EX-99.1 2 lscc2016q3ex-991er.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

lscclogo06010109a01.gif
NEWS RELEASE

For more information contact:
David Pasquale
Global IR Partners
914-337-8801
lscc@globalirpartners.com


LATTICE SEMICONDUCTOR REPORTS THIRD QUARTER 2016 RESULTS

Third Quarter 2016 Financial Highlights*:

•
Revenue of $113.2 million.
•
On a GAAP basis, Net loss of $12.4 million or $0.10 per basic and diluted share.
•
On a Non-GAAP basis, Net income of $5.9 million or $0.05 per basic and diluted share.
•
Gross margin of 59.5% on a GAAP basis and 59.8% on a non-GAAP basis.
* GAAP represents U.S. Generally Accepted Accounting Principles. Non-GAAP represents GAAP excluding the impact of certain activities which the Company's management excludes in analyzing the Company's operating results and in understanding trends in the Company's earnings. For a reconciliation of GAAP to non-GAAP results, see accompanying tables "Reconciliation of U.S. GAAP to Non-GAAP Financial Measures."
PORTLAND, OR - November 7, 2016 - Lattice Semiconductor Corporation (NASDAQ: LSCC), the global leader in smart connectivity solutions, announced financial results today for the fiscal third quarter ended October 1, 2016.
The Company reported revenue for the third quarter of 2016 of $113.2 million, which increased 14.1% sequentially, as compared to the second quarter 2016 revenue of $99.2 million, and increased 3.2%, as compared to the third quarter 2015 revenue of $109.7 million on a GAAP basis (Lattice closed its acquisition of Silicon Image on March 10, 2015).
Gross margin on a GAAP basis was 59.5% for the third quarter of 2016, as compared to the second quarter of 2016 gross margin of 58.9% and 54.5% for the third quarter of 2015. Gross margin for the third quarter of 2016 was 59.8% on a non-GAAP basis, as compared to 59.1% for the second quarter of 2016 and 55.7% for the third quarter of 2015.
Total operating expenses for the third quarter of 2016 were $73.4 million on a GAAP basis as compared to $64.8 million for the second quarter of 2016 and $77.8 million for the third quarter of 2015. GAAP operating expenses in the third quarter of 2016 were adversely impacted by two non-recurring events: $7.5 million in bad debt expense due to the bankruptcy filing of one of our distributors; and a $7.9 million acquired intangible assets impairment charge due to changes in our role as the agent of the HDMI consortium. Total operating expenses were $52.9 million for the third quarter of 2016 on a non-GAAP basis, including the adverse impact of the previously mentioned $7.5 million in bad debt expense, as compared to $50.8 million for the second quarter of 2016, and $57.6 million for the third quarter of 2015.
GAAP net loss for the third quarter was $12.4 million ($0.10 per basic and diluted share), with net income of $5.9 million ($0.05 per basic and diluted share) on a non-GAAP basis. GAAP results for the third quarter of 2016 reflect the above

