs and our third generation BFW III CPLDs. While the collective revenue of these new products is still relatively small, it grew very rapidly on a sequential basis. In addition, these new products accounted for well over a third of our customer design activity last quarter. We believe this positive customer reception will drive continued growth for these products." "Last quarter, we introduced our sixth new product family, the XPIO(TM) 110GXS," continued Tsui. "The XPIO is the industry's lowest power 10 gigabit per second CMOS transceiver and further solidifies our leadership position in the SERDES marketplace. We are committed to embedding this innovative technology into future generations of advanced FPSC and FPGA products," Tsui concluded. Business Outlook - September 2003 Quarter -- We believe that, due to seasonality and general industry conditions, third quarter revenues will be between $52 million and $55 million. -- Gross margins are expected to remain at approximately 60% of revenue. -- Total operating expenses are expected to decrease by approximately $1 million to $2 million on a sequential basis. -- In conjunction with the previously announced retirement of our 4 3/4 percent convertible notes, we will incur a one-time charge of approximately $5.7 million for the call premium and accelerated write-off of remaining unamortized issuance costs related to these notes. Total Other Expense, including this non-recurring charge, is expected to be approximately $5.6 million. -- Finally, we anticipate reporting a tax credit of $3 million to $4 million. On July 22, 2003, Lattice will hold a telephone conference call at 5:30 am (Pacific Time) with financial analysts and publish a "Business Outlook Statement" covering the September 2003 quarter. Investors may listen to our conference call via the web at www.on24.com. Both the conference call and our business outlook statement will be available on our website, www.lscc.com through July 28, 2003. On September 11, 2003, we plan to publish a "Business Update Statement" on our website for five calendar days. Our financial guidance will be limited to the comments on our public quarterly earnings call and these public business outlook statements. Additionally, during the September 2003 quarter, Lattice plans to participate in investor conferences sponsored by Soundview and Bank of America Securities. Specific presentation dates and times are posted on our website at www.lscc.com. The foregoing paragraphs contain forward-looking statements within the meaning of the Federal Securities laws including statements about future quarterly financial results, revenues, customers, product offerings and our ability to compete. Investors are cautioned that actual events and results could differ materially from these statements as a result of a number of factors, including overall semiconductor market conditions, market acceptance and demand for our new products, risks related to our recent acquisitions and their integration with Lattice, our dependencies on our silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks. Oregon-based Lattice Semiconductor Corporation designs, develops and markets the broadest range of Field Programmable Gate Arrays (FPGAs) and Field Programmable System Chips (FPSCs) and high-performance ISP(TM) programmable logic devices (PLDs). 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 communication, computing, 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, L (& design), Lattice (& design), in-system programmable, ISP 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) (unaudited) Three months ended Six months ended ---------------------------- ------------------- June 30, Mar. 31, June 30, June 30, June 30, Description 2003 2003 2002 2003 2002 --------------------- --------- --------- -------- --------- --------- Revenue $58,178 $58,311 $56,466 $116,489 $115,344 Costs and expenses: Costs of products sold 23,289 23,208 22,492 46,497 46,098 Research and development 21,702 21,832 21,078 43,534 42,463 Selling, general and administrative 12,614 12,483 12,220 25,097 24,078 In-process research and development (1) -- -- -- -- 24,200 Amortization of intangible assets (2)(3) 18,687 21,114 17,923 39,801 36,546 --------- --------- -------- --------- --------- Total costs and expenses 76,292 78,637 73,713 154,929 173,385 --------- --------- -------- --------- --------- Loss from operations (18,114) (20,326) (17,247) (38,440) (58,041) Other (expense) income, net (1,365) 1,491 3,078 126 1,177 --------- --------- -------- --------- --------- Loss before benefit for income taxes (19,479) (18,835) (14,169) (38,314) (56,864) Benefit for income taxes (2,554) -- (6,022) (2,554) (23,100) --------- --------- -------- --------- --------- Net loss ($16,925) ($18,835) ($8,147) ($35,760) ($33,764) ========= ========= ======== ========= ========= Basic net loss per share ($0.15) ($0.17) ($0.07) ($0.32) ($0.31) ========= ========= ======== ========= ========= Diluted net loss per share ($0.15) ($0.17) ($0.07) ($0.32) ($0.31) ========= ========= ======== ========= ========= Shares used in per share calculations: Basic 111,507 111,390 109,684 111,473 109,619 ========= ========= ======== ========= ========= Diluted (4) 111,507 111,390 109,684 111,473 109,619 ========= ========= ======== ========= ========= Notes: (1) Represents write-off of in-process research and development in conjunction with the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc. (2) Intangible assets subject to amortization aggregate $120.3 million, net, at June 30, 2003 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, the acquisition of Vantis Corporation on June 16, 1999 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. (3) Includes $0.8 million, $3.3 million and $0.6 million of deferred stock compensation expense for the quarters ended June 30, 2003, March 31, 2003 and June 30, 2002, respectively, and $4.1 million and $1.1 million of deferred stock compensation expense for the six months ended June 30, 2003 and June 30, 2002, respectively, attributable to Research and Development activities. (4) 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. Lattice Semiconductor Corporation Consolidated Balance Sheet (in thousands) (unaudited) June 30, Dec. 31, Description 2003 2002 ---------------------------------------------- ----------- ----------- Assets Current assets: Cash and short-term investments $470,178 $276,880 Accounts receivable, net 28,372 26,374 Inventories 48,283 56,241 Other current assets 11,476 35,033 ----------- ----------- Total current assets 558,309 394,528 Property and equipment, net 58,978 62,786 Foundry investments, advances and other assets 108,574 104,507 Goodwill and other intangible assets, net (1) 343,909 379,442 ----------- ----------- $1,069,770 $941,263 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable and other accrued liabilities $31,238 $33,597 Deferred income on sales to distributors 8,763 11,983 Income taxes payable -- 142 ----------- ----------- Total current liabilities 40,001 45,722 4 3/4% Convertible notes due in 2006 172,304 208,061 Zero Coupon Convertible notes due in 2010 200,000 -- Other long-term liabilities 25,704 26,345 ----------- ----------- 398,008 234,406 Stockholders' equity 631,761 661,135 ----------- ----------- $1,069,770 $941,263 =========== =========== Note: (1) At June 30, 2003, includes approximately $10.4 million of other intangible assets, net, recorded in the September 2002 quarter in connection with the August 26, 2002 acquisition of Cerdelinx Technologies, Inc. Also includes $142.5 million in Goodwill and $61.1 million of other intangible assets, net, recorded in the March 2002 quarter in connection with the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc., and approximately $81.1 million in Goodwill and $48.8 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. Appendix 1 Lattice Semiconductor Corporation Consolidated Operations Information- Non-GAAP Basis (1) (in thousands, except per share data) (unaudited) Three months ended Six months ended -------------------------- ------------------- June 30, Mar. 31, June 30, June 30, June 30, Description 2003 2003 2002 2003 2002 ----------------------- -------- -------- -------- --------- --------- Revenue $58,178 $58,311 $56,466 $116,489 $115,344 Costs and expenses: Costs of products sold 23,289 23,208 22,492 46,497 46,098 Research and development 21,702 21,832 21,078 43,534 42,463 Selling, general and administrative 12,614 12,483 12,220 25,097 24,078 -------- -------- -------- --------- --------- Total costs and expenses 57,605 57,523 55,790 115,128 112,639 -------- -------- -------- --------- --------- Income