UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

 

March 24, 2004

Date of Report (date of earliest event reported)

 

 

Lattice Semiconductor Corporation

(Exact name of Registrant as specified in its charter)

 

Delaware		000-18032		93-0835214
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification Number)

 

 

 

Item 7.    Financial Statements and Exhibits.

 

(c)                                  The following exhibits are being filed or furnished with this report as indicated below:

 

Exhibit No.		Description
99.1		Text of press release issued by Lattice Semiconductor Corporation on March 24, 2004, entitled “Lattice Semiconductor Reports Fourth Quarter and 2003 Year End Financial Results and Restatement of First, Second and Third Quarter 2003 Financial Statements” (furnished herewith)
99.2		Restated consolidated financial statements for the first, second and third quarters of 2003 and consolidated financial statements for the year ended January 3, 2004 (filed herewith)

 

Item 12.  Results of Operations and Financial Condition

 

On March 24, 2004, Lattice Semiconductor Corporation (the “Company”) issued a press release reporting its fourth quarter and year-end results for 2003 and restated results for first, second and third quarters of 2003.  The full text of the press release is attached as Exhibit 99.1.  Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

 

The Company’s restated consolidated financial statements for the first, second and third quarters of 2003, and consolidated financial statements for the year ended January 3, 2004, attached as Exhibit 99.2 hereto, are filed herewith for purposes of Section 18 of the Exchange Act.  In addition, the following information from the press release shall be deemed filed herewith for purposes of Section 18 of the Exchange Act:

 

On March 24, 2004, Lattice Semiconductor Corporation (the “Company”) announced financial results for the fourth quarter and year ended December 2003.

 

In addition, the Company announced that it has completed a review of its deferred income accounting.  Deferred income is the balance sheet account which represents the estimated future gross margin, including credits that may be due, related to inventory held by the Company’s distributors that is expected to be either resold to end users or returned to the Company for a credit.  As the Company’s distributors have price protection and limited return rights, the Company’s policy is to defer recognition of revenue for sales through distribution until the distributor resells the Company’s products to an end customer.  However, upon shipment of product to distributors, the Company records a receivable and credits deferred income while also relieving its inventory account and offsetting the cost of inventory shipped against deferred income.  The receivable and deferred income accounts are also adjusted for estimated credits that may be due distributors.

 

As previously disclosed, the Company has concluded that its deferred income account became overdepleted during 2003.  After review by the Audit Committee and the Company’s independent auditor, the Company has determined restatement of the March, June and September quarter 2003 financial statements is necessary to correct errors and a failure to record a change in accounting estimate related to deferred income.  The restatement resulted from inappropriate accounting entries made by an individual in the Company’s finance department and deficiencies in the design and operation of internal accounting controls related to the deferred income account.

 

For the September 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $51.0 million, by $8.0 million to $43.0 million;

•                  reduces cost of sales, originally reported as $20.7 million, by $1.2 million to $19.4 million;

•                  increases net loss, originally reported as $21.9 million ($0.20 per share), by $6.8 million ($0.06 per share) to $28.7 million ($0.26 per share);

 

 

•                  increases the originally reported deferred income balance sheet account by $3.4 million to $9.8 million;

•                  increases the originally reported accounts payable and other accrued liabilities balance sheet account by $5.5 million to $34.4 million; and

•                  reduces the originally reported retained earnings balance sheet account by $8.9 million to $28.6 million.

 

For the June 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $58.2 million, by $1.6 million to $56.6 million;

•                  reduces cost of sales, originally reported as $23.3 million, by $0.3 million to $23.0 million;

•                  increases net loss, originally reported as $16.9 million ($0.15 per share), by $1.3 million ($0.01 per share) to $18.2 million ($0.16 per share);

•                  increases the originally reported deferred income balance sheet account by $0.8 million to $9.6 million;

•                  increases the originally reported accounts payable and other accrued liabilities balance sheet account by $1.3 million to $32.5 million; and

•                  reduces the originally reported retained earnings balance sheet account by $2.1 million to $57.3 million.

