EX-99.1 2 a4806387ex991.txt PRESS RELEASE Exhibit 99.1 Lattice Semiconductor Reports Fourth Quarter and Year End Financial Results HILLSBORO, Ore.--(BUSINESS WIRE)--Jan. 24, 2005--Lattice Semiconductor Corporation (Nasdaq:LSCC) today announced financial results for the fourth quarter and year ending December 2004. For the year 2004, revenue was $225.8 million, an increase of eight percent from the $209.7 million reported in 2003. During 2004, PLD revenue grew six percent to $183.1 million and accounted for 81 percent of total revenue while FPGA revenue increased 15 percent to $42.7 million and accounted for 19 percent of total revenue. Net loss for 2004 was $52.0 million ($0.46 per share), an improvement from the net loss of $91.8 million ($0.82 per share) reported in 2003. These losses include charges of $47.3 million and $77.1 million, respectively, for the amortization of intangible assets. Excluding these charges, the loss for 2004 was $4.7 million ($0.04 per share) as compared to a loss of $14.7 million ($0.13 per share) for 2003. These non-cash amortization charges have been highlighted as they are currently expected to be substantially eliminated in 2008. The Company believes exclusion of these charges more closely approximate its cash earnings performance. A reconciliation of non-GAAP loss to GAAP net loss accompanies the financial tables in this earnings release. For the fourth quarter of 2004, revenue was $48.5 million, a decrease of eight percent from the $52.8 million reported in the same quarter a year ago and a decrease of 15 percent from the $57.3 million reported last quarter. Quarterly revenue from PLD products was $39.6 million, or 82 percent of total revenue, and declined 14 percent sequentially. Quarterly revenue from FPGA products was $8.9 million, or 18 percent of total revenue, and declined 21 percent sequentially. Quarterly revenue from New products, now 26 percent of total revenue, grew 5 percent sequentially and 72 percent on a year over year basis. Net loss for the fourth quarter was $13.1 million ($0.12 per share). This loss includes a $5.8 million charge for amortization of intangible assets. Excluding this charge, loss for the quarter was $7.4 million ($0.07 per share). This non-cash amortization charge has been highlighted as these charges are currently expected to be substantially eliminated in 2008. The Company believes exclusion of these charges more closely approximate its cash earnings performance. A reconciliation of non-GAAP loss to GAAP net loss accompanies the financial tables in this earnings release. "Last quarter was a difficult one for the PLD industry and our results reflect these unfavorable market conditions," stated Cyrus Y. Tsui, chairman and chief executive officer. "On a positive note, we posted sequential revenue growth from our New products, reduced our inventory balance and continued to generate positive cash flow from operations before the payment of a $25 million advance to our foundry partner Fujitsu." "The year 2004 has been a period of transition for Lattice," continued Tsui. "We sustained a large R&D investment in order to support the development of a full portfolio of next generation FPGA product families. We believe these new products will be critical to our long-term success and ability to grow our revenue and market share in this attractive segment. During the third quarter, we initiated the market roll-out of the first of these new families, the LatticeEC(TM) and LatticeEC-DSP(TM), and are now moving quickly towards volume production availability of all 12 devices in these families. At this early stage, we remain pleased with the initial customer reception and are optimistic about the market potential for these new FPGA families. Looking forward, we expect this new product momentum to continue throughout 2005 as we continue our roll-out of additional families of differentiated products targeted at the FPGA market." Business Outlook - March 2005 Quarter: -- Quarterly revenue is expected to be $46 million to $49 million; -- Gross margin percentage is expected to be approximately flat; -- Total operating expenses are expected to increase by $1 million to $2 million; -- Intangible asset amortization is expected to be approximately $4.4 million; and -- Other Income is expected to be approximately $1 million. On January 25, 2005, Lattice will hold a telephone conference call at 5:30 am (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, 2005, 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 2005 quarter, Lattice plans to participate in investor conferences sponsored by Goldman Sachs and Morgan Stanley. 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 the Company's 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 the Company's new products, the Company's dependencies on our silicon wafer suppliers, the impact of competitive products and pricing, technological and product development risks. 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 (ISP(TM)) 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, L (& design), Lattice (& design) 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) Three months ended Year Ended --------------------------------- -------------------- Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Description 2004 2004 2003 2004 2003 ---------------------------------------------------------------------- (unaudited)(unaudited)(unaudited) (unaudited) Revenue $48,541 $57,281 $52,757 $225,832 $209,662 Costs and expenses: Costs of products sold 21,058 24,848 23,814 96,857 89,266 Research and development 22,886 23,213 22,385 90,957 87,092 Selling, general and administrative 13,017 13,630 13,562 53,803 50,773 Amortization of intangible assets (1)(2) 5,759 5,785 18,661 47,249 77,127 --------------------------------- -------------------- Total costs and expenses 62,720 67,476 78,422 288,866 304,258 --------------------------------- -------------------- Loss from operations (14,179) (10,195) (25,665) (63,034) (94,596) Other income (expense), net 1,141 3,989 421 11,373 (3,064) --------------------------------- -------------------- Loss before (benefit) provision for income taxes (13,038) (6,206) (25,244) (51,661) (97,660) Provision (benefit) for