<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 1, 1995
OR
[] 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 0 - 18032
---------
LATTICE SEMICONDUCTOR CORPORATION
(Exact name of Registrant as specified in its charter)
State of Delaware 93-0835214
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5555 N.E. Moore Court, Hillsboro, Oregon 97124-6421
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 681-0118
(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 X No
----- -----
At July 1, 1995, there were 19,189,483 shares of the Registrant's common stock,
$.01 par value, outstanding.
Page 1 of 17
<PAGE>
LATTICE SEMICONDUCTOR CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Operations -
Three Months Ended July 1, 1995 and
July 2, 1994 3
Consolidated Balance Sheet - July 1, 1995
and April 1, 1995 4
Consolidated Statement of Cash Flows -
Three Months Ended July 1, 1995
and July 2, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
July 1, July 2,
1995 1994
----------- -----------
<S> <C> <C>
Revenue $ 45,013 $ 32,913
Costs and expenses:
Cost of products sold 18,769 13,418
Research and development 6,383 5,306
Selling, general and administrative 7,371 5,769
----------- -----------
Total costs and expenses 32,523 24,493
----------- -----------
Income from operations 12,490 8,420
Other income, net 1,015 669
----------- -----------
Income before provision for income taxes 13,505 9,089
Provision for income taxes 4,659 3,090
----------- -----------
Net income $ 8,846 $ 5,999
----------- -----------
----------- -----------
Net income per share $ 0.45 $ 0.32
----------- -----------
----------- -----------
Weighted average common and
common equivalent shares
outstanding 19,811 19,002
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
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<PAGE>
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands, except share data)
<TABLE>
<CAPTION>
Assets July 1, April 1,
1995 1995
----------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,613 $ 7,697
Short-term investments 82,661 81,113
Accounts receivable 13,772 18,147
Inventories 16,592 14,131
Prepaid expenses and other current assets 12,807 12,751
Deferred income taxes 8,065 7,302
----------- -----------
Total current assets 149,510 141,141
Wafer supply advance 29,172 31,320
Property and equipment, net 21,868 20,115
Other assets 376 341
----------- -----------
$ 200,926 $ 192,917
----------- -----------
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 15,612 $ 18,163
Deferred income on sales to
distributors 11,466 11,751
Income taxes payable 1,957 5,206
----------- -----------
Total current liabilities 29,035 35,120
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, $.01 par value,
10,000,000 shares authorized; none
issued or outstanding -- --
Common stock, $.01 par value,
100,000,000 shares authorized, 19,189,483 and
18,889,703 shares issued and outstanding 192 189
Paid-in capital 88,047 82,802
Retained earnings 83,652 74,806
----------- -----------
Total stockholders' equity 171,891 157,797
----------- -----------
$ 200,926 $ 192,917
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
LATTICE SEMICONDUCTOR CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
July 1, July 2,
1995 1994
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,846 $ 5,999
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,771 1,486
Changes in assets and liabilities:
Accounts receivable 4,375 (1,622)
Inventories (2,461) 2,319
Prepaid expenses and other assets (91) 284
Wafer supply advance 2,148 --
Deferred income taxes (763) --
Accounts payable and other accrued
expenses (2,551) 2,889
Income taxes payable (3,249) (164)
Deferred income (285) 174
--------- ---------
Total adjustments (1,106) 5,368
--------- ---------
Net cash provided by operating activities 7,740 11,367
--------- ---------
Cash flows from investing activities:
Purchase of short-term investments, net (1,548) (10,428)
Capital expenditures (3,545) (549)
Proceeds from sale of equipment 21 --
--------- ---------
Net cash used by investing activities (5,072) (10,977)
--------- ---------
Cash flows from financing acitivities:
Net proceeds from issuance of stock 5,248 966
--------- ---------
Net cash provided by financing activities 5,248 966
--------- ---------
Net increase in cash and cash equivalents 7,916 1,356
Beginning cash and cash equivalents 7,697 18,363
--------- ---------
Ending cash and cash equivalents $ 15,613 $ 19,719
--------- ---------
--------- ---------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
LATTICE SEMICONDUCTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Basis of Presentation
The accompanying consolidated financial statements are unaudited and have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission and in the opinion of management include
all adjustments, consisting only of normal recurring adjustments, necessary
for the fair statement of results for the interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. These consolidated financial statements should be read in
conjunction with the audited financial statements and notes thereto
included in the Company's annual report on Form 10-K for the fiscal year
ended April 1, 1995.
