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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
 
FORM 10-Q
 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended July 3, 2004
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from                        to                        
 
Commission file number 000-18032
 
LATTICE SEMICONDUCTOR CORPORATION
(Exact name of Registrant as specified in its charter)
 
State of Delaware
 
93-0835214
(State or other jurisdictionof incorporation or organization)
 
(I.R.S. EmployerIdentification No.)
 
 
 
5555 N.E. Moore Court, Hillsboro, Oregon
 
97124-6421
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(503) 268-8000
(Registrant’s telephone number, including area code)
 
 
 
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ý    No   o
 
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes   ý    No   o
 
At July 3, 2004, there were 113,421,226 shares of the Registrant’s common stock, $.01 par value, outstanding.
 
The information contained in this Form 10-Q is as of August 10, 2004. This Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2003.
 
 
  1   
 
 
 
LATTICE SEMICONDUCTOR CORPORATION
 
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
  2   
 
 
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act.  Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking.  We use words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “projects,” “may,” “will,” “should,” “continue,” “ongoing,” “future,” “potential” and similar words or phrases to identify forward-looking statements.
 
Forward-looking statements involve estimates, assumptions, risks and uncertainties that could cause actual results to differ materially from those expressed in them.  Among the key factors that could cause our actual results to differ materially from the forward-looking statements are delay in product or technology development, change in economic conditions of the various markets we serve, lack of market acceptance or demand for our new products, dependencies on silicon wafer suppliers and semiconductor assemblers, the impact of competitive products and pricing, opportunities or acquisitions that we pursue, the availability and terms of financing, and the other risks that are described herein and that are otherwise described from time to time in our filings with the Securities and Exchange Commission, including but not limited to the items discussed in “Factors Affecting Futu re Results” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of this report. You should not unduly rely on forward-looking statements because our actual results could materially differ from those expressed in any forward-looking statements made by us.  Further, any forward-looking statement applies only as of the date on which it is made.  We are not required to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.
 
 
 
 
   3  
 
 
PART I.  FINANCIAL INFORMATION
 
ITEM 1.  Financial Statements
 
LATTICE SEMICONDUCTOR CORPORATION
 
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)

   

Three Months Ended

  

 Six Months Ended

  
   
 		  
 		  
 
  

 June 30, 2004 

  

 June 30, 2003

  

 June 30, 2004

  

 June 30, 2003

  
   
 
 
 
 
Revenue
  
$
60,939
  
$
56,575
  
$
120,010
  
$
113,872
  
 
    
 
    
 
    
 
    
 
  
Costs and expenses:
    
 
    
 
    
 
    
 
  
Cost of products sold
    
26,232
    
22,993
    
50,951
    
46,021
  
Research and development
    
22,599
    
21,702
    
44,858
    
43,534
  
Selling, general and administrative
    
14,069
    
12,614
    
27,156
    
25,097
  
Amortization of intangible assets (1)
    
17,051
    
18,687
    
35,705
    
39,801
  
   
 
 
 
 
Total costs and expenses
    
79,951
    
75,996
    
158,670
    
154,453
  
   
 
 
 
 
Loss from operations
    
(19,012
)
  
(19,421
)
  
(38,660
)
  
(40,581
)
 
    
 
    
 
    
 
    
 
  
Other income (expense), net
    
3,136
    
(1,365
)
  
6,243
    
126
  
   
 
 
 
 
Loss before benefit for income taxes
    
(15,876
)
  
(20,786
)
  
(32,417
)
  
(40,455
)
 
    
 
    
 
    
 
    
 
  
Income tax (benefit) expense
    
100
    
(2,554
)
  
100
    
(2,554
)
   
 
 
 
 
Net loss
  
$
(15,976
)
$
(18,232
)
$
(32,517
)
$
(37,901
)
   
 
 
 
 
Basic net loss per share
  
$
(0.14
)
$
(0.16
)
$
(0.29
)
$
(0.34
)
   
 
 
 
 
Diluted net loss per share
  
$
(0.14
)
$
(0.16
)
$
(0.29
)
$
(0.34
)
   
 
 
 
 
Shares used in per share calculations:
    
 
    
 
    
 
    
 
  
 
    
 
    
 
    
 
    
 
  
Basic
    
112,812
    
111,507
    
112,728
    
111,473
  
   
 
 
 
 
Diluted
    
112,812
    
111,507
    
112,728
    
111,473
  
   
 
 
 
 

(1) Includes $1,324 and $841 of amortization of deferred stock compensation expense for the three months ended June 30, 2004 and June 30, 2003, respectively, and $2,130 and $4,111 for the six months ended June 30, 2004 and June 30, 2003, respectively, attributable to Research and Development activities.
 