 

For the March 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $58.3 million, by $1.0 million to $57.3 million;

•                  reduces cost of sales, originally reported as $23.2 million, by $0.2 million to $23.0 million;

•                  increases net loss, originally reported as $18.8 million ($0.17 per share), by $0.8 million ($0.01 per share) to $19.7 million ($0.18 per share);

•                  increases the originally reported deferred income balance sheet account by $0.8 million to $13.9 million; and

•                  reduces the originally reported retained earnings balance sheet account by $0.8 million to $75.5 million.

 

Revenue for the fourth quarter was $52.8 million.  Quarterly revenue from FPGA products was $10.4 million, or 20 percent of total revenue, while revenue from high density CPLD products was $35.6 million.  New product revenue accounted for 14 percent of total quarterly revenue.

 

Net loss for the fourth quarter was $25.2 million ($0.22 per share). This loss includes an $18.7 million charge for amortization of intangible assets.

 

For the year 2003, revenue was $209.7 million, a decrease of eight percent from the $229.1 million reported for 2002.  Net loss for 2003 was $91.8 million ($0.82 per share), as compared to the net loss of $175.2 million ($1.59 per share) reported for 2002.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		LATTICE SEMICONDUCTOR CORPORATION
	By:	/s/ Jan Johannessen
		Jan Johannessen Corporate Vice President and Chief Financial Officer
Date: March 24, 2004

 

 

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Text of press release issued by Lattice Semiconductor Corporation on March 24, 2004, entitled “Lattice Semiconductor Reports Fourth Quarter and 2003 Year End Financial Results and Restatement of First, Second and Third Quarter 2003 Financial Statements” (furnished herewith)
99.2		Restated consolidated financial statements for the first, second and third quarters of 2003 and consolidated financial statements for the year ended January 3, 2004 (filed herewith)

 

Exhibit 99.1

 

For more information contact:

 

Roddy Sloss

Vice President, Finance

Lattice Semiconductor Corporation

(503) 268-8000

 

LATTICE SEMICONDUCTOR REPORTS FOURTH QUARTER AND
2003 YEAR END FINANCIAL RESULTS AND RESTATEMENT
OF FIRST, SECOND AND THIRD QUARTER 2003
FINANCIAL STATEMENTS

 

Company reiterates first quarter 2004 business outlook

 

 

HILLSBORO, Ore.  -  March 24, 2004  -  Lattice Semiconductor Corporation (NASDAQ: LSCC) today announced financial results for the fourth quarter and year ended December 2003.

 

In addition, the Company announced that it has completed a review of its deferred income accounting.  Deferred  income is the balance sheet account which represents the estimated future gross margin, including credits that may be due, related to inventory held by the Company’s distributors that is expected to be either resold to end users or returned to the Company for a credit.  As the Company’s distributors have price protection and limited return rights, the Company’s policy is to defer recognition of revenue for sales through distribution until the distributor resells the Company’s products to an end customer.  However, upon shipment of product to distributors, the Company records a receivable and credits deferred income while also relieving its inventory account and offsetting the cost of inventory shipped against deferred income.  The receivable and deferred income accounts are also adjusted for estimated credits that may be due distributors.

 

As previously disclosed, the Company has concluded that its deferred income account became overdepleted during 2003.  After review by the Audit Committee and the Company’s independent auditor, the Company has determined restatement of the March, June and September quarter 2003 financial statements is necessary to correct errors and a failure to record a change in accounting estimate related to deferred income.  The restatement resulted from inappropriate accounting entries made by an individual in the Company’s finance department

 

 

and deficiencies in the design and operation of internal accounting controls related to the deferred income account.

