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.

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

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

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
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

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	%

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