See Accompanying Notes to Condensed Unaudited Consolidated Financial Statements 
 
  4   

LATTICE SEMICONDUCTOR CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and par value data)
(unaudited)

 
  

 June 30,

 

 December 31,

 
   

2004 

  

2003 

  
 
Assets
    
 
    
 
  
 
    
 
    
 
  
Current assets:
    
 
    
 
  
Cash and cash equivalents
  
$
43,508
  
$
35,276
  
Short-term investments
    
267,326
    
242,474
  
Accounts receivable, net
    
28,937
    
26,796
  
Inventories
    
40,770
    
46,630
  
Other current assets
    
51,118
    
51,537
  
   
 
 
Total current assets
    
431,659
    
402,713
  
 
    
 
    
 
  
Foundry investments, advances and other assets
    
55,733
    
86,883
  
Property and equipment, net
    
51,774
    
53,800
  
Intangible assets, net
    
51,096
    
84,676
  
Goodwill
    
223,556
    
223,556
  
   
 
 
 
  
$
813,818
  
$
851,628
  
   
 
 
Liabilities and Stockholders’ Equity
    
 
    
 
  
 
    
 
    
 
  
Current liabilities:
    
 
    
 
  
Accounts payable and accrued expenses
  
$
28,006
  
$
28,500
  
Deferred income on sales to distributors
    
15,939
    
10,564
  
Income taxes payable
    
7
    
37
  
   
 
 
Total current liabilities
    
43,952
    
39,101
  
 
    
 
    
 
  
Zero Coupon Convertible notes due in 2010
    
184,000
    
184,000
  
Other long-term liabilities
    
23,090
    
22,415
  
Commitments and contingencies
    
—
    
—
  
 
    
 
    
 
  
Stockholders’ equity:
    
 
    
 
  
Preferred stock, $.01 par value, 10,000,000 shares authorized;
none issued or outstanding
    
—
    
—
  
Common stock, $.01 par value, 300,000,000 shares authorized, 113,421,226 and 113,047,874 shares issued and outstanding
    
1,134
    
1,130
  
Paid-in capital
    
589,458
    
586,834
  
Deferred stock compensation
    
(3,246
)
  
(5,444
)
Accumulated other comprehensive income
    
4,558
    
20,203
  
Retained earnings (deficit)
    
(29,128
)
  
3,389
  
   
 
 
Total stockholders’ equity
    
562,776
    
606,112
  
   
 
 
 
  
$
813,818
  
$
851,628
  
   
 
 

See Accompanying Notes to Condensed Unaudited Consolidated Financial Statements.
 
   5  
 
LATTICE SEMICONDUCTOR CORPORATION 
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands) (unaudited)

   

 Six Months Ended

  
   
 		  
 
  

 June 30, 2004 

  

 June 30, 2003

  
   
 
 
Cash flows from operating activities:
    
 
    
 
  
Net loss
  
$
(32,517
)
$
(37,901
)
Adjustments to reconcile net loss to net cash provided by
operating activities:
    
 
    
 
  
Depreciation and amortization
    
47,111
    
50,575
  
Gain on sale of UMC Shares
    
(5,562
)
  
—
  
Gain on retirement of convertible notes
    
—
    
(2,918
)
Changes in assets and liabilities:
   
 
    
 
  
Accounts receivable
    
(2,141
)
  
(1,997
)
Inventories
    
5,860
    
7,958
  
Other current assets
    
1,492
    
24,084
  
Foundry investments, advances and other assets