1


mentioned $7.5 million in bad debt expense and $7.9 million impairment charge, along with $0.3 million in restructuring charges, $1.0 million in tax expense, $8.3 million in amortization of acquired intangible assets, and $4.3 million in stock-based compensation expense. This compares to a net loss on a GAAP basis in the prior quarter of $13.8 million ($0.12 per basic and diluted share), with net income on a non-GAAP basis in the prior quarter of $0.2 million ($0.00 per basic and diluted share), and compares to a net loss on a GAAP basis in the year ago period of $24.9 million ($0.21 per basic and diluted share), or a net loss of $5.4 million ($0.05 per basic and diluted share) on a non-GAAP basis. GAAP results for the second quarter of 2016 reflect $2.6 million in restructuring charges, $4.5 million in tax expense, $8.3 million in amortization of acquired intangible assets, and $3.2 million in stock-based compensation expense. GAAP results for the third quarter of 2015 reflect $6.8 million in restructuring charges, $0.6 million in acquisition related charges, a $0.3 million in tax provision, $8.9 million in amortization of acquired intangible assets, and $4.2 million in stock-based compensation expense.
Darin G. Billerbeck, President and Chief Executive Officer, said, "Our growth remains on track as we execute on our second half ramp, our R&D roadmap and the strategic initiatives that will help ensure our longer-term success. We achieved a 23% gain in FPGA revenue and continued growth in the overall consumer market. Better than expected manufacturing efficiencies combined with a favorable product mix in the quarter enabled us to deliver a 59.5% gross margin, which was well above our guidance."
Max Downing, Interim Chief Financial Officer, added, "Our non-GAAP operating expenses were adversely impacted by the aforementioned bad debt expense due to the unexpected bankruptcy filing of one of our distributors. Absent this non-recurring event, our non-GAAP operating expenses were $45.4 million, consistent with our plan. In addition, we agreed to restructure our role as the HDMI Licensing Agent under an amendment whereby a new independent entity will assume the agency responsibilities leading to reduction in our share of adopter fees. As a result, we recorded a non-cash impairment charge of $7.9 million during the quarter. The agency change will not have a material impact on our long term profitability given the corresponding reduction in associated expenses."

Recent Business Highlights
•
Epson Extends Relationship with Lattice to 60 GHz Wireless Technology: Epson’s flagship PowerLite Home Cinema 5040UBe3LCD Projector, is an industry’ first with 4K support for the consumer and enterprise markets. Lattice’s SiBEAM 60 GHz wireless technology delivers a robust, cable-like experience that is free from Wi-Fi interference to enable a seamless, high quality video connectivity solution, with an interface compatible with the HDMI® standard for in-room applications. This is the third generation of Epson’s projectors to incorporate Lattice’s technology, underscoring the companies long-term partnership.
•
Expands Automotive Product Portfolio with Addition of ECP5™ and CrossLink™ Programmable Devices: Lattice expanded its automotive product portfolio with ECP5™ and CrossLink™ programmable devices tailored specifically for interface bridging applications. Reinforcing Lattice’s commitment to the automotive market, the two products deliver optimized connectivity solutions for Advanced Driver Assistance Systems (ADAS) and infotainment applications, while also bridging the gap between emerging image sensor and video display interfaces with legacy automotive interfaces. Lattice's low power, small form factor, are ideal for multi-sensor aggregation and bridging in ADAS applications and enable the use of mobile interfaces in auto subsystems to reduce overall system cost, power and size.


2


Investor Conference Call / Webcast Details:
On November 3, 2016, the Company announced that it had entered into a definitive agreement to be acquired by Canyon Bridge Capital Partners, Inc. As a result of the acquisition announcement, the Company will not be holding the previously scheduled conference call and webcast, and will not provide an outlook for its future financial results.
The Company will also no longer host the analyst and investor meeting that was scheduled to be held on November 15, 2016.

Forward-Looking Statements Notice:
The foregoing paragraphs contain forward-looking statements that involve estimates, assumptions, risks and uncertainties. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Such forward-looking statements include statements relating to: our expectation that our growth remains on track as we execute on our second half ramp, our R&D roadmap and the strategic initiatives that will help ensure our longer-term success. Other forward-looking statements may be indicated by words such as “will,” “could,” “should,” “would,” “may,” “expect,” “plan,” “project,” “anticipate,” “intend,” “forecast,” “future,” “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 iCE40™ and MachXO3L™ devices, the ability to supply products to customers in a timely manner, changes in our distribution relationships, or the volatility of our consumer business. 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, including commodity costs, variations in manufacturing yields, the failure to sustain operational improvements, the actual amount of 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 could adversely affect our profitability.
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 failure to achieve the anticipated benefits and synergies of the Silicon Image transaction. In addition, actual results are subject to other risks and uncertainties that relate more broadly to our overall business, including those risks more fully described in Lattice’s filings with the SEC including its annual report on Form 10-K for the fiscal year ended January 2, 2016, and Lattice’s quarterly reports filed on Form 10-Q.
You should not unduly rely on forward-looking statements because actual results could differ materially from those expressed in any forward-looking statements. In addition, any forward-looking statement applies only as of the date on which it is made. 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.