The Company reports on a 52 or 53 week fiscal year, which ends on the
Saturday closest to March 31. The accompanying financial statements
include the accounts of Lattice Semiconductor Corporation and its wholly-
owned subsidiaries, Lattice Semiconducteurs SARL, Lattice GmbH, Lattice
Semiconductor KK, Lattice Semiconductor (Shanghai) Co. Ltd., Lattice
Semiconductor Asia Ltd., Lattice Semiconductor International Ltd. and
Lattice UK Limited. The operations of the subsidiaries have not been
significant to date and all intercompany accounts and transactions have
been eliminated. The results of the interim period are not necessarily
indicative of the results for the entire year.
(2) Revenue Recognition
Revenue from sales to OEM (original equipment manufacturer) customers is
recognized upon shipment. Certain of the Company's sales are made to
distributors under agreements providing price protection and right of
return on unsold merchandise. Revenue and costs relating to distributor
sales are deferred until the product is sold by the distributor and the
related revenue and costs are then reflected in income.
(3) Net Income Per Share
Net income per share is computed based on the weighted average number of
shares of common stock and common stock equivalents assumed to be
outstanding during the period (using the treasury stock method). Common
stock equivalents consist of stock options and warrants to purchase common
stock.
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<PAGE>
(4) Inventories (in thousands): July 1, April 1,
1995 1995
-------- --------
Work in progress $10,106 $ 9,686
Finished goods 6,486 4,445
-------- --------
$16,592 $14,131
-------- --------
-------- --------
(5) Changes in Stockholders' Equity (in thousands):
Common Paid-in Retained
Stock Capital Earnings Total
------ ------- ----------- ---------
Balances, April 1, 1995 $ 189 $82,802 $ 74,806 $ 157,797
Stock option exercises 3 5,165 -- 5,168
Other -- 80 -- 80
Net income for the
three-month period -- -- 8,846 8,846
----- ------- -------- --------
Balances, July 1, 1995 $ 192 $88,047 $ 83,652 $ 171,891
----- ------- -------- ---------
----- ------- -------- ---------
(6) Commitments and Contingencies
The Company is exposed to certain asserted and unasserted potential claims.
Patent and other proprietary rights infringement claims are common in the
semiconductor industry and the Company has received a letter from a
semiconductor manufacturer stating that it believes certain patents held by
it cover products sold by the Company. While this manufacturer has offered
to license certain of such patents to the Company, there can be no
assurance that, on this or any other claim which may be made against the
Company, the Company could obtain a license on terms or under conditions
that would not be unfavorable to the Company. Management believes that the
disposition of these claims will not have a material adverse effect on the
Company's financial position or results of operations.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUE
Revenue was $45.0 million in the first quarter of fiscal 1996, an increase of
37% over the first quarter of fiscal 1995. Substantially all of the Company's
revenue is derived from sales of programmable logic devices (PLDs). The
majority of the Company's revenue for the periods presented was derived from
sales of GAL (Generic Array Logic) products, which address the
low-density segment of the CMOS programmable logic market. The majority of the
Company's revenue growth for the periods presented resulted from the sales of
new products, primarily in the high-density segment of the PLD market. The
Company entered the high-density segment of the PLD market in fiscal 1993 with
its pLSI and ispLSI product families. Revenue from international sales was
approximately 48% in the first quarter of fiscal 1996 as compared to 44% for the
first quarter of fiscal 1995. The Company expects export sales to continue to
represent a significant portion of revenue.
Overall average selling prices remained relatively constant between the two
fiscal quarters. Although selling prices of mature products generally decline
over time, this decline is at times offset by higher selling prices of new
products. The Company's ability to maintain its recent trend of revenue growth
and market penetration is in large part dependent on the continued development,
introduction and market acceptance of new products.
GROSS MARGIN
The Company's gross margin as a percentage of revenue was 58% in the first
quarter of fiscal 1996 as compared to 59% for the same quarter of fiscal 1995.
The decrease in gross margin percentage versus the first quarter of fiscal 1995
was primarily due to higher period costs associated with increased production of
high-density products offsetting improved capacity utilization and other
reductions in the Company's manufacturing costs. Profit margins on older
products tend to decrease over time as selling prices decline, but the Company's
strategy has been to offset these decreases by continuously introducing new
products with higher margins.