income taxes 100 118 0 318 (5,854) --------------------------------- -------------------- Net loss ($13,138) ($6,324) ($25,244) ($51,979)($91,806) ================================= ==================== Basic net loss per share ($0.12) ($0.06) ($0.22) ($0.46) ($0.82) ================================= ==================== Diluted net loss per share ($0.12) ($0.06) ($0.22) ($0.46) ($0.82) ================================= ==================== Shares used in per share calculations: Basic 113,307 113,181 112,364 112,976 111,794 ================================= ==================== Diluted (3) 113,307 113,181 112,364 112,976 111,794 ================================= ==================== Notes: (1) Intangible assets subject to amortization aggregate $40.8 million, net, at December 31, 2004 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 $0.6 million, $0.7 million and $0.8 million of deferred stock compensation expense for the quarters ended December 31, 2004, September 30, 2004, December 31, 2003, respectively, attributable to Research and Development activities. Includes $3.4 million, and $5.7 million of deferred stock compensation expense for the years ended December 31, 2004, and December 31, 2003, 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. Lattice Semiconductor Corporation Consolidated Balance Sheet (in thousands) Dec. 31, Dec. 31, Description 2004 2003 ------------------------------------------------------------ --------- (unaudited) Assets Current assets: Cash and short-term investments $296,295 $277,750 Accounts receivable, net 19,587 26,796 Inventories 38,634 46,630 Other current assets 46,527 51,537 ----------- --------- Total current assets 401,043 402,713 Property and equipment, net 47,586 53,800 Foundry investments, advances and other assets 97,877 86,883 Goodwill and other intangible assets, net (1) 264,400 308,232 ----------- --------- $810,906 $851,628 =========== ========= Liabilities and Stockholders' Equity Current liabilities: Accounts payable and other accrued liabilities $61,161 $28,537 Deferred income on sales to distributors 11,399 10,564 ----------- --------- Total current liabilities 72,560 39,101 Zero Coupon Convertible notes due in 2010 169,000 184,000 Other long-term liabilities 26,755 22,415 ----------- --------- 195,755 206,415 Stockholders' equity 542,591 606,112 ----------- --------- $810,906 $851,628 =========== ========= Note: (1) At December 31, 2004, includes approximately $223.6 million in Goodwill and $40.8 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 Year Ended -------------------------- ------------------ Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, Description 2004 2004 2003 2004 2003 ---------------------------------------------------------------------- Revenue $48,541 $57,281 $52,757 $225,832 $209,662 Costs and expenses: Costs of products sold 21,058 24,848 23,814 96,857 89,266 Research and development 22,886 23,213 22,385 90,957 87,092 Selling, general and administrative 13,017 13,630 13,562 53,803 50,773 -------------------------- ------------------ Total costs and expenses 56,961 61,691 59,761 241,617 227,131 -------------------------- ------------------ Loss from operations (8,420) (4,410) (7,004) (15,785) (17,469) Other income (expense), net 1,141 3,989 421 11,373 (3,064) -------------------------- ------------------ Loss before provision (benefit) for income taxes (7,279) (421) (6,583) (4,412) (20,533) Provision (benefit) for income taxes 100 118 0 318 (5,854) -------------------------- ------------------ Non-GAAP net loss ($7,379) ($539)($6,583) ($4,730)($14,679) ========================== ================== Diluted Non-GAAP loss per share (2) ($0.07) ($0.00) ($0.06) ($0.04) ($0.13) ========================== ================== Shares used in calculations 113,307 113,181 112,364 112,976 111,794 ========================== ================== Notes: (1) This table presents operating information which is consistent with the information reported by Thompson Financial, Reuters and Zacks for Lattice Semiconductor Corporation. A reconciliation to GAAP on a per share basis is attached as Appendix 2. (2) For all periods presented, the computation of diluted Non-GAAP loss excludes the effect of stock options and our convertible notes as they are antidilutive. Appendix 2 Lattice Semiconductor Corporation Non-GAAP Earnings Reconciliation (1) (unaudited) Three months ended Year Ended -------------------------- ----------------- Dec. 31, Sep. 30, Dec. 31, Dec. 31, Dec. 31, Description 2004 2004 2003 2004 2003 ---------------------- -------- -------- -------- -------- -------- Net loss ($0.12) ($0.06) ($0.22) ($0.46) ($0.82) Add: Amortization of intangible assets $0.05 $0.06 $0.16 $0.42 $0.69 --------------------------------------------- Non-GAAP loss ($0.07) $0.00 ($0.06) ($0.04) ($0.13) ============================================= Notes: (1) This table reconciles net loss to non-GAAP information, which is presented in Appendix 1, on a per-share basis. Appendix 3 LATTICE SEMICONDUCTOR CORPORATION - Supplemental Historic Financial Information - (Q4 2004) Operations Information Q404 Q304 Q403 --------- -------- --------- Percent of Revenue Gross Margin 56.6% 56.6% 54.9% R&D Expense 47.1% 40.5% 42.4% SG&A Expense 26.8% 23.8% 25.7% Operating Loss -29.2% -17.8% -48.6% Operating Loss (Non-GAAP) -17.3% -7.7% -13.3% Depreciation Expense ($000) 3,890 4,185 4,598 Capital Expenditures ($000) 2,301 1,361 1,808 Balance Sheet Information Current Ratio 5.5 5.6 10.3 A/R Days Revenue Outstanding 37 43 46 Inventory Months 5.5 4.7 5.9 Revenue % (by Product Family) FPGA 18% 20% 20% PLD 82% 80% 80% Revenue % (by Product Classification(a)) New 26% 21% 14% Mainstream 35% 43% 42% Mature 39% 36% 44% Revenue % (by Geography) Americas 33% 31% 36% Europe (incl. Africa) 26% 22% 22% Asia (incl. ROW) 41% 47% 42% Revenue % (by End Market) Communications 48% 50% 51% Computing 20% 20% 21% Other 32% 30% 28% Revenue % (by Channel) Direct 59% 62% 61% Distribution 41% 38% 39% (a) Product Classification: --------------------------- New: LatticeEC/P, FPSC, XPLD, XPGA, GDX2, ORCA 4, ispMACH 4000, 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 CONTACT: Lattice Semiconductor Corporation Rodney Sloss, 503-268-8000