3


Non-GAAP Financial Measures:
Included within this press release and the accompanying tables and notes are non-GAAP financial measures that supplement the Company's consolidated financial information prepared in accordance with U.S. GAAP. The non-GAAP measures presented exclude charges and adjustments primarily related to stock-based compensation, restructuring charges, acquisition-related charges, amortization of acquired intangible assets, purchase accounting adjustments, and the estimated tax effect of these items. These charges and adjustments may or may not be infrequent or nonrecurring in nature but are a result of periodic or non-core operating activities of the Company. The Company describes these non-GAAP financial measures and reconciles them to the most directly comparable GAAP measures in the tables and notes attached to this press release.
The Company's management believes that these non-GAAP financial measures provide an additional and useful way of viewing aspects of our performance that, when viewed in conjunction with our GAAP results, provide a more comprehensive understanding of the various factors and trends affecting our ongoing financial performance and operating results than GAAP measures alone. In particular, investors may find the non-GAAP measures useful in reviewing our operating performance without the significant accounting charges resulting from the Silicon Image acquisition, alongside the comparably adjusted prior year results. Management also uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting, and resource allocation processes and believes that investors should have access to similar data when making their investment decisions.
In addition, the Company uses Adjusted EBITDA to measure compliance with certain of its debt covenants. These non-GAAP measures are included solely for informational and comparative purposes and are not meant as a substitute for GAAP and should be considered together with the consolidated financial information located in the tables attached to this press release.

About Lattice Semiconductor Corporation:
Lattice Semiconductor Corporation (NASDAQ: LSCC) provides smart connectivity solutions powered by our low power FPGA, video ASSP, 60 GHz millimeter wave, and IP products to the consumer, communications, industrial, computing, and automotive markets worldwide. Our unwavering commitment to our customers enables them to accelerate their innovation, creating an ever better and more connected world.
For more information, visit www.latticesemi.com. You can also follow us via LinkedIn, Twitter, Facebook, YouTube or RSS.
# # #
Lattice Semiconductor Corporation, Lattice (& design), L (& design), iCE40 and MachXO3L, 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.


4


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

 
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2016
 
July 2,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
Revenue
 
$
113,225

 
$
99,209

 
$
109,715

 
$
308,946

 
$
304,772

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
   Cost of sales
 
45,801

 
40,783

 
49,866

 
125,992

 
138,965

   Research and development
 
27,747

 
30,915

 
37,619

 
91,270

 
104,813

   Selling, general and administrative
 
29,244

 
23,005

 
23,819

 
75,857

 
73,096

Amortization of acquired intangible assets
 
8,260

 
8,311

 
8,941

 
25,292

 
20,824

   Restructuring charges
 
317

 
2,568

 
6,818

 
8,316

 
15,780

   Acquisition related charges
 
—

 
—

 
610

 
94

 
22,078

Impairment of intangible assets
 
7,866

 
—

 
—

 
7,866

 
—

 
 
119,235

 
105,582

 
127,673

 
334,687

 
375,556

Loss from operations
 
(6,010
)
 
(6,373
)
 
(17,958
)
 
(25,741
)
 
(70,784
)
Interest expense
 
(5,235
)
 
(5,062
)
 
(5,754
)
 
(15,257
)
 
(12,870
)
Other income (expense), net
 
209

 
2,532

 
(841
)
 
3,558

 
(1,095
)
Loss before income taxes and equity in net loss of an unconsolidated affiliate
 
(11,036
)
 
(8,903
)
 
(24,553
)
 
(37,440
)
 
(84,749
)
Income tax expense
 
971

 
4,539

 
309

 
7,410

 
29,030

Equity in net loss of an unconsolidated affiliate, net of tax
 
(407
)
 