RESEARCH AND DEVELOPMENT
Research and development expense increased by approximately $1.1 million, or
20%, from the first quarter of fiscal 1995 to the first quarter of fiscal 1996.
Such expense represented 14% of revenue in the fiscal 1996 quarter as compared
to 16% in the fiscal 1995 quarter. The spending increases were related
primarily to the development of new technologies and new products, including the
Company's high-density product families and their related software development
tools. The Company believes that a continued
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<PAGE>
commitment to research and development is essential in order to maintain product
leadership, and therefore expects to continue to make significant investments in
research and development in the future.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense increased by approximately $1.6
million, or 28%, between the first quarter of fiscal 1995 and the comparable
fiscal 1996 quarter. This increase was primarily due to expansion of the
Company's sales force, the addition of field application engineers to provide
enhanced customer assistance, and higher sales commissions associated with the
higher revenue levels. Selling, general and administrative expense as a
percentage of revenue decreased slightly from 17.5% in the first quarter of
fiscal 1995 to just under 16.5% in the first quarter of fiscal 1996.
INTEREST AND OTHER INCOME
Interest and other income (net of expense), while remaining relatively constant
as a percentage of revenue, increased by approximately $346,000, or 52%, from
the first quarter of fiscal 1995 to the first quarter of fiscal 1996. This was
due primarily to higher interest rates in the fiscal 1996 period.
PROVISION FOR INCOME TAXES
The Company's effective tax rate was 34.5% for the first quarter of fiscal 1996
as compared to 34% recorded in the fiscal 1995 first quarter. This increase
occurred primarily because of the utilization of the Company's remaining tax
credit carryforwards during fiscal 1995.
Deferred tax asset valuation allowances are recorded to offset deferred tax
assets that can only be realized by earning taxable income in distant future
years. Management established the valuation allowances because it cannot
determine if it is more likely than not that such income will be earned.
FACTORS AFFECTING FUTURE RESULTS
The Company believes that its future operating results will be subject to
quarterly variations based upon a wide variety of factors, including the
cyclical nature of both the semiconductor industry and the markets addressed by
the Company's products, the timing of new product introductions, price erosion,
product obsolescence, adverse dollar-yen exchange rate movements, variations in
product mix, scheduling, rescheduling and cancellation of large orders,
competitive factors, the availability of manufacturing capacity, the ability to
develop and implement new process technologies, fluctuations in manufacturing
yields, changes in effective tax rates and litigation expenses. Due to these
and other factors, the Company's past results are a less useful predictor of
future results than is the case in more mature and less dynamic industries. The
Company has increased its level of operating expenses and investment in
manufacturing capacity in
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<PAGE>
anticipation of future growth in revenues, primarily from increased sales of its
high-density products. To the extent that this revenue growth does not
materialize, the Company's operating results would be adversely affected.
The Company does not manufacture finished silicon wafers. Its products,
however, require wafers manufactured with state-of-the-art fabrication equipment
and techniques. Accordingly, the Company's strategy has been to maintain
relationships with large semiconductor manufacturers for the production of its
wafers. All of its silicon wafers are currently manufactured by Seiko Epson
Corporation ("Seiko Epson") in Japan and sold to the Company, through Seiko
Epson's affiliated U.S. distributor, S MOS Systems, Inc. ("S MOS"). An
interruption in supply from Seiko Epson through S MOS would have a material
adverse effect on the Company's business.
Worldwide manufacturing capacity for silicon wafers is limited and inelastic.
Therefore, significant increases in demand or interruptions in supply could
adversely affect the Company. Through fiscal 1995, the Company has been
successful in obtaining adequate wafer capacity commitments and has not
experienced any material difficulties or delays in the supply of wafers.
Presently, demand on wafer suppliers is growing and existing capacity
commitments may not be sufficient to permit the Company to satisfy all of its
customers' demand in future periods. The Company negotiates wafer prices and
certain wafer supply commitments with Seiko Epson and S MOS on an annual basis,
and, in some cases, as frequently as biannually. Moreover, wafer prices and
commitments are subject to continuing review and revision by the parties.
