SOURCE: Lattice Semiconductor Corporation

Lattice Semiconductor Corporation

October 21, 2010 16:00 ET

Lattice Semiconductor Reports Third Quarter 2010 Results

HILLSBORO, OR--(Marketwire - October 21, 2010) -  Lattice Semiconductor Corporation (NASDAQ: LSCC)

Third Quarter 2010 Highlights:

  • Revenue of $77.1 million, flat compared to 2Q10 and up 57% compared to 3Q09.
  • Gross margin of 59.1%, compared to 61.2% in 2Q10 and 54.2% in 3Q09.
  • Net income of $0.13 per share, compared to net income of $0.14 per share in 2Q10 and a net loss of $0.04 per share in 3Q09.

Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the third quarter ended October 2, 2010.

For the third quarter, revenue was $77.1 million, unchanged from the $77.1 million reported in the prior quarter, and an increase of 57% from the $49.1 million reported in the same quarter a year ago. FPGA revenue for the third quarter was $24.7 million compared to $24.6 million reported in the prior quarter, and increased 63% from the $15.2 million reported in the same quarter a year ago. PLD revenue for the third quarter was $52.4 million compared to $52.5 million reported in the prior quarter, and increased 55% from the $33.9 million reported in the same quarter a year ago.

Net income for the third quarter was $15.4 million ($0.13 per share), compared to $16.7 million ($0.14 per share) in the prior quarter and a net loss of $4.1 million ($0.04 per share) reported in the same quarter a year ago.

Other income, net, for the third quarter was $0.7 million compared to $0.9 million reported in the prior quarter and an expense of $0.5 million reported in the same quarter a year ago. Other income, net, included a gain of $0.4 million from the sale of auction rate securities compared to a gain of $0.7 million in the second quarter related to the sale of excess real estate in China. During the same quarter a year ago, the Company recorded an impairment charge of $1.1 million related to an other-than-temporary decline in fair value of auction rate securities.

Christopher M. Fanning, Interim Chief Executive Officer, Corporate Vice President & General Manager Low Density & Mixed Signal Solutions, said, "While the third quarter was in line with guidance, the last month of the quarter was slower than our expectations with some signs of customers managing their inventory at quarter-end. Specifically, revenue was also impacted by lower sequential sales in our mature product category. Importantly, we achieved 10% sequential revenue growth of our new products quarter on quarter and a doubling from the same quarter last year. Our MachXO grew and became our largest revenue contributor, and our LatticeECP3 continues as the fastest growing FPGA product in the Company's history. We are successfully differentiating our business based on our low cost and low power mid-range FPGAs, our low cost and convenient low density solutions and our programmable Power Manager solutions, including the recently launched Platform Manager products. We are excited about our roadmap and are looking forward to several additional new product introductions during the fourth quarter."

Michael G. Potter, Lattice's Corporate Vice President and Chief Financial Officer, added, "Our disciplined cost control allowed us to selectively invest in new product opportunities while keeping total operating expenses at $30.7 million compared to guidance of $31.0 million. Gross margin came in lower than the prior quarter primarily due to the impact of lower sequential sales in our mature product category. We generated $15.4 million of cash from operations, ending the quarter with a cash, cash equivalents and short-term marketable securities balance of $229.1 million. Our inventory increased sequentially in the third quarter of 2010, mainly due to wafer deliveries for new products, specifically our LatticeECP3, to address near-term customer demand."

Business Outlook - Fourth Quarter 2010:

  • Revenue is expected to be down 2% to 7% on a sequential basis.
  • Gross margin percentage is expected to be approximately 58% to 60% of revenue.
  • Total operating expenses are expected to be approximately $34.0 million. The majority of the sequential increase is related to new product launch expenses and associated mask costs.
  • We expect continued profitability in the fourth quarter.

Investor Conference Call / Webcast Details:

Lattice Semiconductor will review detailed third quarter 2010 results on Thursday, October 21, 2010 at 5:00 p.m. EDT. The conference call-in number is 1-706-643-3761. A live webcast of the conference call will also be available on Lattice's website at www.latticesemi.com. Our financial guidance will be limited to the comments on our public quarterly earnings call and the public business outlook statements contained in this press release.

A replay of the call will be available approximately two hours after the conclusion of the live call through 11:59 p.m. EDT on October 28, 2010, by telephone at 1-706-645-9291. To access the replay, use conference identification number 15840374. A webcast replay will also be available on Lattice's investor relations website at www.latticesemi.com.