 

For the September 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $51.0 million, by $8.0 million to $43.0 million;

•                  reduces cost of sales, originally reported as $20.7 million, by $1.2 million to $19.4 million;

•                  increases net loss, originally reported as $21.9 million ($0.20 per share), by $6.8 million ($0.06 per share) to $28.7 million ($0.26 per share);

•                  increases the originally reported deferred income balance sheet account by $3.4 million to $9.8 million

•                  increases the originally reported accounts payable and other accrued liabilities balance sheet account by $5.5 million to $34.4 million; and

•                  reduces the originally reported retained earnings balance sheet account by $8.9 million to $28.6 million.

 

For the June 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $58.2 million, by $1.6 million to $56.6 million;

•                  reduces cost of sales, originally reported as $23.3 million, by $0.3 million to $23.0 million;

•                  increases net loss, originally reported as $16.9 million ($0.15 per share), by $1.3 million ($0.01 per share) to $18.2 million ($0.16 per share);

•                  increases the originally reported deferred income balance sheet account by $0.8 million to $9.6 million;

•                  increases the originally reported accounts payable and other accrued liabilities balance sheet account by $1.3 million to $32.5 million; and

•                  reduces the originally reported retained earnings balance sheet account by $2.1 million to $57.3 million.

 

For the March 2003 quarter, the restatement:

•                  reduces revenue, originally reported as $58.3 million, by $1.0 million to $57.3 million;

•                  reduces cost of sales, originally reported as $23.2 million, by $0.2 million to $23.0 million;

•                  increases net loss, originally reported as $18.8 million ($0.17 per share), by $0.8 million ($0.01 per share) to $19.7 million ($0.18 per share);

•                  increases the originally reported deferred income balance sheet account by $0.8 million to $13.9 million; and

•                  reduces the originally reported retained earnings balance sheet account by $0.8 million to $75.5 million.

 

 

Revenue for the fourth quarter was $52.8 million.  Quarterly revenue from FPGA products was $10.4 million, or 20 percent of total revenue, while revenue from high density CPLD products was $35.6 million.  New product revenue accounted for 14 percent of total quarterly revenue.

 

Net loss for the fourth quarter was $25.2 million ($0.22 per share). This loss includes an $18.7 million charge for amortization of intangible assets.  Excluding these charges, the net loss for the quarter was $6.6 million ($0.06 per share).  These non-cash charges have been highlighted here as they are not expected to continue at these levels beyond June 2004 and are currently expected to be eliminated in 2007.  The Company believes exclusion of these charges more closely approximate its cash earnings performance.  A reconciliation of non-GAAP to GAAP loss accompanies the financial tables in this earnings release.

 

For the year 2003, revenue was $209.7 million, a decrease of eight percent from the $229.1 million reported for 2002.  Net loss for 2003 was $91.8 million ($0.82 per share), as compared to the net loss of $175.2 million ($1.59 per share) reported for 2002.  Net loss for 2003, adjusted for amortization of intangibles assets of $77.1 million, was $14.7 million ($0.13 per share) compared to adjusted earnings of $24.0 million ($0.21 per share) reported for 2002.

 

The Company currently anticipates filing amended Quarterly Reports on Form 10-Q for the first, second and third quarters of 2003, which will contain the restated financial results discussed above, and its 2003 Annual Report on Form 10-K by April 2, 2004.

 

 “We are disappointed with the restatement of our 2003 quarterly financial results”, stated Cyrus Y. Tsui, chairman and chief executive officer.  “However, we have performed an accounting review, made improvements in our method of accounting for Deferred Income and are pursuing improvements in our internal controls under the guidance of our Audit Committee.”

 

Separately, the Company reiterated its business outlook for the March 2004 quarter:

•                  Revenue is expected to be grow 10 to 13 percent on a sequential basis.

•                  Gross margins are expected to be approximately 57 to 58 percent of revenue.

•                  Total operating expenses are expected to be approximately $35 million.