(368
)
 
—

 
(1,085
)
 
—

Net loss
 
$
(12,414
)
 
$
(13,810
)
 
$
(24,862
)
 
$
(45,935
)
 
$
(113,779
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share, basic and diluted
 
$
(0.10
)
 
$
(0.12
)
 
$
(0.21
)
 
$
(0.38
)
 
$
(0.97
)
 
 
 
 
 
 
 
 
 
 
 
Shares used in per share calculations, basic and diluted
 
120,584

 
119,445

 
117,669

 
119,596

 
117,151



5


Lattice Semiconductor Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
 
 
October 1,
2016
 
January 2,
2016
Assets
 
 
 
 
Current assets:
 
 
 
 
    Cash, cash equivalents and short-term marketable securities
 
$
98,914

 
$
102,574

    Accounts receivable, net
 
93,946

 
88,471

    Inventories
 
80,540

 
75,896

    Other current assets
 
18,614

 
18,922

        Total current assets
 
292,014

 
285,863

 
 
 
 
 
Property and equipment, net
 
51,576

 
51,852

Intangible assets, net of amortization
 
127,332

 
162,583

Goodwill
 
269,771

 
267,549

Deferred income taxes
 
473

 
578

Other long-term assets
 
15,087

 
17,495

 
 
$
756,253

 
$
785,920

 
 
 
 
 
Liabilities and Stockholders' Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and other accrued liabilities
 
$
85,995

 
$
83,761

Current portion of long-term debt
 
27,613

 
7,557

Deferred income and allowances on sales to sell-through distributors and deferred licensing and services revenue
 
21,586

 
19,859

        Total current liabilities
 
135,194

 
111,177

 
 
 
 
 
Long-term debt
 
307,747

 
330,870

Other long-term liabilities
 
39,638

 
38,353

        Total liabilities
 
482,579

 
480,400

 
 
 
 
 
Stockholders' equity
 
273,674

 
305,520

 
 
$
756,253

 
$
785,920



6


LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Months Ended
 
October 1, 2016
 
October 3, 2015
Cash flows from operating activities:
 
 
 
Net loss
$
(45,935
)
 
$
(113,779
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
47,908

 
42,916

Impairment of intangible assets
7,866

 
—

Amortization of debt issuance costs and discount
1,213

 
2,037

Change in deferred income tax provision
—

 
17,689

Loss on sale or maturity of marketable securities
72

 
336

Stock-based compensation expense
12,107

 
13,609

Loss on disposal of fixed assets
263

 
—

Gain on sale of business unit
(2,646
)
 
—

Equity in net loss of an unconsolidated affiliate, net of tax
1,085

 
—

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(5,728
)
 
7,708

Inventories
(4,644
)
 
6,738

Prepaid expenses and other current assets
(2,227
)
 
(2,776
)
Accounts payable and accrued expenses (includes restructuring)
6,294

 
7,786

Accrued payroll obligations
(454
)
 
(10,309
)
Income taxes payable
1,335

 
971

Deferred income and allowances on sales to sell-through distributors
3,067

 
5,481

Deferred licensing and services revenue
(258
)
 
967

Net cash provided by (used in) operating activities
19,318

 
(20,626
)
Cash flows from investing activities:
 
 
 
Proceeds from sales or maturities of short-term marketable securities
11,977

 
142,956

Purchases of marketable securities, net
(5,961
)
 
(4,005
)
Cash paid for business acquisition, net of cash acquired
—

 
(431,068
)
Capital expenditures, net
(13,991
)
 
(11,584
)
Proceeds from sale of business unit, net of cash sold
1,972

 
—

Cash paid for a non-marketable investment
(1,000
)
 
(3,000
)
Cash paid for software licenses
(7,370
)
 
(5,393
)
Net cash used in investing activities
(14,373
)
 
(312,094
)
Cash flows from financing activities:
 
 
 