Forward-Looking Statements Notice:

The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties, including statements relating to our business outlook, including those under the heading "Business Outlook - Fourth Quarter 2010"; LatticeECP3 continuing as the fastest growing FPGA product in the Company's history; the successful differentiation of our business; and our introduction of several new products during the fourth quarter. Other forward-looking statements may be indicated by words such as "will," "could," "should," "would," "expect," "plan," "anticipate," "intend," "forecast," "believe," "estimate," "predict," "propose," "potential," "continue" or the negative of these terms or other comparable terminology. Lattice believes the factors identified below could cause actual results to differ materially from the forward-looking statements.

Estimates of future revenue are inherently uncertain due to, among other things, the high percentage of quarterly "turns" business. In addition, revenue is affected by such factors as global economic conditions which may affect customer demand, pricing pressures, competitive actions, the demand for our Mature, Mainstream and New products, and in particular our LatticeECP3 solution, and the ability to supply products to customers in a timely manner. Actual gross margin percentage and operating expenses could vary from the estimates on the basis of, among other things, changes in revenue levels, changes in product pricing and mix, changes in wafer, assembly, test and other costs, variations in manufacturing yields, the failure to sustain operational improvements, and compensation charges due to stock price changes. Any unanticipated declines in revenue or gross margin, any unanticipated increases in our operating expenses or unanticipated charges, including without limitation, restructuring charges or any impairment charges related to an other-than-temporary decline in fair value of auction rate securities held in Long-term marketable securities, could adversely affect our profitability during the quarter.

In addition to the foregoing, other factors that may cause actual results to differ materially from the forward-looking statements in this press release include global economic uncertainty, overall semiconductor market conditions, market acceptance and demand for our new products, 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, and the other risks that are described in this press release 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, PLD, programmable Power Management and Clock Management solutions. For more information, visit www.latticesemi.com.

Lattice Semiconductor Corporation, Lattice (& design), L (& design), ispLEVER, LatticeECP3, LatticeXP2, sysDSP 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 Statements of Operations  
(in thousands, except per share data)  
(unaudited)  
   
   
  Three months ended     Nine months ended  
  October 2, 2010   July 3, 2010     October 3, 2009     October 2, 2010   October 3, 2009  
Revenue $ 77,137   $ 77,119     $ 49,097     $ 224,688   $ 139,333  
                                   
Costs and expenses:                                  
  Cost of products sold   31,551     29,889       22,478       90,704     65,450  
  Research and development   14,814     15,158       14,789       44,654     43,491  
  Selling, general and administrative   15,818     16,385       12,739       47,621     39,255  
  Amortization of intangible assets (1)   -     -       -       -     228  
  Restructuring (2)   79     (120 )     2,544       41     2,504  
    62,262     61,312       52,550       183,020     150,928  
Income (loss) from operations   14,875     15,807       (3,453 )     41,668     (11,595 )
                                   
Other income (expense), net (3)   669     945       (536 )     1,916     (859 )
                                   
Income (loss) before provision for income taxes   15,544     16,752       (3,989 )     43,584     (12,454 )
Provision for income taxes   176     16       125       391     129  
Net income (loss) $ 15,368   $ 16,736     $ (4,114 )   $ 43,193   $ (12,583 )
                                   
Net income (loss) per share (4):                                  
Basic $ 0.13   $ 0.14     $ (0.04 )   $ 0.37   $ (0.11 )
Diluted $ 0.13   $ 0.14     $ (0.04 )   $ 0.36   $ (0.11 )
                                   
Shares used in per share calculations:                                  
Basic    
117,257
    116,101       115,321       116,332     115,356  
Diluted   121,052     120,270       115,321       119,624     115,356  

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 corporate restructuring plans. During the third quarter of fiscal 2010, the Company recorded a net charge of $0.1 million primarily resulting from severance and related costs under the 2009 restructuring plan. During the second quarter of fiscal 2010, the Company recorded a net credit of $0.1 million primarily resulting from changes in original estimates of severance and related costs. During the first quarter of fiscal 2010, the Company recorded a charge of $0.1 million comprised primarily of severance and related costs under the 2009 restructuring plan. During the third quarter of fiscal 2009, the Company initiated a restructuring plan to lower operating expenses and recorded a charge of $2.6 million, comprised primarily of severance and related costs, of which $1.4 million was paid during the third quarter of fiscal 2009, and costs to vacate a portion of  leased space in San Jose, California. During the second and third quarters of fiscal 2009, the Company recorded net credits of less than $0.1 million primarily resulting from changes in original estimates under pre-2009 restructuring plans.  