Although current commitments are anticipated to be adequate through fiscal 1996,
Seiko Epson and S MOS have recently advised the Company that due to high levels
of demand and limited manufacturing capacity there are significant uncertainties
as to whether they will be able to supply wafers to the Company for the
Company's fiscal 1997 at increased levels relative to fiscal 1996 or even in
quantities consistent with historical levels. These uncertainties are unlikely
to be clarified prior to early calendar 1996 when the Company, Seiko Epson and S
MOS normally negotiate wafer price and supply commitments, and may continue so
long as current conditions persist. Although the Company believes Seiko Epson
is making efforts to increase its wafer manufacturing production capacity, there
can be no assurance that Seiko Epson and S MOS will not reduce their allocations
of wafers or increase prices to the Company in future periods or that any such
changes could be offset pursuant to arrangements with alternate sources of
supply. If any substantial reduction of supply or substantial price increase
were to occur, the Company's operating results would be materially adversely
affected. Accordingly, the Company's future revenue growth will depend in large
part on improving yields of die per wafer through reductions in the die size of
its products, shifting capacity to a higher revenue per wafer product mix or
increasing its wafer capacity allocations from Seiko Epson and S MOS or from
other wafer suppliers. There can be no assurance that the Company will be
successful in improving yields, enhancing product mix or increasing wafer
capacity.
The Company's wafer purchases from Seiko Epson are denominated in Japanese yen.
During the first two calendar quarters of 1995, the dollar lost substantial
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<PAGE>
value with respect to the yen. There is no assurance that the value of the
dollar with respect to the yen will not deteriorate further. Any substantial
continued deterioration of dollar-yen exchange rates could have a material
adverse effect on the Company's results of operations.
The Company depends upon its wafer supplier to produce wafers with acceptable
yields and to deliver them to the Company in a timely manner. Substantially all
of the Company's revenues are derived from products based on E2CMOS process
technology. Successful implementation of the Company's proprietary E2CMOS
process technology, UltraMOS, requires a high degree of coordination between the
Company and its wafer supplier. Therefore, significant lead time would be
required to reach volume production at a new wafer supply location. The
manufacture of high performance E2CMOS semiconductor wafers is a complex process
that requires a high degree of technical skill, state-of-the-art equipment and
effective cooperation between the wafer supplier and the circuit designer to
produce acceptable yields. Minute impurities, errors in any step of the
fabrication process, defects in the masks used to print circuits on a wafer and
other factors can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be non-functional. As is common in the
semiconductor industry, the Company has from time to time experienced in the
past and expects that it will experience in the future production yield problems
and delivery delays. Any prolonged inability to obtain adequate yields or
deliveries could adversely affect the Company's operating results.
The Company expects that, as is customary in the semiconductor business, it will
in the future seek to convert its fabrication process technology to larger wafer
sizes, to smaller device geometries or to new or additional suppliers in order
to maintain or enhance its competitive position. Such conversions entail
inherent technological risks that could adversely affect yields and delivery
times and could have a material adverse impact on the Company's operating
results. To a considerable extent, the Company's ability to execute its
strategies will depend upon its ability to maintain and enhance its advanced
process technologies. As the Company does not presently own or operate its own
wafer fabrication or process development facility, it currently depends upon
Seiko Epson to provide the facilities and support for its process development.
In light of this dependency and the intensely competitive nature of the
semiconductor industry, there is no assurance that either process technology
development or timely product introduction can be sustained in the future.
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<PAGE>
In order to remain competitive, the Company must continue to make significant
investments in capital equipment and expansion of facilities, as well as in
research and development. Development and implementation of sub-micron
manufacturing processes is particularly capital intensive, requiring significant
investments in new state-of-the-art equipment. The Company believes that
existing cash balances, cash flow from operations and available equipment
financing will be sufficient to meet the Company's liquidity and capital
requirements in the near future. However, the Company is currently exploring
methods of increasing both its internal and external manufacturing capacity. As
a result, the Company may be required or choose to seek additional equity or
debt financing to fund further expansion of its internal or external wafer
fabrication capacity or for other purposes. The timing and amount of such
capital requirements cannot be precisely determined and will depend on a number
of factors, including demand for the Company's products, product mix, changes in
semiconductor industry conditions and competitive factors. There can be no
assurance that such additional financing will be available when needed or, if
available, will be on satisfactory terms. The failure to obtain financing would
hinder the Company's ability to make continued investments in capital equipment
and facilities, which could materially adversely affect the Company's results of
operations.