Net share settlement upon issuance of restricted stock units
(2,883
)
 
(2,660
)
Purchases of treasury stock
—

 
(6,970
)
Net proceeds from issuance of common stock
5,353

 
3,382

Net proceeds from issuance of long-term debt
—

 
346,500

Cash paid for debt issuance costs
—

 
(8,283
)
Repayment of debt
(4,279
)
 
(1,750
)
Net cash (used in) provided by financing activities
(1,809
)
 
330,219

 
 
 
 
 
 
 
 
 

7


LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
 
 
 
 
 
Nine Months Ended
(In thousands)
October 1, 2016
 
October 3, 2015
Effect of exchange rate change on cash
(579
)
 
(754
)
Net increase (decrease) in cash and cash equivalents
2,557

 
(3,255
)
Beginning cash and cash equivalents
84,606

 
115,611

Ending cash and cash equivalents
$
87,163

 
$
112,356

 
 
 
 
Supplemental cash flow information:
 
 
 
Change in unrealized gain (loss) related to marketable securities, net of tax, included in Accumulated other comprehensive loss
$
(50
)
 
$
(133
)
Income taxes paid, net of refunds
$
7,250

 
$
5,403

Interest paid
$
13,849

 
$
6,225

Accrued purchases of plant and equipment
$
402

 
$
817



8


Lattice Semiconductor Corporation
- Supplemental Historical Financial Information -
(unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2016
 
July 2,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
Operations Information
 
 
 
 
 
 
 
 
 
 
Percent of Revenue
 
 
 
 
 
 
 
 
 
 
  Gross Margin
 
59.5
%
 
58.9
%
 
54.5
%
 
59.2
%
 
54.4
%
  R&D Expense
 
24.5
%
 
31.2
%
 
34.3
%
 
29.5
%
 
34.4
%
  SG&A Expense
 
25.8
%
 
23.2
%
 
21.7
%
 
24.6
%
 
24.0
%
Depreciation and amortization (in thousands)
 
15,556

 
15,021

 
17,553

 
47,908

 
42,916

Capital expenditures (in thousands)
 
3,889

 
4,402

 
4,552

 
13,991

 
11,584

Stock-based compensation (in thousands)
 
4,309

 
3,242

 
4,199

 
12,107

 
12,562

Restructuring and severance related charges (in thousands)
 
317

 
2,568

 
6,818

 
8,316

 
15,780

Taxes paid (cash, in thousands)
 
2,386

 
2,368

 
2,291

 
7,250

 
5,403

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Information
 
 
 
 
 
 
 
 
 
 
Current Ratio
 
2.2

 
2.0

 
2.7

 
 
 
 
A/R Days Revenue Outstanding
 
76

 
78

 
71

 
 
 
 
Inventory Months
 
5.3

 
6.4

 
4.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue% (by Geography)
 
 
 
 
 
 
 
 
 
 
Asia
 
74
%
 
68
%
 
79
%
 
70
%
 
76
%
Europe (incl. Africa)
 
12
%
 
15
%
 
12
%
 
14
%
 
14
%
Americas
 
14
%
 
17
%
 
9
%
 
16
%
 
10
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue% (by End Market) (1)
 
 
 
 
 
 
 
 
 
 
Communications and Computing
 
27
%
 
29
%
 
33
%
 
30
%
 
36
%
Mobile and Consumer
 
31
%
 
24
%
 
34
%
 
27
%
 
31
%
Industrial and Automotive
 
33
%
 
37
%
 
23
%
 
34
%
 
25
%
Licensing and Services
 
9
%
 
10
%
 
10
%
 
9
%
 
8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue% (by Channel)
 
 
 
 
 
 
 
 
 
 
Sell-through distribution
 
62
%
 
59
%
 
46
%
 
58
%
 
45
%
Direct
 
38
%
 
41
%
 
54
%
 
42
%
 
55
%




(1) During the first quarter of fiscal 2016, the Company realigned its End Market categories; prior periods have been reclassified to match current period presentation.