•                  Other income is expected to be approximately $2.5 to $3.0 million, including a gain on the sale of foundry investments.

•                  No tax provision is anticipated.

 

 

On March 24, 2004, Lattice will hold a telephone conference call at 2:30 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.

 

The foregoing paragraphs contain forward-looking statements within the meaning of the federal securities laws including statements about the anticipated filing date of the Company’s 10-K and amended 10-Q, 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 the Company’s ability to file its 10-K and amended 10-Q reports by April 2, 2004, the possibility that further accounting adjustments may be required and the effectiveness of changes to the Company’s internal controls, as well as 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 ISP Programmable Logic Devices (PLDs), including Complex Programmable Logic Devices (CPLD), Programmable Analog Components (PAC), and Programmable Digital Interconnect (GDX). 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, 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)
(unaudited)

 

		Three months ended									Year ended
Description		Dec. 31, 2003			Sept. 30, 2003			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2002
					(Restated)
Revenue		$	52,757		$	43,033		$	57,710		$	209,662		$	229,126
Costs and expenses:
Costs of products sold		23,814			19,431			23,019			89,266			91,546
Research and development		22,385			21,173			21,790			87,092			85,776
Selling, general and administrative		13,562			12,114			12,309			50,773			48,099
In-process research and development (1)		—			—			—			—			29,853
Amortization of intangible assets (2)(3)		18,661			18,665			18,799			77,127			73,415
Total costs and expenses		78,422			71,383			75,917			304,258			328,689
Loss from operations		(25,665		)	(28,350		)	(18,207		)	(94,596		)	(99,563		)
Other income (expense), net		421			(3,611		)	2,253			(3,064		)	6,194
Loss before (benefit) provision for income taxes		(25,244		)	(31,961		)	(15,954		)	(97,660		)	(93,369		)
(Benefit) provision for income taxes		—			(3,300		)	111,146			(5,854		)	81,866
Net loss		$	(25,244	)	$	(28,661	)	$	(127,100	)	$	(91,806	)	$	(175,235	)
Basic net loss per share		$	(0.22	)	$	(0.26	)	$	(1.14	)	$	(0.82	)	$	(1.59	)
Diluted net loss per share		$	(0.22	)	$	(0.26	)	$	(1.14	)	$	(0.82	)	$	(1.59	)
Shares used in per share calculations:
Basic		112,364			111,840			111,311			111,794			110,193
Diluted (4)		112,364			111,840			111,311			111,794			110,193

 

Notes:

 

(1)          Represents write-off of in-process research and development in conjunction with the August 26, 2002 acquisition of Cerdelinx Technologies, Inc. and the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc.

(2)          Intangible assets subject to amortization aggregate $84.6 million, net, at December 31, 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, $0.8 million and $1.1 million of deferred stock compensation expense for the quarters ended December 31, 2003, September 30, 2003 and December 31, 2002, respectively, and $5.7 million and $2.9 million of deferred stock compensation expense for the years ended December 31, 2003 and December 31, 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)

Description		Dec. 31, 2003			Dec. 31, 2002
Assets
Current assets:
Cash and short-term investments		$	277,750		$	276,880
Accounts receivable, net		26,796			26,374
Inventories		46,630			56,241
Other current assets		51,537			35,033
Total current assets		402,713			394,528
Property and equipment, net		53,800			62,786
Foundry investments, advances and other assets		86,883			104,507
Goodwill and other intangible assets, net (1)		308,232			379,442
		$	851,628		$	941,263
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities		$	28,500		$	33,597
Deferred income on sales to distributors		10,564			11,983
Income taxes payable		37			142
Total current liabilities		39,101			45,722
4 3/4% Convertible notes due in 2006		—			208,061
Zero Coupon Convertible notes due in 2010		184,000			—
Other long-term liabilities		22,415			26,345
		206,415			234,406
Stockholders’ equity		606,112			661,135
		$	851,628		$	941,263