Because of the rapid rate of technological change in the semiconductor industry,
the Company's success will ultimately depend in large part on its ability to
introduce new products on a timely basis that meet a market need at a
competitive price and with acceptable margins as well as enhancing the
performance of its existing products. The success of new products depends on a
variety of factors, including product selection, timely and efficient completion
of product design, timely and efficient implementation of manufacturing and
assembly processes, product performance, quality and reliability in the field
and effective sales and marketing. Because new product development commitments
must be made well in advance of sales, new product decisions must anticipate
both future demand and the technology that will be available to supply that
demand. New and enhanced products are continually being introduced into the
Company's markets by others, and these products can be expected to affect the
competitive environment in the markets in which they are introduced. There is
no assurance that the Company will be successful in enhancing its existing
products or in selecting, developing, manufacturing, marketing and selling new
products.
The majority of the Company's revenue and gross margin percentage over the past
three fiscal years was due to revenues from low-density GAL (Generic Array
Logic) products, many of which are second sourced by other suppliers. Continued
revenue growth will be largely dependent on market acceptance of
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<PAGE>
the Company's new and proprietary products, including its high-density product
families, and market acceptance of the Company's proprietary software
development tools. There can be no assurance that the Company's product and
process development efforts will be successful or that new products, including
the Company's new high-density products, will continue to achieve market
acceptance. If the Company were unable to successfully define, develop and
introduce competitive new products in a timely manner, its future operating
results would be adversely affected.
The semiconductor industry is intensely competitive and is characterized by
rapid technological change, sudden price fluctuations, general price erosion,
rapid rates of product obsolescence, periodic shortages of materials and
manufacturing capacity and variations in manufacturing costs and yields. The
Company's competitive position is affected by all of these factors and by
industry competition for effective sales and distribution channels. The
Company's existing and potential competitors range from established major
domestic and international semiconductor companies to emerging companies. Many
of the Company's competitors have substantially greater financial,
technological, manufacturing, marketing and sales resources than the Company.
The Company faces direct competition from companies that have developed or
licensed similar technology and from licensees of the Company's products and
technology. It faces indirect competition from a wide variety of semiconductor
companies offering products and solutions based on alternative technologies.
Although to date the Company has not experienced significant competition from
companies located outside the United States, such companies may become a more
significant competitive factor in the future. As the Company and its current
competitors seek to expand their markets, competition may increase. Any such
increases in competition could have an adverse effect on the Company's operating
results. Development of new technologies that have price/performance
characteristics superior to the Company's technologies could adversely affect
the Company's results of operations. There can be no assurance that the Company
will be able to develop and market new products successfully or that the
products introduced by others will not render the Company's products or
technologies non-competitive or obsolete. The Company expects that its markets
will become more competitive in the future.
In addition, the semiconductor industry is highly cyclical and has been subject
to significant downturns at various times that have been characterized by
diminished product demand, production overcapacity and accelerated erosion of
average selling prices. The Company's rate of growth in recent periods has been
positively impacted by recent trends in the semiconductor industry. Any
material increase in industry-wide production capacity, shift in industry
capacity toward products competitive with the Company's products, reduced demand
or reduced growth in demand or other factors could result in a rapid decline in
product pricing and have a material adverse effect on the Company's operating
results.
International revenues accounted for 44% of the Company's revenue in the first
quarter of fiscal 1995 and 48% of the Company's revenue for the first quarter of
fiscal 1996. The Company believes that international revenues
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<PAGE>
will continue to represent a significant percentage of net revenues.
International revenues and operations may be adversely affected by the
imposition of governmental controls, export license requirements, restrictions
on the export of technology, political instability, trade restrictions, changes
in tariffs and difficulties in staffing and managing international operations.
The future success of the Company is dependent, in part, on its ability to
attract and retain highly qualified technical and management personnel,
particularly highly skilled engineers involved in new product, both silicon and
software, and process technology development. Competition for such personnel is
intense. There can be no assurance that the Company will be able to retain its
existing key technical and management personnel or attract additional qualified
employees in the future. The loss of key technical or management personnel
could delay product development cycles or otherwise have a material adverse
effect on the Company's business.
The Company currently depends on Seiko Epson, a Japanese company, for the
manufacture of all of its finished silicon wafers. In addition, after wafer
manufacturing is completed and each wafer is tested, products are assembled by
subcontractors in South Korea and the Philippines. Although the Company's
subcontractors have not recently experienced any serious work stoppages, the
social and political situations in these countries are volatile, and any
prolonged work stoppages or other disruptions in the Company's ability to
manufacture and assemble its product would have a material adverse effect on the
Company's operating results. Economic risks in these foreign countries,
such as changes in tax laws, tariffs, or freight rates, or interruptions in air
transportation, could have a material adverse effect on the Company's operating
results. Furthermore, natural disasters in these foreign countries, such as
earthquake, fire or flood, could have a material adverse effect on the
Company's operating results.