(3) During the third quarter of fiscal 2010, the Company recognized a gain of $0.4 million on the sale of certain auction rate securities. During the second quarter of fiscal 2010, the Company recognized a gain of $0.7 million related to the sale of real property in Shanghai, China. During the three months ended October 3, 2009, the Company recognized an impairment charge of $1.1 million related to an other-than-temporary decline in fair value of auction rate securities held in Long-term marketable securities. During the nine months ended October 3, 2009, the Company recognized an impairment charge of $2.3 million related to an other-than-temporary decline in fair value of auction rate securities held in Long-term marketable securities, net of a gain of $0.2 million on the sale of auction rate securities and other investments. No impairment charge was recognized in fiscal 2010.

(4) For the three months ended October 2, 2010 and July 3, 2010 and the nine months ended October 2, 2010, the computation of diluted earnings per share includes the effects of stock options and restricted stock units as they are dilutive. For the three and nine months ended October 3, 2009, the computation of diluted earnings per share excludes the effects of stock options, restricted stock units and warrants, as they are antidilutive.

 
Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
    October 2,   January 2,
    2010   2010
Assets            
             
Current assets:            
  Cash, cash equivalents and short-term marketable securities   $ 229,082   $ 164,540
  Accounts receivable, net     49,217     33,551
  Inventories     31,681     25,925
  Other current assets     9,550     19,455
    Total current assets     319,530     243,471
Property and equipment, net     36,883     36,507
Long-term marketable securities     9,719     12,939
Other long-term assets     2,785     3,640
    $ 368,917   $ 296,557
             
Liabilities and Stockholders' Equity            
             
Current liabilities:            
  Accounts payable and other accrued liabilities   $ 41,231   $ 27,797
  Deferred income and allowances on sales to sell-through distributors   18,177     10,160
    Total current liabilities     59,408     37,957
Other long-term liabilities     5,185     5,240
    Total liabilities     64,593     43,197
Stockholders' equity     304,324     253,360
    $ 368,917   $ 296,557
 
Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -
 
 
    Q310   Q210   Q309
Operations Information            
Percent of Revenue            
  Gross Margin   59.1%   61.2%   54.2%
  R&D Expense   19.2%   19.7%   30.1%
  SG&A Expense   20.5%   21.2%   25.9%
             
Depreciation and amortization (in thousands)   3,673   3,460   3,341
Capital Expenditures (in thousands)   3,799   2,627   1,856
Stock Compensation Expense (in thousands)   1,033   1,277   1,013
             
Balance Sheet Information            
Current Ratio   5.4   5.2   6.9
A/R Days Revenue Outstanding   57   55   52
Inventory Months   3.0   2.7   3.6
             
Revenue% (by Product Family)            
PLD   68%   68%   69%
FPGA   32%   32%   31%
             
Revenue% (by Product Classification)            
New   46%   41%   33%
Mainstream   32%   35%   39%
Mature   22%   24%   28%
             
Revenue% (by Geography)            
Asia   69%   68%   68%
Europe (incl. Africa)   17%   18%   17%
Americas   14%   14%   15%
             
Revenue% (by End Market)            
Communications   50%   49%   54%
Industrial & Other   26%   25%   18%
Computing   14%   15%   17%
Consumer   10%   11%   11%
             
Revenue% (by Channel)            
Distribution   55%   57%   37%
Direct   45%   43%   63%

New: LatticeECP3, LatticeXP2, LatticeECP2/M, MachXO, Power Manager II, ispClock A/D/S, ispMACH 4000ZE

Mainstream: ispXPLD, ispGDX2, ispMACH 4000/Z, ispXPGA, LatticeSC, LatticeECP, LatticeXP, ispClock, Power Manager I, Software and IP

Mature: FPSC, 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, GDX/V, ispMACH 4/LV, all SPLDs

Contact Information

  • For more information contact:
    Michael G. Potter
    Chief Financial Officer
    Lattice Semiconductor Corporation
    503-268-8000

    David Pasquale
    Global IR Partners
    914-337-8801
    lscc@globalirpartners.com