9


Lattice Semiconductor Corporation
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2016
 
July 2,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
 
 
 
 
 
 
 
 
 
 
 
GAAP Revenue
 
$
113,225

 
$
99,209

 
$
109,715

 
$
308,946

 
$
304,772

Fair value adjustment to deferred revenue from purchase accounting
 
—

 
—

 
361

 
—

 
5,091

Non-GAAP Revenue
 
$
113,225

 
$
99,209

 
$
110,076

 
$
308,946

 
$
309,863

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Gross margin
 
$
67,424

 
$
58,426

 
$
59,849

 
$
182,954

 
$
165,807

Fair value adjustment to deferred revenue from purchase accounting
 
—

 
—

 
314

 
—

 
3,595

Inventory step-up expense
 
—

 
—

 
716

 
523

 
5,362

Stock-based compensation - gross margin
 
231

 
166

 
406

 
656

 
1,044

Non-GAAP Gross margin
 
$
67,655

 
$
58,592

 
$
61,285

 
$
184,133

 
$
175,808

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Gross margin %
 
59.5
 %
 
58.9
 %
 
54.5
 %
 
59.2
 %
 
54.4
 %
Cumulative effect of non-GAAP Gross Margin adjustments
 
0.3
 %
 
0.2
 %
 
1.2
 %
 
0.4
 %
 
2.3
 %
Non-GAAP Gross margin %
 
59.8
 %
 
59.1
 %
 
55.7
 %
 
59.6
 %
 
56.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Operating expenses
 
$
73,434

 
$
64,799

 
$
77,807

 
$
208,695

 
$
236,591

Amortization of acquired intangible assets
 
(8,260
)
 
(8,311
)
 
(8,941
)
 
(25,292
)
 
(20,824
)
Restructuring charges
 
(317
)
 
(2,568
)
 
(6,818
)
 
(8,316
)
 
(15,780
)
Acquisition related charges (1)
 
—

 
—

 
(610
)
 
(94
)
 
(22,078
)
Impairment of intangible assets
 
(7,866
)
 
—

 
—

 
(7,866
)
 
—

Stock-based compensation - operations
 
(4,078
)
 
(3,076
)
 
(3,793
)
 
(11,451
)
 
(11,518
)
Non-GAAP Operating expenses
 
$
52,913

 
$
50,844

 
$
57,645

 
$
155,676

 
$
166,391

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation and severance costs related to change in control.

10


 
Lattice Semiconductor Corporation
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2016
 
July 2,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
 
 
 
 
 
 
 
 
 
 
 
GAAP Loss from operations
 
$
(6,010
)
 
$
(6,373
)
 
$
(17,958
)
 
$
(25,741
)
 
$
(70,784
)
Fair value adjustment to deferred revenue from purchase accounting
 
—

 
—

 
314

 
—

 
3,595

Inventory step-up expense
 
—

 
—

 
716

 
523

 
5,362

Stock-based compensation - gross margin
 
231

 
166

 
406

 
656

 
1,044

Amortization of acquired intangible assets
 
8,260

 
8,311

 
8,941

 
25,292

 
20,824

Restructuring charges
 
317

 
2,568

 
6,818

 
8,316

 
15,780

Acquisition related charges (1)
 
—

 
—

 
610

 
94

 
22,078

Impairment of intangible assets
 
7,866

 
—

 
—

 
7,866

 
—

Stock-based compensation - operations
 
4,078

 
3,076

 
3,793

 
11,451

 
11,518

Non-GAAP Income from operations
 
$
14,742

 
$
7,748

 
$
3,640

 
$
28,457

 
$
9,417

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Loss from operations %
 
(5.3
)%
 
(6.4
)%
 
(16.4
)%
 
(8.3
)%
 
(23.2
)%
Cumulative effect of non-GAAP Gross Margin and Operating adjustments
 
18.3
 %
 
14.2
 %
 
19.7
 %
 
17.5
 %
 
26.2
 %
Non-GAAP Income from operations %
 
13.0
 %
 
7.8
 %
 
3.3
 %
 
9.2
 %
 
3.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Income tax expense
 
$
971

 
$
4,539

 
$
309

 
$
7,410

 
$
29,030

Estimated tax effect of non-GAAP adjustments (2)
 