 

Note:

 

(1)          At December 31, 2003, includes approximately $9.2 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 $52.2 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 $23.3 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
Description		Dec. 31, 2003			Sept. 30, 2003			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2002
					(Restated)
Revenue		$	52,757		$	43,033		$	57,710		$	209,662		$	229,126
Costs and expenses:
Costs of products sold		23,814			19,431			23,019			89,266			91,546
Research and development		22,385			21,173			21,790			87,092			85,776
Selling, general and administrative		13,562			12,114			12,309			50,773			48,099
Total costs and expenses		59,761			52,718			57,118			227,131			225,421
(Loss) income from operations		(7,004		)	(9,685		)	592			(17,469		)	3,705
Other income (expense), net		421			(3,611		)	2,253			(3,064		)	6,194
(Loss) income before (benefit) provision for income taxes		(6,583		)	(13,296		)	2,845			(20,533		)	9,899
(Benefit) provision for income taxes		—			(3,300		)	740			(5,854		)	2,574
Tax shield (2)		—			—			4,250			—			16,673
Non-GAAP (loss) earnings		$	(6,583	)	$	(9,996	)	$	6,355		$	(14,679	)	$	23,998
Diluted Non-GAAP (loss) earnings per share (3)		$	(0.06	)	$	(0.09	)	$	0.06		$	(0.13	)	$	0.21
Shares used in calculations		112,364			111,840			112,876			111,794			111,889

 

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 the three months and year ended December 31, 2002, 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. For all 2003 periods presented, the computation of diluted Non-GAAP loss excludes the effect of both stock options and the effect of our convertible notes as they are antidilutive.

 

 

Appendix 2

 

Lattice Semiconductor Corporation
Non-GAAP Earnings Reconciliation (1)
(unaudited)

 

		Three months ended									Year ended
Description		Dec. 31, 2003			Sept. 30, 2003			Dec. 31, 2002			Dec. 31, 2003			Dec. 31, 2002
					(Restated)
Net loss		$	(0.22	)	$	(0.26	)	$	(1.14	)	$	(0.82	)	$	(1.59	)
Add:
Amortization of intangible assets		$	0.16		$	0.17		$	0.12		$	0.69		$	0.40
In-process research and development (2)		—			—			—			—			$	0.19
Valuation allowance for deferred tax assets (3)		—			—			$	1.00		—			$	1.01
Tax shield (4)		—			—			$	0.04		—			$	0.15
Difference in effective tax rate (5)		—			—			$	0.04		—			$	0.05
Non-GAAP (loss) income		$	(0.06	)	$	(0.09	)	$	0.06		$	(0.13	)	$	0.21

 

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 August 26, 2002 acquisition of Cerdelinx technologies, Inc. and the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc.

 

(3)          In the quarter ended December 31, 2002, we recorded a tax provision of $111.1 million, representing a 100% valuation allowance for our recorded deferred tax assets, in accordance with the provisions of Statement of Financial Accounting Standards No. 109.

 

(4)          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.

 

(5)          The effective tax rate is the ratio of income tax expense to pretax income. The rate for the three months and year ended December 31, 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 -
(Q4 2003)

 

