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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
JULY 11, 2000
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Date of Report (Date of earliest event reported)
LATTICE SEMICONDUCTOR CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 000-18032 93-0835214
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5555 NE MOORE COURT
HILLSBORO, OR 97124-6421
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(Address of principal executive offices)
(503) 268-8000
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(Registrant's telephone number, including area code)
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ITEM 5. Other Events
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed consolidated statement of
operations is presented for illustrative purposes only and does not purport to
be indicative of the results of operations for future periods or the results
that actually would have been realized had Lattice and Vantis become a
consolidated company during the specified periods. The statement is based on
the respective historical audited and unaudited consolidated financial
statements and the notes thereto of Lattice and Vantis after giving effect to
the acquisition of Vantis on June 15, 1999 using the purchase method of
accounting and the assumptions and adjustments described below. Non-recurring
purchase accounting adjustments are excluded from the pro forma adjustments
in the unaudited pro forma condensed consolidated statement of operations.
The pro forma unaudited condensed consolidated statement of operations
for the nine months ended December 31, 1999 is presented using Lattice's
unaudited condensed consolidated statement of operations for the nine months
ended December 31, 1999 combined with Vantis' unaudited condensed
consolidated statement of operations for the period from December 29, 1998
through June 15, 1999 assuming the acquisition occurred on December 29, 1998.
The purchase price paid for Vantis was allocated to the estimated fair value
of assets acquired and liabilities assumed. The preliminary purchase price
allocation is based on an independent appraisal and management estimates and is
subject to further refinement and change. The amounts recorded are based on
management's current estimate of the costs of integrating Vantis, including
elimination of duplicative facilities and duplicative sales representatives and
distributors, employee separations resulting from changes in responsibilities,
employee relocation and other integration actions. The accruals recorded related
to the integration are in accordance with Emerging Issues Task Force No. 95-3
"Recognition of Liabilities in Connection with a Purchase Business Combination."
For financial reporting purposes, Lattice and Vantis report on 13 and 14
week quarters with different historical year ends. There were no transactions
between Lattice and Vantis during the period prior to June 15, 1999, the
acquistion date, and there are no significant differences between the accounting
policies of Lattice and Vantis.
The unaudited pro forma condensed consolidated statement of operations,
including the notes thereto, are qualified in their entirety by reference to,
and should be read in conjunction with the historical consolidated financial
statements and the notes thereto of Lattice and Vantis, which were previously
reported in Lattice's Annual Report on Form 10-K/A for the nine months ended
December 31, 1999, the Quarterly Report on Form 10-Q for the three months
ended March 31, 2000 and the current report on Form 8-K as of June 15, 1999.
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LATTICE SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31, 1999
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PRO FORMA PRO FORMA
LATTICE VANTIS ADJUSTMENTS COMBINED
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(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenue.................................. $269,699 $44,695 $314,394
Cost and expenses:
Cost of products sold.................. 108,687 21,379 130,066
Research and development............... 45,903 8,473 54,376
Selling, general and administrative.... 50,676 12,805 63,481
Amortization of intangible assets...... 45,780 $ 16,899(A) 62,679
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Total operating expenses................. 251,046 42,657 16,899 310,602
Income (loss) from operations............ 18,653 2,038 (16,899) 3,792
Other (expense) income, net.............. (4,120) 393 (2,753)(B)(C) (6,480)
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Income (loss) before provision (benefit)
for income taxes....................... 14,533 2,431 (19,652) (2,688)
Provision (benefit) for income taxes..... 1,111 909 (6,725)(D) (4,705)
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Income (loss) before extraordinary item.. $ 13,422 $ 1,522 $ (12,927) $ 2,017
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Extraordinary item, net of income taxes.. (1,665) (1,665)
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Net income $ 11,757 $ 352
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Basic income per share, before
extraordinary item (1)................. $ .28 $ .04
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Diluted income per share, before
extraordinary item (1)................. $ .28 $ .04
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Basic net income per share (1)........... $ .25 $ .01
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Diluted net income per share(1).......... $ .25 $ .01
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Shares used in per share calculations:
Basic (1)................................ 47,714 47,714
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Diluted (1).............................. 47,714 47,714
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</TABLE>
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(1) Basic net income and pro forma basic income per share were calculated based
on the weighted average number of shares of Lattice common stock outstanding
for the period ended December 31, 1999. Diluted net income per share was
calculated based on Lattice's weighted average number of shares of common
stock outstanding and potentially dilutive securities assumed to be
outstanding during the period using the "treasury stock" and "if converted"
methods. Pro forma basic and dilutive income per share are the same because
the inclusion of potentially dilutive securities would be anti-dilutive.
Shares outstanding reflect the two-for-one stock split effected in the form
of a stock dividend that was paid on September 16, 1999.
