Lattice Semiconductor Reports Second Quarter 2014 Results

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™, MachXO™ and LatticeECP3™ 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, 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 Semiconductor (NASDAQ: LSCC) is the world's leading provider of low-power programmable IC solutions for makers of smartphones, mobile handheld devices, small-cell networking equipment, industrial control, automotive infotainment, and much more. With more than 1 billion units sold over the past 10 years, Lattice ships more FPGAs, CPLDs and Power Management solutions than any other programmable solutions vendor. For more information, visit www.latticesemi.com. You can also follow Lattice via Twitter, Facebook, or RSS.

Lattice Semiconductor Corporation, Lattice (& design), L (& design), iCE40 Ultra, iCE40, MachXO and LatticeECP3 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							Six Months Ended
	June 28, 2014		March 29, 2014		June 29, 2013			June 28, 2014		June 29, 2013
Revenue	$	99,320	$	96,637	$	84,694		$	195,957	$	155,852
Costs and expenses:
Cost of products sold	44,345		42,499		39,584			86,844		72,587
Research and development	22,302		21,239		20,267			43,541		38,381
Selling, general and administrative	18,832		18,749		17,072			37,581		33,570
Acquisition related charges	737		737		737			1,474		1,486
Restructuring	3		11		19			14		172
	86,219		83,235		77,679			169,454		146,196
Income from operations	13,101		13,402		7,015			26,503		9,656
Other income (loss), net	906		309		(54		)	1,215		(106		)
Income before provision for income taxes	14,007		13,711		6,961			27,718		9,550
Provision for income taxes	2,236		1,727		1,921			3,963		2,620
Net income	$	11,771	$	11,984	$	5,040		$	23,755	$	6,930

Net income per share:
Basic	$	0.10	$	0.10	$	0.04		$	0.20	$	0.06
Diluted	$	0.10	$	0.10	$	0.04		$	0.20	$	0.06

Shares used in per share calculations:
Basic	117,904		116,436		115,733			117,170		115,562
Diluted	120,944		118,917		117,109			120,041		116,935


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

	June 28, 2014		December 28, 2013
Assets
Current assets:
Cash, cash equivalents and short-term marketable securities	$	247,037	$	215,815
Accounts receivable, net	66,289		50,085
Inventories	59,270		46,222
Other current assets	13,857		13,679
Total current assets	386,453		325,801

Property and equipment, net	41,132		41,719
Long-term marketable securities	—		5,241
Other long-term assets	8,921		6,120
Intangible assets, net of amortization	11,011		12,484
Goodwill	44,808		44,808
Deferred income taxes	9,325		11,703
	$	501,650	$	447,876

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrued liabilities	$	48,274	$	51,113
Deferred income and allowances on sales to sell-through distributors	23,631		7,495
Total current liabilities	71,905		58,608

Other long-term liabilities	7,195		3,588
Total liabilities	79,100		62,196

Stockholders' equity	422,550		385,680
	$	501,650	$	447,876


Lattice Semiconductor Corporation - Supplemental Historical Financial Information -

	Three Months Ended						Six Months Ended
	6/28/2014		3/29/2014		6/29/2013		6/28/2014		6/29/2013
Operations Information
Percent of Revenue
Gross Margin	55.4	%	56.0	%	53.3	%	55.7	%	53.4	%
R&D Expense	22.5	%	22.0	%	23.9	%	22.2	%	24.6	%
SG&A Expense	19.0	%	19.4	%	20.2	%	19.2	%	21.5	%
Depreciation and amortization (in thousands)	5,773		5,860		4,894		11,633		9,962
Capital expenditures (in thousands)	2,480		2,395		3,783		4,875		6,837
Stock compensation expense (in thousands)	3,320		3,090		2,513		6,410		4,423
Restructuring and severance related charges (in thousands)	403		90		19		493		172
Taxes paid (cash, in thousands)	418		380		104		798		956
Balance Sheet Information
Current Ratio	5.4		5.2		5.4
A/R Days Revenue Outstanding	60		62		68
Inventory Months	4.0		4.1		3.8
Revenue% (by Product Family)
PLD	65	%	65	%	69	%	65	%	69	%
FPGA	35	%	35	%	31	%	35	%	31	%
Revenue% (by Product Classification) (1)
New	50	%	53	%	46	%	51	%	43	%
Mainstream	38	%	34	%	40	%	36	%	42	%
Mature	12	%	13	%	14	%	13	%	15	%
Revenue% (by Geography)
Asia	74	%	75	%	74	%	75	%	72	%
Europe (incl. Africa)	16	%	15	%	14	%	15	%	16	%
Americas	10	%	10	%	12	%	10	%	12	%
Revenue% (by End Market) (2)
Communications	44	%	41	%	38	%	43	%	38	%
Consumer	26	%	31	%	31	%	28	%	28	%
Industrial	30	%	28	%	31	%	29	%	34	%
Revenue% (by Channel)
Sell-through distribution	42	%	39	%	44	%	40	%	46	%
Direct	58	%	61	%	56	%	60	%	54	%

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