		Q403		Q303		Q402
				(Restated)
Operations Information
Percent of Revenue
Gross Margin		54.9	%	54.8	%	60.1	%
R&D Expense		42.4	%	49.2	%	37.8	%
SG&A Expense		25.7	%	28.2	%	21.3	%
Operating (Loss) Income		-48.6	%	-65.9	%	-31.5	%
Operating (Loss) Income (Non-GAAP)		-13.3	%	-22.5	%	1.0	%
Depreciation Expense ($000)		4,598		4,658		4,856
Capital Expenditures ($000)		1,808		2,300		3,781
Balance Sheet Information
Current Ratio		10.3		8.3		8.6
A/R Days Revenue Outstanding		46		57		42
Inventory Months		5.9		7.6		7.3
Revenue% (by Product Family)
FPGA		20	%	21	%	16	%
CPLD		67	%	69	%	68	%
SPLD		13	%	10	%	16	%
Revenue% (by Product Classification*)
New		14	%	15	%
Mainstream		42	%	52	%
Mature		44	%	33	%
Revenue% (by Geography)
Americas		36	%	32	%	42	%
Europe (incl. Africa)		22	%	21	%	23	%
Asia (incl. ROW)		42	%	47	%	35	%
Revenue% (by End Market)
Communications		51	%	49	%	45	%
Computing		21	%	22	%	26	%
Other		28	%	29	%	29	%
Revenue% (by Channel)
Direct		61	%	67	%	55	%
Distribution		39	%	33	%	45	%

 

* Product Classification:

 

New:                                                                     FPSC, XPLD, XPGA, GDX2, ORCA 4, ispMACH 4000, ispMACH 4000 Z, ispPAC-PWR

Mainstream:                              ORCA 3, GDX/V, ispMACH L/V, ispLSI 2000V, ispLSI 5000V, ispLSI 8000V, ispMACH 5000VG, Mixed Signal, Software

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

 

 

Appendix 4

 

Lattice Semiconductor Corporation
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)

 

		Three months ended									Three months ended
Description		Sept. 30, 2003			June 30, 2003			Mar. 31, 2003			Sept. 30, 2002			June 30, 2002			Mar. 31, 2002
		(Restated)			(Restated)			(Restated)
Revenue		$	43,033		$	56,575		$	57,297		$	56,072		$	56,466		$	58,878
Costs and expenses:
Costs of products sold		19,431			22,993			23,028			22,429			22,492			23,606
Research and development		21,173			21,702			21,832			21,523			21,078			21,385
Selling, general and administrative		12,114			12,614			12,483			11,712			12,220			11,858
In-process research and development (1)		—			—			—			5,653			—			24,200
Amortization of intangible assets (2)(3)		18,665			18,687			21,114			18,070			17,923			18,623
Total costs and expenses		71,383			75,996			78,457			79,387			73,713			99,672
Loss from operations		(28,350		)	(19,421		)	(21,160		)	(23,315		)	(17,247		)	(40,794		)
Other (expense) income, net		(3,611		)	(1,365		)	1,491			2,764			3,078			(1,901		)
Loss before benefit for income taxes		(31,961		)	(20,786		)	(19,669		)	(20,551		)	(14,169		)	(42,695		)
Benefit for income taxes		(3,300		)	(2,554		)	—			(6,180		)	(6,022		)	(17,078		)
Net loss		$	(28,661	)	$	(18,232	)	$	(19,669	)	$	(14,371	)	$	(8,147	)	$	(25,617	)
Basic net loss per share		$	(0.26	)	$	(0.16	)	$	(0.18	)	$	(0.13	)	$	(0.07	)	$	(0.23	)
Diluted net loss per share		$	(0.26	)	$	(0.16	)	$	(0.18	)	$	(0.13	)	$	(0.07	)	$	(0.23	)
Shares used in per share calculations:
Basic		111,840			111,507			111,390			110,232			109,684			109,558
Diluted (4)		111,840			111,507			111,390			110,232			109,684			109,558

 

Notes:

 

(1)   Represents write-off of in-process research and development in conjunction with the August 26, 2002 acquisition of Cerdelinx Technologies, Inc. and the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc.

 

(2)   Intangible assets subject to amortization 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 to three to seven years on a straight-line basis. The balance of these assets are unchanged  as a result of the restatements presented here.

 

(3)   Balances presented include amortization of deferred stock compensation expense attributable to Research and Development Activities, which amounts are unchanged as a result of the restatements presented here.

 

(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.