The accompanying notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
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LATTICE SEMICONDUCTOR CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
NOTE 1. PURCHASE ACCOUNTING
On June 15, 1999, Lattice completed the acquisition of all of the
outstanding capital stock of Vantis from AMD for a total purchase price of
$583.1 million. The purchase was financed using a combination of cash
reserves and a new credit facility bearing interest at adjustable rates (Note
2(B)). In addition, we exchanged our stock options for all of the options
outstanding under Vantis employee stock option plans with a calculated
Black-Scholes value of approximately $24.0 million.
The components of purchase price are as follows (millions):
<TABLE>
<S> <C>
Bank term loan and line of credit bearing interest at
adjustable rates.......................................... $250.3
Cash........................................................ 249.8
Other liabilities assumed................................... 34.5
Fair value of options assumed............................... 24.0
Estimated direct acquisition costs.......................... 10.8
Exit costs.................................................. 8.3
Preacquisition contingencies................................ 5.4
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Total....................................................... $583.1
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</TABLE>
NOTE 2. PRO FORMA ADJUSTMENTS
(A) To reflect the allocation of purchase price to net assets acquired and
liabilities assumed, the purchase price was allocated as follows in
millions:
<TABLE>
<S> <C>
Current technology.......................................... $210.3
Excess of purchase price over net assets acquired........... 158.8
In-process research and development......................... 89.0
Fair value of other tangible net assets..................... 61.3
Assembled workforce, customer list, patents and
trademarks................................................ 53.5
Fair value of property, plant and equipment................. 10.2
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Total....................................................... $583.1
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</TABLE>
We have taken certain actions to integrate the Vantis operations and, in
certain instances, to consolidate duplicative operations. Accrued exit costs
related to Vantis were recorded as an adjustment to the fair value of net
assets in the purchase price allocation. Accrued exit costs include $4.2
million related to Vantis office closures, $2.5 million related to separation
benefits of Vantis employees and $1.1 million in other exit costs
primarily relating to the termination of Vantis foreign distributors.
Separation benefits relate primarily to twenty Vantis senior managers. At
December 31, 1999, seven employees from this group had terminated. As of
December 31, 1999, an additional 55 Vantis employees had terminated for other
merger related reasons. Payments of approximately $1.4 million have been
charged to this accrued liability. If these employees had not terminated,
substantially all of the related costs would have been charged to selling,
general and administrative expenses. Charges to other exit cost accrued
liabilities were not significant for the period from June 15, 1999 through
December 31, 1999. These accruals are based upon our current estimates and
are in accordance with Emerging Issues Task Force No. 95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination." There was
no other significant activity against these exit cost liabilities for the
period June 16, 1999 to December 31, 1999.
IN-PROCESS RESEARCH AND DEVELOPMENT
The value assigned to the IPR&D was determined by identifying individual
research projects for which technological feasibility had not been established.
These include semiconductor projects with a value after application of the SEC's
IPR&D valuation methodology of $77.2 million and a process technology project
with a value of $11.8 million.
USEFUL LIVES OF INTANGIBLE ASSETS
The estimated weighted average useful life of the intangible assets for
current technology, assembled workforce, customer lists, trademarks, patents and
residual goodwill, created as a result of the acquisition, is approximately five
years.
(B) Adjustment to record the interest related to the issuance on October
28, 1999 of $260 million in 4 3/4% convertible subordinated notes due
on November 1, 2006. These notes pay interest semi-annually on May 1
and November 1. Holders of these notes may convert them into shares
of our common stock at any time on or before November 1, 2006, at a
conversion price of $41.44 per share, subject to adjustment in
certain events. Beginning on November 6, 2002 and ending on October
31, 2003, we may redeem the notes in whole or in part at a redemption
price of 102.71% of the principal amount. In the subsequent three
twelve-month periods, the redemption price declines to 102.04%,
101.36% and 100.68% of principal, respectively. The notes are
subordinated in right of payment to all of our senior indebtedness,
and are subordinated by operation of law to all liabilities of our
subsidiaries. Amortization of capitalized debt issuance costs were
$1,385,379 for the pro forma period presented. Costs and expenses
related to the issuance of this debt totaled approximately $6.9 million
and are capitalized and amortized over the life of the notes using the
interest method.
(C) Adjustment to reflect the reversal of interest income on the cash used
for the acquisition. The assumed rate of return on this cash balance was
approximately 3.5% which is based upon the estimated rate of return on
short-term investments for Lattice.
(D) Adjustment to reflect the tax effect of the pro forma adjustments at
the combined rate of Lattice and Vantis during the period presented.
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SIGNATURE
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
Date: July 11, 2000 By: /s/ Stephen A. Skaggs
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Stephen A. Skaggs,
Senior Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
and Secretary