from operations 573 788 676 1,361 2,705 Other (expense) income, net (1,365) 1,491 3,078 126 1,177 -------- -------- -------- --------- --------- Income before (benefit) provision for income taxes (792) 2,279 3,754 1,487 3,882 (Benefit) provision for income taxes (2,554) -- 976 (2,554) 1,009 Tax shield (2) -- -- 4,250 -- 8,173 -------- -------- -------- --------- --------- Non-GAAP earnings $1,762 $2,279 $7,028 $4,041 $11,046 ======== ======== ======== ========= ========= Diluted Non-GAAP earnings per share (3) $0.02 $0.02 $0.06 $0.04 $0.10 ======== ======== ======== ========= ========= Shares used in calculations 113,405 113,098 110,991 113,268 111,978 ======== ======== ======== ========= ========= Notes: (1) This table presents operating information which is consistent with the information reported by First Call, IBES and Zacks for Lattice Semiconductor Corporation. A reconciliation to GAAP on a per-share basis is attached as Appendix 2. (2) Tax Shield represents the current period tax deduction available from amortizing gross goodwill and other intangible assets (approximately $750 million as of December 31, 2002) over 15 years on a straight line basis using a 34% tax rate. As of the March 31, 2003 quarter, we are no longer reporting a Tax Shield. (3) For all periods presented, the computation of diluted Non-GAAP earnings includes the effect of stock options but excludes the effect of our convertible notes as they are antidilutive. Appendix 2 Lattice Semiconductor Corporation Non-GAAP Earnings Reconciliation (1) (unaudited) Three months ended Six months ended ----------------------------- ------------------- June 30, Mar. 31, June 30, June 30, June 30, Description 2003 2003 2002 2003 2002 -------------------- --------- --------- --------- --------- --------- Net loss ($0.15) ($0.17) ($0.07) ($0.32) ($0.31) Add: Amortization of intangible assets $0.17 $0.19 $0.09 $0.36 $0.20 In-process research and development (2) -- -- -- -- $0.13 Tax shield (3) -- -- $0.04 -- $0.07 Difference in effective tax rate (4) -- -- -- -- $0.01 --------- --------- --------- --------- --------- Non-GAAP earnings $0.02 $0.02 $0.06 $0.04 $0.10 ========= ========= ========= ========= ========= Notes: (1) This table reconciles net income (loss) to non-GAAP information, which is presented in Appendix 1, on a per-share basis. (2) Represents write-off of in-process research and development in conjunction with the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc. (3) Tax Shield represents the current period tax deduction available from amortizing gross goodwill and other intangible assets (approximately $750 million as of December 31, 2002) over 15 years on a straight line basis using a 34% tax rate. As of the March 31, 2003 quarter, we are no longer reporting a Tax Shield. (4) The effective tax rate is the ratio of income tax expense to pretax income. The rate for the six months ended June 30, 2002 presented in the non-GAAP information presentation is different from the rates in the Statement of Operations, due to the difference in the proportion of taxable income derived from operations. Appendix 3 LATTICE SEMICONDUCTOR CORPORATION - Supplemental Historic Financial Information - (Q2 2003) Operations Information Q203 Q103 Q202 ---------- ---------- ---------- Percent of Revenue Gross Margin 60.0% 60.2% 60.2% R&D Expense 37.3% 37.4% 37.3% SG&A Expense 21.7% 21.4% 21.6% Operating (Loss) Income -31.1% -34.9% -30.5% Operating Income (Non-GAAP) 1.0% 1.4% 1.2% Depreciation Expense ($000) 4,603 4,742 4,780 Capital Expenditures ($000) 2,504 3,211 5,626 Balance Sheet Information Q203 Q103 Q202 ---------- ---------- ---------- Current Ratio 14.0 7.4 8.2 A/R Days Revenue Outstanding 45 48 46 Inventory Months 6.2 6.7 8.5 Revenue % (by Product Family) Q203 Q103 Q202 ---------- ---------- ---------- FPGA 16% 14% 13% CPLD 69% 70% 68% SPLD 15% 16% 19% Revenue % (by Geography) Q203 Q103 Q202 ---------- ---------- ---------- Americas 45% 41% 47% Europe (incl. Africa) 24% 29% 23% Asia (incl. ROW) 31% 30% 30% Revenue % (by End Market) Q203 Q103 Q202 ---------- ---------- ---------- Communications 52% 44% 55% Computing 21% 21% 23% Other 27% 35% 22% Revenue % (by Channel) Q203 Q103 Q202 ---------- ---------- ---------- Direct 52% 54% 52% Distribution 48% 46% 48% CONTACT: Lattice Semiconductor Corporation Roddy Sloss, 503-268-8000