 

 

Appendix 5

 

Lattice Semiconductor Corporation
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)

 

Description		Nine months ended Sept. 30, 2003			Six months ended June 30, 2003			Nine months ended Sept. 30, 2002			Six months ended June 30, 2002
		(Restated)			(Restated)
Revenue		$	156,905		$	113,872		$	171,416		$	115,344
Costs and expenses:
Costs of products sold		65,452			46,021			68,527			46,098
Research and development		64,707			43,534			63,986			42,463
Selling, general and administrative		37,211			25,097			35,790			24,078
In-process research and development (1)		—			—			29,853			24,200
Amortization of intangible assets (2)(3)		58,466			39,801			54,616			36,546
Total costs and expenses		225,836			154,453			252,772			173,385
Loss from operations		(68,931		)	(40,581		)	(81,356		)	(58,041		)
Other (expense) income, net		(3,485		)	126			3,941			1,177
Loss before benefit for income taxes		(72,416		)	(40,455		)	(77,415		)	(56,864		)
Benefit for income taxes		(5,854		)	(2,554		)	(29,280		)	(23,100		)
Net loss		$	(66,562	)	$	(37,901	)	$	(48,135	)	$	(33,764	)
Basic net loss per share		$	(0.60	)	$	(0.34	)	$	(0.44	)	$	(0.31	)
Diluted net loss per share		$	(0.60	)	$	(0.34	)	$	(0.44	)	$	(0.31	)
Shares used in per share calculations:
Basic		111,615			111,473			109,855			109,619
Diluted (4)		111,615			111,473			109,855			109,619

 

Notes:

 

(1)   Represents write-off of in-process research and development in conjunction with the August 26, 2002 acquisition of Cerdelinx Technologies, Inc. and the January 18, 2002 acquisition of the FPGA business of Agere Systems, Inc.

 

(2)   Intangible assets subject to amortization 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. The balance of these assets are unchanged  as a result of the restatements presented here.

 

(3)   Balances presented include amortization of deferred stock compensation expense attributable to Research and Development Activities, which amounts are unchanged as a result of the restatements presented here.

 

(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.

 

 

Appendix 6

 

Lattice Semiconductor Corporation
Consolidated Balance Sheet
(in thousands)
(unaudited)

Description		Sept. 30, 2003			June 30, 2003			Mar. 31, 2003			Dec. 31, 2002
		(Restated)			(Restated)			(Restated)
Assets
Current assets:
Cash and short-term investments		$	278,754		$	470,178		$	252,847		$	276,880
Accounts receivable, net		26,941			28,372			30,651			26,374
Inventories		47,942			48,283			51,876			56,241
Other current assets		12,617			11,476			34,748			35,033
Total current assets		366,254			558,309			370,122			394,528
Property and equipment, net		56,520			58,978			61,284			62,786
Foundry investments, advances and other assets		124,670			108,574			100,059			104,507
Goodwill and other intangible assets, net (1)		326,071			343,909			361,754			379,442
		$	873,515		$	1,069,770		$	893,219		$	941,263
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued liabilities		$	34,356		$	32,538		$	37,170		$	33,597
Deferred income on sales to distributors		9,766			9,604			13,936			11,983
Income taxes payable		—			—			—			142
Total current liabilities		44,122			42,142			51,106			45,722
4 3/4% Convertible notes due in 2006		—			172,304			175,304			208,061
Zero Coupon Convertible notes due in 2010		184,000			200,000			—			—
Other long-term liabilities		22,053			25,704			26,335			26,345
		206,053			398,008			201,639			234,406
Stockholders’ equity		623,340			629,620			640,474			661,135
		$	873,515		$	1,069,770		$	893,219		$	941,263

 

Note:

 

(1)   Includes other intangible assets, net, recorded in the September 2002 quarter in connection with the August 26, 2002 acquisition of Cerdelinx Technologies, Inc. Also includes Goodwill and 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 Goodwill and 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. Goodwill and other intangible assets, net, are unchanged as a result of the restatements presented here.