2,389

 
(2,499
)
 
2,182

 
438

 
(19,941
)
Non-GAAP Income tax expense
 
$
3,360

 
$
2,040

 
$
2,491

 
$
7,848

 
$
9,089

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation and severance costs related to change in control.
(2) During the second quarter of fiscal 2016, we refined our calculation of non-GAAP tax expense by applying our tax
      provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between
      calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of
      non-GAAP adjustments.” Prior periods have been similarly recalculated to conform to the current presentation.

11


 
Lattice Semiconductor Corporation
- Reconciliation of U.S. GAAP to Non-GAAP Financial Measures -
(in thousands, except per share data)
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
October 1,
2016
 
July 2,
2016
 
October 3,
2015
 
October 1,
2016
 
October 3,
2015
 
 
 
 
 
 
 
 
 
 
 
GAAP Net Loss
 
$
(12,414
)
 
$
(13,810
)
 
$
(24,862
)
 
$
(45,935
)
 
$
(113,779
)
Fair value adjustment to deferred revenue from purchase accounting
 
—

 
—

 
314

 
—

 
3,595

Inventory step-up expense
 
—

 
—

 
716

 
523

 
5,362

Stock-based compensation - gross margin
 
231

 
166

 
406

 
656

 
1,044

Amortization of acquired intangible assets
 
8,260

 
8,311

 
8,941

 
25,292

 
20,824

Restructuring charges
 
317

 
2,568

 
6,818

 
8,316

 
15,780

Acquisition related charges (1)
 
—

 
—

 
610

 
94

 
22,078

Impairment of intangible assets
 
7,866

 
—

 
—

 
7,866

 
 
Stock-based compensation - operations
 
4,078

 
3,076

 
3,793

 
11,451

 
11,518

Gain on sale of Qterics
 
—

 
(2,646
)
 
—

 
(2,646
)
 
—

Estimated tax effect of non-GAAP adjustments (2)
 
(2,389
)
 
2,499

 
(2,182
)
 
(438
)
 
19,941

Non-GAAP Net income (loss)
 
$
5,949

 
$
164

 
$
(5,446
)
 
$
5,179

 
$
(13,637
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Net loss per share - basic and diluted
 
$
(0.10
)
 
$
(0.12
)
 
$
(0.21
)
 
$
(0.38
)
 
$
(0.97
)
Cumulative effect of Non-GAAP adjustments
 
0.15

 
0.12

 
0.16

 
0.42

 
0.85

Non-GAAP Net income (loss) per share - basic and diluted
 
$
0.05

 
$
—

 
$
(0.05
)
 
$
0.04

 
$
(0.12
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares used in per share calculations:
 
 
 
 
 
 
 
 
 
 
Basic
 
120,584

 
119,445

 
117,669

 
119,596

 
117,151

Diluted - GAAP (3)
 
120,584

 
119,445

 
117,669

 
119,596

 
117,151

Diluted - Non-GAAP (3)
 
122,236

 
120,871

 
117,669

 
121,232

 
117,151

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Includes stock-based compensation and severance costs related to change in control.
(2) During the second quarter of fiscal 2016, we refined our calculation of non-GAAP tax expense by applying our tax
      provision model to year-to-date and projected income after adjusting for non-GAAP items. The difference between
      calculated values for GAAP and non-GAAP tax expense has been included as the “Estimated tax effect of
      non-GAAP adjustments.” Prior periods have been similarly recalculated to conform to the current presentation.
(3) Diluted shares are calculated using the GAAP treasury stock method. In a loss position, diluted shares equal basic shares.

12