The market price of the Company's Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results,
shortfalls in revenues or earnings from levels expected by securities analysts
and other factors such as announcements of technological innovations or new
products by the Company or by the Company's competitors, government regulations,
developments in patent or other proprietary rights, and developments in the
Company's relationships with parties to collaborative agreements. In addition,
the stock market has recently experienced significant price fluctuations. These
fluctuations often have been unrelated to the operating performance of the
specific companies whose stocks are traded. Broad market fluctuations, as well
as economic conditions generally, and in the semiconductor industry
specifically, may adversely affect the market price of the Company's Common
Stock.
LIQUIDITY AND CAPITAL RESOURCES
As of July 1, 1995, the Company's principal source of liquidity was $98.3
million of cash and short-term investments, an increase of $9.5 million from the
balance of $88.8 million at April 1, 1995. This increase was primarily the
result of cash generated from operations. The Company also has available an
unsecured $10 million demand bank credit facility with interest
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<PAGE>
due on outstanding balances at a money market rate. This facility has not been
used.
Accounts receivable decreased 24% as compared to the balances at April 1, 1995.
This decrease was primarily due to the timing of receipts from customers.
Inventories increased by 17% versus amounts recorded at April 1, 1995 due to
increased production in response to higher revenue levels and a higher
proportion of finished products. Accounts payable and accrued expenses
decreased 20% as compared to the balance at April 1, 1995 due to the timing of
payments more than offsetting increased expense activity related to the higher
revenue levels.
The decrease in income taxes payable of $3.2 million between April 1, 1995 and
July 1, 1995 is primarily attributable to the timing of quarterly tax payments.
Substantially all of the Company's silicon wafer purchases are denominated in
Japanese yen. The Company maintains yen-denominated bank accounts and bills its
Japanese customers in yen. The yen bank deposits utilized to hedge yen-
denominated wafer purchases are accounted for as identifiable hedges against
specific and firm wafer purchases.
The Company believes its existing sources of liquidity and funds expected to be
generated from operations will provide adequate cash to fund the Company's
anticipated cash needs for at least the next 12 months.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
11.1 Computation of Net Income Per Share
27 Financial Data Schedule for Three Months Ended
July 1, 1995
(b) No reports on Form 8-K were filed during the three months ended
July 1, 1995.
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<PAGE>
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 thereunto duly authorized.
LATTICE SEMICONDUCTOR CORPORATION
Date: August 4, 1995 Rodney F. Sloss
--------------------------- ---------------------------------
By: Rodney F. Sloss
Vice President, Finance
(Principal Financial and Accounting
Officer)
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EXHIBIT 11.1
LATTICE SEMICONDUCTOR CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
July 1, 1995 July 2, 1994
------------ ------------
(unaudited)
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . $ 8,846 $ 5,999
------- -------
------- -------
Weighted average common stock and common stock equivalents:
Common stock . . . . . . . . . . . . 19,031 18,448
Options and warrants . . . . . . . . 780 554
------- -------
19,811 19,002
------- -------
------- -------
Net income per share . . . . . . . . . . . $ 0.45 $ 0.32
------- -------
------- -------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-02-1995
<PERIOD-END> JUL-01-1995
<CASH> 15,613
<SECURITIES> 82,661
<RECEIVABLES> 13,772
<ALLOWANCES> 752
<INVENTORY> 16,592
<CURRENT-ASSETS> 149,510
<PP&E> 47,980
<DEPRECIATION> 26,112
<TOTAL-ASSETS> 200,926
<CURRENT-LIABILITIES> 29,035
<BONDS> 0
<COMMON> 192
0
0
<OTHER-SE> 171,699
<TOTAL-LIABILITY-AND-EQUITY> 171,891
<SALES> 0
<TOTAL-REVENUES> 45,013
<CGS> 18,769
<TOTAL-COSTS> 32,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,015)
<INCOME-PRETAX> 13,505
<INCOME-TAX> 4,659
<INCOME-CONTINUING> 8,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,846
<EPS-PRIMARY> 0.45
<EPS-DILUTED> 0.45
</TABLE>
